<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 1, 1999
REGISTRATION NO. 333-87435
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
LANDA MANAGEMENT SYSTEMS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
CALIFORNIA 7379 94-2817962
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION NUMBER) IDENTIFICATION NUMBER)
</TABLE>
4151 ASHFORD DUNWOODY RD.
SUITE 505
ATLANTA, GA 30319
(404) 531-9956
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
EUGENE SANTA CATTARINA
LANDA MANAGEMENT SYSTEMS CORPORATION
4151 ASHFORD DUNWOODY RD.
SUITE 505
ATLANTA, GA 30319
(404) 531-9956
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
MICHAEL J. DANAHER, ESQ. NILS H. OKESON, ESQ.
MARTIN J. WATERS, ESQ. J. MARK RAY, ESQ.
WILSON SONSINI GOODRICH & ROSATI ALSTON & BIRD LLP
PROFESSIONAL CORPORATION ONE ATLANTIC CENTER
650 PAGE MILL ROAD 1201 WEST PEACHTREE STREET
PALO ALTO, CA 94304 ATLANTA, GA 30309-3424
(650) 493-9300 (404) 881-7000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended, 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 of 1933, as amended, 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 of 1933, as amended, 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(d)
under the Securities Act of 1933, as amended, check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C>
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE REGISTRATION FEE
------------------------------------------------------------------------------------------------------------
Common Stock, no par value.............................. $40,250,000(1) $11,190(2)
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(2) A registration fee in the amount of $11,120 was paid at the time of the
initial filing of the registration statement and the balance of $70 is being
paid upon filing of this amendment.
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT
SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
(SUBJECT TO COMPLETION) ISSUED DECEMBER 1, 1999
PROSPECTUS
3,500,000 SHARES
[LOGO OF LANDACORP]
COMMON STOCK
This is an initial public offering of common stock by Landacorp, Inc.
This prospectus relates to an offering of 3,500,000 shares of common stock.
Landacorp is selling all of the shares of common stock being sold in the
offering.
Prior to the offering, there has been no public market for our common
stock. It is currently estimated that the initial public offering price per
share will be between $8 and $10.
------------------
We have applied to list our common stock on the Nasdaq National Market
under the symbol "LCOR."
------------------
<TABLE>
<CAPTION>
Per Share Total
---------------- ----------------
<S> <C> <C>
Initial public offering price............................... $9 $31,500,000
Underwriting discounts and commissions...................... $0.63 $2,205,000
Proceeds to Landacorp, before expenses...................... $8.37 $29,295,000
</TABLE>
We and three of our stockholders have granted the underwriters an option
for a period of 30 days to purchase up to 525,000 additional shares of common
stock.
------------------
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 8.
------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
HAMBRECHT & QUIST
SG COWEN
VOLPE BROWN WHELAN & COMPANY
, 1999
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 4
Risk Factors................................................ 7
Forward-Looking Statements.................................. 15
How We Intend to Use the Proceeds from the Offering......... 16
Dividend Policy............................................. 16
Capitalization.............................................. 17
Dilution.................................................... 18
Selected Financial Data..................................... 19
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 20
Business.................................................... 29
Management.................................................. 39
Certain Relationships and Related Transactions.............. 45
Principal Stockholders...................................... 47
Description of Capital Stock................................ 49
Shares Eligible for Future Sale............................. 52
Underwriting................................................ 54
Legal Matters............................................... 57
Experts..................................................... 57
Where You Can Find More Information......................... 57
Index to Financial Statements............................... F-1
Signatures.................................................. II-4
Power of Attorney........................................... II-4
</TABLE>
------------------------
3
<PAGE> 4
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. This summary may not contain all of the information that you should
consider before investing in the common stock. You should read the entire
prospectus carefully, including "Risk Factors" and our financial statements
before making an investment decision. In this prospectus, unless the context
indicates otherwise, "Landacorp," "we," "us" and "our" refer to Landacorp, Inc.
LANDACORP
We offer business-to-business Internet-based and other electronic
medical management solutions to healthcare payers and providers that are
designed to control the cost and improve the quality of healthcare delivery. The
term medical management solution refers to our applications that automate and
streamline administrative and business processes, minimize inefficient paper-,
fax-and phone-based communications, and facilitate interaction among various
healthcare participants. Our solutions enable our clients to deliver consistent
and appropriate medical care utilizing their chosen clinical guidelines and
business process rules.
We currently offer two products to healthcare payers: maxMC and e-maxMC,
our new Internet-based medical management solution. We currently provide maxMC
to six payers with more than seven million members. We have successfully tested
e-maxMC internally and recently began offering the solution to payers. We expect
to complete on-site testing of e-maxMC with one of our payer customers in early
2000. We believe that the lack of functionality offered by existing
Internet-based medical management products provides a significant market
opportunity for e-maxMC. e-maxMC will add medical management functions to
payers' Web sites in order to attract repeat visits by their members. We refer
to Internet-based functions that generate repeat visits as sticky applications.
Maxsys II is our medical management solution for healthcare providers.
Currently, more than 200 hospitals use Maxsys II and its predecessor, Maxsys I.
Although we no longer market Maxsys I, we continue to support it as a service to
our customers.
The Internet is emerging as a powerful tool for connecting healthcare
participants, enhancing the efficiency of business processes, clinical
decision-making and case and disease management, and minimizing expenditures on
unauthorized or inappropriate care. It is estimated that of the $1.0 trillion
spent on healthcare in the U.S. annually, more than $250 billion is wasted
through delivery of unnecessary care, performance of redundant tests and
procedures and excessive administrative costs. We believe the healthcare
industry has failed to realize much of the potential offered by the Internet, as
existing Internet-based products have merely linked healthcare participants
without providing the medical management functions needed to make their
interactions more efficient.
The open, multi-tiered system architecture of our solutions enables them
to complement existing information systems, as well as other Internet-based
products, with a rich set of medical management functions, including:
- functions that assist with authorization of medical care by putting to
use clinical guidelines chosen by our customers in order to match
payers' business rules with providers' and members' requests for care;
- case and disease management tools that assist with the determination
of appropriate levels of care, perform short- and long-term care
planning and minimize unnecessary procedures; and
- tools for maintaining and reviewing physicians' credentials and other
biographical information, such as continuing medical education
credits, medical board certifications and records of disciplinary and
other adverse actions.
4
<PAGE> 5
Our solutions are scalable, flexible and secure, and can be deployed
across a broad range of computing environments. As a result, our customers are
able to tailor our solutions to suit their specific administrative and business
processes, clinical guidelines, existing information systems and business
models.
Our objective is to be the leading provider of Internet-based and other
electronic medical management solutions for healthcare payers and providers. Key
components of our strategy include:
- aggressively marketing our new Internet-based medical management
solution, e-maxMC;
- developing sticky applications to attract members to payers' Web
sites;
- achieving greater market penetration among healthcare payers and
providers;
- offering new medical management solutions and improved features and
functions of existing solutions to our payer and provider customers;
and
- pursuing strategic partnerships and acquisitions.
The address of our principal executive offices is 4151 Ashford Dunwoody
Road, Suite 505, Atlanta, Georgia, 30319. Our telephone number is (404)
531-9956. We incorporated on April 27, 1982 as Landa Management Systems
Corporation, a California corporation. We reincorporated as Landacorp, Inc., a
Delaware corporation on , 1999. Our fiscal year ends December 31.
-------------------------
THE OFFERING
COMMON STOCK OFFERED BY US.............. 3,500,000 shares
COMMON STOCK TO BE OUTSTANDING AFTER THE
OFFERING................................ 13,262,210 shares
USE OF PROCEEDS......................... Working capital and general
corporate purposes, including:
- development and implementation of
new applications;
- enhancing our sales and marketing
organization; and
- possible strategic partnerships
and acquisitions.
PROPOSED NASDAQ NATIONAL MARKET
SYMBOL.................................. LCOR
-------------------------
This number does not include 881,315 shares of common stock subject to
outstanding options at September 30, 1999 with a weighted average exercise price
of $1.26 per share. Please see "Capitalization" for a more complete discussion
regarding our common stock and options to purchase our common stock and other
related matters.
-------------------------
Unless otherwise noted, all information in this prospectus:
- assumes the conversion of all outstanding preferred stock into common
stock on a one-for-one basis;
- assumes the exercise of outstanding warrants to purchase 350,000
shares of common stock at an exercise price of $1.20 per share;
- assumes a reincorporation in Delaware as Landacorp, Inc.; and
- assumes no exercise by the underwriters of their option to purchase
additional shares of common stock to cover over-allotments, if any.
5
<PAGE> 6
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following summary financial data should be read in conjunction with
our financial statements and their related notes and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included in this
prospectus. The statement of operations data for the years ended December 31,
1996, 1997 and 1998 are derived from, and are qualified by reference to, the
audited financial statements included at the end of this prospectus. The
statement of operations data for the nine month periods ended September 30, 1998
and 1999 are derived from, and are qualified by reference to, the unaudited
financial statements included at the end of this prospectus. The pro forma as
adjusted balance sheet data summarized below gives effect to the receipt of the
estimated net proceeds from the sale of 3,500,000 shares of common stock offered
by us in this offering at an initial public offering price of $9.00 per share,
after deducting underwriting discounts and commissions and estimated offering
expenses, the exercise of warrants to purchase 350,000 shares of common stock at
a price of $1.20 per share, and the conversion of all outstanding shares of
preferred stock into common stock on a one-for-one basis.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- ---------------------
1996 1997 1998 1998 1999
------- ------- ------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues.................................. $ 1,939 $ 4,038 $ 6,217 $ 4,648 $ 7,067
Loss from operations.......................... (1,697) (803) (1,985) (1,047) (1,524)
Net loss...................................... (1,897) (1,011) (1,910) (998) (1,452)
Net loss per share:
Basic and diluted.......................... $ (1.74) $ (0.91) $ (1.83) $ (0.95) $ (1.32)
Weighted average shares.................... 1,090 1,110 1,043 1,056 1,100
Pro forma net loss per share:(1)
Basic and diluted (unaudited).............. $ (0.27) $ (0.18)
Weighted average shares (unaudited)........ 7,117 8,250
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
---------------------
PRO FORMA
ACTUAL AS ADJUSTED
------ -----------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $2,094 30,890
Working capital........................................... 327 29,123
Total assets.............................................. 5,317 34,113
Stockholders' equity...................................... 967 29,763
</TABLE>
-------------------------
(1) See Note 2 of Notes to Financial Statements for a discussion of the
computation of pro forma basic and diluted net loss per share and weighted
average shares outstanding.
6
<PAGE> 7
RISK FACTORS
You should carefully consider the risks described below before buying
shares in this offering. If any of the following risks actually occur, our
business, results of operations and financial condition could be materially
adversely affected, the trading price of our common stock could decline, and you
could lose all or part of your investment.
OUR BUSINESS WILL SUFFER IF OUR MAXMC AND E-MAXMC MEDICAL MANAGEMENT SOLUTIONS
DO NOT ACHIEVE WIDESPREAD MARKET ACCEPTANCE AMONG HEALTHCARE PAYER ORGANIZATIONS
Achieving our growth objectives depends on our maxMC and e-maxMC medical
management solutions achieving widespread market acceptance among healthcare
payer organizations, which is difficult to determine at this time. maxMC was
commercially released in 1997 and is currently used by six payer customers.
Therefore, it currently has limited market acceptance. We expect to complete
testing e-maxMC in early 2000. As a result, e-maxMC has not achieved any market
acceptance at this time and we currently do not have sufficient evidence to
determine whether and to what extent it will achieve market acceptance.
Achieving market acceptance for our medical management solutions will require
ongoing improvement of their features and functionalities and enhanced sales and
marketing efforts. Our business may suffer if we do not gain significant market
share for our maxMC and e-maxMC medical management solutions before our
competitors introduce alternative products with features similar to ours. We
cannot assure you that our medical management solutions will achieve market
acceptance among healthcare payer organizations, or that any pricing strategy
that we develop, such as our planned subscription pricing for payers, will be
economically viable or acceptable to the market.
THE HEALTHCARE INDUSTRY MAY NOT ACCEPT OUR MEDICAL MANAGEMENT SOLUTIONS
To be successful, we must attract a significant number of payer
customers, such as managed care companies, and continue to attract provider
customers, such as hospitals. We cannot determine the extent to which the payer
market will accept our medical management solutions as substitutes for
traditional methods of processing healthcare information and managing patient
care. To date, many healthcare industry participants have been slow to adopt new
technology solutions. We believe that the complex nature of healthcare processes
and communications among healthcare industry participants, as well as concerns
about confidentiality of patient information, may hinder the development and
acceptance of new technology solutions such as our medical management solutions.
In addition, customers using existing information systems in which they have
made significant investments may refuse to adopt our solutions if they perceive
that our solutions will not complement their existing systems. As a result, the
conversion from traditional methods of communication to electronic information
exchange may not occur as rapidly as we expect it will. Even if the conversion
does occur as rapidly as expected, payers and providers may use solutions,
products and services offered by others.
WE HAVE A HISTORY OF QUARTERLY AND ANNUAL FLUCTUATIONS IN OUR REVENUE AND
OPERATING RESULTS, AND EXPECT THESE FLUCTUATIONS TO CONTINUE, WHICH MAY RESULT
IN VOLATILITY IN OUR STOCK PRICE
Our quarterly and annual revenue and operating results have varied
significantly in the past and are likely to vary significantly in the future due
to a number of factors, many of which are outside of our control. The factors
that may cause our quarterly revenue and operating results to fluctuate include:
- fluctuations in demand for our medical management solutions and
related services, including payers' and providers' reluctance to make
large technology purchases as we approach, and shortly following, the
year 2000;
- the timing of customer orders and product implementations,
particularly orders from large customers involving substantial
implementation;
7
<PAGE> 8
- the length of our sales cycle, which varies and is unpredictable;
- the length of our implementation process, which varies, is
unpredictable and often depends on matters outside of our control such
as the customer's ability to commit its resources to the
implementation process;
- our ability to develop, introduce, implement and support new products
and product enhancements;
- the rate of adoption of our medical management solutions, which often
require our customers to change some aspects of the way in which they
have traditionally conducted business;
- announcements and new product introductions by our competitors and
deferrals of customer orders in anticipation of new products, services
or product enhancements introduced by us or our competitors; and
- changes in the prices at which we can sell our medical management
solutions.
Accordingly, you should not rely on the results of any past periods as
an indication of our future performance. It is likely that in some future
periods, our operating results may be below expectations of public market
analysts or investors. If this occurs, our stock price may drop.
IF WE DO NOT HIRE AND RETAIN ADDITIONAL SALES, MARKETING AND IMPLEMENTATION
PERSONNEL OUR BUSINESS MAY SUFFER
Our future growth depends to a significant extent on our ability to hire
additional sales, marketing and implementation personnel. Competition for these
people is intense. We have experienced difficulty in hiring qualified sales and
marketing professionals, as well as database administrators, and we may not be
successful in attracting and retaining such individuals. If we are unable to
hire additional qualified sales and marketing personnel, our targeted revenue
growth may not be achieved. In addition, even if our sales increase, our market
penetration and revenue growth will be limited if we are unable to hire
additional personnel to implement the medical management solutions we sell.
We also believe that our success depends to a significant extent on the
ability of our key personnel to operate effectively, both individually and as a
group. Many of our employees have only recently joined us, and we may experience
high turnover rates in some categories of personnel. If we are unable to
assimilate new employees in a timely and cost-effective manner, the productivity
of those employees and our operating results may suffer.
In addition, companies in our industry whose employees accept positions
with competitors frequently claim that their competitors have engaged in unfair
hiring practices. We may be subject to such claims in the future as we seek to
hire qualified personnel. Any claim of this nature could result in material
litigation. We could incur substantial costs in defending ourselves against
these claims, regardless of their merits.
BECAUSE WE OFFER A LIMITED NUMBER OF PRODUCTS AND OPERATE EXCLUSIVELY IN THE
MARKET FOR MEDICAL MANAGEMENT SOLUTIONS, OUR BUSINESS IS NOT DIVERSIFIED
We depend on a limited number of products and we operate exclusively in
the market for medical management solutions. To date, we have derived
substantially all of our revenue from the sale and associated support of Maxsys
II (and its predecessor Maxsys I), a medical management solution marketed to
hospital providers. We anticipate that substantially all of our revenue in the
foreseeable future will be attributable to continued sales and associated
support of that solution, as well as sales and support of maxMC and e-maxMC, our
medical management solutions marketed to payers. Accordingly, our business is
not diversified. Dependence on a limited product line makes us particularly
susceptible to the successful introduction of, or changes in market preferences
for,
8
<PAGE> 9
competing products. In addition, operating exclusively in the market for medical
management solutions makes us particularly susceptible to downturns in that
market that may be unrelated to the quality or competitiveness of our solutions.
OUR FUTURE SUCCESS DEPENDS IN SIGNIFICANT PART UPON THE CONTINUED SERVICE OF OUR
SENIOR MANAGEMENT PERSONNEL
Eugene Santa Cattarina, our President and Chief Executive Officer,
Stephen Kay, our Chief Operating Officer and Chief Financial Officer, and Bryan
Lang, our founder, Chief Technology Officer and Chief Marketing Officer, have a
great deal of experience in the healthcare information technology industry in
general and in the market for medical management solutions in particular.
Therefore, they are uniquely qualified to manage our business and would be
difficult to replace. We do not have employment contracts with these officers or
any of our other key personnel. As a result, these employees may voluntarily
terminate their employment with us at any time. If any of such persons were to
terminate their employment with us, the search for a replacement could be time
consuming, could distract management from the day-to-day operations of our
business and could delay the implementation of our growth strategy. In addition,
with the exception of two executive officers and one key employee, we do not
maintain key person life insurance on our key personnel.
WE HAVE A LONG HISTORY OF LOSSES AND MAY NEVER BECOME PROFITABLE
We have been in business since 1982 and have incurred significant losses
since that time. We expect to continue to incur losses on an annual basis for
the foreseeable future. As of September 30, 1999, our accumulated deficit was
$12.7 million. We expect to incur increased levels of product development, sales
and marketing and administrative expenses and, as a result, we will need to
increase our revenue significantly to achieve future profitability. Although our
revenue has grown in recent quarters, we may not be able to sustain this growth
and we may not realize sufficient revenue to achieve profitability. Further,
even if we achieve profitability, given the competition and the evolving nature
of the healthcare information technology and Internet market, we may not be able
to sustain or increase profitability on a quarterly or annual basis.
THE LENGTH AND COMPLEXITY OF OUR SALES CYCLE AND PRODUCT IMPLEMENTATION PERIOD
MAY CAUSE US TO EXPEND SUBSTANTIAL TIME, EFFORT AND FUNDS WITHOUT RECEIVING
RELATED REVENUE
We do not control many of the factors that influence our customers'
buying decisions and the implementation of our medical management solutions. The
sales and implementation process for our solutions is lengthy, involves a
significant technical evaluation and requires our customers to commit a great
deal of time and money. The sale and implementation of our solutions are subject
to delays due to healthcare payers' and providers' internal budgets and
procedures for approving large capital expenditures and deploying new
technologies within their organizations. The sales cycle for our solutions is
unpredictable and has generally ranged from six to twenty-four months from
initial contact to contract signing. The time it takes to implement our
solutions is also difficult to predict and has typically ranged from six to
fifteen months from contract execution to the commencement of live operation.
During the sales cycle and the implementation period, we may expend substantial
time, effort and money preparing contract proposals, negotiating the contract
and implementing the solution without receiving any related revenue.
OUR MEDICAL MANAGEMENT SOLUTIONS ARE COMPLEX AND MAY CONTAIN UNDETECTED SOFTWARE
ERRORS, WHICH COULD LEAD TO AN INCREASE IN OUR COSTS OR A REDUCTION IN OUR
REVENUES
Complex software products such as those included in our medical
management solutions frequently contain undetected errors when first introduced
or as new versions are released. We have, from time to time, found errors in the
software products included in our solutions, and in the future we may find
additional errors. In addition, we combine our solutions with software and
9
<PAGE> 10
hardware products from other vendors. As a result, it may be difficult to
identify the source of an error, should one occur. The occurrence of hardware
and software errors, whether caused by our solutions or another vendor's
products, could:
- adversely affect sales of our solutions;
- cause us to incur significant warranty and repair costs;
- divert the attention of our technical personnel away from product
development efforts; and
- cause significant customer relations problems.
BECAUSE OUR MEDICAL MANAGEMENT SOLUTIONS RELY ON TECHNOLOGY THAT WE OWN, THE
PROTECTION OF OUR INTELLECTUAL PROPERTY RIGHTS TO THAT TECHNOLOGY AGAINST
INFRINGEMENT BY COMPETITORS IS CRITICAL TO OUR SUCCESS
To protect our intellectual property rights, we rely on a combination of
copyright, trademark and trade secret laws and restrictions on disclosure. We
also enter into confidentiality or license agreements with our employees,
consultants and corporate partners, and control access to and distribution of
our software, documentation and other proprietary information. Despite our
efforts to protect our proprietary rights, unauthorized parties may copy or
otherwise obtain and use our products or technology. Monitoring unauthorized use
of our solutions is difficult and the steps we have taken may not prevent
unauthorized use of our technology, particularly in foreign countries where the
laws may not protect our proprietary rights as fully as in the United States. If
we are unable to protect our intellectual property from infringement, other
companies may be able to use our intellectual property to offer competitive
products at lower prices, and we may not be able to compete effectively against
these companies. See "Business -- Intellectual Property."
EFFORTS TO PROTECT OUR INTELLECTUAL PROPERTY MAY CAUSE US TO BECOME INVOLVED IN
COSTLY AND LENGTHY LITIGATION
Although we are not currently involved in any intellectual property
litigation, we may be a party to litigation in the future either to protect our
intellectual property or as a result of an alleged infringement by us of the
intellectual property of others. These claims and any resulting litigation could
subject us to significant liability, and could cause our ownership rights in the
technology used in our solutions to be invalidated. Litigation, regardless of
the merits of the claim or outcome, would likely be time-consuming and expensive
to resolve and would divert management time and attention from our core
business.
Any potential intellectual property litigation could also force us to do
one or more of the following:
- stop using the challenged intellectual property or selling our
products or services that incorporate it;
- obtain a license to use the challenged intellectual property or to
sell products or services that incorporate it, which could be costly
or unavailable; and
- redesign those products or services that are based on or incorporate
the challenged intellectual property, which could be costly and time
consuming or could adversely affect the functionality and market
acceptance of our products.
If we are forced to take any of the foregoing actions, we may be unable
to manufacture and sell our solutions, and our revenues would be substantially
reduced.
10
<PAGE> 11
WE MAY FACE SIGNIFICANT COMPETITION FROM, AMONG OTHERS, SOFTWARE VENDORS,
INTERNET COMPANIES AND CONSULTING GROUPS FOCUSED ON THE HEALTHCARE INDUSTRY
The market for our medical management solutions is intensely competitive
and is characterized by rapidly changing technology, evolving user needs and
frequent introduction of new products and services. Certain aspects of our
medical management solutions compete with products and/or services supplied by
our competitors, many of whom may have greater financial, technical, product
development, marketing and other resources than we have. These organizations may
be better known and have more customers than us. We may not be able to compete
successfully against these organizations. The principal companies we compete
against in the payer market include HPR (a subsidiary of McKesson HBOC),
MedDecision and PhyCom. In the hospital provider market, we compete against
MIDS, SoftMed Systems/IHS and others.
We expect that competition will continue to increase as a result of
consolidation in the Internet, information technology and healthcare industries.
See "Business -- Competition."
RAPIDLY CHANGING TECHNOLOGY MAY IMPAIR OUR ABILITY TO DEVELOP AND MARKET OUR
MEDICAL MANAGEMENT SOLUTIONS
Because our business relies on technology, it is susceptible to:
- rapid technological change;
- changing customer needs;
- frequent new product introductions; and
- evolving industry standards.
In particular, the Internet is rapidly evolving and the technology used in
Internet related products is subject to rapid change. As the Internet, computer
and software industries continue to experience rapid technological change, we
must be able to modify our solutions quickly to adapt to such changes. The
demands of operating in such an environment may delay or prevent our development
and introduction of new solutions and additional functions for our existing
solutions that continually meet changing market demands and that keep pace with
evolving industry standards. Moreover, products that are superior to our
solutions could be developed and implemented by competitors and could make our
products obsolete.
OUR BUSINESS WILL SUFFER IF OUR CUSTOMERS ENCOUNTER SYSTEM DELAYS, FAILURES OR
LOSS OF DATA WHEN USING OUR NEW INTERNET-BASED MEDICAL MANAGEMENT SOLUTION, AS A
RESULT OF DISRUPTIONS OR OTHER PROBLEMS WITH INTERNET SERVICES AND INTERNET
ACCESS PROVIDED BY THIRD PARTIES
We believe that our business could be harmed if our customers were to
experience system delays, failures or loss of data. The success of our new
Internet-based medical management solution for payers will depend on the
efficient operation of Internet connections among our payer customers and their
members and associated providers. These connections, in turn, depend on the
efficient operation of Web browsers, Internet connections and Internet service
providers. In the past, Internet users have occasionally experienced
difficulties with Internet connections and services due to system failures. Any
disruption in Internet access provided by third parties could have a material
adverse effect on the performance and the market acceptance of our new Internet-
based solution for payers. Furthermore, we will be dependent on our customers'
hardware suppliers for prompt delivery, installation and service of the
equipment that runs our applications.
SECURITY BREACHES AND SECURITY CONCERNS ABOUT INTERNET TRANSMISSIONS MAY CAUSE
CUSTOMERS TO REFUSE TO PURCHASE OR DISCONTINUE THE USE OF OUR MEDICAL MANAGEMENT
SOLUTIONS
Our customers will retain confidential customer and patient information
using our solutions. An experienced computer user who is able to access our
customers' computer systems
11
<PAGE> 12
could gain access to confidential patient and company information. Therefore, it
is critical that our products remain and are perceived by the marketplace to be
secure. The occurrence of security breaches could cause customers to refuse to
purchase or discontinue use of our solutions. We may be required to expend
significant capital and other resources to protect against such security
breaches or to alleviate problems caused by security breaches. We may also be
required to spend significant resources and encounter significant delays in
upgrading our systems to incorporate more advanced encryption and authentication
technology as it becomes available. Concerns over the security of the Internet
and other online transactions and the privacy of users may also inhibit the
growth of the market for our Internet-based medical management solution.
WE OPERATE IN AN INDUSTRY SUBJECT TO CHANGING REGULATORY INFLUENCES, WHICH MAY
ADVERSELY AFFECT OUR REVENUES AND OPERATING RESULTS
During the past several years, the U.S. healthcare industry has been
subject to an increase in governmental regulation and reform proposals. These
reforms may increase governmental involvement in healthcare, continue to reduce
reimbursement rates and otherwise change the operating environment for our
customers. Our customers may react to these proposals and the uncertainty
surrounding the proposals by curtailing or deferring investments, including
those for our medical management solutions.
Existing state and federal laws regulate the confidentiality of
healthcare information and the circumstances under which such records may be
released. Congress is considering legislation and the Department of Health and
Human Services has proposed regulations that would further regulate the
confidentiality of healthcare information. In addition, the Department of Health
and Human Services has proposed regulations setting forth security standards for
all health plans, clearinghouses and providers to follow with respect to
healthcare information that is electronically transmitted, processed or stored.
While these laws and regulations may not apply to us directly, our products must
comply with existing and future laws and regulations in order to achieve market
acceptance. Such compliance may be difficult and expensive or even impossible to
achieve. Finally, these laws or regulations, when adopted, could restrict the
ability of our customers to obtain, use or disseminate patient information,
which in turn could adversely affect the usefulness of our medical management
solutions.
Because of the Internet's popularity and increasing use, new laws and
regulations with respect to the Internet are becoming prevalent. Such new laws
and regulations could limit the effectiveness and market acceptance of our
Internet-based medical management solutions or could cause us to have to modify
our solutions, which could be expensive and time consuming. See
"Business -- Government Regulation."
CONSOLIDATION IN THE HEALTHCARE INDUSTRY COULD LEAD TO LARGE INTEGRATED
HEALTHCARE DELIVERY SYSTEMS WHO MAY USE THEIR ENHANCED MARKET POWER TO FORCE
PRICE REDUCTIONS FOR OUR MEDICAL MANAGEMENT SOLUTIONS AND RELATED SERVICES
Many healthcare industry participants are consolidating to create
integrated healthcare delivery systems with greater market power. As the
healthcare industry consolidates, competition to provide products and services
to industry participants will become more intense and the importance of
establishing a relationship with large industry participants will become
greater. These industry participants may try to use their market power to
negotiate price reductions for our products and services. If we were forced to
reduce our prices, our operating results could suffer if we cannot achieve
corresponding reductions in our expenses.
12
<PAGE> 13
WE MAY BE SUBJECT TO CLAIMS RELATED TO YEAR 2000 ISSUES, AND YEAR 2000 CONCERNS
COULD ADVERSELY AFFECT DEMAND FOR OUR MEDICAL MANAGEMENT SOLUTIONS
The Year 2000 issue refers to the potential for disruption to business
activities caused by system failures or miscalculations that are triggered by
advancement of date records after 1999. A failure due to Year 2000 issues
involves numerous risks including:
- potential claims from our customers and their constituents;
- negative impact on market demand for medical management solutions
until our customers complete preparations for the calendar change;
- negative impact on demand for our solutions as potential customers
reduce their budgets for new information technology products and
services due to expenditures on their own Year 2000 compliance
efforts; and
- manufacturing, information, facility and development systems problems,
both those that are unique to us and those that affect geographical
areas where our business and employees reside.
Although we believe that our medical management solutions are ready for
the Year 2000 calendar change, we may yet discover that our current medical
management solutions or any new solutions, applications or product enhancements
that we develop in the future have problems because of the Year 2000 calendar
change. In this event, our business may be adversely affected and our customer
relationships may suffer. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Year 2000 Readiness."
BECAUSE WE MAY ENGAGE IN ACQUISITIONS, WE MAY ENCOUNTER ACQUISITION-RELATED
RISKS SUCH AS BECOMING RESPONSIBLE FOR UNEXPECTED LIABILITIES OF ACQUIRED
BUSINESSES AND DIFFICULTIES INTEGRATING EMPLOYEES AND OPERATIONS OF ACQUIRED
BUSINESSES
While we have no current agreements or active negotiations underway, as
part of our strategy, we expect to review opportunities to acquire other
businesses or technologies. In the event of any future acquisitions, we could:
- issue stock that would dilute our stockholders' percentage ownership;
- incur debt; or
- assume liabilities.
These purchases could also involve numerous risks, including:
- problems integrating the purchased operations, technologies or
products;
- unanticipated costs;
- diversion of management's attention from our core business;
- adverse effects on existing business relationships with suppliers and
customers;
- risks associated with entering markets in which we have no or limited
prior experience; and
- potential loss of key employees of purchased organizations.
We may not be able to successfully integrate any businesses, products,
technologies or personnel that we might purchase in the future.
OUR PRINCIPAL STOCKHOLDERS HAVE SIGNIFICANT VOTING POWER, WHICH MAY LIMIT YOUR
ABILITY TO INFLUENCE THE OUTCOME OF DIRECTOR ELECTIONS AND OTHER STOCKHOLDER
MATTERS
Upon completion of this offering, our executive officers and directors
and their affiliates will beneficially own, in the aggregate, approximately
66.4% of our outstanding common stock. As a
13
<PAGE> 14
result, these stockholders will be able to exercise significant control over all
matters requiring stockholder approval, including the election of directors and
approval of significant corporate transactions, which could delay or prevent an
outside party from acquiring or merging with us. See "Principal Stockholders."
PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD PREVENT OR DELAY A
CHANGE IN CONTROL OF OUR COMPANY AND MAY REDUCE THE MARKET PRICE OF OUR COMMON
STOCK
Provisions of our certificate of incorporation and bylaws may
discourage, delay or prevent a merger or acquisition that a stockholder may
consider favorable. These provisions include:
- authorizing our board of directors to issue preferred stock without
stockholder approval;
- prohibiting cumulative voting in the election of directors;
- requiring super-majority voting to effect significant amendments to
our certificate of incorporation and bylaws;
- limiting the ability of stockholders to act by written consent; and
- establishing advance notice requirements for nominations for election
to the board of directors or for proposing matters that can be acted
on by stockholders at stockholder meetings.
Certain provisions of Delaware law also may discourage, delay or prevent
someone from acquiring or merging with us, which may cause the market price of
our common stock to decline.
IF WE ARE UNABLE TO MEET OUR FUTURE CAPITAL REQUIREMENTS, WE MAY BE UNABLE TO
DEVELOP OR ENHANCE OUR MEDICAL MANAGEMENT SOLUTIONS, TAKE ADVANTAGE OF FUTURE
OPPORTUNITIES OR RESPOND TO COMPETITIVE PRESSURES OR UNANTICIPATED EVENTS
We believe that the net proceeds of this offering, together with our
existing cash balances, credit facilities and expected cash flow from
operations, will be sufficient to meet our capital requirements at least through
the next 12 months. However, we may be required, or could elect, to seek
additional capital prior to that time. In the event we are required to raise
additional capital, we may not be able to do so on favorable terms, if at all.
Further, if we issue new equity securities, stockholders may experience
additional dilution or the new equity securities may have rights, preferences or
privileges senior to those of existing holders of common stock. If we cannot
raise capital on acceptable terms, we may be unable to develop or enhance our
products, take advantage of future opportunities or respond to competitive
pressures or unanticipated events. For additional information on our anticipated
future capital requirements, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
SUBSTANTIAL FUTURE SALES OF OUR COMMON STOCK IN THE PUBLIC MARKET MAY DEPRESS
OUR STOCK PRICE
Our current stockholders hold a substantial number of shares, which they
will be able to sell in the public market in the near future. Sales of a
substantial number of shares of our common stock after this offering could cause
our stock price to fall. In addition, the sale of these shares could impair our
ability to raise capital through the sale of additional stock. You should read
"Shares Eligible for Future Sale" for a full discussion of shares that may be
sold in the public market in the future.
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN THE BOOK VALUE OF YOUR
SHARES
The initial public offering price is substantially higher than the book
value per share of our outstanding common stock immediately after the offering.
Accordingly, if you purchase common stock in the offering, you will incur
immediate dilution of approximately $6.76 in the pro forma net tangible book
value per share of our common stock from the price you pay for our common stock.
For additional information on this calculation, see "Dilution."
14
<PAGE> 15
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks
and uncertainties, which may include statements about our:
- plans for implementing our Internet-based strategy, including the
general release of e-maxMC, our new e-medical management solution for
payers;
- business strategy;
- the market opportunity for our solutions;
- plans for hiring additional personnel;
- anticipated sources of funds and the ability to meet future liquidity
and capital requirements; and
- plans, objectives, expectations and intentions contained in this
prospectus that are not historical facts.
When used in this prospectus, the words "expects," "anticipates,"
"intends," "plans," "believes," "seeks," "estimates," and similar expressions
are generally intended to identify forward-looking statements. Because these
forward-looking statements involve risks and uncertainties, actual results could
differ materially from those expressed or implied by these forward-looking
statements for a number of reasons, including those discussed under "Risk
Factors" and elsewhere in this prospectus. We assume no obligation to update any
forward-looking statements.
Landacorp(R) is a registered trademark of our company. We have applied
to register the trademarks Maxsys(TM), maxMC(TM) and e-maxMC(TM). All other
brand names and trademarks appearing in this prospectus are the property of
their respective owners.
15
<PAGE> 16
HOW WE INTEND TO USE THE PROCEEDS FROM THE OFFERING
We expect to receive net proceeds of approximately $28,376,000 from the
sale of 3,500,000 shares of common stock (approximately $32,770,250 if the
underwriters exercise their over-allotment option in full), at the initial
public offering price of $9.00 per share, after deducting underwriting discounts
and commissions and estimated offering expenses.
We expect to use the net proceeds from this offering for working capital
and other general corporate purposes, including expenditures for:
- the development and implementation of new products;
- increasing the size of our sales and marketing organization; and
- pursuing strategic partnerships and acquisitions that are
complementary to our current and future business and product lines.
Although we have no current commitments or agreements with respect to any such
partnerships or acquisitions, we might in the future use a portion of the net
proceeds from this offering to pay for such transactions. Pending these uses,
the net proceeds of this offering will be invested in short-term,
investment-grade, interest-bearing investments or accounts.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock.
We currently intend to retain all available funds and any future earnings for
use in the operation and expansion of our business and do not anticipate paying
any cash dividends in the foreseeable future.
16
<PAGE> 17
CAPITALIZATION
The following table sets forth the capitalization of Landacorp as of
September 30, 1999:
- on an actual basis;
- on a pro forma basis to reflect the conversion of 6,800,000
outstanding shares of preferred stock to common stock on a one-for-one
basis; and the exercise of outstanding warrants to purchase 350,000
shares of common stock at an exercise price of $1.20.
- on a pro forma basis as adjusted to reflect the sale by Landacorp of
3,500,000 shares of common stock offered hereby at an assumed public
offering price of $9.00 per share and the receipt of the estimated net
proceeds of such sale after deducting underwriting discounts and
commissions and estimated offering expenses.
The following information regarding the number of shares of common stock
to be outstanding after this offering is based on the number of shares
outstanding as of September 30, 1999 and does not include:
- 881,315 shares of our common stock subject to outstanding options at a
weighted average exercise price of $1.26 per share; and
- 659,645 additional shares of our common stock reserved for future
issuance under our stock option plans.
The information below is qualified by and should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and the notes to those statements
appearing at the end of this prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
--------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------------ ------------ ------------
<S> <C> <C> <C>
Long-term note payable, net of current
portion:.................................. $ 170,000 $ 170,000 $ 170,000
Stockholders' equity:
Preferred stock, $0.001 par value;
8,000,000 shares authorized; 6,800,000
shares issued and outstanding, actual;
no shares issued and outstanding, pro
forma; no shares issued and
outstanding, pro forma as adjusted..... $ 7,000 $ -- $ --
Common stock, $0.001 par value, 15,000,000
shares authorized; 2,612,000 shares
issued and outstanding, actual,
9,762,000 shares issued and
outstanding, pro forma; 13,262,000
shares issued and outstanding, pro
forma as adjusted...................... 3,000 10,000 14,000
Additional paid-in capital................ 16,919,000 17,339,000 45,711,000
Notes receivable from officers............ (189,000) (189,000) (189,000)
Unearned stock-based compensation......... (3,103,000) (3,103,000) (3,103,000)
Accumulated deficit....................... (12,670,000) (12,670,000) (12,670,000)
------------ ------------ ------------
Total stockholders' equity........ $ 967,000 $ 1,387,000 $ 29,763,000
============ ============ ============
Total capitalization.............. $ 1,137,000 $ 1,557,000 $ 29,933,000
============ ============ ============
</TABLE>
17
<PAGE> 18
DILUTION
Our pro forma net tangible book value at September 30, 1999, after
giving effect to the conversion of all outstanding shares of preferred stock
into common stock on a one-for-one basis and the exercise of outstanding
warrants to purchase 350,000 shares of common stock, was $1,316,000 or $0.13 per
share. Pro forma net tangible book value per share represents the amount of our
total tangible assets less total liabilities divided by the pro forma number of
shares of common stock outstanding. Dilution in pro forma net tangible book
value per share represents the difference between the amount per share paid by
purchasers of common stock in this offering and the net tangible book value per
share of our common stock immediately afterwards. Assuming our sale of 3,500,000
shares of common stock offered by this prospectus at an assumed initial public
offering price of $9.00 per share, and after deducting underwriting discounts
and commissions and estimated offering expenses, our pro forma net tangible book
value at September 30, 1999 would have been approximately $29,692,000 or $2.24
per share. This represents an immediate decrease in net tangible book value of
$6.76 per share to new investors. The following table illustrates this dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $ 9.00
Pro forma net tangible book value per share at September
30, 1999............................................... $0.13
Increase per share attributable to new investors.......... 2.11
As adjusted pro forma net tangible book value per share
after this offering....................................... 2.24
Dilution per share to new investors......................... $ 6.76
</TABLE>
The following table summarizes, on a pro forma basis at September 30,
1999, the differences between the number of shares of common stock purchased
from us, the total consideration paid and the average price per share paid by
existing stockholders and by new investors purchasing shares in this offering.
We have assumed an initial public offering price of $9.00 per share, and we have
not deducted estimated underwriting discounts and commissions and estimated
offering expenses in our calculations.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders.......... 9,762,210 73.6% $11,605,000 26.9% $1.79
New investors.................. 3,500,000 26.4 31,500,000 73.1 9.00
--------- ------- ----------- -------
Total................ 13,262,210 100.0% $43,105,000 100.0% 3.25
========= ======= =========== =======
</TABLE>
The foregoing discussion and tables assume no exercise of any
outstanding stock options. At September 30, 1999, there were outstanding options
to purchase an aggregate of 881,315 shares of common stock at a weighted average
exercise price of $1.26 per share. To the extent any stock options are
exercised, there will be further dilution to new investors. See "Capitalization"
and "Management -- Benefit Plans."
If the underwriters exercise their over-allotment in full, the following
will occur:
- the percentage of shares of common stock held by existing stockholders
will decrease to approximately 70.8% of the total number of shares of
our common stock outstanding after this offering; and
- the number of shares held by new investors will increase to 4,025,000,
or approximately 29.2% of the total number of shares of our common
stock outstanding after this offering.
18
<PAGE> 19
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected financial data should be read in conjunction with
our financial statements and their related notes and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere in this prospectus. The statement of operations data for the years
ended December 31, 1996, 1997 and 1998, and the balance sheet data as of
December 31, 1997 and 1998, are derived from the audited financial statements
included at the end of this prospectus. The balance sheet data as of December
31, 1995 and 1996 are derived from audited financial statements not included
elsewhere in this prospectus. The statement of operations data for the years
ended December 31, 1994 and 1995, and the nine month periods ended September 30,
1998 and 1999, and the balance sheet data as of December 31, 1994 and September
30, 1999 are derived from our unaudited financial statements and, in the opinion
of management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of Landacorp's financial position
and results of operations. The results of operations for any interim period are
not necessarily indicative of results to be expected for a full year.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------- ------------------
1994 1995 1996 1997 1998 1998 1999
------ ------ ------- ------- ------- ------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
System sales........................................ $ 886 $ 583 $ 1,007 $ 3,136 $ 4,967 $ 3,835 $ 5,633
Support services.................................... 1,089 980 932 902 1,250 813 1,434
------ ------ ------- ------- ------- ------- -------
Total revenues.................................... 1,975 1,563 1,939 4,038 6,217 4,648 7,067
------ ------ ------- ------- ------- ------- -------
Cost of revenues:
System sales........................................ 456 282 499 1,097 2,244 1,626 2,082
Support services.................................... 263 235 285 299 419 297 429
------ ------ ------- ------- ------- ------- -------
Total cost of revenues............................ 719 517 784 1,396 2,663 1,923 2,511
------ ------ ------- ------- ------- ------- -------
Gross profit.......................................... 1,256 1,046 1,155 2,642 3,554 2,725 4,556
Operating expenses:
Sales and marketing................................. 382 376 782 1,176 1,588 1,103 2,005
Research and development............................ 905 1,127 1,269 1,294 1,393 1,024 1,139
General and administrative.......................... 565 408 801 975 1,385 999 1,472
Stock-based compensation............................ -- -- -- -- 1,173 646 1,464
------ ------ ------- ------- ------- ------- -------
Total operating expenses.......................... 1,852 1,911 2,852 3,445 5,539 3,772 6,080
------ ------ ------- ------- ------- ------- -------
Loss from operations.................................. (596) (865) (1,697) (803) (1,985) (1,047) (1,524)
Interest and other income, net........................ -- -- -- -- 101 75 76
Interest expense...................................... (27) (52) (200) (208) (26) (26) (4)
------ ------ ------- ------- ------- ------- -------
Net loss.............................................. $ (623) $ (917) $(1,897) $(1,011) $(1,910) $ (998) $(1,452)
====== ====== ======= ======= ======= ======= =======
Net loss per share:
Basic and diluted................................... $(0.60) $(0.86) $ (1.74) $ (0.91) $ (1.83) $ (0.95) $ (1.32)
====== ====== ======= ======= ======= ======= =======
Weighted average shares............................. 1,040 1,061 1,090 1,110 1,043 1,056 1,100
Pro forma net loss per share(1):
Basic and diluted(unaudited)........................ $ (0.27) $ (0.18)
======= =======
Weighted average shares(unaudited).................. 7,117 8,250
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------ SEPTEMBER 30,
1994 1995 1996 1997 1998 1999
----------- ------- ------- ------- ------ -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................. $ 45 $ 81 $ -- $ 142 $2,032 $2,094
Working capital (deficit)............................. (3,007) (2,700) (4,482) (5,545) 455 327
Total assets.......................................... 930 613 1,536 1,181 4,313 5,317
Notes payable and accrued interest to stockholders.... 1,697 1,588 2,035 2,716 -- --
Stockholders' equity (deficit)........................ (2,753) (2,420) (4,269) (5,259) 899 967
</TABLE>
-------------------------
(1) See Note 2 of Notes to Financial Statements for a discussion of the
computation of pro forma basic and diluted net loss per share and weighted
average shares outstanding.
19
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
All statements, trend analyses and other information contained in the
following discussion relative to markets for our products and trends in
revenues, gross margins and anticipated expense levels, as well as other
statements including words such as "anticipate," "believe," "could" "estimate,"
"expect" "intend" and "plan" and other similar expressions, constitute
forward-looking statements. These forward-looking statements are subject to
business and economic risks and uncertainties, and our actual results of
operations may differ materially from the forward-looking statements. Factors
that could cause or contribute to such differences include, but are not limited
to, those discussed in "Risk Factors" as well as other risks and uncertainties
referenced in this prospectus.
OVERVIEW
We offer business-to-business e-medical management solutions to
healthcare payers and providers that are designed to help our clients control
the cost and improve the quality of healthcare delivery. Our applications
automate and streamline administrative and business processes and enable
real-time interaction among various healthcare participants. We currently
provide our maxMC solution to six payers with more than seven million members
and our Maxsys solutions to more than 200 hospital providers. We recently began
offering e-maxMC, our Internet-based medical management solution for payers. We
have successfully tested e-maxMC internally and expect to complete beta testing
of the application in early 2000.
We have historically derived revenues from the installation and
licensing of our maxMC and Maxsys solutions, sublicensing third-party software
applications as part of system implementations and delivery of post-contract
customer support, training and consulting services. We are currently focusing
our primary development, sales and marketing efforts on our e-maxMC, maxMC and
Maxsys II solutions. Although we do not anticipate future system sales or
enhancements of Maxsys I, we continue to provide maintenance services to, and
receive maintenance fees from, customers who purchased this product in the past.
We plan to continue to support Maxsys I for the foreseeable future as a service
to such customers.
Traditionally, system sales revenues and associated costs have been
recognized using the percentage-of-completion method, with labor hours incurred
relative to total estimated contract hours as the measure of progress towards
completion. Revenues from sublicensing of third-party software are recognized
upon installation of such software. Support services are recognized ratably over
the support period. Revenues from training and consulting are recognized as such
services are delivered.
We are introducing a new subscription-based fee structure for our
e-maxMC and maxMC solutions that would provide for implementation services at a
fixed hourly rate and the licensing of installed systems and post customer
contract support through a monthly subscription fee based upon the number of
members covered by the payer organization. If subscription-based contracts are
entered into, we will recognize the fair value of the implementation services as
such services are delivered and will recognize subscription fees on a monthly
basis.
We expect to expand our operations and employee base, including our
sales, marketing, research and development, implementation, and support services
resources. In particular, we intend to expand our sales force significantly to
market our maxMC, e-maxMC and Maxsys II solutions to payer organizations and
hospitals. To accelerate the implementation of elements of our strategy, we
intend to target and pursue strategic acquisitions and relationships, such as
marketing alliances with vendors of complementary products and services and
partnerships with Internet providers of healthcare content, disease management
and health-related e-commerce services. Investigating or entering into any such
strategic relationships could lead to additional expenditures.
20
<PAGE> 21
During the year ended December 31, 1998 and the nine month period ended
September 30, 1999, we recorded unearned compensation totaling $4,166,000 and
$1,574,000, respectively, in connection with the grant of stock-based awards to
employees and directors. These amounts are being amortized over the four-year
vesting period of the related options. These options were issued to create
incentives for continued performance. Of the total unearned compensation,
$1,173,000 was amortized in 1998 and $1,464,000 was amortized in the nine months
ended September 30, 1999. We expect aggregate amortization to be $493,000 in the
fourth quarter of 1999, $1,503,000 in 2000, $765,000 in 2001, $289,000 in 2002
and $54,000 in 2003. Unearned compensation expense will be reduced for future
periods to the extent that options are terminated prior to full vesting.
RESULTS OF OPERATIONS
The following table presents the statement of operations data as a
percentage of total revenues:
<TABLE>
<CAPTION>
Percentage of Revenues
-----------------------------------------
Nine Months
Ended
Year Ended December 31, September 30,
----------------------- --------------
1996 1997 1998 1998 1999
----- ----- ----- ----- -----
(unaudited)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
System sales..................................... 51.9% 77.7% 79.9% 82.5% 79.7%
Support services................................. 48.1 22.3 20.1 17.5 20.3
----- ----- ----- ----- -----
Total revenues................................ 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
Cost of revenues:
System sales..................................... 25.8 27.2 36.1 35.0 29.4
Support services................................. 14.7 7.4 6.7 6.4 6.1
----- ----- ----- ----- -----
Total cost of revenues........................ 40.5 34.6 42.8 41.4 35.5
----- ----- ----- ----- -----
Gross profit....................................... 59.5 65.4 57.2 58.6 64.5
----- ----- ----- ----- -----
Operating expenses:
Sales and marketing.............................. 40.3 29.1 25.5 23.7 28.4
Research and development......................... 65.4 32.0 22.4 22.0 16.1
General and administrative....................... 41.3 24.1 22.3 21.5 20.8
Stock-based compensation......................... -- -- 18.9 13.9 20.7
----- ----- ----- ----- -----
Total operating expenses...................... 147.0 85.2 89.1 81.1 86.0
----- ----- ----- ----- -----
Loss from operations............................... (87.5) (19.8) (31.9) (22.5) (21.5)
Interest and other income, net..................... -- -- 1.6 1.6 1.1
Interest expense................................... (10.3) (5.2) (0.4) (0.6) (0.1)
----- ----- ----- ----- -----
Net loss........................................... (97.8)% (25.0)% (30.7)% (21.5)% (20.5)%
===== ===== ===== ===== =====
</TABLE>
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Revenues. During the nine months ended September 30, 1999, system sales
revenues were $5,633,000, an increase of $1,798,000 or 47% from system sales
revenues of $3,835,000 during the nine months ended September 30, 1998. This
increase resulted from growth in the volume of maxMC and Maxsys II contracts and
an increase in the value of maxMC contracts. During the nine months ended
September 30, 1999, two customers accounted for 23% and 16% of system sales
revenues.
21
<PAGE> 22
During the nine months ended September 30, 1999, support services
revenues were $1,434,000, an increase of $621,000 or 76% from support services
revenues of $813,000 during the nine months ended September 30, 1998. This
increase in support services revenues resulted from an increase in the number of
support contracts sold for completed maxMC and Maxsys II contracts, partially
offset by declines in the number of Maxsys I support customers.
We believe that sales to hospital providers have decreased due to their
internal Year 2000 issues. We expect this trend to continue through the first
quarter of 2000.
Cost of Revenues. Cost of systems sales revenues consists principally of
costs incurred in the implementation of our software products, including
personnel costs, non-reimbursed travel expenditures, related department
overhead, amortization of capitalized software development costs, costs of third
party software products, and depreciation on equipment. Cost of system sales
increased by $456,000 or 28% from $1,626,000, representing 42% of system sales
revenues, during the nine months ended September 30, 1998 to $2,082,000,
representing 37% of system sales revenues, during the nine months ended
September 30, 1999. This cost increase resulted from an increase in personnel
costs as employees were added to perform software implementations and additional
license fees were paid to third party software vendors resulting from an
increase in the volume of completed software contracts. The increase in the
gross margin on system sales from 58% during the nine months ended September 30,
1998 to 63% during the nine months ended September 30, 1999 resulted from
implementation efficiencies realized from the increased volume of software
contracts and the increased size of individual software contracts. We expect
that cost of system sales revenues will continue to increase as we add personnel
to meet anticipated increases in contract volume. We cannot yet determine the
impact of these increased costs on our gross margins.
Cost of support services revenues consists of personnel costs, support
costs for third party software licenses, related department overhead and
depreciation on equipment. Cost of support services revenues increased by
$132,000 or 44% from $297,000, representing 37% of support services revenues,
during the nine months ended September 30, 1998 to $429,000, representing 30% of
support services revenues, during the nine months ended September 30, 1999. This
increase in dollars resulted from an increase in salaries, benefits and other
personnel-related expenses as we increased the size of the support services
staff due to the increased volume of customers purchasing support contracts. The
increase in the gross margin on support services from 63% during the nine months
ended September 30, 1998 to 70% during the nine months ended September 30, 1999
resulted from efficiencies realized from additional support contracts sold for
completed Maxsys II and maxMC contracts. We expect that cost of support services
revenues will continue to increase in dollar amount as we continue to expand our
customer support department to meet anticipated customer demand. We cannot yet
determine the impact of these increased costs on our gross margins.
Research and Development. Research and development expenses consist of
personnel costs, related department overhead and depreciation on equipment.
Research and development expenses increased $115,000 or 11% from $1,024,000,
representing 22% of total revenues, during the nine months ended September 30,
1998 to $1,139,000, representing 16% of total revenues, during the nine months
ended September 30, 1999. This increase in dollars resulted from an increase in
salaries, benefits and other personnel-related expenses as we increased the size
of the research and development staff. We anticipate that we will continue to
devote substantial resources to research and development and that such expenses
will increase in dollar amounts. We cannot yet determine the impact of these
increased costs on our total operating expenses.
Sales and Marketing. Sales and marketing expenses consist principally of
compensation for our sales and marketing personnel, advertising, trade show and
other promotional costs, and department overhead. Sales and marketing expenses
increased $902,000 or 82% from $1,103,000, representing 24% of total revenues,
during the nine months ended September 30, 1998 to $2,005,000,
22
<PAGE> 23
representing 28% of total revenues, during the nine months ended September 30,
1999. This increase resulted from increased salaries, benefits and other
personnel-related expenses due to growth in the number of sales and marketing
personnel, increases in sales commissions due to an increase in the volume of
customer contracts, increases in travel costs due to the increased headcount,
and increases in trade shows and other marketing expenses incurred to build
additional product awareness. We expect that sales and marketing expenses will
continue to increase in dollar amounts as we continue to expand our sales and
marketing efforts, continue to add personnel and increase promotional
activities. We cannot yet determine the impact of these increased expenses on
our total operating expenses.
General and Administrative. General and administrative expenses consist
of compensation for personnel, fees for outside professional services, and
allocated occupancy and overhead costs. General and administrative expenses
increased $473,000 or 47% from $999,000, representing 21% of total revenues,
during the nine months ended September 30, 1998 to $1,472,000, representing 21%
of total revenues, during the nine months ended September 30, 1999. This
increase in dollars was due to an increase in the number of employees, higher
professional service fees, and increased occupancy costs due to the commencement
of our Atlanta office lease payment in December 1998. We believe that our
general and administrative expenses will continue to increase in dollar amounts
as a result of our growing operations, the commencement of a new lease for
expanded facilities in Chico in September 1999 and the expenses associated with
operating as a public company. We cannot yet determine the impact of these
increased expenses on our total operating expenses.
Stock-based Expenses. During the nine months ended September 30, 1999,
we recorded aggregate unearned compensation in the amount of $1,574,000 in
connection with the grant of certain stock options during 1999. Amortization of
stock-based compensation expense totaled $1,464,000 during the nine month period
ended September 30, 1999. See Note 8 of Notes to Financial Statements.
Interest and Other Income and Interest Expense. Interest and other
income consists primarily of earnings on our cash and cash equivalents. Interest
and other income amounted to $75,000 and $76,000 for the nine month periods
ended September 30, 1998 and 1999, respectively. During the nine month period
ended September 30, 1998, we incurred interest expense of $26,000 on obligations
to stockholders of the Company. The obligations were paid in full in March 1998.
Income Taxes. No income tax provision was recorded in the nine months
ended September 30, 1998 or 1999 due to the operating losses incurred.
COMPARISON OF YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
Revenues. System sales revenues increased by $2,129,000 or 211% from
$1,007,000 in 1996 to $3,136,000 in 1997 and by $1,831,000 or 58% to $4,967,000
in 1998. This increase in revenues resulted from growth in the volume of maxMC
and Maxsys II contracts. The increase from 1997 to 1998 was also due to an
increase in the value of maxMC contracts. In 1996, one customer accounted for
12% of system sales revenues and in 1998, one customer accounted for 13% of
system sales revenues. No customer accounted for more than 10% of system sales
revenues in 1997.
Support services revenues decreased $30,000 or 3% from $932,000 in 1996
to $902,000 in 1997 and increased by $348,000 or 39% to $1,250,000 in 1998. The
decrease from 1996 to 1997 in support services revenues resulted from the
decline in the total number of Maxsys I customers purchasing support contracts.
The increase from 1997 to 1998 in support services revenues resulted from
additional support contracts obtained as a result of the completion of maxMC and
Maxsys II software implementations, partially offset by a decline in Maxsys I
support revenues resulting from a continued decline in the total number of
Maxsys I support customers.
Cost of Revenues. Cost of system sales increased $598,000 or 120% from
$499,000, representing 50% of system sales revenues, in 1996 to $1,097,000,
representing 35% of system sales
23
<PAGE> 24
revenues, in 1997 and by $1,147,000 or 105% to $2,244,000, representing 45% of
system sales revenues, in 1998. This increase in dollars resulted primarily from
an increase in personnel-related expenses arising from an increase in headcount
and, to a lesser extent from an increase in license fees paid to third party
software vendors resulting from an increase in the volume of completed
implementations. The increase in the gross margin on system sales from 50% in
1996 to 65% in 1997 resulted from an increase in contract volume without a
proportionate increase in headcount. The decrease in the gross margin on system
sales from 65% in 1997 to 55% in 1998 resulted from an increase in headcount as
personnel were added in anticipation of increases in the volume of software
contracts.
Cost of support services revenues increased by $14,000 or 5% from
$285,000, representing 31% of support services revenues, in 1996 to $299,000,
representing 33% of support services revenues, in 1997 and by $120,000 or 40% to
$419,000, representing 34% of support services revenues, in 1998. This increase
in dollars resulted from an increase in personnel-related expenses as we
increased the size of the support services staff due to the increased volume of
customers purchasing support contracts. The decrease in the gross margin on
support services from 69% in 1996 to 67% in 1997 resulted from the decline in
support services revenues due a decrease in the total number of Maxsys I
customers. The decrease in gross margin on support services from 67% in 1997 to
66% in 1998 resulted from an increase in headcount to support the increase in
customers purchasing support contracts.
Research and Development. Research and development expenses increased by
$25,000 or 2% from $1,269,000, representing 65% of total revenues, in 1996 to
$1,294,000, representing 32% of total revenues, in 1997 and by $99,000 or 8% to
$1,393,000, representing 22% of total revenues in 1998. This increase in dollars
resulted from an increase in personnel-related expenses as we increased the size
of the research and development staff.
Sales and Marketing. Sales and marketing expenses increased by $394,000
or 50% from $782,000, representing 40% of total revenues, in 1996 to $1,176,000,
representing 29% of total revenues, in 1997 and by $412,000 or 35% to
$1,588,000, representing 26% of total revenues, in 1998. This increase in
dollars resulted from increased personnel-related expenses due to growth in the
number of sales and marketing personnel, increases in sales commissions due to
an increase in the volume of software contracts, increases in travel costs due
to the increased headcount, and increases in trade shows and other marketing
expenses to build additional product awareness.
General and Administrative. General and administrative expenses
increased by $174,000 or 22% from $801,000, representing 41% of total revenues,
in 1996 to $975,000, representing 24% of total revenues, in 1997 and by $410,000
or 42% to $1,385,000, representing 22% of total revenues, in 1998. This increase
in dollars was due to an increase in the number of employees and higher
professional service fees. The increase from 1997 to 1998 was also due to
increased employee relocation expenses.
Stock-based Expenses. During 1998, we recorded aggregate unearned
compensation in the amount of $4,166,000 in connection with the grant of certain
stock options during 1998. Related amortization totaled $1,173,000 during 1998.
See Note 8 of Notes to Financial Statements.
INTEREST AND OTHER INCOME AND INTEREST EXPENSE
The increase in interest income of $101,000 results entirely from
interest earned on the proceeds from the Company's Series D Preferred Stock
financing. Interest expense increased from $200,000 in 1996 to $208,000 in 1997
due to additional borrowings from stockholders, and decreased to $26,000 in 1998
due to the repayment of stockholder borrowings using proceeds from the sale of
preferred stock in February 1998.
24
<PAGE> 25
INCOME TAXES
No provision for federal and state income taxes was recorded as we
incurred net operating losses in 1996, 1997 and 1998. As of December 31, 1998,
we had net operating loss carryforwards for federal tax purposes of $6,309,000
and for state tax purposes of $1,442,000. These federal and state tax loss
carryforwards are available to reduce future taxable income and expire at
various dates through fiscal 2013. Under the provisions of the Internal Revenue
Code, certain substantial changes in our ownership may limit the amount of net
operating loss carryforwards that could be utilized annually in the future to
offset taxable income. We have not recognized a deferred tax asset on our
balance sheet. See Note 5 of Notes to Financial Statements.
QUARTERLY FINANCIAL RESULTS
The following table presents our quarterly results of operations for
each of the seven quarters in the period ended September 30, 1999. You should
read the following table in conjunction with our financial statements and the
related notes included in this prospectus. We have prepared this unaudited
information on the same basis as the audited financial statements. This table
includes all adjustments, consisting only of normal recurring adjustments, that
we consider necessary for a fair presentation of our financial position and
operating results for the quarters presented. You should not draw any
conclusions about our future results from the results of operations for any
quarter.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1998 1998 1998 1998 1999 1999 1999
------------- ------------- ------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF
OPERATIONS DATA:
Revenues:
System sales....... $ 677 $1,392 $1,766 $1,132 $1,688 $2,037 $1,908
Support services... 239 275 299 437 444 482 508
------ ------ ------ ------ ------ ------ ------
Total revenues... 916 1,667 2,065 1,569 2,132 2,519 2,416
------ ------ ------ ------ ------ ------ ------
Cost of revenues:
System sales....... 432 522 672 618 707 679 696
Support services... 90 100 107 122 145 143 141
------ ------ ------ ------ ------ ------ ------
Total cost of
revenues....... 522 622 779 740 852 822 837
------ ------ ------ ------ ------ ------ ------
Gross profit......... 394 1,045 1,286 829 1,280 1,697 1,579
------ ------ ------ ------ ------ ------ ------
Operating expenses:
Sales and
marketing........ 363 394 346 485 654 673 678
Research and
development...... 335 318 371 369 368 359 412
General and
administrative... 264 274 461 386 427 469 576
Stock-based
compensation..... 51 164 431 527 517 463 484
------ ------ ------ ------ ------ ------ ------
Total operating
expenses....... 1,013 1,150 1,609 1,767 1,966 1,964 2,150
------ ------ ------ ------ ------ ------ ------
Loss from
operations......... (619) (105) (323) (938) (686) (267) (571)
Interest and other
income, net........ 16 33 26 26 22 27 27
Interest expense..... (26) -- -- -- -- -- (4)
------ ------ ------ ------ ------ ------ ------
Net loss............. $ (629) $ (72) $ (297) $ (912) $ (664) $ (240) $ (548)
====== ====== ====== ====== ====== ====== ======
</TABLE>
25
<PAGE> 26
<TABLE>
<CAPTION>
AS A PERCENTAGE OF TOTAL REVENUES
-------------------------------------------------------------------------------------------------------------
QUARTER ENDED
-------------------------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1998 1998 1998 1998 1999 1999 1999
------------- ------------- ------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
System sales....... 73.9% 83.5% 85.5% 72.1% 79.2% 80.9% 79.0%
Support services... 26.1 16.5 14.5 27.9 20.8 19.1 21.0
------ ------ ------ ------ ------ ------ ------
Total revenues... 100.0 100.0 100.0 100.0 100.0 100.0 100.0
------ ------ ------ ------ ------ ------ ------
Cost of revenues:
System sales....... 47.2 31.3 32.5 39.4 33.2 26.9 28.8
Support services... 9.8 6.0 5.2 7.8 6.8 5.7 5.8
------ ------ ------ ------ ------ ------ ------
Total cost of
revenues....... 57.0 37.3 37.7 47.2 40.0 32.6 34.6
------ ------ ------ ------ ------ ------ ------
Gross profit......... 43.0 62.7 62.3 52.8 60.0 67.4 65.4
------ ------ ------ ------ ------ ------ ------
Operating expenses:
Sales and
marketing........ 39.6 23.6 16.7 30.9 30.7 26.7 28.1
Research and
development...... 36.6 19.1 18.0 23.5 17.3 14.3 17.1
General and
administrative... 28.8 16.4 22.3 24.6 20.0 18.6 23.8
Stock-based
compensation..... 5.6 9.9 20.9 33.6 24.2 18.4 20.0
------ ------ ------ ------ ------ ------ ------
Total operating
expenses....... 110.6 69.0 77.9 112.6 92.2 78.0 89.0%
------ ------ ------ ------ ------ ------ ------
Loss from
operations......... (67.6) (6.3) (15.6) (59.8) (32.2) (10.6) (23.6)
Interest and other
income, net........ 1.7 2.0 1.2 1.7 1.1 1.1 1.1
Interest expense..... (2.8) -- -- -- -- -- (.2)
------ ------ ------ ------ ------ ------ ------
Net loss............. (68.7%) (4.3%) (14.4%) (58.1%) (31.1%) (9.5%) (22.7%)
------ ------ ------ ------ ------ ------ ------
</TABLE>
Our revenues in the fourth quarter have generally been lower than those
in the third quarter due to staff vacations and our customers' holiday
schedules, which impact the progress of our implementation efforts.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations through net cash
generated from operating activities, and private sales of common and preferred
stock, with net proceeds totaling $11.1 million. As of September 30, 1999, we
had $2.1 million in cash and cash equivalents and $327,000 in working capital
with outstanding debt totaling $255,000.
Net cash used in operating activities was $359,000 in 1996, $17,000 in
1997 and $2.4 million in 1998. Net cash provided by operating activities was
$435,000 in the nine months ended September 30, 1999. Net cash used to fund
operating activities in 1996 reflects net losses before non-cash charges for
depreciation and amortization and increases in accounts receivable, offset in
part by increases in deferred revenues, and increases in accounts payable and
accrued expenses. Net cash used to fund operating activities in 1997 reflects
net losses before non-cash charges for depreciation and amortization and
decreases in deferred revenue, offset in part by increases in accounts payable
and accrued expenses, and decreases in accounts receivable. Net cash used to
fund operating activities in 1998 reflects net losses before non-cash charges
for depreciation and amortization, amortization of unearned stock-based
compensation, increases in accounts receivable, decreases in deferred revenue,
and decreases in accounts payable and accrued expenses. Net cash provided by
operating activities in the nine months ended September 30, 1999 consists of net
losses before non-cash charges for depreciation and amortization, and increases
to accounts payable, accrued expenses and deferred revenue.
Net cash used in investing activities was $161,000 in 1996, $235,000 in
1997, $397,000 in 1998 and $636,000 for the nine months ended September 30,
1999. Investing activities consist
26
<PAGE> 27
primarily of purchases of computer equipment, office furniture and leasehold
improvements, and additions to capitalized software development costs.
Net cash generated from financing activities was $439,000 in 1996,
$394,000 in 1997, $4.7 million in 1998 and $263,000 for the nine months ended
September 30, 1999. Net cash generated from financing activities in 1996 and
1997 resulted almost entirely from net proceeds from bank and stockholder
borrowings. Net cash generated from financing activities in 1998 resulted from
the issuance of preferred stock and common stock, partially offset by principal
payments on stockholder notes payable.
In February 1999, we obtained a line of credit that allows maximum
borrowings of $2.0 million. The agreement allows us to designate up to $300,000
of the maximum borrowings as a term note. Advances on the line of credit and the
term note are secured by all of our tangible and intangible personal property.
At September 30, 1999, no credit had been drawn down against the line of credit,
and $255,000 was outstanding on the term note, which was drawn to finance the
purchase of certain fixed assets.
We signed a lease for a new principal facility in March 1999. Lease
payments commenced in September 1999 and will continue for eighty-four months,
resulting in aggregate lease expenses of approximately $34,000 per quarter.
We expect to experience significant growth in our operating expenses for
the foreseeable future in order to execute our business plan. As a result, we
anticipate that operating expenses and planned capital expenditures will
constitute a material use of our cash resources. In addition, we may utilize
cash resources to fund acquisitions or investments in other businesses,
technologies or product lines. We believe that available cash and cash
equivalents and the net proceeds from the sale of the common stock in this
offering will be sufficient to meet our working capital and operating expense
requirements for at least the next twelve months. Thereafter, we may require
additional funds to support our working capital and operating expense
requirements or for other purposes and may seek to raise such additional funds
through public or private debt or equity financings. There can be no assurance
that such additional financing will be available, or if available, will be on
reasonable terms and not dilutive to our stockholders.
YEAR 2000 READINESS
Many currently installed computer systems, software products and other
control devices are unable to accept four digit entries to distinguish 21st
century dates from 20th century dates. As a result, many companies' computer
systems, software products and control devices may need to be upgraded or
replaced in order to operate properly in 2000 and beyond.
We have designed our solutions to be Year 2000 compliant. The
third-party software vendors whose products we sublicense to our customers have
provided us with assurances that their software is also Year 2000 compliant.
However, there can be no assurance that our solutions and the software we
sublicense to our customers do not contain undetected errors or defects
associated with Year 2000 date functions. If such errors or defects do exist, we
may incur material costs to resolve them.
We have assessed our material internal information technology systems,
including our own solutions and third-party software and hardware technology,
and our non-information technology systems. We have completed the majority of
the necessary testing of our critical information technology systems and
non-information technology systems. To the extent that we are not able to test
the technology provided by third-party vendors, we have sought assurances from
these vendors that their systems are Year 2000 compliant. We are not currently
aware of any material operational issues or costs associated with preparing our
internal information technology and non-information technology systems for the
Year 2000. However, there can be no assurance that we will not experience
material unanticipated problems and costs caused by undetected errors or defects
in the technology used in our internal information technology and
non-information technology systems.
27
<PAGE> 28
If our customers are not Year 2000 compliant, they may experience
material costs to remedy problems, and they could potentially face litigation
costs if problems with their information or other systems effect patient care.
In either case, Year 2000 issues could reduce or eliminate the budgets that
current or potential customers could have for our solutions or could delay
purchases of our solutions. As a result, our business could be seriously harmed.
We have funded our Year 2000 plan from operating cash flows and have not
separately accounted for these costs in the past. To date, these costs have not
been material. We will incur additional costs related to the Year 2000 plan but
anticipate that the costs will continue to be funded out of our operating cash
flow and regular personnel work schedules.
Due to the Year 2000 readiness information gathered so far on our
solutions and internal systems that are critical to our continued operations in
the Year 2000, we believe that significant expenditures on contingency plans is
not warranted and no such expenditures have been made. Finally, we are also
subject to external forces that might generally affect industry and commerce,
such as utility or transportation company Year 2000 compliance failure
interruptions.
Year 2000 issues affecting our business, if not adequately addressed by
us, our third party vendors or suppliers or our customers, could have a number
of "worst case" consequences. These include:
- a significant decline in demand for our solutions;
- the failure of our newer solutions or applications in development to
achieve market acceptance;
- claims from our customers asserting liability, including liability for
breach of warranties related to the failure of our solutions and
services to function properly, and any resulting settlements or
judgments; and
- our inability to manage our own business.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Cost of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 is effective for
financial statements for years beginning after December 15, 1998. SOP 98-1
provides guidance over accounting for computer software developed or obtained
for internal use including the requirement to capitalize specified costs and
amortization of such costs. We have adopted the provisions of SOP 98-1 in our
fiscal year beginning January 1, 1999, and the effects of adoption did not have
a material effect on our financial statements.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivatives and Hedging Activities" ("SFAS 133"). SFAS 133
is effective for all fiscal quarters of all fiscal years beginning after June
15, 1999. SFAS 133 establishes accounting and reporting standards of derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. In July 1999, the Financial Accounting
Standards Board issued SFAS No. 137 "Accounting for Derivative Instruments and
Hedging Activities -- Deferral of the Effective Date of FASB Statement No. 133"
("SFAS 137"). SFAS 137 deferred the effective date until the first fiscal
quarter ending June 30, 2000. We will adopt SFAS 133 in our quarter ending June
30, 2000 and do not expect such adoption to have a material effect on our
financial statements.
In December 1998, the AICPA issued Statement of Position No. 98-9,
"Modification of SoP No. 97-2, Software Revenue Recognition, With respect to
Certain Transactions" ("SoP 98-9"), which is effective for transactions entered
into in fiscal years beginning after March 15, 1999. SoP 98-9 amends SoP 97-2
and extends the effective date of SoP No. 98-4 "Deferral of the Effective Date
of a Provision of SoP 97-2, Software Revenue Recognition" ("SoP 98-4"), and
provides additional interpretive guidance. The adoption of SoP 97-2 has not had,
and the adoption of SoP 98-4 and SoP 98-9 are not expected to have, a material
effect on our financial statements.
28
<PAGE> 29
BUSINESS
OVERVIEW
We offer business-to-business Internet-based and other electronic
medical management solutions to healthcare payers and providers designed to
control the cost and improve the quality of healthcare delivery. Our medical
management solutions automate and streamline administrative and business
processes and facilitate interaction among various healthcare participants. Our
solutions help our clients deliver consistent and appropriate medical care
utilizing clinical guidelines and business process rules specified by them,
while minimizing inefficient paper-, fax- and phone-based communications.
We currently offer two products to healthcare payers: maxMC and e-maxMC,
our new, Internet-based medical management solution. Six payers serving more
than seven million members currently use maxMC. We have completed internal
testing of e-maxMC, and we expect to complete on-site testing with one of our
payer customers in early 2000. We believe that the lack of functionality offered
by existing Internet-based medical management products provides a significant
market opportunity for e-maxMC. We believe that the sticky applications
incorporated in e-maxMC will drive repeat visits to payers' Web sites by their
members.
Maxsys II is our product for healthcare providers. More than 200
hospitals use Maxsys II and its predecessor, Maxsys I, which we continue to
support, but no longer market.
The open, multi-tiered system architecture of our solutions enables them
to complement existing information systems, as well as other Internet-based
products, with a rich set of medical management functions. Our solutions are
scalable, flexible and secure, and can be deployed across a broad range of
computing environments. As a result, our customers are able to configure and
adapt our solutions to fit their specific administrative and business processes,
clinical guidelines, existing information systems and business models.
THE INDUSTRY
Growth and Proliferation of the Internet
The Internet is the fastest growing medium in history. The Internet is
increasingly being used for business-to-business and business-to-consumer
interaction and is transforming the fundamental economics and structure of many
industries. The use of the Internet has evolved from simple information
publishing, messaging and data gathering to enabling critical business
transactions and confidential communications. We believe payers and providers
will increasingly rely on the Internet to improve and expand their businesses
and to control the cost of healthcare delivery. In a recent survey by The
Gartner Group, e-commerce ranked as the second most important initiative for
managed care organizations after Year 2000 issues and was identified as the
factor that will differentiate managed care organizations in the future.
Complexity of the Healthcare Industry
Healthcare costs in the United States have risen dramatically over the
past two decades and now represent approximately $1.0 trillion, or 14% of the
annual gross domestic product. It is estimated that of this $1.0 trillion, over
$250 billion is wasted through the delivery of unnecessary care, performance of
redundant tests and procedures and excessive administrative costs. Insurance
carriers and other third-party payers have moved aggressively to control costs.
These payers have established rules for providers and patients to follow in
arriving at treatment decisions in order to manage the use of healthcare
resources more efficiently. These rules have increased the complexity and
administrative burden of delivering healthcare by requiring numerous and
complicated interactions among various industry participants, including
interactions related to verification of eligibility, determination of benefits,
treatment decisions, authorization of care and case and disease
29
<PAGE> 30
management. Managing these interactions is labor and time intensive, as most
information is delivered via paper-, phone- and fax-based exchanges and involves
redundant data entry and significant communication inefficiencies.
Problems with the Current Healthcare Information Technology Environment
The unique characteristics of the healthcare industry, including the
large number of participants, the complexity of healthcare transactions and
pervasive concerns about confidentiality of patient information, have inhibited
the development of technology solutions that automate administrative and
business processes and clinical procedures and transactions across multiple
industry participants. Healthcare organizations and their traditional technology
vendors have focused on automating discrete business and administrative
processes, such as billing and scheduling for physicians, or claims processing
for hospitals and payers. As a result, the industry currently uses numerous
different mainframe and client/server systems that do not communicate with one
another, trapping information that needs to be shared among industry
participants in isolated, proprietary databases using non-standardized data
formats.
Impact of the Internet on the Healthcare Industry
We believe the healthcare industry, because of its size, fragmentation
and dependence on information exchange, is extremely well suited to benefit from
greater use of the Internet. Consumers are utilizing the Internet to become more
involved in their personal healthcare by accessing healthcare information
content and purchasing health-related goods and services. Healthcare
organizations are increasingly utilizing the Internet to achieve enhanced
connectivity and communication among industry participants across the continuum
of care. However, we believe that many existing Internet-based products have
merely linked industry participants without providing them with the medical
management functions needed to manage administrative and business processes and
clinical procedures and transactions.
OUR SOLUTIONS
Our solutions provide the medical management functionality lacking in
existing Internet-based connectivity products and traditional healthcare
technology products. Our solutions utilize an open, multi-tiered architecture to
manage communication and interaction among payers, providers and members. Our
solutions automate and streamline administrative and business processes and
clinical procedures and transactions, and minimize inefficient paper-, fax- and
phone-based communications among payers, providers and members.
Our solutions benefit payers by:
- automating and streamlining administrative and business processes and
clinical procedures and transactions to enhance operational
efficiencies;
- increasing adherence to clinical guidelines to reduce delivery of
inappropriate care;
- providing sticky applications to attract members to payers' Web sites;
- enhancing member satisfaction; and
- aggregating member data for trend analysis and decision support.
Our solutions benefit providers by:
- automating and streamlining administrative and business processes and
clinical procedures and transactions to enhance operational
efficiencies;
- reducing payment denials and claims appeals by payers;
- increasing quality and consistency of care;
30
<PAGE> 31
- improving the efficiency of incident reporting and reducing the risk
of legal liability;
- assisting with accreditation and administration of compliance
programs; and
- aggregating data for trend analysis and decision support.
Members benefit from:
- increased access to health information content;
- empowerment and self care, including participation in case management,
disease management and wellness programs; and
- improved information flow such as referral tracking, claims status
inquiries and personal information updating.
OUR STRATEGY
Our objective is to be the leading provider of Internet-based and other
electronic medical management solutions for healthcare payers and providers. Key
components of our strategy include:
Aggressively marketing our new Internet-based medical management solution
We will aggressively market e-maxMC to payers. We believe that the lack
of medical management features and functions offered by existing Internet-based
products and services provides a significant market opportunity for e-maxMC.
Developing sticky applications for our payer customers' Web sites
We will incorporate our sticky applications into payers' Web sites to
assist them with their Internet healthcare initiatives. In addition, we plan to
partner with leading providers of Internet healthcare content, disease
management and health-related e-commerce services in order to provide a
comprehensive Internet services offering for our payer clients. We believe that
this will enable us to forge stronger relationships with our payer customers and
to generate sponsorship, advertising and e-commerce revenues.
Achieving greater market penetration
We intend to expand our sales and marketing team significantly in order
to achieve greater penetration in the healthcare payer and provider markets.
Offering new medical management solutions and improved features and functions of
existing solutions to our payer and provider customers
We will continue to pursue opportunities for additional sales to
customers who may wish to acquire new solutions, add new functions to existing
solutions or extend our solutions to new facilities and territories. We will
maintain our commitment to providing excellent customer service.
Continuing to add functionality to our medical management solutions
We will further develop the features and functionality of our solutions
to enhance our competitive position. We will continue to leverage our industry
experience and understanding of payers' and providers' specific medical
management requirements and respond to developments in the healthcare industry
to address our customers' evolving clinical, administrative and business needs.
We recently added functionality to our payer solution by incorporating an
expedited appeals function in response to new government regulations requiring
payers to process members' appeals of care denials within a seventy-two hour
period.
31
<PAGE> 32
Pursuing strategic partnerships and acquisitions
To accelerate implementation of elements of our strategy, we intend to
target and pursue strategic acquisitions and relationships, such as marketing
alliances with vendors of complementary products and services and partnerships
with Internet providers of healthcare content, disease management and
health-related e-commerce services. We may pursue acquisitions, partnerships or
licensing arrangements to obtain technology if we determine that to do so would
be more cost effective or timely than developing our own. We also may choose to
broaden our customer base through acquisitions to improve our economies of
scale.
PRODUCTS
We currently market our solutions to payers and providers. The flexible
and open design of our solutions enables us to configure them to address our
customers' evolving needs and specific clinical, administrative and business
requirements. Our solutions feature:
- Rules Based Processing Capabilities. Our workflow engine utilizes a
series of customized "if . . . then . . . " associations to trigger
actions based upon changes in the state of any data within the
database (e.g., automatically notifying a case manager if a high-risk
authorization is requested).
- Clinical Guidelines integrated into Workflow Applications. Our
solutions incorporate industry standard clinical guidelines and
specific medical management criteria provided by our customers into
automated authorization, case management and disease management
workflow processes.
- Interfacing Capabilities. We have built more than 300 interfaces which
enable efficient integration of our medical management solutions with
other data systems.
- Trend Analysis and Decision Support Tools. Our solutions enable
healthcare personnel to graphically view data in order to identify
trends and spend more time resolving issues rather than identifying
them.
MAXMC. Our core medical management solution for payers is maxMC. maxMC
integrates a payer's internal medical management guidelines and clinical,
administrative and business processes with specific information about a payer's
members. Key functions of this product include:
Care Coordination Center. This function verifies membership and benefits
eligibility and incorporates industry standard clinical guidelines, including
InterQual(R) and Milliman & Robertson, and criteria provided by the payer into
the treatment decision process to ensure consistent decisions about care across
member populations. Once the treatment decision data is input and the treatment
request is authorized, the function enables the appropriate data to be directly
and promptly exported to the payer's claims adjudication systems.
Case and Disease Management. This function supports both case management
and disease management programs using a combination of clinical disease
assessment protocols selected by the client. These protocols can be employed to
determine appropriate levels of care, perform short- and long-term care planning
and minimize costly unnecessary procedures. Health assessments can be deployed
to identify members requiring case or disease management, care planning or
healthcare education.
Credentialing. This function assists with maintenance and review of
healthcare provider credentials by automating the maintenance and review of
physician and other care provider information, such as continuing medical
education credits, medical board certifications and records of disciplinary and
other adverse actions. Using the function a payer can efficiently send requests
for data to the National Practitioner Data Bank and other governmental bodies
and receive and incorporate that data in its systems for use in regulatory
compliance and other decisionmaking.
32
<PAGE> 33
E-MAXMC. Our new Internet-based medical management solution for payers,
e-maxMC, introduces providers and members into payers' internal medical
management systems by combining the immediate and broad-based connectivity of
the Internet with the medical management functions provided by our maxMC
solution. This solution will enable providers and members to secure access to a
payer's medical management information and proprietary business processes,
giving them the ability to engage in real-time, Internet-based transactions such
as clinically-based authorizations, referrals and health risk assessments. We
have successfully tested e-maxMC internally, and we expect to complete an
on-site test with one of our payer customers in early 2000.
e-maxMC will enable the following Web-based interactions between payers
and providers:
Referral Advice. Online notification to payers of referrals to
specialists and others by primary care physicians.
Treatment Requests and Communications. Affords primary care physicians
and specialists a medium for conducting online eligibility checks, requests for
care, clinical criteria analysis and benefits checks, in each case, in
accordance with individual payers' requirements.
Assignment of Care. Online capability for primary care physicians to
assign care management to appropriate specialists.
Cross-coverage. Online notification by one primary care physician that
another primary care physician will provide coverage for a specific period of
time.
Case and Disease Management Program Enrollment. Online requests that
patients be considered for enrollment in a particular case or disease management
program.
Inpatient Admission. Online notification by an inpatient facility that a
member has been admitted.
Health Risk Assessment. Online completion of health risk assessments by
primary care physicians and specialists.
e-maxMC enables the following Web-based interactions between payers and their
members:
Information Exchange. Online reviewing and updating of member
demographic information and checking of plan benefit and claim status
information.
Physician Selection. Online selection of primary care physician in
accordance with payer-specific policies from up-to-date lists of in-network
physicians.
Health Risk Assessment. Online completion of health risk assessments by
members.
We will leverage e-maxMC's sticky applications to assist our payer
clients with the development of their healthcare Web sites and other Internet
healthcare initiatives. We plan to provide payer organizations with, among other
Internet services, healthcare content, disease management tools and e-commerce
capabilities in partnership with leading Internet companies. We believe that
this strategy will enable us to forge strong relationships with our payer
clients, as well as generate sponsorship, advertising and e-commerce revenues.
MAXSYS II. Maxsys II, our medical management solution for hospital
providers, enables hospital providers to improve communications and apply more
efficient workflow tools to the process of delivering healthcare. Maxsys II is
the successor to our Maxsys I product, which we continue to support with a
maintenance program, but no longer market. Key functions of our Maxsys II
solution include:
Case/Utilization Management. This function helps ensure that patients
receive appropriate levels of care and minimizes expenses associated with
inappropriate and unduly lengthy hospital stays. The function enables providers
to avoid inefficient use of human resources and reduce denials of reimbursement
for care by payers resulting from failure to follow payer guidelines. These
33
<PAGE> 34
outcomes are achieved through the automation of the initial evaluation and
on-going review of patient care in order to monitor compliance with clinical
guidelines provided by the provider customer and industry standard clinical
guidelines, such as InterQual(R) and Milliman & Robertson.
Quality Management. This function helps identify deficiencies in patient
care or provider performance and rapidly alert process improvement personnel in
order to promote early intervention. The function allows a provider's staff to
monitor and evaluate the provider's care processes, treatments, operative
procedures and outcomes. It also permits quality managers to better monitor
high-cost, high-risk procedures and to enforce quality initiatives by providing
variance reporting, process monitoring and centralized data.
Risk Management. This function minimizes financial losses by automating
and supporting timely and thorough investigations, interventions, communication
and education regarding potential and actual claims. This function enables a
provider's risk management staff to be notified instantly as incidents are
reported by personnel anywhere within the organization. The function also
supports efficient management, tracking and analysis of potential and asserted
claims by patient/episode, staff members, physicians, allied health
professionals and visitors.
Infection Control. This function facilitates effective management of
epidemology and analysis of treatment protocols based on the National Nosocomial
Infections Study model, which reports the national standards for epidemology
studies. The function eliminates manual data entry by extracting pertinent data
from other sources in a provider's information technology system and from data
collected by case and quality management staff.
Credentialing. This function supports the tracking of provider
credentials by automating the maintenance and review of physician and other care
provider information such as continuing medical education credits, medical board
certifications and records of disciplinary and other adverse actions. The
function also facilitates the exchange of data with the National Practitioner
Data bank and other governmental bodies.
SERVICES
We offer our payer and provider customers comprehensive implementation
services such as:
- management of projects;
- identification of customer-specific system requirements;
- consideration of interactions between our solutions and our customer's
information systems and designing appropriate administrative, clinical
and business processes;
- building proprietary interfaces to other systems and configuring
hardware and software to support the customer's administrative,
clinical and business processes; and
- training customer personnel.
We plan to offer a broad range of Internet-related services, such as:
- co-developing payers' healthcare Web sites;
- designing and implementing branding strategies and sticky
applications;
- determining hardware and software requirements; and
- providing general health content, disease management tools and
e-commerce capabilities in partnership with leading Internet
companies.
34
<PAGE> 35
CUSTOMERS
We target payers with membership ranging from several million to 50,000
covered lives. We currently serve six payers with a combined membership of more
than seven million participants. Our top payer customers by total contract value
are Highmark (Blue Cross Blue Shield of Western Pennsylvania,) Blue Shield of
California and Renal Management Systems (a subsidiary of Baxter International
Inc.). Highmark and Renal Management Systems are currently using our maxMC
solution. Renal Management was the first of our customers to utilize maxMC's
disease management functionality, which they have implemented using a central
database and twenty-two remote satellite operations throughout the United
States.
We target hospital providers with licensed beds ranging from several
thousand to as few as 250. We currently serve over 200 providers. Our top three
provider customers by total contract value are New York and Presbyterian Health
Network, All Children's Hospital of St. Petersburg and the Baptist Healthcare
Systems, Inc. New York and Presbyterian Health Network is currently implementing
Maxsys II at nine of its thirteen facilities. All Children's Hospital has
recently completed implementation of Maxsys II. Baptist Healthcare Systems has
completed implementation of Maxsys II across its five hospital system. Many of
our hospital provider customers continue to use Maxsys I, the predecessor of
Maxsys II, which we continue to support with a maintenance program, but no
longer market.
TECHNOLOGY
We believe that our proprietary technology platform provides us with a
significant competitive advantage. Our products utilize multi-tiered and web
architecture systems derived from our proprietary object oriented software
foundation. Through the application of middleware platforms that include
business rules and service functions, our technology supports our medical
management solutions by ensuring high availability and scalability. We currently
employ Oracle database management systems to support the data storage
requirements of our solutions. We are also currently working towards releasing a
Microsoft SQL Server database management system version to appropriately
qualified sites.
We have developed an open architecture standard, allowing separate
functional components to run on several different hardware platforms. Maxsys II
and maxMC, based upon the leading fourth generation language of PowerBuilder,
run on standard Intel-compatible personal computers. Our common object request
broker architecture, CORBA, based rules engine runs on Microsoft NT and Sun
Solaris systems. emaxMC, which utilizes Java and Java Servelets for its
functionality and either Microsoft's Internet Explorer or Netscape's Netscape
Communicator browsers for the provider interface, makes use of any Internet
capable system with the application itself being served by a Microsoft NT or Sun
Solaris platform. Our data interface engine operates on the leading UNIX or
Microsoft NT platforms. Additional servers may be placed in the system (e.g.,
report server or fax server) in order to ensure scalability without performance
loss. The interaction of all these services and middleware makes the system
truly multi-tiered, rather than two-tiered (client/server) or three-tiered
(client/application/server).
COMPETITION
The market for our solutions is highly competitive and is characterized
by rapidly changing technology, evolving user needs and the frequent
introduction of new products. Certain aspects of our medical management
solutions compete with features and functions, products or services supplied by
other companies. The principal companies we compete against in the payer market
include HPR (a subsidiary of McKesson HBOC), MedDecision and PhyCom. In the
hospital provider market, we compete against MIDS, SoftMed Systems/IHS and
others.
We expect that competition will continue to increase as a result of
consolidation in the Internet, information technology and healthcare industries.
We believe that the principal factors
35
<PAGE> 36
affecting competition in our markets include, product functionality,
performance, flexibility and features, use of open standards technology, quality
of service and support, company reputation, price and overall cost of ownership.
See "Risk Factors -- Competition."
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
We are dependent upon our proprietary information and technology. We
rely primarily on a combination of copyright, trademark and trade secret laws
and license agreements to establish and protect our rights in our software
products and other proprietary technology. We require employees and third-party
consultants and contractors to enter into nondisclosure agreements to limit use
of, access to, and distribution of, our proprietary information. There can be no
assurance that our means of protecting our proprietary rights will be adequate
to prevent misappropriation. The laws of some foreign countries may not protect
our proprietary rights as fully or in the same manner as do the laws of the
United States. Also, despite the steps taken by us to protect our proprietary
rights, it may be possible for unauthorized third parties to copy aspects of our
products, reverse engineer such products or otherwise obtain and use information
that we regard as proprietary. Furthermore, there can be no assurance that
others will not independently develop technologies similar or superior to our
technology, or design around the proprietary rights owned by us.
GOVERNMENT REGULATION
Participants in the healthcare industry, such as our payer and provider
customers, are subject to extensive and frequently changing laws and
regulations, including laws and regulations relating to the confidential
treatment and secure transmission of healthcare information such as patient
medical records. Additional legislation relating to the use and disclosure of
medical information has been proposed at both the state and federal levels, and
new federal laws or regulations are likely to be enacted in the near future.
Pursuant to the Health Insurance Portability and Accountability Act of 1996,
HIPAA, the Department of Health and Human Services, DHHS, has proposed
regulations setting forth security and privacy standards for all health plans,
clearinghouses and providers to follow with respect to an individual's
healthcare information that is electronically transmitted, processed, or stored.
In addition, Congress is currently considering various legislative proposals
regarding health information privacy.
While we do not believe that the security and privacy provisions of
HIPAA apply to Landacorp directly, our provider customers and our payer
customers must comply with HIPAA, its associated regulations and all other
applicable healthcare laws and regulations. Accordingly, in order for our
medical management solutions to be marketable, they must contain features and
functionality that allow our customers to comply with these laws and
regulations. We believe our products currently allow our customers to comply
with existing laws and regulations. However, because new regulations are yet to
come and because the proposed regulations are subject to modification prior to
becoming final, our products may require modification in the future. Any such
modification could be expensive, could divert resources away from other product
development efforts or could delay future releases or product enhancements. If
we fail to offer solutions that permit our customers to comply with applicable
laws and regulations our business will suffer.
In addition, laws governing healthcare payers and providers are often
not uniform among states. This could require us to undertake the expense and
difficulty of tailoring our products in order for our customers to be in
compliance with applicable state and local laws and regulations.
The Internet and its associated technologies are also subject to
government regulation. Many existing laws and regulations, when enacted, did not
anticipate the methods of Internet-based medical management solutions we offer.
We believe, however, that these laws and regulations may nonetheless be applied
to us. Current laws and regulations which may affect our Internet-based business
relate to the following:
36
<PAGE> 37
- patient medical record information;
- the electronic transmission of information between healthcare
providers, payers, clearinghouses and other healthcare industry
participants;
- the use of software applications in the diagnosis, cure, treatment,
mitigation or prevention of disease;
- health maintenance organizations, insurers, healthcare service
providers and/or employee health benefit plans; and
- the relationships between or among healthcare providers.
We expect to conduct our Internet-based medical management business in
substantial compliance with all material federal, state and local laws and
regulations governing our operations. However, the impact of regulatory
developments in the healthcare industry is complex and difficult to predict, and
our business could be adversely affected by existing or new healthcare
regulatory requirements or interpretations. These requirements or
interpretations could also limit the use of the Internet for our medical
management solutions or even prohibit the sale of a particular product or
service.
Because of the Internet's popularity and increasing use, new laws and
regulations with respect to the Internet are becoming more prevalent. Such laws
and regulations have covered, or may cover in the future, issues such as:
- security, privacy and encryption;
- pricing;
- content;
- copyrights and other intellectual property;
- contracting and selling over the Internet;
- distribution; and
- characteristics and quality of services.
Moreover, the applicability to the Internet of existing laws in various
jurisdictions, industry laws governing issues such as property ownership, sales
and other taxes, libel and personal privacy, is uncertain and may take years to
resolve. Demand for our Internet-based applications and services may be affected
by additional regulation of the Internet. Any new legislation or regulation
regarding the Internet, or the application of existing law and regulations to
the Internet, could adversely affect our business. Additionally, while we do not
currently operate outside of the United States, the international regulatory
environment relating to the Internet market could have an adverse effect on our
business, especially if we expand internationally.
The growth of the Internet, coupled with publicity regarding Internet
fraud, may also lead to the enactment of more stringent consumer protection
laws. These laws may impose additional burdens on our business. The enactment of
any additional laws or regulations in this area may impede the growth of the
Internet, which could decrease our potential revenues or otherwise cause our
business to suffer.
EMPLOYEES
As of August 31, 1999, we employed ninety-eight employees, including
twenty-seven employees in research and development, forty-one employees in
client services (including implementation and support services), nineteen
employees in sales and marketing and eleven employees in finance and
administration. Our success depends on our continued ability to attract and
retain highly skilled and qualified personnel. Competition for such personnel is
intense in the information technology industry, particularly for talented
software developers, service consultants, and sales and marketing personnel.
There can be no assurance that we will be able to attract and retain qualified
personnel in the future.
37
<PAGE> 38
Our employees are not members of any labor union. We consider our
relations with our employees to be good.
FACILITIES
Our corporate headquarters are located in Atlanta, Georgia, and our
Research and Development and Support Departments are located in Chico,
California. We have under leases approximately 21,000 square feet of office
space. We anticipate that our current facilities are adequate for our current
needs.
LEGAL PROCEEDINGS
Landacorp is not currently involved in any litigation.
38
<PAGE> 39
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information with respect to our executive
officers and directors as of September 30, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Eugene Santa Cattarina............... 52 President, Chief Executive Officer and Director
Stephen Kay.......................... 37 Chief Operating Officer and Chief Financial Officer
Bryan Lang........................... 41 Chief Technology Officer, Chief Marketing Officer and
Director
David Brown.......................... 44 Senior Vice President, Sales
Marlene McCurdy...................... 46 Senior Vice President, Client Services
Thomas Stephenson.................... 57 Chairman of the Board of Directors
Howard Cox........................... 55 Director
Jason Rosenbluth, MD................. 42 Director
Jerome Grossman, MD.................. 60 Director
</TABLE>
Eugene Santa Cattarina, President and Chief Executive Officer and
Director, came to Landacorp in July 1998, after serving since 1996 as President
and Chief Executive Officer of Medicode, Inc., a leading healthcare information
technology company that was recently acquired by United Healthcare Corporation.
From 1986 to 1993, Mr. Santa Cattarina served in a number of leadership
positions with TDS Healthcare Systems Corporation, a healthcare software systems
company, including President and Chief Operating Officer. Following the
acquisition of TDS Healthcare Systems Corporation by ALLTEL Corporation in 1993,
Mr. Santa Cattarina continued as President and Chief Operating Officer of TDS
Healthcare Systems Corporation until 1994, and as Executive Vice President of
ALLTEL Information Services-Healthcare Division from 1994 to 1995. From 1967 to
1986, he held various positions with Technicon Corporation, a clinical
laboratory automation company, including President, Domestic Division.
Stephen Kay, Chief Operating Officer and Chief Financial Officer, has
been involved with Landacorp since 1992, initially as the Director of Finance of
Landacorp UK Ltd. In early 1995, Mr. Kay was promoted to Chief Operating Officer
of Landacorp. He is currently Chief Operating Officer and Chief Financial
Officer of Landacorp and is responsible for overseeing finance and operations.
He has worked in a consultative capacity in the structuring of contracts,
implementation, and deployment plans of healthcare information systems for
hospitals, integrated delivery networks, managed care organizations, and
insurance companies, as well as for the United Kingdom's National Health
Service. Mr. Kay is a member of The Institute of Chartered Accountants in
England and Wales. He received his training at Touche Ross (now Deloitte Touche)
in London, England.
Bryan Lang, Chief Technology Officer and Chief Marketing Officer and
Director, is the founder of Landacorp. Mr. Lang served as Chief Executive
Officer of Landacorp from 1993 to 1998, has served as Chief Technology Officer
since 1998, and as Chief Marketing Officer since January 1999. Mr. Lang has been
a consultant and automated systems designer for fifteen years during which time
he has worked extensively with healthcare industry projects in the United
States, the United Kingdom, Canada, Saudi Arabia and Australia. As a specialist
in healthcare process optimization, information systems and resource management,
his efforts include work with hundreds of hospitals, health maintenance
organizations, ambulatory care services, private physician practices and the
U.S. and Saudi armed forces.
David Brown, Senior Vice President, Sales, joined Landacorp in July
1998. From 1997 to 1998, he was Vice President-Sales for HBO & Company's (now
McKesson/HBOC) provider and payer solutions. From 1985 to 1997, Mr. Brown served
in a number of sales and sales executive positions including Regional Sales
Director/Vice President-Sales for Eclipsys Corporation (formerly ALLTEL
Information Services-Healthcare Division, TDS Healthcare Systems Corporation and
39
<PAGE> 40
Technicon Data Systems). From 1983 to 1985, Mr. Brown was Regional Sales
Director for Compucare, a provider of mainframe- and minicomputer-based software
and services to hospitals. Mr. Brown began his career in healthcare with
Technicon in 1980 as a Hospital Consultant and then moved into the position of
Sales Representative.
Marlene McCurdy, Senior Vice President, Client Services, joined
Landacorp in July 1998 after serving as Director, Implementation
Strategy/Research & Development for Eclipsys Corporation since 1995. From 1990
to 1995, Ms. McCurdy held a number of implementation and technical support
positions for TDS Healthcare Systems Corporation and ALLTEL Information
Services -- Healthcare Division, including Director, Implementation Services.
Thomas Stephenson, Director and Chairman of the Board, has been a
director of Landacorp since February 1998. He has been a general partner and
managing member of Sequoia Capital General Funds since 1988. Prior thereto, Mr.
Stephenson was President of Fidelity Venture Associates, the venture capital
subsidiary of Fidelity Investments. Mr. Stephenson is a director of Chapters
Online and a number of private companies. Mr. Stephenson received his BA and MBA
from Harvard University, and a law degree from Boston College Law School.
Howard Cox, Director, has served as a director of Landacorp since
February 1998. He is a General Partner of Greylock, a national venture capital
firm headquartered in Boston, with which he has been associated for 28 years.
Mr. Cox is a Director of Stryker Corporation in Michigan and numerous other
private companies. Prior to joining Greylock, Mr. Cox served in the Office of
the Secretary of Defense.
Jason Rosenbluth, MD, Director, has served as a director of Landacorp
since February 1998. Dr. Rosenbluth is a Managing Director of Bedrock Capital
Partners, a venture capital firm which he co-founded in 1997. From 1993 to 1997,
Dr. Rosenbluth was a healthcare securities analyst and managing director of
Volpe Brown Whelan & Company, an investment banking firm. Dr. Rosenbluth
currently serves as a director of a number of privately-held technology
companies. Dr. Rosenbluth holds an MD from Cornell University Medical College
and an MBA from the Wharton School of the University of Pennsylvania.
Jerome Grossman, MD, Director, has been a director of Landacorp since
May 1998. Dr. Grossman is currently chairman and Chief Executive Officer of a
newly formed company, Lion Gate Management Corporation. From 1995 to early 1999,
he was Chief Executive Officer of Health Quality Inc. He is chairman emeritus of
New England Medical Center, Inc. Dr. Grossman has been a founder of several
healthcare companies, and has held teaching, research, and medical positions at
Tufts University School of Medicine, Massachusetts General Hospital and Harvard
Medical School. Dr. Grossman serves as Trustee/Director of several corporations
and institutions, including Wellesley College, Stryker Corporation, Arthur D.
Little, Inc. and Stryker Corp. He served on the Board of the Federal Reserve
Bank of Boston from 1990 to 1997 and was its Chairman from 1994 to 1997.
BOARD COMPOSITION
Landacorp's board of directors is currently comprised of six members.
Four of our directors, Thomas Stephenson, Howard Cox, Jason Rosenbluth, MD and
Jerome Grossman, MD, are not employees of Landacorp.
BOARD COMMITTEES
Audit Committee. The audit committee of the board of directors is
comprised of Thomas Stephenson, Howard Cox, Jason Rosenbluth, MD and Jerome
Grossman, MD. Jason Rosenbluth is the chairman of the audit committee.
Compensation Committee. The compensation committee of the board of
directors is comprised of Thomas Stephenson, Howard Cox, Jason Rosenbluth, MD
and Jerome Grossman, MD. Howard Cox is the chairman of the compensation
committee.
40
<PAGE> 41
DIRECTOR COMPENSATION
Employees of Landacorp and representatives of institutional investors in
Landacorp do not receive any compensation for serving on the board of directors.
Jerome Grossman, MD receives a fee of $1,000 per board meeting attended. In
1998, Eugene Santa Cattarina received $4,000 for serving as a director of
Landacorp prior to becoming employed by Landacorp.
All of our directors, including employees and representatives of
institutional investors in Landacorp, may be reimbursed for travel expenses
incurred in attending board meetings. In addition, all of our directors are
eligible to receive grants of stock options or other rewards pursuant to our
stock option plan. In July, 1999, each non-employee member of the board of
directors was granted an option to purchase 12,500 shares of our stock at $1.00
per share. These options become exercisable over a period of four years. Our
shareholders have approved a policy of granting future non-employee directors
initial option grants for 12,500 shares of stock, vesting over four years, when
they join the board, and of granting all non-employee directors additional
option grants for 5,000 shares, vesting over two years, effective on the date of
each annual meeting.
EXECUTIVE COMPENSATION
The following table contains information in summary form concerning the
compensation paid to our chief executive officer and each of our most highly
compensated executive officers whose total salary, bonus and other compensation
exceeded $100,000 during the year ended December 31, 1998. In accordance with
the rules of the Securities Exchange Commission, the compensation described in
this table does not include perquisites and other personal benefits received by
the executive officers named in the table below which did not exceed the lesser
of $50,000 or 10% of the total salary or bonus reported for those officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
-----------------------
RESTRICTED SECURITIES ALL
STOCK UNDERLYING OTHER 1999 ANNUAL
AWARD(S) OPTIONS COMPENSATION SALARY
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) ($) (2) ($) ($)(1)
--------------------------- --------- -------- ---------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Eugene Santa Cattarina.............. 103,366 -- -- 805,550 -- 250,000
President and Chief Executive
Officer
Stephen Kay......................... 168,700 15,000 -- 300,000 -- 175,000
Chief Operating Officer and
Chief Financial Officer
Bryan Lang.......................... 187,162 15,000 -- 195,000 -- 175,000
Chief Technology Officer and
Chief Marketing Officer
</TABLE>
-------------------------
(1) Figures are based on annualized salary, excluding bonus, if any.
(2) The figures listed represent the number of incentive stock options granted
in October 1998. All the options were exercised during 1999. See "Certain
Relationships and Related Transactions -- Early Exercise of Stock Options."
41
<PAGE> 42
OPTION GRANTS
The following table provides certain information regarding options
granted by Landacorp to the named executive officers during the fiscal year
ended December 31, 1998.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENT OF POTENTIAL REALIZABLE VALUE
TOTAL AT ASSUMED ANNUAL RATES
NUMBER OF OPTIONS OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM
DATE OF OPTIONS DURING PRICE EXPIRATION ---------------------------
NAME GRANT GRANTED PERIOD ($/SHARE) DATE 5% 10%
---- ------------ ---------- ---------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Eugene Santa
Cattarina.......... October 1998 805,550 46.02% $0.12 October 2008 $11,712,697 $18,704,871
Stephen Kay.......... October 1998 300,000 17.14 0.12 October 2008 4,362,000 6,966,000
Bryan Lang........... October 1998 195,000 11.14 0.12 October 2008 2,835,300 4,527,900
</TABLE>
OPTION EXERCISES AND YEAR END OPTION VALUES
The following table provides certain information with respect to options
exercised by named executive officers during the fiscal year ended December 31,
1998 and the value of unexercised options held by named executive officers as of
December 31, 1998.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF
NUMBER OF OPTIONS AT FISCAL UNEXERCISED OPTIONS
SHARES ACQUIRED YEAR END 1998 AT FISCAL YEAR END 1998(1)
NAME ON EXERCISE($) VALUE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE($)
---- --------------- -------------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Eugene Santa
Cattarina............. -- -- 805,550/0 0/0
Stephen Kay............. -- -- 300,000/0 0/0
Bryan Lang.............. -- -- 195,000/0 0/0
</TABLE>
-------------------------
(1) For purposes of this calculation, value is based upon the difference between
the fair market value of the securities at the at fiscal year ended December
31, 1998, and the exercise price. The exercise price was equal to the fair
market value at the end of the fiscal year ended December 31, 1998.
BENEFIT PLANS
1995 Incentive Stock Option Plan and 1998 Equity Incentive Plan
The 1995 Incentive Stock Option Plan (the "1995 Plan") was adopted by
the board of directors in April 1995, and ratified by the shareholders in
December 1995. The 1998 Equity Incentive Plan (the "1998 Plan") was adopted by
the board of directors in July 1998, and approved by the shareholders in
September 1998. The 1998 Plan provides for the granting to employees of
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, and for the granting to employees, directors
and consultants of non-statutory stock options and stock purchase rights. Since
adoption of the 1998 Plan, no further options have been granted under the 1995
Plan.
As of September 30, 1999, there were 3,000,000 shares of our common
stock reserved for issuance under both plans. During 1998, options to purchase
95,000 shares of common stock granted under the 1995 and 1998 plans were
exercised. At December 31, 1998, options to purchase 2,253,947 shares of common
stock were outstanding, and options to purchase 588,797 shares of
42
<PAGE> 43
common stock remained available. The outstanding options were exercisable at a
weighted average price of $0.71 per share. During the nine months ended
September 30, 1999, options to purchase 1,572,284 shares of common stock granted
under the 1995 and 1998 plans were exercised. At September 30, 1999, options to
purchase 881,315 shares of common stock were outstanding, and options to
purchase 659,645 shares of common stock remained available. The outstanding
options were exercisable at a weighted average price of $1.26 per share.
The 1995 Plan was administered by a stock option committee appointed by
the board of directors. The 1998 Plan may be administered by the board of
directors or a committee of the board. Currently our compensation committee
administers the 1998 Plan.
Options granted under the 1995 Plan will vest in full upon notice of (a)
a merger, consolidation or reorganization in which we are not the surviving
company, (b) the acquisition by another company of all or substantially all of
our assets, or (c) our dissolution or liquidation. The options will expire
within thirty days of such notice, or otherwise, by their own terms.
Options granted under the 1998 Plan will terminate in the event of our
dissolution or termination. In the event of (a) a merger, consolidation or
reorganization in which we are not the surviving company, (b) a reverse merger
in which we are the surviving company, but our shares immediately prior to the
merger are converted into other property, or (c) the acquisition by another
company of all or substantially all of our assets, the surviving or acquiring
company must either assume the options, or substitute similar options or awards
for those outstanding under our 1998 Plan. If the acquiring or surviving company
refuses to do so, then all our outstanding options vest in full, and must be
exercised or expire at the time of such event.
The 1995 Plan will terminate automatically in April 2005, unless sooner
terminated by the board of directors. The 1998 Plan will terminate automatically
in July 2008, unless sooner terminated by the board of directors.
401(K) PLAN
We maintain a tax-qualified employee savings and retirement plan, a
401(k) plan, that covers all of our eligible employees. Pursuant to the 401(k)
plan, participants may elect to reduce their current compensation, on a pre-tax
basis, by up to 15% of their taxable compensation or of the statutorily
prescribed annual limit, whichever is lower, and have the amount of such
reduction contributed to the 401(k) plan. Participants' salary reduction
contributions are fully vested at all times. Landacorp contributes matching
funds of up to 25% of employee contributions, subject to a cap of $900 per
employee per year. Landacorp, in its sole discretion, may make additional
employer contributions to the 401(k) plan. Participants' interests in their
additional employer contributions, if any, vest in accordance with a five-year
graduated vesting schedule. Participants generally are eligible for a
distribution from the 401(k) plan upon their reaching age 59 1/2, age 65, death,
disability or separation from service with Landacorp. The 401(k) plan is
intended to qualify under Section 401(a) of the Internal Revenue Code of 1986,
as amended, and its accompanying trust is intended to be a tax-exempt trust
under Section 501(a) of the Internal Revenue Code of 1986, as amended.
Contributions made on behalf of the participants, on a pre-tax basis, to the
401(k) plan, and income earned on such contributions, are not currently taxable
to participants. All such contributions are tax deductible by Landacorp.
LIMITATIONS OF DIRECTORS' LIABILITY AND INDEMNIFICATION
Our certificate of incorporation limits the liability of our directors
to the maximum extent permitted by Delaware law. Delaware law provides that the
directors of a corporation will not be
43
<PAGE> 44
personally liable for monetary damages for breach of the fiduciary duties as
directors, except liability for any of the following:
- any breach of their duty of loyalty to the corporation or its
stockholders;
- acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
- any transaction from which the director derived an improper personal
benefit.
This limitation of liability does not apply to liabilities arising under
the federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.
Our certificate of incorporation and bylaws provide that we will
indemnify our directors and executive officers, and that we may indemnify our
other officers and employees and other agents, to the fullest extent permitted
by law. Our bylaws also permit us to secure insurance on behalf of any officer,
director, employee or other agent for any liability arising out of his or her
actions in such capacity, regardless of whether the bylaws would permit
indemnification.
We have entered into agreements to indemnify our executive officers, in
addition to indemnification provided for in our bylaws. These agreements, among
other things, provide for indemnification of our directors and executive
officers for expenses, judgments, fines, and settlement amounts incurred by any
such person in any action or proceedings arising out of such person's services
as a director or executive officer of Landacorp or at our request. We believe
that these provisions and agreements are necessary to attract and retain
qualified persons as directors and executive officers. We also maintain
directors and officers liability insurance. At present, we are not aware of any
pending litigation or proceeding involving any director, officer, employee or
agent of Landacorp where indemnification will be required or permitted.
Furthermore, we are not aware of any threatened litigation or proceeding that
might result in a claim for indemnity by these individuals.
44
<PAGE> 45
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Series D Preferred Stock Financing.
In February 1998, we amended our articles of incorporation to authorize
the issuance of 6,800,000 shares of Series D Preferred Stock ("Series D
Preferred Stock"), to designate the Series D Preferred Stock and to provide the
holders thereof with certain rights, privileges and preferences, including
certain liquidation and dividend preferences. In addition, we entered into an
Investors' Rights Agreement with each holder of Series D Preferred Stock
pursuant to which Landacorp granted the holders of Series D Preferred Stock
"piggy-back" registration rights with respect to certain registrations of our
securities pursuant to the Securities Act. See "Description of Capital Stock."
Immediately following the authorization, all 41,000 shares of Series A
Preferred Stock then outstanding were converted into shares of Series D
Preferred Stock, on a one-for-one basis, and all 115,000 shares of Series B
Preferred Stock and 450,000 shares of Series C Preferred Stock then outstanding
were converted into 1,122,000 shares of Series D Preferred Stock, using a ratio
of 1.9833 shares of Series D Preferred Stock for each share of Series B and
Series C Preferred Stock. In February 1998, following these conversions, the
holders of the converted Series D Preferred Stock sold all their shares to new
investors, for $1.20 per share. At the same time we sold an additional 5,678,000
shares of Series D Preferred Stock to the new investors.
The following directors and beneficial owners of more than five percent
of our outstanding capital stock acquired beneficial ownership of Series D
Preferred Stock in this private placement as follows:
<TABLE>
<CAPTION>
DIRECTORS/5% STOCKHOLDERS NUMBER OF SHARES
------------------------- ----------------
<S> <C>
Bedrock Capital Partners I, LP(1)........................... 1,750,000
Greylock IX Limited Partnership............................. 2,500,000
Sequoia Capital VII(2)...................................... 2,500,000
Eugene Santa Cattarina...................................... 41,667
Jason Rosenbluth(3)......................................... 1,750,000
Howard Cox(4)............................................... 2,500,000
Thomas Stephenson(5)........................................ 2,500,000
</TABLE>
-------------------------
(1) Includes 1,575,000 shares held by Bedrock Capital Partners I, LP, 87,500
shares held by Credit Suisse First Boston Bedrock Fund, L.P., 6,250 shares
held by Chris Paul, 6,250 shares held by Theodore Ridgeway and 75,000 shares
held by the VBW Employee Bedrock Fund, LP. Bedrock General Partner I, LLC is
a general partner of Bedrock Capital Partners I, LP and of VBW Employee
Bedrock Fund, LP.
(2) Includes 2,287,500 shares held by Sequoia Capital VII, 100,000 shares held
by Sequoia Technology Partners VII, 46,400 shares held by SQP 1997, 26,100
shares held by Sequoia 1997 LLC and 40,000 shares held by Sequoia
International Partners. SC VII-A Management Company LLC is a general partner
of Sequoia Capital VII, Sequoia Technical Partners VII and Sequoia
International Partners.
(3) Includes 1,750,000 shares held by Bedrock Capital Partners I, LP and its
affiliates, as listed in note 1 above. Dr. Rosenbluth is a co-founder and
managing partner of Bedrock General Partner I, LLC, the general partner of
Bedrock Capital Partners I, LP and of VBW Employee Bedrock Fund, LP. Dr.
Rosenbluth disclaims beneficial ownership of the shares held by the entities
or persons listed in note 1 above, except to the extent of his direct
pecuniary interest in the shares.
(4) Includes 2,500,000 shares held by Greylock IX Limited Partnership, Mr. Cox
is a general partner of Greylock IX Limited Partnership. Mr. Cox is a
general partner of Greylock IX GP Limited Partnership, which is a general
partner of Greylock IX Limited Partnership. Mr. Cox disclaims beneficial
ownership of the shares held by Greylock IX Limited Partnership, except to
the extent of his direct pecuniary interest in the shares.
45
<PAGE> 46
(5) Includes 2,500,000 shares held by Sequoia Capital VII and its affiliates, as
listed in note 2 above. Mr. Stephenson is a managing member of SC VII-A
Management Company LLC, the general partner of Sequoia Capital VII, Sequoia
Technology Partners VII and Sequoia International Partners. Mr. Stephenson
disclaims beneficial ownership of the shares held by the entities listed in
note 2 above, except to the extent of his direct pecuniary interest in the
shares.
Warrants
In conjunction with our sale of preferred stock in February 1998, we
issued warrants to Mr. Gilbert Lang and Mrs. Beulah Lang and to Westminster
Health Care PLC for the purchase of 100,000 and 250,000 shares of common stock,
respectively, at the price of $1.20 per share. The warrants were fully vested
and exercisable on the date of grant. The warrants expire on the earlier of
February 28, 2003 or the closing of this offering.
Stockholders' Notes
At December 31, 1996, we had notes payable to Mr. Gilbert Lang, Mrs.
Beulah Lang, Mr. Bryan Lang and Mr. Roger Stratton totaling $1,720,000. At
December 31, 1997, we had notes payable to Mr. Gilbert Lang, Mrs. Beulah Lang,
Mr. Bryan Lang, Mr. Roger Stratton and Westminster Health PLC totaling
$2,221,000. These notes accrued interest at an annual rate of 12%. In March
1998, we used the proceeds of our February 1998 preferred stock financing to
repay stockholder notes and related accrued interest totaling $2,558,000.
During the year ended December 31, 1996, Mr. Bryan Lang converted notes
payable totaling $27,000 as payment of the exercise price of 13,000 vested
options. During the year ended December 31, 1997, Mr. Bryan Lang converted notes
payable totaling $21,000 as payment of the exercise price of 10,000 vested
options. During the six months ended June 30, 1998 and the year ended December
31, 1998, Mr. Gilbert Lang and Mrs. Beulah Lang converted notes payable totaling
$289,000 as payment of the exercise price of 91,000 vested options.
Early Exercise of Stock Options
As of September 30, 1999, we had full recourse notes from Mr. Eugene
Santa Cattarina, Mr. Stephen Kay, Mr. David Brown, Ms. Marlene McCurdy, Mr.
Brandon Raines and Mr. Bryan Lang, all employees, related to the early exercise
of stock options in the amount of $189,000. These notes accrue interest at a
rate of 6% per year, are secured by such shares of common stock, and are due and
payable in the event of termination of employment. Pursuant to the terms of
restricted stock purchase agreements entered into with these employees, we have
the option to repurchase a portion of these shares in the event of termination
of employment.
Bonus in Respect of Waiver of Deferred Compensation
Pursuant to agreement dated February 27, 1998, and in connection with
the sale of the preferred stock, Bryan Lang agreed to waive any and all rights
to $335,000 in deferred compensation that had accrued to his benefit. In
connection with this waiver, a further agreement was made in the event that
either Landacorp's common stock became publicly traded following an initial
public offering, or that Landacorp was sold for a value in excess of
$40,000,000, then a success fee from the proceeds would be paid to Mr. Lang in
the amount of $335,000. This bonus payment will be payable upon completion of
the offering and will be recognized as an operating expense.
Line of Credit
In 1997, we maintained an operating line of credit with a bank which was
guaranteed by Westminster Health Care PLC. This line of credit expired on
December 31, 1997, and the outstanding balance of $163,000 was repaid to the
bank by Westminster Health Care PLC in exchange for a note payable by Landacorp.
We repaid the note in March 1998.
46
<PAGE> 47
PRINCIPAL STOCKHOLDERS
Beneficial ownership is determined under the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Unless otherwise indicated below, to our knowledge, the
persons and entities named in the table have sole voting and sole investment
power with respect to all shares beneficially owned, subject to community
property laws where applicable. The number and percentage of shares beneficially
owned are based on 9,762,210 shares of common stock outstanding as of September
30, 1999, assuming the conversion of all outstanding preferred stock and the
exercise of all outstanding warrants. Shares of common stock subject to options
that are currently exercisable or exercisable within sixty days of September 30,
1999 are deemed to be outstanding and to be beneficially owned by the person
holding the options for the purpose of computing the percentage ownership of
that person but are not treated as outstanding for the purpose of computing the
percentage ownership of any other person. The number of shares of common stock
outstanding after this offering includes shares of common stock being offered
and does not include the shares that are subject to the underwriters'
over-allotment option. Unless otherwise indicated, the address for each listed
stockholder is the same as Landacorp's.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
NUMBER OF BENEFICIALLY OWNED
SHARES --------------------
BENEFICIALLY BEFORE AFTER
NAME OF BENEFICIAL OWNER OWNED OFFERING OFFERING
------------------------ ------------ -------- --------
<S> <C> <C> <C>
Entities affiliated with Bedrock Capital Partners I,
LP(1).................................................. 1,750,000 17.9% 13.2%
One Maritime Plaza, 11(th) Floor
San Francisco, CA 94111
Greylock IX Limited Partnership.......................... 2,500,000 25.6 18.9
One Federal Street
Boston, MA 02110
Sequoia Capital VII(2)................................... 2,500,000 25.6 18.9
3000 Sandhill Road, Building 4, Suite 780
Menlo Park, CA 94025
Eugene Santa Cattarina................................... 847,217 8.7 6.4
Bryan Lang............................................... 626,307 6.4 4.7
Jason Rosenbluth, M.D.(3)................................ 1,750,000 17.9 13.2
One Maritime Plaza, 11(th) Floor
San Francisco, CA 94111
Howard Cox(4)............................................ 2,500,000 25.6 18.9
One Federal Street
Boston, MA 02110
Thomas Stephenson(5)..................................... 2,500,000 25.6 18.9
3000 Sandhill Road, Building 4, Suite 780
Menlo Park, CA 94025
Jerome Grossman, M.D.(6)................................. 33,565 * *
72 Spooner Road
Chestnut Hill, MA 02617
Stephen Kay.............................................. 300,000 3.1 2.3
All directors and executive officers as a group
(9 persons)(7)......................................... 8,803,824 90.2 66.4
</TABLE>
-------------------------
* Less than 1% of the outstanding shares of common stock.
(1) Includes 1,575,000 shares held by Bedrock Capital Partners I, LP, 87,500
shares held by Credit Suisse First Boston Bedrock Fund, L.P., 6,260 shares
held by Chris Paul, 6,250 shares held by Theodore Ridgeway, and 75,000
shares held by the VBW Employee Bedrock Fund, LP. Bedrock General Partner I,
LLC is a general partner of Bedrock Capital Partners I, LP and of VBW
Employee Bedrock Fund, LP.
47
<PAGE> 48
(2) Includes 2,287,000 shares held by Sequoia Capital VII, 100,000 shares held
by Sequoia Technology Partners VII, 46,400 shares held by SQP 1997, 26,100
shares held by Sequoia 1997 LLC and 40,000 shares held by Sequoia
International Partners. SC VII-A Management Company LLC is a general partner
of Sequoia Capital VII, Sequoia Technical Partners VII and Sequoia
International Partners.
(3) Includes 1,750,000 shares held by Bedrock Capital Partners I, LP and its
affiliates, as listed in note 1 above. Dr. Rosenbluth is a co-founder and
managing partner of Bedrock General Partner I, LLC, the general partner of
Bedrock Capital Partners I, LP and of VBW Employee Bedrock Fund, LP. Dr.
Rosenbluth disclaims beneficial ownership of the shares held by the entities
or persons listed in note 1 above, except to the extent of his direct
pecuniary interest in the shares. Bedrock General Partner I, LLC has voting
and disposition power over the shares underlying the options held by Dr.
Rosenbluth.
(4) Includes 2,500,000 shares held by Greylock IX Limited Partnership. Mr. Cox
is a general partner of Greylock IX GP Limited Partnership, which is a
general partner of Greylock IX Limited Partnership. Mr. Cox disclaims
beneficial ownership of the shares held by Greylock IX Limited Partnership,
except to the extent of his direct pecuniary interest in the shares.
(5) Includes 2,500,000 shares held by Sequoia Capital VII and its affiliates, as
listed in note 2 above. Mr. Stephenson is a managing member of SC VII-A
Management Company LLC, the general partner of Sequoia Capital VII, Sequoia
Technology Partners VII and Sequoia International Partners. Mr. Stephenson
disclaims beneficial ownership of the shares held by the entities listed in
note 2 above, except to the extent of his direct pecuniary interest in the
shares.
(6) Includes 33,565 shares of common stock issuable upon the exercise of options
exercisable within sixty days of September 30, 1999.
(7) Includes 33,565 shares of common stock issuable upon the exercise of options
exercisable within sixty days of September 30, 1999. Includes 1,750,000
shares held by Bedrock Capital Partners I, LP and its affiliates, as listed
in notes 1 and 3 above, 2,500,000 shares held by Greylock IX Limited
Partnership, as listed in note 4 above, and 2,500,000 shares held by Sequoia
Capital VII and its affiliates, as listed in notes 2 and 5 above.
48
<PAGE> 49
DESCRIPTION OF CAPITAL STOCK
GENERAL
Landacorp's amended and restated certificate of incorporation, which
will become effective upon the closing of this offering, authorizes the issuance
of up to 15,000,000 shares of common stock, par value $0.001 per share, and
8,000,000 shares of preferred stock, par value $0.001 per share. This
description is only a summary. You should refer to the amended and restated
certificate of incorporation and bylaws which have been filed with the
Securities and Exchange Commission as exhibits to our registration statement, of
which this prospectus forms a part. As of September 30, 1999 2,612,210 shares of
common stock were outstanding and 6,800,000 shares of preferred stock, which
will automatically convert into 6,800,000 shares of common stock upon the
completion of this offering, were issued and outstanding. As of September 30,
1999, we had 109 stockholders.
COMMON STOCK
Each holder of common stock is entitled to one vote for each share on
all matters to be voted upon by the stockholders. There are no cumulative voting
rights. Subject to preferences to which holders of preferred stock issued in the
future may be entitled, holders of common stock are entitled to receive ratably
such dividends, if any, as may be declared from time to time by the board of
directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of Landacorp, holders of common stock
would be entitled to share in Landacorp's assets remaining after the payment of
liabilities and the satisfaction of any liquidation preference granted the
holders of any then outstanding shares of Preferred Stock. Holders of common
stock have no preemptive or conversion rights or other subscription rights.
There are no redemption or sinking fund provisions applicable to the common
stock. All outstanding shares of common stock are, and the shares of common
stock offered by Landacorp in this offering, when issued and paid for, will be
fully paid and nonassessable. The rights, preferences and privileges of the
holders of common stock are subject to and may be adversely affected by the
rights of the holders of shares of any series of preferred stock which Landacorp
may designate in the future.
PREFERRED STOCK
Upon the closing of this offering, the board of directors will be
authorized, without stockholder approval, from time to time to issue up to an
aggregate of 8,000,000 shares of preferred stock, $0.001 par value per share, in
one or more series, each of such series to have such rights and preferences,
including voting rights, dividend rights, conversion rights, redemption
privileges and liquidation preferences, as shall be determined by the Board of
Directors. The rights of the holders of common stock will be subject to, and may
be adversely affected by, the rights of holders of any preferred stock that may
be issued in the future. Issuance of preferred stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could either have the effect of making it more difficult for a third
party to acquire, or of discouraging a third party from attempting to acquire, a
majority of the outstanding stock of Landacorp. Landacorp has no present plans
to issue any shares of preferred stock.
REGISTRATION RIGHTS
Pursuant to the terms of the Investor Rights Agreement dated February
27, 1998 and upon the consummation of this offering, the holders of 6,800,000
shares of common stock issuable upon conversion of the preferred stock, holders
of 250,000 shares of common stock issued or issuable upon exercise of the
warrant granted to Westminster Health Care Limited, holders of any common stock
issued as a dividend or distribution, and their permitted transferees are
entitled to rights with respect to the registration of such shares under the
Securities Act. The holders of at least 30% of these securities may require us,
subject to limitations, to file a registration statement if the aggregate gross
offering price of at least $15 million. We are not required to effect (i) more
than
49
<PAGE> 50
two such registrations pursuant to such demand registration rights; (ii) a
registration during the period in which any other registration statement has
been filed and for a period of 180 days after such registration has been
declared effective; or (iii) a registration for a period not to exceed 90 days,
if the Board of Directors of Landacorp has made a good faith determination that
such registration would be seriously detrimental to Landacorp or to its
stockholders. Furthermore, pursuant to the terms of the Investor Rights
Agreement, the holders of the these securities are entitled to registration
rights in connection with any registration by us of our securities for our own
account or the account of other security holders. In the event that we propose
to register any shares of common stock under the Securities Act, the holders of
such piggyback registration rights are entitled to receive notice of such
registration and are entitled to include their shares therein.
At any time after we become eligible to file a registration statement on
Form S-3, holders of $500,000 of registrable securities may require us to file
registration statements on Form S-3 under the Securities Act with respect to
their shares of common stock. We are not required to effect more than two such
registrations in any 12 month period.
Each of the foregoing registration rights is subject to conditions and
limitations, including the right of the underwriters in any underwritten
offering to limit the number of shares of registrable securities to be included
in such registration. The registration rights with respect to any holder thereof
terminate upon the earlier of 5 years from the effective date of this offering
or when the shares held by such holder may be sold under Rule 144 during any 90
day period. We are required to bear all of the expenses of all such
registrations, except underwriting discounts and commissions. Registration of
any of the registrable securities would result in such shares becoming freely
tradable without restriction under the Securities Act immediately upon
effectiveness of such registration. The Investor Rights Agreement also contains
a commitment of Landacorp to indemnify the holders of registration rights,
subject to limitations.
Holders of the shares of common stock issuable upon exercise of the
warrants described above are entitled to registration rights in connection with
any registration by us of our securities for its own account or the account of
other security holders.
EFFECT OF SELECTED PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BYLAWS,
AND THE DELAWARE ANTITAKEOVER STATUTE
Provisions of our amended and restated certificate of incorporation and
bylaws may have the effect of making it more difficult for a third party to
acquire, or of discouraging a third party from attempting to acquire, control of
Landacorp. Such provisions could limit the price that investors might be willing
to pay in the future for shares of our common stock. These provisions allow us
to issue preferred stock without any vote or further action by the stockholders
and eliminate the right of stockholders to act by written consent without a
meeting. These provisions may make it more difficult for stockholders to take
corporate actions and could have the effect of delaying or preventing a change
in control of Landacorp.
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Subject to exceptions, Section 203 of Delaware law prohibits a
publicly-held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless the
interested stockholder attained such status with the approval of the board of
directors or unless the business combination is approved in a prescribed manner.
A "business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Subject to
exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within three years did own fifteen percent
or more of a corporation's voting stock. This statute could prohibit or delay
the accomplishments of mergers or other takeover or change in control attempts
with respect to Landacorp and, accordingly, may discourage attempts to acquire
us.
50
<PAGE> 51
Our amended and restated certificate of incorporation eliminates the
right of stockholders to act by written consent without a meeting and our bylaws
eliminate the right of stockholders to call special meetings of stockholders.
The amended and restated certificate of incorporation does not provide for
cumulative voting in the election of directors. These and other provisions may
have the effect of deferring hostile takeovers or delaying changes in control or
management of Landacorp. The amendment of any of these provisions would require
approval by the board of directors and holders of at least 66 2/3% of the
outstanding common stock.
BOARD OF DIRECTORS VACANCIES
Our bylaws authorize the board of directors to fill vacant directorships
or increase the size of the Board of Directors. This may deter a stockholder
from removing incumbent directors and simultaneously gaining control of the
board of directors by filling the vacancies created by such removal with its own
nominees.
STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS
Our certificate of incorporation provides that stockholders may act only
at duly called annual or special meetings of stockholders, not by written
consent. Our bylaws further provide that special meetings of our stockholders
may be called only by the President, Chief Executive Officer or Chairman of the
board of directors or a majority of the board of directors.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
Our bylaws provide that stockholders seeking to bring business before
our annual meeting of stockholders, or to nominate candidates for election as
directors at our annual meeting of stockholders, must provide timely notice
thereof in writing. To be timely, a stockholder's notice must be delivered to,
or mailed and received at, our principal executive offices not less than 120
days prior to the first anniversary of the date of notice of annual meeting
provided with respect to the previous year's annual meeting of stockholders
provided, that if no annual meeting of stockholders was held in the previous
year if the date of the annual meeting of stockholders has been changed to be
more than 30 calendar days earlier than such anniversary, then notice by the
stockholder, to be timely, must be received before the solicitation is made. The
bylaws also specify requirements as to the form and content of a stockholder's
notice. These provisions may discourage stockholders from bringing matters
before our annual meeting of stockholders or from making nominations for
directors at our annual meeting of stockholders.
AUTHORIZED BUT UNISSUED SHARES
Our authorized but unissued shares of common stock and preferred stock
are available for future issuance without stockholder approval, subject to
limitations imposed by the Nasdaq National Market. These additional shares may
be utilized for a variety of corporate purposes, including future public
offerings to raise additional capital, corporate acquisitions and employee
benefit plans. The existence of authorized but unissued and unreserved common
stock and preferred stock could render more difficult or discourage an attempt
to obtain control of us by means of a tender offer, merger or otherwise.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is Norwest Bank of
Minnesota, N.A.
51
<PAGE> 52
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of common stock, including shares issued
upon exercise of outstanding options, in the public market could adversely
affect prevailing market prices. Furthermore, as described below, 9,405,211
shares currently outstanding will be available for sale after the expiration of
contractual restrictions on resale with the underwriters. Sales of substantial
amounts of our common stock in the public market after contractual restrictions
lapse could adversely affect the prevailing market price and our ability to
raise equity capital in the future.
Upon completion of this offering, we will have outstanding 13,262,210
shares of common stock, assuming no exercise of the underwriters' over-allotment
option and no exercise of outstanding options. Of these shares, the 3,500,000
shares sold in this offering will be freely tradable without restriction under
the Securities Act unless purchased by our "affiliates." Based on shares
outstanding as of September, the remaining shares will become eligible for
public sale as follows:
<TABLE>
<CAPTION>
ELIGIBILITY OF RESTRICTED SHARES FOR SALE IN PUBLIC MARKET
-----------------------------------------------------------------------------
<S> <C>
At effective date.......................................... 392,968 shares
90 days after effective date............................... 130,944 shares
After 180 days post-effective date......................... 8,881,299 shares
</TABLE>
Lock-Up Agreements with the Underwriters
Stockholders holding 8,881,299 shares or approximately 67% of our common
stock, including all of our officers and directors, have signed lock-up
agreements with the underwriters under which they agreed not to sell, transfer
or dispose of, directly or indirectly, any shares of common stock or any
securities convertible into or exercisable or exchangeable for shares of common
stock without the prior consent of Hambrecht & Quist LLC for a period of 180
days after the date of this prospectus.
Hambrecht & Quist LLC may choose to release some of these shares from
these restrictions prior to the expiration of this 180-day period, although we
are not aware of any current intention to request them to do so.
Rule 144
In general, under Rule 144 as currently in effect, beginning 90 days
after the date of this prospectus, a person who has beneficially owned shares of
our common stock for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of: 1% of
the number of shares of our common stock then outstanding, which will equal
approximately 132,622 shares immediately after this offering; or the average
weekly trading volume of the common stock on the Nasdaq National Market during
the four calendar weeks preceding the filing of a notice on Form 144 with
respect to the sale. Sales under Rule 144 are also subject to manner of sale
provisions and notice requirements and to the availability of current public
information about Landacorp.
Rule 144(k)
Under Rule 144(k), a person who has not been one of our affiliates at
any time during the 90 days preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years, is entitled to sell those
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144. Therefore, unless otherwise
restricted, 144(k) shares may be sold immediately upon the completion of this
offering.
52
<PAGE> 53
Rule 701
Any employee, officer or director of, or consultant to, Landacorp who
purchased shares under a written compensatory plan or contract may be entitled
to sell our shares in reliance on Rule 701. Rule 701 permits affiliates to sell
their Rule 701 shares under Rule 144 without complying with the holding period
requirements of Rule 144. Rule 701 further provides that non-affiliates may sell
these shares in reliance on Rule 144 without having to comply with the holding
period, public information, volume limitation or notice provisions of Rule 144.
Under this rule, all holders of Rule 701 shares are required to wait until 90
days after the date of this prospectus before selling those shares. However,
because all shares that we have issued under Rule 701 are subject to lock-up
agreements, they will only become eligible for sale when the 180-day lock-up
agreements expire. As a result, they may be sold 90 days after the offering only
if the holder obtains the prior written consent of Hambrecht & Quist LLC.
53
<PAGE> 54
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below, through their representatives, Hambrecht & Quist LLC,
SG Cowen Securities Corporation and Volpe Brown Whelan & Company, LLC, have
severally agreed to purchase from Landacorp the following respective numbers of
shares of common stock:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Hambrecht & Quist LLC.......................................
SG Cowen Securities Corporation.............................
Volpe Brown Whelan & Company, LLC...........................
---------
Total............................................. 3,500,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in Landacorp's business and the receipt of
certain certificates, opinions and letters from Landacorp, its counsel and its
independent auditors. The nature of the underwriters' obligation is such that
they are committed to purchase all shares of common stock offered hereby if any
of such shares are purchased.
The following tables show the per share and total underwriting discounts
and commissions to be paid to the underwriters. Such amounts are shown assuming
both no exercise and full exercise of the underwriters' over-allotment option to
purchase additional shares.
UNDERWRITING DISCOUNTS AND COMMISSIONS PAYABLE BY LANDACORP
<TABLE>
<CAPTION>
WITH WITHOUT
OVER-ALLOTMENT EXERCISE OVER-ALLOTMENT EXERCISE
----------------------- -----------------------
<S> <C> <C>
Per Share.................................. $ 0.63 $ 0.63
Total...................................... $2,535,750 $ 2,205,000
</TABLE>
Landacorp estimates that the total expenses of this offering, excluding
underwriting discounts and commissions, will be approximately $919,000.
The underwriters propose to offer the shares of common stock directly to
the public at the initial public offering price set forth on the cover page of
this prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The underwriters may allow and such dealers may
reallow a concession not in excess of $ per share to certain other dealers.
After the initial public offering of the shares, the offering price and other
selling terms may be changed by the representatives of the underwriters. The
representatives have informed Landacorp that the underwriters do not intend to
confirm discretionary sales in excess of 5% of the shares of common stock
offered hereby.
Landacorp and three stockholders of Landacorp have granted to the
underwriters an option, exercisable no later than 30 days after the date of this
prospectus, to purchase up to an aggregate of 525,000 additional shares of
common stock at the initial public offering price, less the underwriting
discount, set forth on the cover page of this prospectus. To the extent that the
underwriters exercise this option, each of the underwriters will have a firm
commitment to purchase approximately the same percentage thereof which the
number of shares of common stock to be purchased by it shown in the above table
bears to the total number of shares of common stock offered hereby. Landacorp
and the three stockholders will be obligated, pursuant to the
54
<PAGE> 55
option, to sell shares to the underwriters to the extent the option is
exercised. The underwriters may exercise such option only to cover
over-allotments made in connection with the sale of shares of common stock
offered hereby.
The offering of the shares is made for delivery when, as and if accepted
by the underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
Landacorp has agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, and to
contribute to payments the underwriters may be required to make in respect
thereof.
Certain stockholders of Landacorp, including executive officers and
directors, who will own in the aggregate 8,883,299 shares of common stock after
this offering, have agreed that they will not, without the prior written consent
of Hambrecht & Quist LLC, offer, sell or otherwise dispose of any shares of
common stock, options or warrants to acquire shares of common stock or
securities exchangeable for or convertible into shares of common stock owned by
them during the 180-day period following the date of this prospectus. Landacorp
has agreed that it will not, without the prior written consent of Hambrecht &
Quist LLC, offer, sell or otherwise dispose of any shares of common stock,
options or warrants to acquire shares of common stock or securities exchangeable
for or convertible into shares of common stock during the 180-day period
following the date of this prospectus, except that Landacorp may issue shares
upon the exercise of options granted prior to the date hereof, and may grant
additional options under its stock option plans, provided that, without the
prior written consent of Hambrecht & Quist LLC, such additional options shall
not be exercisable during such period.
An aggregate of shares of the Common Stock offered hereby have
been reserved for purchase from the underwriters through a directed share
program by persons having relationships with Landacorp. Such sales will be at
the initial public offering price. The number of shares of Common Stock
available for sale to the general public will be reduced to the extent such
persons purchase the reserved shares. Any reserved shares not so purchased will
be offered by the underwriters to the general public on the same terms as the
other shares offered hereby.
Affiliates of Volpe Brown Whelan & Company, LLC, Bedrock Capital
Partners, L.P. and its affiliates, own an aggregate of 1,750,000 shares of
Landacorp's Series D preferred stock, which, upon consummation of the offering,
will automatically convert to shares of common stock on a one-for-one basis and
will represent approximately 13.2% of the outstanding common stock. Because
affiliates of Volpe Brown Whelan & Company, LLC beneficially own more than ten
percent of the preferred equity of Landacorp prior to giving effect to any
conversion of the preferred stock, this offering is being conducted in
accordance with the "conflict of interests" provisions of Rule 2720 of the
Conduct Rules of the National Association of Securities Dealers, Inc. Under Rule
2720, when a member of the NASD, such as of Volpe Brown Whelan & Company, LLC,
proposes to underwrite or otherwise assist in the public distribution of
securities by an issuer with which it may be deemed to have a "conflict of
interest," the price at which such securities are to be distributed to the
public must be no higher than that recommended by a "qualified independent
underwriter" which must also participate in the preparation of the registration
statement and the prospectus and which must exercise the usual standards of "due
diligence" with respect to the preparation of the registration statement and the
prospectus. In accordance with these requirements, Hambrecht & Quist LLC is
assuming the responsibilities of acting as "qualified independent underwriter"
and will recommend the maximum public offering price for the shares of common
stock in compliance with the requirements of Rule 2720. In connection with this
offering, Hambrecht & Quist LLC is performing due diligence investigations and
is reviewing and participating in the preparation of this prospectus and the
registration statement of which this prospectus forms a part. The initial public
offering
55
<PAGE> 56
price of the common stock will be no higher than the price recommended by
Hambrecht & Quist LLC.
Prior to this offering, there has been no public market for the common
stock. The initial public offering price for the common stock will be determined
by negotiation among Landacorp and the representatives of the several
underwriters. The principal factors to be considered in determining the initial
public offering price include:
- the current state of our development and our current financial condition;
- the prospects for our future revenue and earnings;
- the experience and ability of our management;
- the general condition of the securities markets at the time of this
offering; and
- the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies.
The estimated initial public offering price range set forth on the cover
of this preliminary prospectus is subject to change as a result of market
conditions or other factors.
Certain persons participating in this offering may over-allot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the common stock at levels above those which might otherwise prevail in the open
market. Specifically, the underwriters may over-allot in connection with this
offering, creating a short position in the common stock for their own account.
In addition, to cover over-allotments or to stabilize the price of the 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 common stock in this
offering if the syndicate repurchases previously distributed shares of common
stock in transactions to cover syndicate short positions, in stabilization
transactions or otherwise. Each of these transactions would create additional
demand for the common stock and, as a result, the price of the common stock may
be higher than the price that otherwise might exist in the open market. Such
transactions may be effected on the Nasdaq National Market, in the
over-the-counter market, or otherwise. The underwriters may discontinue these
transactions at any time.
56
<PAGE> 57
LEGAL MATTERS
Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California, will pass upon the validity of the issuance of the shares of common
stock offered by this prospectus. Alston & Bird LLP, Atlanta, Georgia, will pass
upon certain legal matters in connection with this offering for the
underwriters.
EXPERTS
The balance sheets of Landacorp as of December 31, 1997 and 1998 and the
statements of operations, stockholders' equity and cash flows for each of the
three years ended December 31, 1998, included in this prospectus, have been
included herein in reliance upon the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with Securities and Exchange Commission in Washington,
D.C. a Registration Statement on Form S-1 under the Securities Act with respect
to the common stock offered in this prospectus. This prospectus, filed as part
of the registration statement, does not contain all of the information set forth
in the registration statement and its exhibits and schedules, portions of which
have been omitted as permitted by the rules and regulations of the SEC. For
further information about us and the common stock, we refer you to the
registration statement and to its exhibits and schedules. Statements in this
prospectus about the contents of any contract, agreement or other document are
not necessarily complete and, in each instance, we refer you to the copy of such
contract, agreement or document filed as an exhibit to the registration
statement. Each such statement is qualified in all respects by reference to the
document to which it refers. Anyone may inspect the registration statement and
its exhibits and schedules without charge at the public reference facilities the
SEC maintains at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the SEC located at 7 World Trade Center, Suite 1300, New
York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois,
60661. You may obtain copies of all or any part of these materials from the SEC
upon payment to the SEC of prescribed fees. You may also inspect these reports
and other information without charge at a Web site maintained by the SEC. The
address of this site is http://www.sec.gov.
Upon completion of this offering, we will become subject to the
informational requirements of the Exchange Act and, in accordance therewith,
file reports, proxy statements and other information with the SEC. You will be
able to inspect and copy these reports, proxy statements and other information
at the public reference facilities maintained by the SEC and at the SEC's
regional offices at the addresses noted above. You also will be able to obtain
copies of this material from the Public Reference Section of the SEC as
described above, or inspect them without charge at the SEC's Web site. Our
common stock has been approved for quotation on the Nasdaq National Market. Upon
completion of this offering, you will be able to inspect reports, proxy
statements and information statements and other information concerning us at the
National Association of Securities Dealers, Inc. at 1735 K Street, N.W.,
Washington, D.C. 20006.
57
<PAGE> 58
[THIS PAGE IS INTENTIONALLY LEFT BLANK]
58
<PAGE> 59
LANDA MANAGEMENT SYSTEMS CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Balance Sheet............................................... F-3
Statement of Operations..................................... F-4
Statement of Stockholders' Equity (Deficit)................. F-5
Statement of Cash Flows..................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 60
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Landa Management Systems Corporation
The reincorporation described in Note 9 to the financial statements has
not been consummated at November 29, 1999. When the reincorporation has been
consummated, we will be in a position to furnish the following report:
"In our opinion, the accompanying balance sheet and the related statements
of operations, of stockholders' equity (deficit) and of cash flows present
fairly, in all material respects, the financial position of Landa
Management Systems Corporation at December 31, 1997 and 1998 and the
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1998, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion
expressed above."
San Jose, California
February 12, 1999, except for Note 9
which is as of November 29, 1999
F-2
<PAGE> 61
LANDA MANAGEMENT SYSTEMS CORPORATION
BALANCE SHEET
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY AT
-------------------------- SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1999 1999
----------- ------------ ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 142,000 $ 2,032,000 $ 2,094,000
Accounts receivable and costs and estimated
earnings in excess of billings on uncompleted
contracts, net.................................. 640,000 1,651,000 2,218,000
Other current assets.............................. 113,000 186,000 195,000
----------- ------------ ------------
Total current assets....................... 895,000 3,869,000 4,507,000
Property and equipment, net......................... 187,000 352,000 739,000
Capitalized software, net........................... 99,000 92,000 71,000
----------- ------------ ------------
$ 1,181,000 $ 4,313,000 $ 5,317,000
=========== ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.................................. $ 421,000 $ 125,000 $ 283,000
Accrued expenses.................................. 1,058,000 833,000 1,276,000
Deferred revenue and billings in excess of costs
and estimated earnings on uncompleted
contracts....................................... 2,245,000 2,456,000 2,536,000
Current portion of note payable................... -- -- 85,000
Accrued interest -- related party................. 495,000 -- --
Notes payable -- related party.................... 2,221,000 -- --
----------- ------------ ------------
Total current liabilities.................. 6,440,000 3,414,000 4,180,000
Long-term note payable, net of current portion...... -- -- 170,000
----------- ------------ ------------
6,440,000 3,414,000 4,350,000
----------- ------------ ------------
Commitments and contingencies (Note 6)
Stockholders' equity (deficit):
Preferred Stock, $0.001 par value, issuable in
series; aggregate liquidation amount $8,160,000
at December 31, 1998 and September 30, 1999
(unaudited); 8,000,000 shares authorized;
606,000, 6,800,000 and 6,800,000 (unaudited)
shares issued and outstanding, no shares pro
forma (unaudited)............................... 1,000 7,000 7,000 $ --
Common Stock, $0.001 par value, 15,000,000 shares
authorized; 1,113,000, 1,030,000 and 2,612,000
(unaudited) shares issued and outstanding,
9,762,000 (unaudited) shares issued and
outstanding pro forma........................... 1,000 1,000 3,000 10,000
Additional paid-in capital........................ 4,047,000 15,102,000 16,919,000 17,339,000
Notes receivable from officers.................... -- -- (189,000) (189,000)
Unearned stock-based compensation................. -- (2,993,000) (3,103,000) (3,103,000)
Accumulated deficit............................... (9,308,000) (11,218,000) (12,670,000) (12,670,000)
----------- ------------ ------------
Total stockholders' equity (deficit)....... (5,259,000) 899,000 967,000 $ 1,387,000
----------- ------------ ------------ ------------
$ 1,181,000 $ 4,313,000 $ 5,317,000
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 62
LANDA MANAGEMENT SYSTEMS CORPORATION
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- -------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
System sales.................... $ 1,007,000 $ 3,136,000 $ 4,967,000 $ 3,835,000 $ 5,633,000
Support services.............. 932,000 902,000 1,250,000 813,000 1,434,000
----------- ----------- ----------- ----------- -----------
Total revenues............. 1,939,000 4,038,000 6,217,000 4,648,000 7,067,000
----------- ----------- ----------- ----------- -----------
Cost of revenues:
System sales.................. 499,000 1,097,000 2,244,000 1,626,000 2,082,000
Support services.............. 285,000 299,000 419,000 297,000 429,000
----------- ----------- ----------- ----------- -----------
Total cost of revenues..... 784,000 1,396,000 2,663,000 1,923,000 2,511,000
----------- ----------- ----------- ----------- -----------
Gross profit.................... 1,155,000 2,642,000 3,554,000 2,725,000 4,556,000
----------- ----------- ----------- ----------- -----------
Operating expenses:
Sales and marketing........... 782,000 1,176,000 1,588,000 1,103,000 2,005,000
Research and development...... 1,269,000 1,294,000 1,393,000 1,024,000 1,139,000
General and administrative.... 801,000 975,000 1,385,000 999,000 1,472,000
Stock-based compensation...... -- -- 1,173,000 646,000 1,464,000
----------- ----------- ----------- ----------- -----------
Total operating expenses... 2,852,000 3,445,000 5,539,000 3,772,000 6,080,000
----------- ----------- ----------- ----------- -----------
Loss from operations............ (1,697,000) (803,000) (1,985,000) (1,047,000) (1,524,000)
Interest and other income,
net........................... -- -- 101,000 75,000 76,000
Interest expense................ (200,000) (208,000) (26,000) (26,000) (4,000)
----------- ----------- ----------- ----------- -----------
Net loss........................ $(1,897,000) $(1,011,000) $(1,910,000) $ (998,000) $(1,452,000)
=========== =========== =========== =========== ===========
Net loss per share:
Basic and diluted............. $ (1.74) $ (0.91) $ (1.83) $ (0.95) $ (1.32)
=========== =========== =========== =========== ===========
Weighted average shares....... 1,090,000 1,110,000 1,043,000 1,056,000 1,100,000
=========== =========== =========== =========== ===========
Pro forma net loss per share:
Basic and diluted
(unaudited)................ $ (0.27) $ (0.18)
=========== ===========
Weighted average shares
(unaudited)................ 7,117,000 8,250,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 63
LANDA MANAGEMENT SYSTEMS CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
NOTES
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE UNEARNED
------------------ ------------------ PAID-IN FROM STOCK-BASED
SHARES AMOUNT SHARES AMOUNT CAPITAL OFFICERS COMPENSATION
--------- ------ --------- ------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995....... 606,000 $1,000 1,079,000 $1,000 $ 3,978,000 $ -- $ --
Issuance of Common Stock........... -- -- 24,000 -- 48,000 -- --
Net loss........................... -- -- -- -- -- -- --
--------- ------ --------- ------ ----------- --------- -----------
Balance at December 31, 1996....... 606,000 1,000 1,103,000 1,000 4,026,000 -- --
Issuance of Common Stock........... -- -- 10,000 -- 21,000 -- --
Net loss........................... -- -- -- -- -- -- --
--------- ------ --------- ------ ----------- --------- -----------
Balance at December 31, 1997....... 606,000 1,000 1,113,000 1,000 4,047,000 -- --
Issuance of Common Stock........... -- -- 95,000 -- 297,000 -- --
Conversion of Common Stock into
Series D Preferred Stock.......... 18,000 -- (178,000) -- -- -- --
Conversion of Series A, B and C
Preferred Stock to Series D
Preferred Stock................... -- -- -- -- -- -- --
Issuance of Series D
Preferred Stock................... 6,176,000 6,000 -- -- 6,592,000 -- --
Unearned stock-based
compensation...................... -- -- -- -- 4,166,000 -- (4,166,000)
Amortization of unearned stock-
based compensation................ -- -- -- -- -- -- 1,173,000
Net loss........................... -- -- -- -- -- -- --
--------- ------ --------- ------ ----------- --------- -----------
Balance at December 31, 1998....... 6,800,000 7,000 1,030,000 1,000 15,102,000 -- (2,993,000)
Issuance of Common Stock
(unaudited)....................... -- -- 10,000 -- 56,000 -- --
Common Stock issued for notes
receivable from officers
(unaudited)....................... -- -- 1,572,000 2,000 187,000 (189,000) --
Unearned stock-based compensation
(unaudited)....................... -- -- -- -- 1,574,000 -- (1,574,000)
Amortization of unearned stock-
based compensation (unaudited).... -- -- -- -- -- -- 1,464,000
Net loss (unaudited)............... -- -- -- -- -- -- --
--------- ------ --------- ------ ----------- --------- -----------
Balance at September 30, 1999
(unaudited)....................... 6,800,000 $7,000 2,612,000 $3,000 $16,919,000 $(189,000) $(3,103,000)
========= ====== ========= ====== =========== ========= ===========
<CAPTION>
TOTAL
STOCKHOLDERS'
ACCUMULATED EQUITY
DEFICIT (DEFICIT)
------------ -------------
<S> <C> <C>
Balance at December 31, 1995....... $ (6,400,000) $(2,420,000)
Issuance of Common Stock........... -- 48,000
Net loss........................... (1,897,000) (1,897,000)
------------ -----------
Balance at December 31, 1996....... (8,297,000) (4,269,000)
Issuance of Common Stock........... -- 21,000
Net loss........................... (1,011,000) (1,011,000)
------------ -----------
Balance at December 31, 1997....... (9,308,000) (5,259,000)
Issuance of Common Stock........... -- 297,000
Conversion of Common Stock into
Series D Preferred Stock.......... -- --
Conversion of Series A, B and C
Preferred Stock to Series D
Preferred Stock................... -- --
Issuance of Series D
Preferred Stock................... -- 6,598,000
Unearned stock-based
compensation...................... -- --
Amortization of unearned stock-
based compensation................ 1,173,000
Net loss........................... (1,910,000) (1,910,000)
------------ -----------
Balance at December 31, 1998....... (11,218,000) 899,000
Issuance of Common Stock
(unaudited)....................... -- 56,000
Common Stock issued for notes
receivable from officers
(unaudited)....................... -- --
Unearned stock-based compensation
(unaudited)....................... -- --
Amortization of unearned stock-
based compensation (unaudited).... -- 1,464,000
Net loss (unaudited)............... (1,452,000) (1,452,000)
------------ -----------
Balance at September 30, 1999
(unaudited)....................... $(12,670,000) $ 967,000
============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 64
LANDA MANAGEMENT SYSTEMS CORPORATION
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- -------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.............................................. $(1,897,000) $(1,011,000) $(1,910,000) $ (998,000) $(1,452,000)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization..................... 81,000 162,000 239,000 167,000 270,000
Provision for doubtful accounts................... 46,000 24,000 100,000 100,000 28,000
Amortization of unearned stock-based
compensation.................................... -- -- 1,173,000 646,000 1,464,000
Stock issued at discount for services rendered.... -- -- -- -- 48,000
Changes in assets and liabilities:
Accounts receivable............................. (919,000) 529,000 (1,111,000) (1,589,000) (595,000)
Other current assets............................ (51,000) 17,000 (73,000) (40,000) (9,000)
Accounts payable................................ 188,000 59,000 (296,000) (263,000) 158,000
Accrued expenses................................ 375,000 251,000 (225,000) (290,000) 443,000
Deferred revenue................................ 1,633,000 (228,000) 211,000 238,000 80,000
Accrued interest -- related party............... 185,000 180,000 (495,000) (495,000) --
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in) operating
activities.................................. (359,000) (17,000) (2,387,000) (2,524,000) 435,000
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchases of property and equipment, net............ (112,000) (167,000) (321,000) (203,000) (578,000)
Capitalized software development costs.............. (49,000) (68,000) (76,000) (58,000) (58,000)
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities......... (161,000) (235,000) (397,000) (261,000) (636,000)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Bank borrowings, net................................ 128,000 35,000 -- -- 255,000
Proceeds from stockholder notes payable............. 510,000 382,000 100,000 100,000 --
Payments on stockholder notes payable............... (220,000) (23,000) (2,032,000) (2,032,000) --
Proceeds from Common Stock issuances................ 21,000 -- 8,000 8,000 8,000
Proceeds from Preferred Stock issuances............. -- -- 6,598,000 6,598,000 --
----------- ----------- ----------- ----------- -----------
Net cash provided by financing activities..... 439,000 394,000 4,674,000 4,674,000 263,000
----------- ----------- ----------- ----------- -----------
Increase (decrease) in cash and cash equivalents...... (81,000) 142,000 1,890,000 1,889,000 62,000
Cash and cash equivalents, beginning of period........ 81,000 -- 142,000 142,000 2,032,000
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents, end of period.............. $ -- $ 142,000 $ 2,032,000 $ 2,031,000 $ 2,094,000
=========== =========== =========== =========== ===========
Supplemental cash flow information:
Cash paid for interest.............................. $ 1,000 $ 21,000 $ 526,000 $ 526,000 $ 4,000
=========== =========== =========== =========== ===========
Cash paid for income taxes.......................... $ 1,000 $ 1,000 $ 1,000 $ -- $ 1,000
=========== =========== =========== =========== ===========
Supplemental non-cash financing activities:
Bank borrowing transferred to stockholder........... $ -- $ -- $ 163,000 $ 163,000 $ --
=========== =========== =========== =========== ===========
Stockholder notes payable converted
into Common Stock................................. $ 27,000 $ 21,000 $ 289,000 $ 289,000 $ --
=========== =========== =========== =========== ===========
Series A, B and C Preferred Stock converted into
Series D Preferred Stock.......................... $ -- $ -- $ 1,291,000 $ 1,291,000 $ --
=========== =========== =========== =========== ===========
Common Stock converted into
Series D Preferred Stock............................ $ -- $ -- $ 22,000 $ 22,000 $ --
=========== =========== =========== =========== ===========
Common Stock issued for notes receivable from
officers.......................................... $ -- $ -- $ -- $ -- $ 189,000
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 65
LANDA MANAGEMENT SYSTEMS CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. THE COMPANY
Landa Management Systems Corporation (the Company), was established in
1982 for the purpose of developing health care quality and resource management
systems that target cost containment and quality improvement for hospitals and
managed care organizations. The Company maintains offices in Chico, California
and Atlanta, Georgia and derives all of its revenues from customers in the
United States.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue recognition
The Company derives revenues from the installation and licensing of
health care quality and resource management software systems, sales of third
party software applications as part of system implementations and from the
delivery of post-contract customer support, training and consulting services.
System sales revenues and the associated costs are recognized using the
percentage-of-completion method, using labor hours incurred relative to total
estimated contract hours as the measure of progress towards completion. When the
current estimates of total contract revenue and contract cost indicate a loss,
the Company records a provision for the estimated loss on the contract. The
allowance for contract losses totaled $100,000 at December 31, 1997 and 1998 and
$120,000 at September 30, 1999 (unaudited). Sales of software products of other
vendors are recognized upon installation. Support services included in the
initial licensing agreement and annual support service renewal contracts are
deferred and are recognized ratably over the support period. Revenues from
training and consulting are recognized when the Company has delivered the
services in accordance with the terms of the service agreements or have no
future performance obligations. Amounts billed in advance of revenue recognition
are recorded as deferred revenue.
In future periods, the Company plans to introduce a new
subscription-based fee structure to payer organizations that would provide for
implementation services at a fixed hourly rate and licensing of the installed
system and post-contract customer support through a monthly subscription fee
based upon the number of members maintained by the payer organization. In
connection with such future arrangements, if any, that conform to the new
licensing structure, the Company will recognize the fair value of the
implementation services as such services are delivered and will recognize
license and post-contract customer support fees on a monthly basis at the
subscription rate.
The Company has not experienced any material product returns to date.
Accordingly, no provision for future product returns has been made.
Concentration of credit risk
Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist primarily of trade accounts
receivable. The Company's revenues are derived from software licensing and
service transactions with customers in the United States. The Company
F-7
<PAGE> 66
LANDA MANAGEMENT SYSTEMS CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
performs ongoing credit evaluations of its customers and maintains an allowance
for probable credit losses based upon its historical experience.
At December 31, 1997, two customers accounted for 32% and 15% of gross
accounts receivable and costs and estimated earnings in excess of billings on
uncompleted contracts, respectively. At December 31, 1998, three customers
accounted for 12%, 11% and 10% of gross accounts receivable and costs and
estimated earnings in excess of billings on uncompleted contracts, respectively.
At September, 1999, one customer accounted for 41% (unaudited) of gross accounts
receivable and costs and estimated earnings in excess of billings on uncompleted
contracts.
During the year ended December 31, 1998, one customer accounted for 10%
of total revenues. During the nine month period ended September 30, 1999, two
customers accounted for 18% (unaudited) and 13% (unaudited) of total revenues,
respectively. No individual customer accounted for 10% or more of total revenues
during the years ended December 31, 1996 and 1997.
Cash and cash equivalents
Cash equivalents include highly liquid investments with maturities of
three months or less when purchased.
Property and equipment
Property and equipment are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful life of the asset,
generally three to five years, or the lease term, if shorter.
Impairment of long-lived assets
The Company evaluates the recoverability of long-lived assets in
accordance with Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of" ("SFAS 121"). SFAS 121 requires recognition of impairment of long-lived
assets in the event the net book value of such assets exceeds the future
undiscounted cash flows available to such assets.
Software development costs
In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed," the Company capitalizes certain software development costs from the
date the technological feasibility of the product is established, using the
working model approach, through the date the product is available for general
release to customers. Capitalized costs are amortized on a product-by-product
basis, based on the greater amount computed by using (a) the ratio that current
gross revenues for a product bear to the total of current and anticipated future
gross revenues for that product, or (b) straight-line amortization over the
estimated product life. The Company evaluates the estimated net realizable value
of capitalized costs relating to each software product on a quarterly basis and
records write-downs to net realizable value for any amounts for which the net
book value is in excess of net realizable value. Net realizable value is
determined based upon the estimated future gross revenues from each product
reduced by the estimated future costs of completing and disposing of that
product. No write-downs of software development costs occurred during the years
F-8
<PAGE> 67
LANDA MANAGEMENT SYSTEMS CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
ended December 31, 1996, 1997 and 1998, or the nine month periods ended
September 30, 1998 (unaudited) and 1999 (unaudited), respectively.
Research and development
Research and development costs include expenses incurred by the Company
to develop and enhance its software products and are expensed as incurred.
Stock-based compensation
The Company accounts for stock-based employee compensation arrangements
in accordance with provisions of APB No. 25, "Accounting for Stock Issued to
Employees," and complies with the disclosure provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Under APB No. 25, compensation cost
is recognized based on the difference, if any, on the date of grant between the
fair value of the Company's stock and the amount an employee must pay to acquire
the stock.
Advertising expense
Advertising costs are expensed as incurred and totaled $42,000, $183,000
and $152,000 during the years ended December 31, 1996, 1997 and 1998,
respectively, and $118,000 (unaudited) and $98,000 (unaudited) during the nine
months ended September 30, 1998 and 1999, respectively.
Income taxes
Income taxes are accounted for using an asset and liability approach,
which requires the recognition of taxes payable or refundable for the current
year and deferred tax assets and liabilities for the future tax consequences of
events that have been recognized in the Company's financial statements or tax
returns. The measurement of current and deferred tax assets and liabilities are
based on provisions of the enacted tax law; the effects of future changes in tax
laws or rates are not anticipated. The measurement of deferred tax assets is
reduced, if necessary, by the amount of any tax benefits that, based on
available evidence, are not expected to be realized.
Pro forma stockholder's equity (unaudited)
Effective upon the closing of the Company's planned initial public
offering, the outstanding shares of Series D Preferred Stock will automatically
convert into 6,800,000 shares of Common Stock. Additionally, the holders of
warrants to purchase 350,000 shares of common stock (see Note 7) have committed
to exercise the warrants concurrent with the closing of the Company's planned
initial public offering. The pro forma effects of the conversion and exercise of
warrants are unaudited and have been reflected in the accompanying pro forma
balance sheet at September 30, 1999.
Net loss per share
Basic net loss per share is computed using the weighted average number
of common shares outstanding. Diluted net loss per share is computed using the
weighted average number of common and potential common shares outstanding.
Potential common shares consist of outstanding common shares subject to
repurchase by the company, the incremental number of common shares issuable upon
conversion of Preferred Stock (using the if-converted method) and common shares
issuable upon the exercise of stock options and warrants (using the treasury
stock method). Potential
F-9
<PAGE> 68
LANDA MANAGEMENT SYSTEMS CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
common shares are excluded from the computation if their effect is
anti-dilutive. Net loss per share computations are in accordance with SFAS No.
128, "Earnings Per Share," and the Securities and Exchange Commission Staff
Accounting Bulletin ("SAB") No. 98.
The weighted average potential common shares excluded from the
determination of basic and diluted net loss per share as their effect is
anti-dilutive, are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------- ----------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Preferred Stock........................ 606,000 606,000 5,782,000 5,724,000 6,800,000
Common Stock subject to repurchase..... -- -- -- -- 1,345,000
Common Stock options................... 576,000 818,000 941,000 627,000 1,519,000
Common Stock warrants.................. -- -- 292,000 272,000 350,000
--------- --------- --------- --------- ----------
1,182,000 1,424,000 7,015,000 6,623,000 10,014,000
========= ========= ========= ========= ==========
</TABLE>
Pro forma net loss per share (Unaudited)
Pro forma basic net loss per share is computed using the weighted
average number of common shares outstanding and the pro forma effects of the
exercise of outstanding warrants to purchase 350,000 shares of common stock and
the automatic conversion of the Company's outstanding Preferred Stock into
shares of the Common Stock, effective upon closing of the initial public
offering as if such conversion and exercise of warrants occurred January 1,
1998, or at date of original issuance, if later. Pro forma diluted net loss per
share is computed using the pro forma weighted average number of common and
potential common shares outstanding. Pro forma potential shares of Common Stock
consist of Common Stock subject to repurchase and stock options and warrants
(using the treasury stock method). Pro forma potential shares of Common Stock
have been excluded from the computation as their effect is antidilutive.
Fair value of financial information
The Company's financial instruments, including cash and cash
equivalents, accounts receivable and accounts payable are carried at cost, which
approximates fair value due to the short maturity of these instruments.
Segment information
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." The
Company identifies its operating segments based on business activities,
management responsibility and geographical location, and reports one measure of
profitability to the chief operating decision maker. During the years ended
December 31, 1996, 1997 and 1998, and the nine months ended September 30, 1999,
the Company operated in a single business segment; licensing, installing and
supporting computer software to customers located in the United States.
Comprehensive income
Effective January 1, 1998, the Company adopted the provisions of SFAS
No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards
for reporting comprehensive income and its components in financial statements.
Comprehensive income, as
F-10
<PAGE> 69
LANDA MANAGEMENT SYSTEMS CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
defined, includes all changes in equity (net assets) during a period from
non-owner sources. To date, the Company has not had any transactions other than
its reported net losses, that are required to be reported in comprehensive
income.
Interim Financial Information (Unaudited)
The accompanying interim financial statements as of September 30, 1999
and for the nine months ended September 30, 1998 and 1999, are unaudited. The
unaudited interim financial statements have been prepared on the same basis as
the annual financial statements and, in the opinion of management, reflect all
adjustments, which include only normal recurring adjustments, necessary to
present fairly the Company's financial position as of September 30, 1999 and the
results of the Company's operations and its cash flows for the nine months ended
September 30, 1998 and 1999. The financial data and other information disclosed
in these notes to financial statements related to these periods are unaudited.
The results for the nine months ended September 30, 1999, are not necessarily
indicative of the results to be expected for the year ending December 31, 1999.
Reclassifications
Certain prior year balances have been reclassified to conform to current
year presentation.
Recent accounting pronouncements
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Cost of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 is effective for
financial statements for years beginning after December 15, 1998. SOP 98-1
provides guidance over accounting for computer software developed or obtained
for internal use including the requirement to capitalize specified costs and
amortization of such costs. The Company has adopted the provisions of SOP 98-1
in its fiscal year beginning January 1, 1999, and the effects of adoption did
not to have a material effect on the Company's financial statements.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivatives and Hedging Activities" ("SFAS 133"). SFAS 133
is effective for all fiscal quarters of all fiscal years beginning after June
15, 1999. SFAS 133 establishes accounting and reporting standards of derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. In July 1999, the Financial Accounting
Standards Board issued SFAS No. 137 "Accounting for Derivative Instruments and
Hedging Activities -- Deferral of the Effective Date of FASB Statement No. 133"
("SFAS 137"). SFAS 137 deferred the effective date until the first fiscal
quarter ending June 30, 2000. The Company will adopt SFAS 133 in its quarter
ending June 30, 2000 and does not expect such adoption to have a material effect
impact on the Company's financial statements.
In December 1998, the AICPA issued Statement of Position No. 98-9,
"Modification of SoP No. 97-2, Software Revenue Recognition, With Respect to
Certain Transactions" ("SoP 98-9"), which is effective for transactions entered
into in fiscal years beginning after March 15, 1999. SoP 98-9 amends SoP 97-2
and extends the effective date of SoP No. 98-4 "Deferral of the Effective Date
of a Provision of SoP 97-2, Software Revenue Recognition" ("SoP 98-4"), and
provides additional interpretive guidance. The adoption of SoP 97-2 has not had,
and the adoption of SoP 98-4 and SoP 98-9 are not expected to have, a material
effect on the Company's financial statements.
F-11
<PAGE> 70
LANDA MANAGEMENT SYSTEMS CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. BALANCE SHEET COMPONENTS
The components of certain balance sheet captions are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ SEPTEMBER 30,
1997 1998 1999
---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Accounts receivable:
Accounts receivable and costs and estimated
earnings in excess of billings on uncompleted
contracts, net................................ $ 727,000 $1,291,000 $1,893,000
Costs and estimated earnings in excess of
billings on uncompleted contracts............. -- 547,000 540,000
Less: Allowance for doubtful accounts........... (87,000) (87,000) (95,000)
Less: Allowance for contract losses............. -- (100,000) (120,000)
---------- ---------- ----------
$ 640,000 $1,651,000 $2,218,000
========== ========== ==========
Other current assets:
Prepaid license fees............................ $ 79,000 $ 85,000 $ 56,000
Prepaid expenses and other...................... 34,000 101,000 139,000
---------- ---------- ----------
$ 113,000 $ 186,000 $ 195,000
========== ========== ==========
Property and equipment, net:
Computer equipment.............................. $ 631,000 $ 870,000 $1,282,000
Furniture and fixtures.......................... 131,000 140,000 188,000
Leasehold improvements.......................... 43,000 48,000 160,000
---------- ---------- ----------
805,000 1,058,000 1,630,000
Less: accumulated depreciation.................. (618,000) (706,000) (891,000)
---------- ---------- ----------
$ 187,000 $ 352,000 $ 739,000
========== ========== ==========
Capitalized software, net:
Capitalized software............................ $ 208,000 $ 284,000 $ 342,000
Less: accumulated amortization.................. (109,000) (192,000) (271,000)
---------- ---------- ----------
$ 99,000 $ 92,000 $ 71,000
========== ========== ==========
Accrued expenses:
Payroll related................................. $ 849,000 $ 733,000 $1,112,000
Allowance for contract losses................... 100,000 -- --
Other........................................... 109,000 100,000 164,000
---------- ---------- ----------
$1,058,000 $ 833,000 $1,276,000
========== ========== ==========
Deferred revenue and billings in excess of costs and
estimated earnings on uncompleted contracts:
Billings in excess of costs and estimated
earnings on uncompleted contracts............. $1,518,000 $1,235,000 $ 977,000
Deferred support revenue........................ 702,000 1,167,000 1,472,000
Other deferred revenue.......................... 25,000 54,000 87,000
---------- ---------- ----------
$2,245,000 $2,456,000 $2,536,000
========== ========== ==========
</TABLE>
F-12
<PAGE> 71
LANDA MANAGEMENT SYSTEMS CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. RELATED PARTY TRANSACTIONS
At December 31, 1996 and 1997, the Company had notes payable to certain
stockholders totaling $1,720,000 and $2,221,000, respectively, which, accrued
interest at an annual rate of 12%. Interest expense recognized on stockholder
notes totaled $185,000, $180,000 and $31,000 for the years ended December 31,
1996, 1997 and 1998, respectively, and $31,000 (unaudited) for the nine months
ended September 30, 1998. In March 1998, these stockholder notes payable and
related accrued interest totaling $2,558,000 were repaid using proceeds from the
Series D Preferred Stock issuance (See Note 7).
During the year ended December 31, 1996, a stockholder converted notes
payable totaling $27,000 as payment for the exercise of 13,000 vested options.
During the year ended December 31, 1997, stockholders converted notes payable
totaling $21,000 as payment for the exercise of 10,000 vested options. During
the nine months ended September 30, 1998 and year ended December 31, 1998,
stockholders converted notes payable totaling $289,000 as payment for the
exercise of 91,000 vested options.
In 1997, the Company maintained an operating line of credit with a bank
which was guaranteed by a stockholder (the guarantor). The line of credit
expired on December 31, 1997, and the outstanding balance of $163,000 was repaid
by the guarantor in exchange for a note payable from the Company. The Company
repaid the note to the guarantor in March 1998.
At September 30, 1999, the Company held full recourse notes receivable
from officers related to their purchases of Common Stock in the amount of
$189,000 (unaudited). The notes accrue interest at 6% per annum, are secured by
all shares of the Company's Common Stock purchased by these individuals and are
due and payable in 2006 or immediately in the event of termination.
5. INCOME TAXES
No current provision or benefit for federal or state income taxes has
been recorded for the years ended December 31, 1996, 1997 and 1998 and for the
nine months ended September 30, 1998 (unaudited) and 1999 (unaudited), as the
Company has incurred net operating losses and has no carryback potential.
At December 31, 1998, the Company had federal and state net operating
loss carryforwards of approximately $6,309,000 and $1,442,000, respectively,
available to reduce future taxable income. At September 30, 1999, the Company
had federal and state net operating loss carryforwards of approximately
$6,487,000 (unaudited) and $1,531,000 (unaudited), respectively, available to
reduce future taxable income. Utilization of such carryforwards may be limited
in certain circumstances including, but not limited to, cumulative stock
ownership changes of more than 50 percent over a three-year period and expire at
varying amounts during the period from 1999 through 2013. The Company believes
that there were cumulative changes of ownership of greater than 50 percent in
February 1998. Accordingly, the amount of loss carryforwards that can be
utilized to reduce future taxable income for federal and state income tax
purposes will be limited. The amount of the limitation has not yet been
calculated. The Company's planned initial public offering is not expected to
generate another 50 percent ownership change.
F-13
<PAGE> 72
LANDA MANAGEMENT SYSTEMS CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
Net deferred tax assets are composed of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- SEPTEMBER 30,
1997 1998 1999
----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Net operating loss carryforward................ $ 1,716,000 $ 2,228,000 $ 2,294,000
Depreciation and amortization.................. 810,000 629,000 438,000
Research and development credits............... 115,000 210,000 279,000
Allowance for doubtful accounts................ 35,000 35,000 38,000
Allowance for contract losses.................. 40,000 40,000 48,000
Other.......................................... 122,000 40,000 122,000
----------- ----------- -----------
Gross deferred tax assets...................... 2,838,000 3,182,000 3,219,000
Less: Valuation allowance...................... (2,838,000) (3,182,000) (3,219,000)
----------- ----------- -----------
Net deferred tax assets........................ $ -- $ -- $ --
=========== =========== ===========
</TABLE>
Based on a number of factors, including the lack of a history of
profits, management believes that there is sufficient uncertainty regarding the
realization of deferred tax assets such that a full valuation allowance has been
provided.
6. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases its facilities and certain equipment under
noncancelable operating leases which expire at various times through 2002.
Future minimum lease payments at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING RENTAL
DECEMBER 31, AMOUNTS
------------ ----------
<S> <C>
1999........................................................ $ 234,000
2000........................................................ 258,000
2001........................................................ 218,000
2002........................................................ 167,000
2003........................................................ 142,000
Thereafter.................................................. 136,000
----------
$1,155,000
==========
</TABLE>
Rent expense under noncancelable operating leases totaled $218,000,
$208,000 and $139,000 for the years ended December 31, 1996, 1997 and 1998,
respectively and $118,530 (unaudited) and $187,459 (unaudited) for the nine
months ended September 30, 1998 and 1999, respectively.
Line of credit agreement
In February 1999, the Company obtained a line of credit that allows
maximum borrowings of $2 million. Advances on the line of credit are
collateralized by all tangible and intangible personal property of the Company,
accrue interest at prime and are due in February 2000. The agreement also allows
the Company to designate up to $300,000 of the maximum borrowings as a term note
to finance equipment purchases. Borrowings under the term note must be drawn by
August 1999 and are payable in 36 equal payments of principal plus interest
beginning September
F-14
<PAGE> 73
LANDA MANAGEMENT SYSTEMS CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
1999. The interest rate for borrowings under the term note is the Bank's prime
rate plus 1%. At September 30, 1999, the Company had no (unaudited) outstanding
borrowings under the line of credit agreement and $255,000 (unaudited) on the
term note.
Shareholder bonus
In February 1998, the Company entered into an agreement with a
shareholder whereby the Company would pay a bonus of $335,000 to the shareholder
upon the successful completion of an initial public offering. Such amount will
be accrued and recorded as an operating expense in the period the initial public
offering is completed.
7. STOCKHOLDERS' EQUITY
As of December 31, 1998, the Company's Articles of Incorporation
authorized the Company to issue 15,000,000 shares of no par value Common Stock,
and 41,000, 115,000, 450,000 and 6,800,000 shares of $0.001 par value Series A,
B, C and D Preferred Stock, respectively.
Preferred Stock
Preferred Stock consists of the following:
<TABLE>
<CAPTION>
SHARES ISSUED AND OUTSTANDING DECEMBER 31, 1998 SEPTEMBER 30, 1999
----------------------------------- ------------------------ ------------------------
DECEMBER 31,
SHARES ------------------- SEPTEMBER 30, GROSS LIQUIDATION GROSS LIQUIDATION
AUTHORIZED 1997 1998 1999 PROCEEDS AMOUNT PROCEEDS AMOUNT
---------- ------- --------- ------------- ---------- ----------- ---------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Series A............. 41,000 41,000 -- -- $ -- $ -- $ -- $ --
Series B............. 115,000 115,000 -- -- -- -- -- --
Series C............. 450,000 450,000 -- -- -- -- -- --
Series D............. 6,800,000 -- 6,800,000 6,800,000 8,513,000 8,160,000 8,513,000 8,160,000
Undesignated......... 594,000 -- -- -- -- -- -- --
--------- ------- --------- --------- ---------- ---------- ---------- ----------
8,000,000 606,000 6,800,000 6,800,000 $8,513,000 $8,160,000 $8,513,000 $8,160,000
========= ======= ========= ========= ========== ========== ========== ==========
</TABLE>
Recapitalization
At December 31, 1997, the Company had 41,000, 115,000 and 450,000
outstanding shares of Series A, B and C Preferred Stock, respectively. In
February 1998, the Company's Articles of Incorporation were amended to authorize
the Company to issue 6,800,000 shares of Series D Preferred Stock. Immediately
following the authorization, all 41,000 shares of Series A Preferred Stock were
converted into Series D Preferred Stock on a one-for-one basis. All shares of
Series B and Series C Preferred Stock were converted into 1,122,000 shares of
Series D Preferred Stock using a conversion ratio of 1.9833 shares of Series D
Preferred Stock issued for each share of Series B and Series C Preferred Stock
converted.
Additionally, certain stockholders converted 178,000 shares of Common
Stock into 18,000 shares of Series D Preferred Stock using a conversion ratio of
approximately .10 shares of Series D Preferred Stock issued for each share of
Common Stock converted.
Following the above conversions, in February 1998, the holders of the
converted Series D Preferred Stock sold all of their shares to new investors for
approximately $1.20 per share in accordance with an agreement between the
Company and its stockholders. In addition, the Company issued 5,619,000 shares
of Series D Preferred Stock to new investors for approximately
F-15
<PAGE> 74
LANDA MANAGEMENT SYSTEMS CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. STOCKHOLDERS' EQUITY (CONTINUED)
$1.20 per share. Offering costs of $141,000 were recorded as an offset to the
gross proceeds from the sale of Series D Preferred Stock.
Voting
Each share of Series D Preferred Stock has voting rights equal to one
share of Common Stock into which it is convertible and votes together as one
class with the Common Stock.
Dividends
Holders of Series A Preferred Stock were entitled to receive
noncumulative dividends at a rate of 10 percent per year, when and if declared
by the Company's Board of Directors. Holders of Series B and C Preferred Stock
were entitled to receive cumulative dividends at a rate of 3 percent per year,
when and if declared by the Company's Board of Directors. Cumulative dividends
were to be paid before any dividends could be declared or paid on any other
class of stock. No dividends were declared by the Board of Directors on the
Series A, B and C Preferred Stock.
Holders of Series D Preferred Stock are entitled to receive
noncumulative dividends at a rate of 10 percent per year, when and if declared
by the Company's Board of Directors. The holders of Series D Preferred Stock
will also be entitled to participate in dividends on Common Stock, when and if
declared by the Board of Directors, based on the number of shares of Common
Stock held on an as-if converted basis. No dividends on Series D Preferred Stock
or Common Stock were declared by the Company's Board of Directors during the
year ended December 31, 1998 or the nine months ended September 30,1999
(unaudited).
Liquidation
In the event of the liquidation, dissolution or winding up of the
Company, including merger, consolidation, reorganization, sale of voting control
or sale of substantially all of the assets of the Company in which the
stockholders of the Company do not own a majority (50% or more) of the
outstanding shares of the surviving corporation, the holders of Series D
Preferred Stock are entitled to receive a sum equal to the original issue price
of the stock plus all declared and unpaid dividends. The remaining assets, if
any, shall be distributed ratably among the holders of Common Stock and Series D
Preferred Stock on an as-if-converted to Common Stock basis. Should the
Company's legally available assets be insufficient to satisfy the liquidation
preferences, the funds will be distributed ratably among the holders of Series D
Preferred Stock.
Conversion
Each share of Series D Preferred Stock is convertible at the option of
the holder into shares of Common Stock by multiplying the appropriate conversion
rate in effect by the number of Series D Preferred Stock being converted. The
conversion rate is the quotient obtained by dividing the Original Issue Price by
the conversion price (which is initially the respective Original Issue Price,
until it is adjusted). Additionally, each share of Series D Preferred Stock
shall automatically be converted upon (i) an initial public offering of the
Company equal to or exceeding $6.00 per share with aggregate proceeds not less
than $15,000,000, or (ii) the written consent of at least sixty six and
two-thirds (66 2/3) percent of the Series D Preferred Stock holders then
outstanding. At December 31, 1998 and September 30, 1999, the conversion rate
was one to one and is not expected to change prior to the Company's Initial
Public Offering.
F-16
<PAGE> 75
LANDA MANAGEMENT SYSTEMS CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. STOCKHOLDERS' EQUITY (CONTINUED)
Common Stock warrants
In conjunction with the Series D Preferred Stock issuance, the Company
issued warrants to two stockholders for the rights to purchase 100,000 and
250,000 shares, respectively, of Common Stock at a price of $1.20 per share. The
warrants were fully vested and exercisable on the date of grant and expire on
the earlier of February 2003, or the closing of an initial public offering by
the Company. The fair value of warrants, determined using the Black-Scholes
option pricing model, was immaterial on the date of issuance.
Restricted Common Stock
In March and May 1999, certain officers exercised, in exchange for full
recourse notes payable to the Company, stock options to purchase 1,572,284
(unaudited) shares of the Company's Common Stock at a price of $0.12 per share
(See Note 4). Under the terms of the stock purchase agreements, the Company has
the right to repurchase the unvested shares of Common Stock at the original
issue price in the event the officers cease to be employees of the Company. The
repurchase rights lapse ratably over 48 months from the original grant date of
the options. At September 30, 1999, 1,076,187 (unaudited) shares of Common Stock
were subject to repurchase rights.
8. STOCK OPTION PLANS
The Company has two stock option plans, the 1995 Stock Option Plan (1995
Plan) and the 1998 Equity Incentive Plan (1998 Plan), which provide for the
granting of incentive stock option awards to employees of the Company. Under the
two plans, options must be issued at prices not less than 100 percent of the
estimated fair value of the stock on the date of grant and are exercisable for
periods not exceeding ten years from the date of grant. Options granted to
stockholders who own greater than 10 percent of the outstanding stock at the
time of grant are exercisable for periods not exceeding five years from the date
of grant and must be issued at prices not less than 110 percent of the estimated
fair value at the date of grant. Options granted under the 1995 Plan vest in 25
percent increments 9, 15, 21 and 27 months after the date of grant. Options
granted to employees under the 1998 Plan vest at a rate of 20 percent per year
over five years from the grant date. Options granted to officers and directors
under the 1998 Plan vest over periods determined by the Board of Directors,
which was four years for options granted in 1998.
F-17
<PAGE> 76
LANDA MANAGEMENT SYSTEMS CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. STOCK OPTION PLANS (CONTINUED)
The following table summarizes the status of the Company's stock option
plans as of and for the years ended December 31, 1996, 1997 and 1998 and as of
and for the nine months ended September 30, 1999:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
-------------------------------------------------------- SEPTEMBER 30, 1999
1996 1997 1998 (UNAUDITED)
-------------------- -------------------- ---------------------- -----------------------
WEIGHTED- WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE SHARES PRICE
-------- --------- -------- --------- ---------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year.... 487,048 $3.23 609,048 $2.85 900,298 $2.54 2,253,947 $0.71
Granted................ 164,000 1.94 379,500 1.95 1,750,349 0.12 280,100 0.95
Exercised.......... (24,000) 3.75 (10,000) 2.09 (95,000) 3.13 (1,572,284) 0.12
Forfeited.......... (18,000) 1.90 (78,250) 2.13 (6,700) 1.90 (9,600) 0.13
Expired............ -- -- -- -- (295,000) 1.99 (70,848) 8.00
-------- -------- ---------- -----------
Outstanding at period
end.................. 609,048 2.85 900,298 2.54 2,253,947 0.71 881,315 1.26
-------- -------- ---------- -----------
Options exercisable at
period end........... 427,798 3.23 602,298 2.84 2,005,132 0.72 516,315 1.70
-------- -------- ---------- -----------
Weighted-average fair
value of options
granted during the
period............... $ -- $ -- $ 2.40 $ 5.85
======== ======== ========== ===========
</TABLE>
As of December 31, 1998 and September 30, 1999, 588,797 and 659,645
(unaudited) shares of Common Stock were reserved for future issuance.
The following table summarizes information about stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE WEIGHTED-AVERAGE
NUMBER OF REMAINING NUMBER OF REMAINING
EXERCISE SHARES CONTRACTUAL LIFE SHARES CONTRACTUAL LIFE
PRICES OUTSTANDING IN YEARS EXERCISABLE IN YEARS
-------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C>
$0.12 1,750,349 9.8 1,572,284 9.8
1.90 432,750 5.9 362,000 5.9
8.00 70,848 0.3 70,848 0.3
--------- --- --------- ---
2,253,947 8.8 2,005,132 8.8
========= === ========= ===
</TABLE>
F-18
<PAGE> 77
LANDA MANAGEMENT SYSTEMS CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. STOCK OPTION PLANS (CONTINUED)
The following table summarizes information about stock options
outstanding at September 30, 1999 (unaudited):
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE WEIGHTED-AVERAGE
NUMBER OF REMAINING NUMBER OF REMAINING
EXERCISE SHARES CONTRACTUAL LIFE SHARES CONTRACTUAL LIFE
PRICES OUTSTANDING IN YEARS EXERCISABLE IN YEARS
-------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C>
$0.12 168,565 9.1 33,565 9.1
0.50 28,000 9.8 -- --
1.00 252,000 9.8 50,000 9.8
1.90 432,750 5.3 432,750 5.3
------- --- ------- ---
881,315 7.4 516,315 5.9
======= === ======= ===
</TABLE>
Fair value disclosures
The Company calculated the minimum value of each option on the date of
grant using the Black-Scholes option pricing model as prescribed by SFAS No. 123
using the following assumptions:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------ --------------------------
1996 1997 1998 1998 1999
---- ---- ---- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Risk-free interest
rates................. 6.3% 6.3% 5.8% 4.1% 5.7%
Expected lives (in
years).................. 5.0 5.0 5.0 5.0 5.0
Dividend yield.......... 0.0% 0.0% 0.0% 0.0% 0.0%
Expected volatility..... 0.1% 0.1% 0.1% 0.1% 0.1%
</TABLE>
Had compensation cost for the Company's stock-based compensation plans
been determined based on the minimum value method prescribed by SFAS No. 123,
the Company's net pro forma loss would have been as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
--------------------------------------- -------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net loss:
As reported..................... $(1,897,000) $(1,011,000) $(1,910,000) $ (998,000) $(1,452,000)
Pro forma..................... $(1,897,000) $(1,011,000) $(1,912,000) $(1,004,000) $(1,470,000)
Basic and diluted net loss per
share:
As reported................... $ (1.74) $ (0.91) $ (1.83) $ (0.95) $ (1.32)
Pro forma..................... $ (1.74) $ (0.91) $ (1.83) $ (0.95) $ (1.34)
</TABLE>
Unearned stock-based compensation
In connection with certain stock option grants and common stock
issuances during the year ended December 31, 1998 and the nine months ended
September 30, 1999, the Company recognized unearned compensation totaling
$4,166,000 and $1,574,000 (unaudited), respectively, which is being amortized
over the vesting periods of the related options using the multiple option
approach prescribed by SFAS No. 123. Amortization expense recognized during the
year ended
F-19
<PAGE> 78
LANDA MANAGEMENT SYSTEMS CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. STOCK OPTION PLANS (CONTINUED)
December 31, 1998 and the nine months ended September 30, 1998 and 1999, totaled
$1,173,000, $646,000 (unaudited) and $1,464,000 (unaudited), respectively.
Additionally compensation expense of $48,000 (unaudited) was recorded in the
period ended September 30, 1999 for stock sold at a discount to a third party
consultant for services provided, and is included in general and administrative
expense.
9. SUBSEQUENT EVENTS
Reincorporation
In September 1999, the Board of Directors authorized the reincorporation
of the Company from a California corporation to a Delaware corporation. The
reincorporation is expected to become effective prior to the effective date of
the Company's planned initial public offering.
F-20
<PAGE> 79
INSIDE FRONT COVER PAGE HEADER:
Imagine... a healthcare industry where communication among decision-makers is
actually timely, interactive and meaningful.
INSIDE SPREAD HEADER:
Make the right connections. Landacorp e-medical management solutions.
COPY HEADERS:
Landacorp.
Providing business-to-business solutions to enable e-medical management.
Landacorp provides comprehensive medical management and Internet-based solutions
to healthcare payers and providers that:
o Automate and streamline administrative and business processes;
o Enable secure, real-time interaction among various healthcare participants
over the Internet; and
o Add functionality to our payer clients' Web sites to attract repeat visits by
members.
Our solutions complement existing information systems and Internet-based
products and services, enabling our customers to configure and adapt our
solutions to fit their specific administrative and business processes and
clinical guidelines. This is possible through our:
o Open, multi-tiered system architecture;
o Rules-based processing capabilities; and
o Proprietary interfaces.
Our solutions help our clients:
o Control the cost and improve the quality of healthcare delivery;
o Develop their Internet healthcare initiatives; and
o Improve their members' satisfaction and empowerment.
DESCRIPTION OF DIAGRAM:
The diagram illustrates the interactions between members and health plan, and
providers and health plan on mock computer screens that would be available to
members and providers using our e-maxMC medical management solution via Internet
connection.
<PAGE> 80
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
3,500,000 SHARES
[LANDACORP
LOGO]
COMMON STOCK
---------------------
PROSPECTUS
---------------------
HAMBRECHT & QUIST
SG COWEN
VOLPE, BROWN, WHELAN & COMPANY
YOU SHOULD RELY ONLY ON INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY
SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK.
NO ACTION IS BEING TAKEN IN ANY JURISDICTION OUTSIDE THE UNITED STATES
TO PERMIT A PUBLIC OFFERING OF THE COMMON STOCK OR POSSESSION OR DISTRIBUTION OR
DISTRIBUTION OF THIS PROSPECTUS IN ANY SUCH JURISDICTION. PERSONS WHO COME INTO
POSSESSION OF THIS PROSPECTUS IN JURISDICTIONS OUTSIDE THE UNITED STATES ARE
REQUIRED TO INFORM THEMSELVES ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO THIS
OFFERING AND THE DISTRIBUTION IF THIS PROSPECTUS APPLICABLE TO THAT
JURISDICTION.
UNTIL (25 DAYS AFTER THE DAY OF THIS PROSPECTUS), ALL
DEALERS THAT BUY, SELL OR TRADE IN OUR COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 81
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than the
underwriting discounts, payable by the Registrant in connection with the sale of
the securities being registered. All amounts are estimates except the SEC
registration fee, the NASD filing fee and the Nasdaq/ NMS listing fee.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 11,190
NASD Filing Fee............................................. 4,500
Nasdaq National Market Listing Fee.......................... 10,000
Printing Costs.............................................. 200,000
Legal Fees and Expenses..................................... 375,000
Accounting Fees and Expenses................................ 275,000
Blue Sky Fees and Expenses.................................. 5,000
Transfer Agent and Registrar Fees........................... 3,000
Miscellaneous............................................... 35,310
----------
Total............................................. $ 919,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits a
corporation to include in its charter documents, and in agreements between the
corporation and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.
Our certificate of incorporation and bylaws provide that we will
indemnify our directors and executive offices, and that we may indemnify our
other officers and employees and other agents, to the fullest extent permitted
by law. We believe that the indemnification under our bylaws covers at least
negligence and gross negligence on the part of the indemnified parties. Our
bylaws also permit us to secure insurance on behalf of any officer, director,
employee or other agent for any liability arising out of his or her actions in
such capacity, regardless of whether the bylaws would permit indemnification.
We have entered into agreements to indemnify our executive offices, in
addition to indemnification provided for in our bylaws. These agreements, among
other things, provide for indemnification of our directors and executive
officers for expenses, judgments, fines, and settlement amounts incurred by any
such person in any action or proceedings arising out of such person's services
as a director or executive officer of Landacorp or at our request. We believe
that these provisions and agreements are necessary to attract and retain
qualified persons as directors and executive officers. We also maintain
directors and officers liability insurance. At present, we are not aware of any
pending litigation or proceeding involving any director, officer, employee or
agent of Landacorp where indemnification will be required or permitted.
Furthermore, we are not aware of any threatened litigation or proceeding that
might result in a claim for indemnity by these individuals.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since January 1, 1996, the Registrant has sold and issued the following
unregistered securities:
1. On April 16, 1996, we sold 13,000 shares of common stock to a
director for a purchase price of $27,000.
II-1
<PAGE> 82
2. On May 31, 1996, we sold 1,000 shares of common stock to Ben Steel
for a purchase price of $1,900.
3. On September 26, 1996, we sold 10,000 shares of common stock to David
Wellons for a purchase price of $19,000.
4. On December 22, 1997, we sold 2,000 shares of common stock to Howard
Shortly for a purchase price of $16,000.
5. On March 11, 1998, we sold 3000 shares of common stock to Daniel
Legare for a purchase price of $5,700.
6. On June 15, 1998, we sold an aggregate of 1,250 shares of common
stock to Matt Zerega for a purchase price of $2,375.
7. On February 27, 1999, we sold an aggregate of 6,800,000 shares of
Series D preferred stock to investors for an aggregate purchase price of
$8,160,000.
8. On March 17, 1999, we sold an aggregate of 1,362,285 shares of common
stock to employees, officers and directors for an aggregate purchase price of
$165,373.50.
9. On April 1, 1999, we sold 5,000 shares of common stock to Michael
Lake for a purchase price of $2,500.
10. On August 1, 1999, we sold 5,000 shares of common stock to Michael
Lake for a purchase price of $5,000.
The offers, sales and issuances of the above securities were deemed to
be exempt from registration under the Securities Act in reliance on Section 4(2)
of the Securities Act, and/or Regulation D promulgated thereunder, or Rule 701
promulgated under Section 3(b) of the Securities Act as transactions by an
issuer not involving a public offering or transactions pursuant to compensatory
benefit plans and contracts relating to compensation as provided under such Rule
701. The recipients of securities in each such transaction represented their
intention to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof and appropriate legends
were affixed to the share certificates and warrants issued in such transactions.
All recipients had adequate access, through employment or other relationships,
to information about Landacorp.
ITEM 16. EXHIBITS.
<TABLE>
<C> <S>
*1.1 Form of Underwriting Agreement.
3.1 Intentionally omitted.
3.2 Intentionally omitted.
3.3 Intentionally omitted.
3.4 Amended and Restated Certificate of Incorporation.
3.5 Form of Bylaws.
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4, 3.5, 10.5
and 10.11.
4.2 Specimen common stock certificate.
*5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1 Form of Indemnification Agreement between the Company and
each of its directors and officers.
10.2 1995 Stock Plan.
10.3 1998 Equity Incentive Plan.
10.4 Series D Preferred Stock Purchase Agreement dated February
27, 1998.
10.5 Investor Rights Agreement dated February 27, 1998.
10.6 Sublease Agreement for Offices located at 4151 Ashford
Dunwoody Rd., Atlanta, Georgia, between Landacorp and Unisys
Corporation, dated September 1, 1991.
10.7 Lease Agreement for offices located on Fortress Avenue,
Chico, CA, between Landacorp and Fortress Development Group,
dated March 8, 1999.
10.8 Restricted Stock Purchase Agreement of Eugene Santa
Cattarina, dated October 20, 1998.
</TABLE>
II-2
<PAGE> 83
<TABLE>
<C> <S>
10.9 Restricted Stock Purchase Agreement of Stephen Kay, dated
October 20, 1998.
10.10 Restricted Stock Purchase Agreement of Bryan Lang, dated
October 20, 1998.
10.11 Voting Rights Agreement dated February 27, 1998.
10.12 Licensing Agreement by and between Interqual, Incorporated
and Landa management Systems Corporation, dated September 8,
1992.
10.14 Sublicensor Agreement by and between Interqual(R)
Incorporated and Landa Management Systems, effective April
15, 1994.
10.15 Distribution Agreement for Interqual(R)Medical
Appropriateness Review Systems, signed on January 1, 1996.
10.16 License Agreement - Software Developers, between Milliman &
Robertson, Inc. and Landacorp, dated August 17, 1998.
23.1 Consent of Independent Accountants
*23.2 Consents of Wilson Sonsini Goodrich & Rosati, P.C. (included
in Exhibit 5.1)
24.1 Powers of Attorney (included in this Registration Statement
at page II-5)
27.1 Financial Data Schedule
</TABLE>
------------------------
* To be filed by amendment
(b) Financial Statement Schedules
Schedule II -- Valuation and Qualifying Accounts
Other schedules are omitted because they are not applicable, or because
the information is included in the Financial Statements or the Notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreements
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, 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 of 1933, 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> 84
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Palo Alto,
State of California on September 20, 1999.
By:
/s/ STEPHEN P. KAY
------------------------------------
Stephen P. Kay
Chief Operating Officer
and Chief Financial Officer
(Principal Financial and Accounting
Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints, jointly and severally, Eugene
Santa Cattarina and Stephen P. Kay, and each of them, as his attorney-in-fact,
with full power of substitution, for him in any and all capacities, to sign any
and all amendments to this registration statement (including post-effective
amendments), and any and all registration statements filed pursuant to Rule 462
under the Securities Act of 1933, as amended, in connection with or related to
the offering contemplated by this registration statement and its amendments, if
any, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming our signatures as they may be signed by our said
attorney to any and all amendments to said registration statement.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on September 20, 1999:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ EUGENE SANTA CATTARINA President, Chief Executive Officer and
----------------------------------------------------- Director
Eugene Santa Cattarina
/s/ STEPHEN P. KAY Chief Operating Officer
----------------------------------------------------- and Chief Financial Officer
Stephen P. Kay (Principal Financial and Accounting Officer)
/s/ BRYAN H. LANG Chief Technology Officer,
----------------------------------------------------- Chief Marketing Officer and Director
Bryan H. Lang
/s/ THOMAS F. STEPHENSON Chairman of the Board of Directors
-----------------------------------------------------
Thomas F. Stephenson
/s/ HOWARD E. COX Director
-----------------------------------------------------
Howard E. Cox
/s/ JASON M. ROSENBLUTH Director
-----------------------------------------------------
Jason M. Rosenbluth
/s/ JEROME H. GROSSMAN Director
-----------------------------------------------------
Jerome H. Grossman
</TABLE>
II-4
<PAGE> 85
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*1.1 Form of Underwriting Agreement.
3.1 Intentionally omitted.
3.2 Intentionally omitted.
3.3 Intentionally omitted.
3.4 Amended and Restated Certificate of Incorporation.
3.5 Form of Bylaws.
4.1 Reference is made to Exhibits 3.4, 3.5, 10.5 and 10.11.
4.2 Specimen common stock certificate.
*5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1 Form of Indemnification Agreement between the Company and
each of its directors and officers.
10.2 1995 Stock Plan.
10.3 1998 Equity Incentive Plan.
10.4 Series D Preferred Stock Purchase Agreement dated February
27, 1998.
10.5 Investor Rights Agreement dated February 27, 1998.
10.6 Sublease Agreement for Offices located at 4151 Ashford
Dunwoody Rd., Atlanta, Georgia, between Landacorp and Unisys
Corporation, dated September 1, 1991.
10.7 Lease Agreement for offices located on Fortress Avenue,
Chico, CA, between Landacorp and Fortress Development Group,
dated March 8, 1999.
10.8 Restricted Stock Purchase Agreement of Eugene Santa
Cattarina, dated October 20, 1998.
10.9 Restricted Stock Purchase Agreement of Stephen Kay, dated
October 20, 1998.
10.10 Restricted Stock Purchase Agreement of Bryan Lang, dated
October 20, 1998.
10.11 Voting Rights Agreement dated February 27, 1998.
10.12 Licensing Agreement by and between Interqual(R) Incorporated
and Landa management Systems Corporation, dated September 8,
1992.
10.14 Sublicensor Agreement by and between Interqual(R)
Incorporated and Landa Management Systems, effective April
15, 1994.
10.15 Distribution Agreement for Interqual(R)Medical
Appropriateness Review Systems, signed on January 1, 1996.
10.16 License Agreement - Software Developers, between Milliman &
Robertson, Inc. and Landacorp, dated August 17, 1998.
23.1 Consent of Independent Accountants
*23.2 Consents of Wilson Sonsini Goodrich & Rosati, P.C. (included
in Exhibit 5.1)
24.1 Powers of Attorney (included in this Registration Statement
at page II-5)
27.1 Financial Data Schedule
</TABLE>
------------------------
* To be filed by amendment
<PAGE> 1
EXHIBIT 3.4
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
LANDACORP, INC.
Eugene Santa Cattarina and Stephen P. Kay certify that:
1. They are the Chief Executive Officer and the Secretary, respectively,
of Landacorp, Inc., a Delaware Corporation (the "Corporation").
2. The original Certificate of Incorporation of the Corporation was
first filed with the Office of the Secretary of State of Delaware on October 15,
1999.
3. The Certificate of Incorporation of the Corporation is hereby amended
and restated in full to read in its entirety as set forth in Exhibit A hereto.
4. The attached Amended and Restated Certificate of Incorporation has
been duly approved by the Board of Directors of this Corporation.
5. The attached Amended and Restated Certificate of Incorporation has
been duly approved by the required vote of the stockholders entitled to vote in
accordance with the Certificate of Incorporation of this Corporation and
Sections 242 and 245 of the Delaware General Corporation Law. The total number
of shares of Common Stock entitled to vote with respect to the foregoing Amended
and Restated Certificate of Incorporation was 8,475,000. The percentage vote
required was more than 50% of the outstanding shares of Common Stock, voting as
a single class. The number of shares of Common Stock voting in favor of the
Amended and Restated Certificate of Incorporation equaled or exceeded the vote
required.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned have executed this Amended and
Restated Certificate of Incorporation on _________________, 1999.
___________________________________
Eugene Santa Cattarina, Chief
Executive Officer
___________________________________
Stephen P. Kay, Secretary
The undersigned declare under penalty of perjury that the matters set
forth in the foregoing Amended and Restated Certificate of Incorporation are
true and correct of their own knowledge.
Executed at Chico, California on _____________, 1999
___________________________________
Eugene Santa Cattarina, Chief
Executive Officer
___________________________________
Stephen P. Kay, Secretary
<PAGE> 3
EXHIBIT A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
LANDACORP, INC.
FIRST. The name of this corporation is Landacorp, Inc.
SECOND. The address of the corporation's registered office in the State
of Delaware is 1209 Orange Street, Wilmington, County of New Castle, Delaware
19801. The name of its registered agent at such address is The Corporation Trust
Company.
THIRD. The purpose of this corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH. This corporation is authorized to issue two classes of shares,
to be designated "Common Stock" and "Preferred Stock", respectively. The total
number of shares which this corporation is authorized to issue is 34,800,000
shares. The number of shares of Common Stock this corporation is authorized to
issue is 23,000,000 shares, with the par value of $0.001, and the number of
shares of Preferred Stock this corporation is authorized to issue is 11,800,000
shares, with the par value of $0.001.
1. Designation of Series.
There is hereby provided one series of Preferred Stock,
designated Series D Preferred Stock (the "Series D Preferred").
2. Number of Shares.
The number of shares constituting the Series D Preferred Stock is
fixed at 6,800,000 shares.
3. Dividend Provisions.
Prior to the payment of any dividend to the holders of Common
Stock, the holders of Series D Preferred Stock shall be entitled to receive
dividends, out of any assets legally available therefor (payable other than in
Common Stock or other securities and rights convertible into or entitling the
holder thereof to receive, directly or indirectly, additional shares of Common
Stock of this corporation), at the annual rate of $0.096 per share. After
payment of such dividends, any addi-
<PAGE> 4
tional dividends declared shall be distributed among all holders of Common
Stock. Such dividends shall be payable when, as and if declared by the Board of
Directors, and shall not be cumulative.
4. Liquidation Preference.
(a) Preference. In the event of any liquidation,
dissolution or winding up of this corporation, either voluntary or involuntary,
the holders of Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets of this corporation to the
holders of Common Stock by reason of their ownership thereof, an amount per
share equal to the sum of original issue price, and any declared but unpaid
dividends on such shares of Preferred Stock for each outstanding share of
Preferred Stock held by them.
If upon such liquidation, dissolution or winding up of the
corporation, the assets of the corporation are insufficient to provide for the
preferential payment described above, then all of such assets shall be
distributed ratably among the holders of the Preferred Stock in proportion to
the full preferential amount each such holder is otherwise entitled to receive.
After the payment or the setting apart of payment to the
holders of Preferred Stock of the preferential amounts payable to them, the
holders of Common Stock shall be entitled to receive pro rata the remaining
assets of the corporation.
(b) Consolidation or Mergers. A consolidation or merger of
the corporation with or into any other corporation or corporations, or sale of
all or substantially all of the assets of this corporation in which the
shareholders of this corporation immediately prior to the transaction possess
less than 50% of the voting power of the surviving entity (or its parent)
immediately after the transaction shall be deemed to be a liquidation,
dissolution or winding up within the meaning of this Section 4. Any securities
to be delivered to the holders of Preferred Stock and Common Stock upon
consolidation, merger or sale of substantially all the assets of the corporation
shall be valued as follows:
(1) if traded on a securities exchange, the value
shall be deemed to be the average of the closing prices of the securities on
such exchange over the 30-day period ending three (3) business days prior to the
closing;
(2) if actively traded over-the-counter, the value
shall be deemed to be the average of the closing prices over the 30-day period
ending three (3) business days prior to the closing; and
(3) if there is no active public market, the value
shall be the fair market value thereof as determined in good faith by the
corporation's board of directors.
(c) Consent for Certain Repurchase. Each holder of an
outstanding share of Preferred Stock shall be deemed to have consented to
distributions made by the corporation in connection with the repurchase of
shares of Common Stock issued to or held by employees or consultants
<PAGE> 5
upon termination of their employment or services pursuant to agreements
providing for the right of said repurchase between the corporation and such
persons.
5. Conversion.
The holders of the Preferred Stock shall have conversion rights
as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Preferred Stock shall
be convertible without the payment of any additional consideration and, at the
option of the holder thereof, at any time after the date of issuance of such
share, at the office of the corporation or any transfer agent for the Preferred
Stock. Each share of Preferred Stock shall be convertible into the number of
fully paid and nonassessable shares of Common Stock which results from dividing
the Conversion Price (as hereinafter defined) per share in effect for the
Preferred Stock at the time of conversion into the per share Conversion Value
(as hereinafter defined). The initial Conversion Price per share of Series D
Preferred Stock shall be $1.20. The per share Conversion Value of the Series D
Preferred Stock shall be $1.20 ( the "Conversion Value"). The initial Conversion
Price of Series D Preferred Stock shall be subject to adjustment from time to
time as provided below (as so adjusted and as the case may be, the "Conversion
Price"). The number of shares of Common Stock into which a share of Preferred
Stock is convertible is hereinafter referred to as the "Conversion Rate" of such
series.
(b) Automatic Conversion. Each share of Preferred Stock
shall automatically be converted into shares of Common Stock at its then
effective Conversion Rate upon the earlier of (i) the affirmative vote of the
holders of at least sixty-six and two thirds percent (66 2/3%) of the
outstanding shares of the Preferred Stock, or (ii) immediately upon the closing
of a firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), other than a registration relating solely to a transaction
under Rule 145 under the Securities Act or to an employee benefit plan of the
corporation, covering the offer and sale of the corporation's securities in
which the aggregate gross proceeds to the corporation exceed $15,000,000 and the
price per share is not less than $6.00 (as adjusted to reflect stock dividends,
stock splits, combinations, subdivisions or recapitalizations).
(c) Mechanics of Conversion. Before any holder of shares
of Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he shall surrender the certificate(s) therefor, duly endorsed, at the
office of the corporation or of any transfer agent for the Preferred Stock and
shall give written notice to the corporation at such office that he elects to
convert the same (except that no such written notice of election to convert
shall be necessary in the event of an automatic conversion pursuant to Section
5(b) hereof). The corporation shall, as soon as practicable thereafter, issue
and deliver at such office to such holder of shares of Preferred Stock
certificate(s) for the number of shares of Common Stock to which such holder
shall be entitled. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the shares of
Preferred Stock to be converted (except that in the case of an automatic
conversion pursuant to Section 5(b) hereof such conversion shall be deemed to
have been made (i) upon the effective time of the requisite affirmative vote set
forth in Section 5(b)(i), or (ii) immediately prior to the closing of the
offering referred to in Section 5(b)(ii))
5
<PAGE> 6
and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date.
(d) Fractional Shares. In lieu of any fractional shares to
which the holder of Preferred Stock would otherwise be entitled, the corporation
shall pay cash equal to such fraction multiplied by the fair market value of one
share of such series of Preferred Stock as determined by the board of directors
of the corporation. Whether or not fractional shares are issuable upon such
conversion shall be determined on the basis of the total number of shares of
Preferred Stock of each holder at the time converting into Common Stock and the
number of shares of Common Stock issuable upon such aggregate conversion.
(e) Adjustment of Conversion Price. The Conversion Prices
of each series of Preferred Stock shall be subject to adjustment from time to
time as follows:
(i) If the corporation shall issue any shares of
Common Stock other than "Excluded Stock" (as defined below) for a consideration
per share less than the Conversion Price for any series of Preferred Stock in
effect immediately prior to the issuance of such shares of Common Stock
(excluding stock dividends, subdivisions, stock splits, combinations, dividends
or recapitalizations which are covered by Sections 5(e)(iii), (iv), (v) and
(vi)), the Conversion Price for such series of Preferred Stock in effect after
each such issuance shall thereafter (except as provided in this Section 5(e)) be
adjusted to a price equal to the quotient obtained by dividing:
(A) an amount equal to the sum of
(x) the total number of shares of
Common Stock outstanding (including any shares of Common Stock issuable upon
conversion of the Preferred Stock, or deemed to have been issued pursuant to
subdivision (3) of this clause (i) and to clause (ii) below) immediately prior
to such issuance multiplied by the Conversion Price in effect immediately prior
to such issuance, plus
(y) the consideration received by
the corporation upon such issuance, by
(B) the total number of shares of Common
Stock outstanding (including any shares of Common Stock issuable upon conversion
of the Preferred Stock or deemed to have been issued pursuant to subdivision (3)
of this clause (i) and to clause (ii) below) immediately prior to such issuance
plus the additional shares of Common Stock issued in such issuance (but not
including any additional shares of Common Stock deemed to be issued as a result
of any adjustment in the Conversion Price resulting from such issuance).
For purposes of any adjustment of the
Conversion Price pursuant to this clause (i) the following provisions shall be
applicable:
6
<PAGE> 7
(1) In the case of the issuance of
Common Stock for cash, the consideration shall be deemed to be the amount of
cash paid therefor after deducting any discounts or commissions paid or incurred
by the corporation in connection with the issuance and sale thereof.
(2) In the case of the issuance of
Common Stock for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair market value
thereof as determined by the board of directors of the corporation, in
accordance with generally accepted accounting treatment; provided, however, that
if, at the time of such determination, the corporation's Common Stock is traded
in the over-the-counter market or on a national or regional securities exchange,
such fair market value as determined by the board of directors of the
corporation shall not exceed the aggregate "Current Market Price" (as defined
below) of the shares of Common Stock being issued.
(3) In the case of the issuance of
(i) options to purchase or rights to subscribe for shares of Common Stock (other
than Excluded Stock), (ii) securities by their terms convertible into or
exchangeable for shares of Common Stock (other than Excluded Stock), or (iii)
options to purchase or rights to subscribe for such convertible or exchangeable
securities:
(A) the aggregate maximum
number of shares of Common Stock deliverable upon exercise of such options to
purchase or rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in subdivisions
(1) and (2) above), if any, received by the corporation upon the issuance of
such options or rights plus the minimum purchase price provided in such options
or rights for the Common Stock covered thereby;
(B) the aggregate maximum
number of shares of Common Stock deliverable upon conversion of or in exchange
for any such convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible or exchangeable
securities and subsequent conversion or exchange thereof, shall be deemed to
have been issued at the time such securities were issued or such options or
rights were issued and for a consideration equal to the consideration received
by the corporation for any such securities and related options or rights
(excluding any cash received on account of accrued interest or accrued
dividends), plus the minimum additional consideration, if any, to be received by
the corporation upon the conversion or exchange of such securities or the
exercise of any related options or rights (the consideration in each case to be
determined in the manner provided in subdivisions (1) and (2) above);
(C) on any change in the
number of shares of Common Stock deliverable upon exercise of any such options
or rights or conversion of or exchange for such convertible or exchangeable
securities, or on any change in the minimum purchase price of such options,
rights or securities, other than a change resulting from the anti-dilution
provisions of such options, rights or securities, the Conversion Price shall
forthwith be readjusted to such
7
<PAGE> 8
Conversion Price as would have obtained had the adjustment made upon (x) the
issuance of such options, rights or securities not exercised, converted or
exchanged prior to such change, as the case may be, been made upon the basis of
such change or (y) the options or rights related to such securities not
converted or exchanged prior to such change, as the case may be, been made upon
the basis of such change; and
(D) on the expiration of any
such options or rights, the termination of any such rights to convert or
exchange or the expiration of any options or rights related to such convertible
or exchangeable securities, the Conversion Price shall forthwith be readjusted
to such Conversion Price as would have obtained had the adjustment made upon the
issuance of such options, rights, convertible or exchangeable securities or
options or rights related to such convertible or exchangeable securities, as the
case may be, been made upon the basis of the issuance of only the number of
shares of Common Stock actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such convertible or exchangeable
securities or upon the exercise of the options or rights related to such
convertible or exchangeable securities, as the case may be.
(ii) "Excluded Stock" shall mean:
(A) all shares of Common Stock issued and
outstanding on the date this certificate is filed with the Delaware Secretary of
State, and all shares issued or issuable to officers, directors, consultants or
employees of the corporation pursuant to any plan or arrangement approved by the
board of directors of the corporation;
(B) all shares of Preferred Stock issued and
outstanding on the date this certificate is filed with the Delaware Secretary of
State, and the shares of Common Stock into which the shares of Preferred Stock
are convertible.
All outstanding shares of Excluded Stock
(including any shares issuable upon conversion of the Preferred Stock but
excluding shares reserved for issuance for option plans for which options have
not yet been granted) shall be deemed to be outstanding for all purposes of the
computations of Section 5(e)(i) above.
(iii) If the number of shares of Common Stock
outstanding at any time after the date hereof is increased by a stock dividend
payable in shares of Common Stock or by a subdivision or split-up of shares of
Common Stock, then, on the date such payment is made or such change is
effective, the Conversion Price of each series of Preferred Stock shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of any shares of such series of Preferred Stock shall be increased in
proportion to such increase of outstanding shares.
(iv) If the number of shares of Common Stock
outstanding at any time after the date hereof is decreased by a combination of
the outstanding shares of Common Stock, then, on the effective date of such
combination, the Conversion Price of each series of Preferred Stock shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion
8
<PAGE> 9
of any shares of such series of Preferred Stock shall be decreased in proportion
to such decrease in outstanding shares.
(v) In case the corporation shall declare a cash
dividend upon its Common Stock payable otherwise than out of retained earnings
or shall distribute to holders of its Common Stock shares of its capital stock
(other than Common Stock), stock or other securities of other persons, evidences
of indebtedness issued by the corporation or other persons, assets (excluding
cash dividends) or options or rights (excluding options to purchase and rights
to subscribe for Common Stock or other securities of the corporation convertible
into or exchangeable for Common Stock), then, in each such case, the holders of
shares of Preferred Stock shall, concurrent with the distribution to holders of
Common Stock, receive a like distribution based upon the number of shares of
Common Stock into which each series of Preferred Stock is convertible.
(vi) In case, at any time after the date hereof, of
any capital reorganization, or any reclassification of the stock of the
corporation (other than as a result of a stock dividend or subdivision, split-up
or combination of shares), or the consolidation or merger of the corporation
with or into another person (other than a consolidation or merger in which the
corporation is the continuing entity and which does not result in any change in
the Common Stock) or of the sale or other disposition of all or substantially
all the properties and assets of the corporation, the shares of Preferred Stock
shall, after such reorganization, reclassification, consolidation, merger, sale
or other disposition, be convertible into the kind and number of shares of stock
or other securities or property of the corporation or otherwise to which such
holder would have been entitled if immediately prior to such reorganization,
reclassification, consolidation, merger, sale or other disposition he had
converted his shares of Preferred Stock into Common Stock. The provisions of
this clause (vi) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, sales or other dispositions.
(vii) All calculations under this Section 5 shall
be made to the nearest cent or to the nearest one hundredth (1/100) of a share,
as the case may be.
(viii) For the purpose of any computation pursuant
to this Section 5(e), the "Current Market Price" at any date of one share of
Common Stock, shall be deemed to be the average of the highest reported bid and
the lowest reported offer prices on the preceding business day as furnished by
the National Quotation Bureau, Incorporated (or equivalent recognized source of
quotations); provided, however, that if the Common Stock is not traded in such
manner that the quotations referred to in this clause (ix) are available for the
period required hereunder, Current Market Price shall be determined in good
faith by the board of directors of the corporation.
(f) Minimal Adjustments. No adjustment in the Conversion
Price need be made if such adjustment would result in a change in the Conversion
Price of less than $0.01. Any adjustment of less than $0.01 which is not made
shall be carried forward and shall be made at the time of and together with any
subsequent adjustment which, on a cumulative basis, amounts to an adjustment of
$0.01 or more in the Conversion Price.
9
<PAGE> 10
(g) No Impairment. The corporation will not through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 5 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of Preferred Stock against impairment.
(h) Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Conversion Rate pursuant to this Section
5, the corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The corporation shall, upon written request at any time
of any holder of Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (i) such adjustments and readjustments,
(ii) the Conversion Rate of such series at the time in effect, and (iii) the
number of shares of Common Stock and the amount, if any, of other property which
at the time would be received upon the conversions of such holder's shares of
Preferred Stock.
(i) Notices of Record Date. In the event of any taking by
the corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property or to receive any other right, the corporation
shall mail to each holder of Preferred Stock at least ten (10) days prior to
such record date, a notice specifying the date on which any such record is to be
taken for the purpose of such dividend or distribution or right, and the amount
and character of such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. The
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of Preferred Stock such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Preferred Stock, the
corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
(k) Notices. Any notice required by the provisions of this
Section 5 to be given to the holder of shares of Preferred Stock shall be deemed
given if deposited in the United States mail, postage prepaid, and addressed to
each holder of record at his address appearing on the books of the corporation.
6. Voting Rights.
10
<PAGE> 11
(a) The holder of each share of Preferred Stock shall be
entitled to notice of any shareholders' meeting in accordance with the bylaws of
the corporation and shall vote with holders of the Common Stock upon the
election of directors and upon any other matter submitted to a vote of
shareholders, except those matters required by law to be submitted to a class
vote and except as otherwise set forth herein. Subject to Section 8, the holder
of each share of Preferred Stock shall be entitled to that number of votes equal
to the number of shares of Common Stock into which each share of Preferred Stock
could be converted on the record date for the vote or consent of shareholders.
Fractional votes shall not, however, be permitted and any fractional voting
rights resulting from the above formula (after aggregating all shares of
Preferred Stock held by each holder) shall be disregarded.
7. Protective Provisions. So long as shares of Preferred Stock
are outstanding, this corporation shall not, without first obtaining the
approval (by vote or written consent, as provided by law) of the holders of more
than fifty percent (50%) of the then outstanding shares of Preferred Stock,
voting together as a class:
(a) authorize a liquidation, dissolution, winding-up,
recapitalization or reorganization of the corporation, or a sale, lease or
transfer of all or substantially all of the assets of the corporation or a
merger or consolidation of the corporation if, as a result of such merger or
consolidation, the shareholders of the corporation shall own less than 50% of
the voting securities of the surviving corporation; or
(b) amend this corporation's Articles of Incorporation or
Bylaws; or
(c) pay or declare any dividend or distribution on any
shares of Common Stock or Preferred Stock or apply any of its assets to the
redemption, retirement, purchase or other acquisition (or pay into or set aside
for payment into a sinking fund for such purpose) directly, or indirectly
through as subsidiary or otherwise, of any shares of Common Stock or Preferred
Stock; provided, however, that this restriction shall not apply to the
repurchase of shares of Common Stock from directors or employees of, and
consultants to, the corporation or any subsidiary pursuant to agreements
approved by the Board of Directors or pursuant to the Bylaws of the corporation,
under which the corporation has the right to repurchase such shares upon the
occurrence of certain events, including termination of employment or services;
or
(d) authorize or issue, or obligate itself to issue, any
other equity security senior to or on a parity with the Preferred Stock as to
dividend or redemption rights, liquidation preferences, conversion rights,
voting rights or otherwise, or create any obligation or security convertible
into or exchangeable for, or having any option rights to purchase, any such
equity security which is senior to or on a parity with the Preferred Stock, or
which would adversely alter or change the preferences, rights, privileges or
powers of or the restrictions provided for the benefit of the Preferred Stock;
or
(e) increase the shares of Common Stock subject to the
corporation's option plan.
11
<PAGE> 12
8. Reissuance of Preferred Stock. In the event any shares of
Preferred Stock shall be converted, redeemed, or purchased by the corporation,
the shares so converted, redeemed or purchased shall be canceled and shall not
be reissuable by the corporation.
FIFTH. The Board of Directors, by vote of a majority of the whole Board,
shall have the power to adopt, amend or repeal the bylaws of the corporation,
but any bylaw adopted by the Board may be amended or repealed by the
stockholders.
SIXTH. Meetings of stockholders may be held within or without the State
of Delaware, as the bylaws may provide. The books of the corporation may be kept
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.
Elections of directors need not be by written ballot except and to the extent
provided in the bylaws of the corporation.
SEVENTH. At all elections of directors of the corporation, each holder
of stock or of any class or series of stock shall be entitled to as many votes
as shall equal the number of votes which such stockholder would be entitled to
cast for the election of directors with respect to his or her shares of stock
multiplied by the number of directors to be elected, and may cast all of such
votes for, or for any two or more of them as such stockholder may see fit.
EIGHTH. 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 to the extent such exemption from liability or
limitation thereof is not permitted under the Delaware General Corporation Law
as the same exists or may hereafter be amended. If the Delaware General
Corporation Law is amended after approval by the stockholders of this Article
EIGHTH to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended. Any repeal or modification
of this Article EIGHTH shall not adversely affect any right or protection of a
director of the corporation existing hereunder with respect to any act or
omission occurring prior to such repeal or modification.
12
<PAGE> 1
EXHIBIT 3.5
BYLAWS
OF
LANDACORP, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 STOCKHOLDERS......................................................................1
1.1 ANNUAL MEETINGS...................................................................1
1.2 SPECIAL MEETINGS..................................................................1
1.3 NOTICE OF MEETINGS................................................................1
1.4 ADJOURNMENTS......................................................................1
1.5 QUORUM............................................................................2
1.6 ORGANIZATION......................................................................2
1.7 VOTING; PROXIES...................................................................2
1.8 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD...........................3
1.9 LIST OF STOCKHOLDERS ENTITLED TO VOTE.............................................3
1.10 ACTION BY CONSENT OF STOCKHOLDERS.................................................4
ARTICLE 2 BOARD OF DIRECTORS................................................................4
2.1 NUMBER; QUALIFICATIONS............................................................4
2.2 ELECTION; RESIGNATION; REMOVAL; VACANCIES.........................................4
2.3 REGULAR MEETINGS..................................................................5
2.4 SPECIAL MEETINGS..................................................................5
2.5 TELEPHONIC MEETINGS PERMITTED.....................................................5
2.6 QUORUM; VOTE REQUIRED FOR ACTION..................................................5
2.7 ORGANIZATION......................................................................5
2.8 INFORMAL ACTION BY DIRECTORS......................................................5
ARTICLE 3 COMMITTEES........................................................................6
3.1 COMMITTEES........................................................................6
3.2 COMMITTEE RULES...................................................................6
ARTICLE 4 OFFICERS..........................................................................6
4.1 EXECUTIVE OFFICERS; ELECTION; QUALIFICATIONS; TERM OF OFFICE; RESIGNATION;
REMOVAL; VACANCIES................................................................6
4.2 POWERS AND DUTIES OF EXECUTIVE OFFICERS...........................................7
ARTICLE 5 STOCK.............................................................................7
5.1 CERTIFICATES......................................................................7
5.2 LOST, STOLEN OR DESTROYED STOCK CERTIFICATES; ISSUANCE OF NEW CERTIFICATES........7
ARTICLE 6 INDEMNIFICATION...................................................................8
6.1 THIRD PARTY ACTIONS...............................................................8
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION.....................................8
6.3 SUCCESSFUL DEFENSE................................................................9
6.4 DETERMINATION OF CONDUCT..........................................................9
6.5 PAYMENT OF EXPENSES IN ADVANCE....................................................9
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
6.6 INDEMNITY NOT EXCLUSIVE...........................................................9
6.7 INSURANCE INDEMNIFICATION.........................................................9
6.8 THE CORPORATION..................................................................10
6.9 EMPLOYEE BENEFIT PLANS...........................................................10
6.10 INDEMNITY FUND...................................................................10
6.11 INDEMNIFICATION OF OTHER PERSONS.................................................10
6.12 SAVINGS CLAUSE...................................................................11
6.13 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES......................11
ARTICLE 7 MISCELLANEOUS....................................................................11
7.1 FISCAL YEAR......................................................................11
7.2 SEAL.............................................................................11
7.3 WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS, DIRECTORS AND COMMITTEES...........11
7.4 INTERESTED DIRECTORS; QUORUM.....................................................12
7.5 FORM OF RECORDS..................................................................12
7.6 AMENDMENT OF BY-LAWS.............................................................12
</TABLE>
-ii-
<PAGE> 4
BYLAWS
OF
LANDACORP, INC.
ARTICLE 1
STOCKHOLDERS
1.1 ANNUAL MEETINGS
An annual meeting of stockholders shall be held for the election of
directors at such date, time and place, either within or without the state of
Delaware, as may be designated by resolution of the Board of Directors from time
to time. Any other proper business may be transacted at the annual meeting.
1.2 SPECIAL MEETINGS
Special meetings of stockholders for any purpose or purposes may be
called at any time by the Board of Directors, or by a committee of the Board of
Directors which has been duly designated by the Board of Directors and whose
powers and authority, as expressly provided in a resolution of the Board of
Directors, include the power to call such meetings.
1.3 NOTICE OF MEETINGS
Whenever stockholders are required or permitted to take any action at a
meeting, a written notice of the meeting shall be given which shall state the
place, date and hour of the meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called. Unless otherwise provided
by law, the certificate of incorporation or these by-laws, the written notice of
any meeting shall be given not less than ten nor more than sixty days before the
date of the meeting to each stockholder entitled to vote at such meeting. If
mailed, such notice shall be deemed to be given when deposited in the mail,
postage prepaid, directed to the stockholder at his address as it appears on the
records of the corporation.
1.4 ADJOURNMENTS
Any meeting of stockholders, annual or special, may adjourn from time to
time to reconvene at the same or some other place, and notice need not be given
of any such adjourned meeting if the
-1-
<PAGE> 5
time and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty 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 meeting.
1.5 QUORUM
Except as otherwise provided by law, the certificate of incorporation or
these by-laws, at each meeting of stockholders the presence in person or by
proxy of the holders of shares of stock having a majority of the votes which
could be cast by the holders of all outstanding shares of stock entitled to vote
at the meeting shall be necessary and sufficient to constitute a quorum. In the
absence of a quorum, the stockholders so present may, by majority vote, adjourn
the meeting from time to time in the manner provided in Section 1.4 of these
by-laws until a quorum shall attend. Shares of its own stock belonging to the
corporation or to another corporation, if a majority of the shares entitled to
vote in the election of directors of such other corporation is held, directly or
indirectly, by the corporation, shall neither be entitled to vote nor be counted
for quorum purposes; provided, however, that the foregoing shall not limit the
right of the corporation to vote stock, including but not limited to its own
stock, held by it in a fiduciary capacity.
1.6 ORGANIZATION
Meetings of stockholders shall be presided over by the Chairman of the
Board, if any, or in his absence by the Vice Chairman of the Board, if any, or
in his absence by the President, or in his absence by a Vice President, or in
the absence of the foregoing persons by a chairman designated by the Board of
Directors, or in the absence of such designation by a chairman chosen at the
meeting. The Secretary shall act as secretary of the meeting, but in his absence
the chairman of the meeting may appoint any person to act as secretary of the
meeting.
1.7 VOTING; PROXIES
Except as otherwise provided by the certificate of incorporation or
these bylaws, each stockholder entitled to vote at any meeting of stockholders
shall be entitled to one vote for each share of stock held by him which has
voting power upon the matter in question, and stockholders shall not be entitled
to cumulate their votes in the election of directors. Each stockholder entitled
to vote at a meeting of stockholders may authorize another person or persons to
act for him by proxy, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period. A duly
executed proxy shall be irrevocable if it states that it is irrevocable and if,
and only as long as, it is coupled with an interest sufficient in law to support
an irrevocable power. A stockholder may revoke any proxy which is not
irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed proxy bearing
a later date with the Secretary of the corporation. Voting at meetings of
-2-
<PAGE> 6
stockholders need not be by written ballot and need not be conducted by
inspectors of election unless so determined by the holders of shares of stock
having a majority of the votes which could be cast by the holders of all
outstanding shares of stock entitled to vote thereon which are present in person
or by proxy at such meeting.
1.8 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted by
the Board of Directors and which record date: (1) in the case of determination
of stockholders entitled to vote at any meeting of stockholders or adjournment
thereof, shall, unless otherwise required by law, not be more than sixty nor
less than ten days before the date of such meeting; (2) in the case of
determination of stockholders entitled to express consent to corporate action in
writing without a meeting, shall not be more than ten days from the date upon
which the resolution fixing the record date is adopted by the Board of
Directors; and (3) in the case of any other action, shall not be more than sixty
days prior to such other action. If no record date is fixed: (1) the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; (2) the record date
for determining stockholders entitled to express consent to corporate action in
writing without a meeting when no prior action of the Board of Directors is
required by law, 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 in accordance with applicable law, or, if prior action by the Board
of Directors is required by law, shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action; and
(3) 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. 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.
1.9 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The Secretary shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list
-3-
<PAGE> 7
shall also be produced and kept at the time and place of the meeting during the
whole time thereof and may be inspected by any stockholder who is present. Upon
the willful neglect or refusal of the directors to produce such a list at any
meeting for the election of directors, they shall be ineligible for election to
any office at such meeting. The stock ledger shall be the only evidence as to
who are the stockholders entitled to examine the stock ledger, the list of
stockholders or the books of the corporation, or to vote in person or by proxy
at any meeting of stockholders.
1.10 ACTION BY CONSENT OF STOCKHOLDERS
Unless otherwise restricted by the certificate of incorporation, any
action required or permitted to 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 in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing.
ARTICLE 2
BOARD OF DIRECTORS
2.1 NUMBER; QUALIFICATIONS
The Board of Directors shall consist of one or more members, the number
thereof to be determined from time to time by resolution of the Board of
Directors. Directors need not be stockholders.
2.2 ELECTION; RESIGNATION; REMOVAL; VACANCIES
The Board of Directors shall initially consist of the persons named as
directors in the certificate of incorporation, and each director so elected
shall hold office until the first annual meeting of stockholders or until his
successor is elected and qualified. At the first annual meeting of stockholders
and at each annual meeting thereafter, the stockholders shall elect directors
each of whom shall hold office for a term of one year or until his successor is
elected and qualified. Any director may resign at any time upon written notice
to the corporation. Any newly created directorship or any vacancy occurring in
the Board of Directors for any cause may be filled by a majority of the
remaining members of the Board of Directors, although such majority is less than
a quorum, or by a plurality of the votes cast at a meeting of stockholders, and
each director so elected shall hold office until the expiration of the term of
office of the director whom he has replaced or until his successor is elected
and qualified.
-4-
<PAGE> 8
2.3 REGULAR MEETINGS
Regular meetings of the Board of Directors may be held at such places
within or without the State of Delaware and at such times as the Board of
Directors may from time to time determine, and if so determined notices thereof
need not be given.
2.4 SPECIAL MEETINGS
Special meetings of the Board of Directors may be held at any time or
place within or without the State of Delaware whenever called by the President,
any Vice President, the Secretary, or by any member of the Board of Directors.
Notice of a special meeting of the Board of Directors shall be given by the
person or persons calling the meeting at least twenty-four hours before the
special meeting.
2.5 TELEPHONIC MEETINGS PERMITTED
Members of the Board of Directors, or any committee designated by the
Board of Directors, may participate in a meeting thereof by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this by-law shall constitute presence in person at such meeting.
2.6 QUORUM; VOTE REQUIRED FOR ACTION
At all meetings of the Board of Directors a majority of the whole Board
of Directors shall constitute a quorum for the transaction of business. Except
in cases in which the certificate of incorporation or these by-laws otherwise
provide, the vote of a majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors.
2.7 ORGANIZATION
Meetings of the Board of Directors shall be presided over by the
Chairman of the Board, if any, or in his absence by the Vice Chairman of the
Board, if any, or in his absence by the President, or in their absence by a
chairman chosen at the meeting. The Secretary shall act as secretary of the
meeting, but in his absence the chairman of the meeting may appoint any person
to act as secretary of the meeting.
2.8 INFORMAL ACTION BY DIRECTORS
-5-
<PAGE> 9
Unless otherwise restricted by the certificate of incorporation or these
by-laws, any action required or permitted to be taken at any meeting of the
Board of Directors, or of any committee thereof, may be taken without a meeting
if all members of the Board of Directors or such committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or such committee.
ARTICLE 3
COMMITTEES
3.1 COMMITTEES
The Board of Directors may, by resolution passed by a majority of the
whole Board of Directors, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The Board of
Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of the committee,
the member or members thereof 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 place of any
such absent or disqualified member. Any such committee, to the extent permitted
by law and to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the corporation, and
may authorize the seal of the corporation to be affixed to all papers which may
require it.
3.2 COMMITTEE RULES
Unless the Board of Directors otherwise provides, each committee
designated by the Board of Directors may make, alter and repeal rules for the
conduct of its business. In the absence of such rules each committee shall
conduct its business in the same manner as the Board of Directors conducts its
business pursuant to Article 3 of these by-laws.
ARTICLE 4
OFFICERS
4.1 EXECUTIVE OFFICERS; ELECTION; QUALIFICATIONS; TERM OF OFFICE;
RESIGNATION; REMOVAL; VACANCIES
-6-
<PAGE> 10
The Board of Directors shall elect a President and Secretary, and it
may, if it so determines, choose a Chairman of the Board and a Vice Chairman of
the Board from among its members. The Board of Directors may also choose one or
more Vice Presidents, one or more Assistant Secretaries, a Treasurer and one or
more Assistant Treasurers. Each such officer shall hold office until the first
meeting of the Board of Directors after the annual meeting of stockholders next
succeeding his election, and until his successor is elected and qualified or
until his earlier resignation or removal. Any officer may resign at any time
upon written notice to the corporation. The Board of Directors may remove any
officer with or without cause at any time, but such removal shall be without
prejudice to the contractual rights of such officer, if any, with the
corporation. Any number of offices may be held by the same person. Any vacancy
occurring in any office of the corporation by death, resignation, removal or
otherwise may be filled for the unexpired portion of the term by the Board of
Directors at any regular or special meeting.
4.2 POWERS AND DUTIES OF EXECUTIVE OFFICERS
The officers of the corporation shall have such powers and duties in the
management of the corporation as may be prescribed by the Board of Directors
and, to the extent not so provided, as generally pertain to their respective
offices, subject to the control of the Board of Directors. The Board of
Directors may require any officer, agent or employee to give security for the
faithful performance of his duties.
ARTICLE 5
STOCK
5.1 CERTIFICATES
Every holder of stock shall be entitled to have a certificate signed by
or in the name of the corporation by the Chairman or Vice Chairman of the Board
of Directors, if any, or the President or Vice President, and by the Treasurer
or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the
corporation, certifying the number of shares owned by him in the corporation.
Any of or all the signatures on the certificate may be a facsimile. In case any
officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue.
5.2 LOST, STOLEN OR DESTROYED STOCK CERTIFICATES; ISSUANCE OF NEW
CERTIFICATES
-7-
<PAGE> 11
The corporation may issued a new certificate of stock in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.
ARTICLE 6
INDEMNIFICATION
6.1 THIRD PARTY ACTIONS
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director or officer of the corporation, or that such
director or officer is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture trust or other enterprise (collectively "Agent"), against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement (if
such settlement is approved in advance by the Company, which approval shall not
be unreasonably withheld) actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was an Agent (as defined in Section 6.1)
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in manner he reasonably believed to be in or not opposed
to the best interests of the corporation and except that no indemnification
shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the Delaware Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view
-8-
<PAGE> 12
of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Delaware Court of Chancery or
such other court shall deem proper.
6.3 SUCCESSFUL DEFENSE
To the extent that an Agent of the corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Sections 6.1 and 6.2, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
6.4 DETERMINATION OF CONDUCT
Any indemnification under Sections 6.1 and 6.2 (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that the indemnification of the Agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Sections 6.1 and 6.2. Such determination shall be made (1) by the Board of
Directors or an executive committee by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (2) or if
such quorum is not obtainable or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or (3)
by the stockholders.
6.5 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending a civil or criminal action, suit or
proceeding shall be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized in this Article 4.
6.6 INDEMNITY NOT EXCLUSIVE
The indemnification and advancement of expenses provided or granted
pursuant to the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
6.7 INSURANCE INDEMNIFICATION
-9-
<PAGE> 13
The corporation shall have the power to purchase and maintain insurance
on behalf of any person who is or was an Agent of the corporation, or is or was
serving at the request of the corporation, as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of this Article 6.
6.8 THE CORPORATION
For purposes of this Article 6, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors and officers, so that any person who is or
was a director or Agent of such constituent corporation, or is or was serving at
the request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under and subject to the provisions
of this Article 6 (including, without limitation the provisions of Section 6.4)
with respect to the resulting or surviving corporation as he would have with
respect to such constituent corporation if its separate existence had continued.
6.9 EMPLOYEE BENEFIT PLANS
For purposes of this Article 6, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this Article
6.
6.10 INDEMNITY FUND
Upon resolution passed by the Board, the corporation may establish a
trust or other designated account, grant a security interest or use other means
(including, without limitation, a letter of credit), to ensure the payment of
certain of its obligations arising under this Article 6 and/or agreements which
may be entered into between the corporation and its officers and directors from
time to time.
-10-
<PAGE> 14
6.11 INDEMNIFICATION OF OTHER PERSONS
The provisions of this Article 6 shall not be deemed to preclude the
indemnification of any person who is not an Agent (as defined in Section 6.1),
but whom the corporation has the power or obligation to indemnify under the
provisions of the General Corporation Law of the State of Delaware or otherwise.
The corporation may, in its sole discretion, indemnify an employee, trustee or
other agent as permitted by the General Corporation Law of the State of
Delaware. The corporation shall indemnify an employee, trustee or other agent
where required by law.
6.12 SAVINGS CLAUSE
If this Article or any portion thereof shall be invalidated on any
ground by any court of competent jurisdiction, then the corporation shall
nevertheless indemnify each Agent against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement with respect to any action,
suit, proceeding or investigation, whether civil, criminal or administrative,
and whether internal or external, including a grand jury proceeding and an
action or suit brought by or in the right of the corporation, to the full extent
permitted by any applicable portion of this Article that shall not have been
invalidated, or by any other applicable law.
6.13 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article 6 shall, unless otherwise prided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
ARTICLE 7
MISCELLANEOUS
7.1 FISCAL YEAR
The fiscal year of the corporation shall be determined by resolution of
the Board of Directors.
7.2 SEAL
-11-
<PAGE> 15
The corporate seal shall have the name of the corporation inscribed
thereon and shall be in such form as may be approved from time to time by the
Board of Directors.
7.3 WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS, DIRECTORS AND
COMMITTEES
Any written waiver of notice, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of any regular or special meeting
of the stockholders, directors, or members of a committee of directors need be
specified in any written waiver of notice.
7.4 INTERESTED DIRECTORS; QUORUM
No contract or transaction between the corporation and one or more of
its directors or officers, or between the corporation and any other corporation,
partnership, association, or other organization in which one or more of its
directors or officers are directors or officers, 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 of
Directors or committee thereof which authorizes the contract or transaction, or
solely because his or their votes are counted for such purpose, if: (1) the
material facts as to his 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 (2) the material facts as to his 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 stockholders; or (3) 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.
7.5 FORM OF RECORDS
Any records maintained by the corporation in the regular course of its
business, including its stock ledger, books of account, and minute books, may be
kept on, or be in the form of, punch cards, magnetic tape, photographs,
microphotographs, or any other information storage device, provided that the
records so kept can be converted into clearly legible form within a reasonable
time. The corporation shall so convert any records so kept upon the request of
any person entitled to inspect the same.
-12-
<PAGE> 16
7.6 AMENDMENT OF BY-LAWS
These by-laws may be altered or repealed, and new by-laws made, by the
Board of Directors, but the stockholders may make additional by-laws and may
alter and repeal any by-laws whether adopted by them or otherwise.
-13-
<PAGE> 1
EXHIBIT 4.2
[COMMON STOCK CERTIFICATE]
NUMBER SHARES
INCORPORATED UNDER THE LAWS CUSIP 514741 10 7
OF THE STATE OF DELAWARE SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $.001 PAR VALUE, OF
LANDACORP, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized Attorney upon the surrender of this certificate properly
endorsed. This certificate is not valid until countersigned by the Transfer
Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
DATED:
[LANDACORP, INC. SEAL]
INCORPORATED
1999
DELAWARE
CHIEF OPERATING & FINANCIAL OFFICER PRESIDENT & CHIEF EXECUTIVE OFFICER
Countersigned and Registered:
NORWEST BANK MINNESOTA, N.A.
(Minneapolis, Minnesota) Transfer Agent
and Registrar
By
Authorized Signature
<PAGE> 2
LANDACORP, INC.
A statement of the rights, preferences, privileges and restrictions granted
to or imposed upon the respective classes or series of shares of stock of the
Corporation, and upon the holders thereof as established by the Articles of
Incorporation or by any certificate of determination of preferences, and the
number of shares constituting each series or class and the designations
thereof, may be obtained by any stockholder of the Corporation upon request and
without charge from the secretary of the Corporation at the principal office of
the Corporation.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ______________ Custodian ____________
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right Act____________________________________
of survivorship and not as (State)
tenants in common
UNIF TRF MIN ACT - _____________ Custodian (until age ___)
(Cust)
______________ under Uniform Transfers
(Minor)
to Minors Act ________________________
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED,_____________ hereby sell(s), assigns and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
of the capital stock represented by the within Certificate and do(es) hereby
irrevocably constitute and appoint
_______________________________________________________________________ Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated_____________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN ON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
By________________________________________________________________________
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIPS IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
<PAGE> 1
EXHIBIT 10.1
INDEMNITY AGREEMENT
THIS AGREEMENT is made and entered into this 27th day of February by and
between LANDA MANAGEMENT SYSTEMS CORPORATION, a California corporation (the
"Company"), and ("Indemnitee").
RECITALS
WHEREAS, Indemnitee performs a valuable service to the Company in his or
her capacity as a member of the Board of Directors and an Officer of the
Company;
WHEREAS, the shareholders of the Company have adopted provisions in the
Company's Amended and Restated Articles of Incorporation (the "Articles") and
the Company's Amended and Restated Bylaws (the "Bylaws") providing for the
indemnification of the directors, officers, employees and other agents of the
Company, including persons serving at the request of the Company in such
capacities with other corporations or enterprises, as authorized by the
California General Corporation Law, as amended (the "Code");
WHEREAS, the Articles, the Bylaws and the Code, by their non-exclusive
nature, permit contracts between the Company and its directors, officers,
employees and other agents with respect to indemnification of such persons; and
WHEREAS, in order to induce Indemnitee to serve as a member of the Board
of Directors and an Officer of the Company, the Company has determined and
agreed to enter into this Agreement with Indemnitee;
NOW, THEREFORE, in consideration of Indemnitee's continued service as a
member of the Board of Directors and an Officer after the date hereof, the
parties hereto agree as follows:
AGREEMENT
1. SERVICES TO THE COMPANY. Indemnitee will serve as a member of the
Board of Directors and an Officer of the Company or as a director, officer or
other fiduciary of the Company or an affiliate of the Company (including any
employee benefit plan of the Company) faithfully and to the best of his or her
ability so long as he or she is duly elected and qualified in accordance with
the provisions of the Bylaws or other applicable charter documents of the
Company or such affiliate; provided, however, that Indemnitee may at any time
and for any reason resign from such position (subject to any contractual
obligation that Indemnitee may have assumed apart from this Agreement) and that
the Company or any affiliate shall have no obligation under this Agreement to
continue Indemnitee in any such position.
2. INDEMNITY. Subject to a determination pursuant to Section 8 hereof,
the Company hereby agrees to hold harmless and indemnify Indemnitee:
1.
<PAGE> 2
(a) against any and all expenses (including attorneys' fees),
witness fees, damages, judgments, fines and amounts paid in settlement and any
other amounts that Indemnitee becomes legally obligated to pay because of any
claim or claims made against or by him or her in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, arbitrational, administrative or investigative (including an action
by or in the right of the Company) to which Indemnitee is, was or at any time
becomes a party, or is threatened to be made a party, by reason of the fact
that Indemnitee is, was or at any time becomes a director, officer, employee or
other agent of the Company, or is or was serving or at any time serves at the
request of the Company as a director, officer, employee or other agent of
another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise; and
(b) otherwise to the fullest extent not prohibited by the Articles,
the Bylaws or the Code.
3. LIMITATIONS ON ADDITIONAL INDEMNITY. To the extent that any of the
matters set forth in subsections (a) through (l) of this Section 3 are
successfully established by the Company as defenses in accordance with the
provisions of Section 9 hereof, no indemnity pursuant to Section 2 hereof will
be payable by the Company:
(a) on account of any claim against Indemnitee for an accounting of
profits made from the purchase or sale by Indemnitee of securities of the
Company pursuant to the provisions of Section 16(b) of the Securities Exchange
Act of 1934 and amendments thereto or similar provisions of any federal, state
or local statutory law;
(b) on account of Indemnitee's conduct from which Indemnitee derived
an improper personal benefit;
(c) on account of Indemnitee's conduct that he or she believed to be
contrary to the best interests of the Company or its shareholders or that
involved the absence of good faith on the part of Indemnitee;
(d) on account of Indemnitee's conduct that constituted intentional
misconduct or a knowing and culpable violation of law;
(e) on account of Indemnitee's conduct that showed a reckless
disregard for Indemnitee's duty to the Company or its shareholders in
circumstances in which Indemnitee was aware, or should have been aware, in the
ordinary course of performing his or her duties, of a risk of serious injury to
the Company or its shareholders;
(f) on account of Indemnitee's conduct that constituted an unexcused
pattern of inattention that amounted to an abdication of the Indemnitee's duty
to the Company or its shareholders;
(g) on account of Indemnitee's conduct which constituted a violation
of the Indemnitee's duties under Sections 310 or 316 of the Code;
2.
<PAGE> 3
(h) for which payment is actually made to Indemnitee under a valid
and collectible insurance policy or under a valid and enforceable indemnity
clause, bylaw or agreement, except in respect of any excess beyond payment
under such insurance, clause, bylaw or agreement;
(i) if indemnification is not lawful (and, in this respect, both the
Company and Indemnitee have been advised that the Securities and Exchange
Commission considers indemnification for liabilities arising under the federal
securities laws to be against public policy and is, therefore, unenforceable
and that claims for indemnification should be submitted to appropriate courts
for adjudication);
(j) in connection with any proceeding (or part thereof) initiated by
Indemnitee, or any proceeding by Indemnitee against the Company or its
directors, officers, employees or other agents, unless (i) such indemnification
is expressly required to be made by law, (ii) the proceeding was authorized by
the Board of Directors of the Company, (iii) such indemnification is provided
by the Company, in its sole discretion, pursuant to the powers vested in the
Company under the Code, or (iv) the proceeding is initiated pursuant to Section
9 hereof;
(k) with respect to any action by or in the right of the Company:
(i) if Indemnitee is adjudged to be liable to the Company in
performance of Indemnitee's duty to the Company and its shareholders, unless
and only to the extent that the court in which such action is or was pending
shall determine upon application that, in view of all of the circumstances of
the case, Indemnitee is fairly and reasonably entitled to indemnity for
expenses, and then only to the extent that the court shall determine;
(ii) for expenses incurred in defending a pending action which
is settled or otherwise disposed of without court approval; or
(iii) for amounts paid in settling or otherwise disposing of a
pending action without court approval; and
(l) to the extent, and only to the extent, that indemnification with
respect to such action (i) would be inconsistent with the Articles or Bylaws,
or a resolution of the shareholders or agreement of the Company prohibiting or
otherwise limiting such indemnification and in effect at the time of the
accrual of the action or (ii) would be inconsistent with any condition
expressly imposed by a court in approving a settlement, unless Indemnitee has
been successful on the merits or unless the indemnification has been approved
by the shareholders of the Company in accordance with Section 153 of the Code
(with the shares of the Indemnitee not being entitled to vote thereon).
4. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Company contained herein shall continue during the period Indemnitee is a
director, officer, employee or other agent of the Company (or is serving or had
served at the request of the Company as a director, officer, employee or other
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as
Indemnitee shall be subject to any possible claim or threatened, pending or
completed action, suit or
3.
<PAGE> 4
proceeding, whether civil, criminal, arbitrational, administrative or
investigative, by reason of the fact that Indemnitee had served in the capacity
referred to herein.
5. PARTIAL INDEMNIFICATION. Indemnitee shall be entitled under this
Agreement to indemnification by the Company for a portion of the expenses
(including attorneys' fees), witness fees, damages, judgments, fines and amounts
paid in settlement and any other amounts that Indemnitee becomes legally
obligated to pay in connection with any action, suit or proceeding referred to
in Section 2 hereof even if not entitled hereunder to indemnification for the
total amount thereof, and the Company shall indemnify Indemnitee for the portion
thereof to which Indemnitee is entitled.
6. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Indemnitee of notice of the commencement of any action, suit
or proceeding, Indemnitee will, if a claim in respect thereof is to be made
against the Company under this Agreement, notify the Company of the
commencement thereof; but the omission so to notify the Company will not
relieve it from any liability which it may have to Indemnitee otherwise than
under this Agreement. With respect to any such action, suit or proceeding as to
which Indemnitee notifies the Company of the commencement thereof:
(A) the Company will be entitled to participate therein at its own
expense;
(B) except as otherwise provided below, the Company may, at its
option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Indemnitee. After notice from the Company to
Indemnitee of its election to assume the defense thereof, the Company will not
be liable to Indemnitee under this Agreement for any legal or other expenses
subsequently incurred by Indemnitee in connection with the defense thereof
except for reasonable costs of investigation or otherwise as provided below.
Indemnitee shall have the right to employ separate counsel in such action, suit
or proceeding but the fees and expenses of such counsel incurred after notice
from the Company of its assumption of the defense thereof shall be at the
expense of Indemnitee unless (i) the employment of counsel by Indemnitee has
been authorized by the Company, (ii) Indemnitee shall have reasonably concluded
that there may be a conflict of interest between the Company and Indemnitee in
the conduct of the defense of such action or (iii) the Company shall not in fact
have employed counsel to assume the defense of such action, in each of which
cases the fees and expenses of Indemnitee's separate counsel shall be at the
expense of the Company. The Company shall not be entitled to assume the defense
of any action, suit or proceeding brought by or on behalf of the Company or as
to which Indemnitee shall have made the conclusion provided for in clause (ii)
above; and
(c) the Company shall not be liable to indemnify Indemnitee under
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent, which shall not be reasonably withheld.
The Company shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Indemnitee without Indemnitee's written consent, which may be
given or withheld in Indemnitee's sole discretion.
4.
<PAGE> 5
7. EXPENSES. The Company shall advance, prior to the final disposition
of any proceeding, promptly following request therefor, all expenses incurred
by Indemnitee in connection with such proceeding upon receipt of an undertaking
by or on behalf of Indemnitee to repay said amounts if it shall be determined,
ultimately that Indemnitee is not entitled to be indemnified under the
provisions of this Agreement, the Bylaws, the Articles, the Code or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to Section
10, no advance shall be made by the Company if a determination is reasonably
and promptly made by the Board of Directors by a majority vote of a quorum
consisting of directors who are not parties to the proceeding (or, if no such
quorum exists, by independent legal counsel in a written opinion) that the
facts known to the decision making party at the time such determination is made
demonstrate clearly and convincingly demonstrate that such person acted in bad
faith or in a manner that such person did not believe to be in the best
interests of the Company and its shareholders.
8. DETERMINATION BY THE COMPANY. To the extent required by the Code,
promptly after a receipt of a request for indemnification hereunder made by
Indemnitee (and in any event within 90 days), the Company shall make a
reasonable, good faith determination as to whether indemnification of
Indemnitee is proper under the Code by means of:
(A) A majority vote of a quorum consisting of directors who are not
parties to such proceeding;
(B) If such quorum is not obtainable, by independent legal counsel
in a written opinion;
(C) Approval or ratification by the affirmative vote of a majority
of the shares of the COMPANY represented and voting at a duly held meeting
which a quorum is present (which shares voting affirmatively also constitute at
least a majority of the required quorum) or by written consent of a majority of
the outstanding shares entitled to vote; where in each case the shares owned by
the person to be indemnified shall not be considered entitled to vote thereon.
Such determination shall be reasonably made in good faith by the
decision-making party based upon the facts known to the decision-making party
at the time such determination is made.
9. ENFORCEMENT. Any right to indemnification or advances granted by this
Agreement to Indemnitee shall be enforceable by or on behalf of Indemnitee in
the forum in which the proceeding is or was pending, or, if such forum is not
available or a determination is made that such forum is not convenient, in any
court of competent jurisdiction if (i) the claim for indemnification or advances
is denied, in whole or in part, or (ii) no disposition of such claim is made
within ninety (90) days of request therefor. Indemnitee, in such enforcement
action, if successful in whole or in part, shall be entitled to be paid also the
expense of prosecuting his or her claim. The Company shall be entitled to raise
by pleading as an affirmative defense to any action for which a claim for
indemnification is made under Section 2 hereof that Indemnitee is not entitled
to indemnification because of the limitations set forth in Section 3 hereof.
Neither the failure of the Company (including its Board of Directors, its
shareholders or independent legal counsel) to have made a determination prior to
the commencement of such enforcement action that indemnification of Indemnitee
is proper in the circumstances, nor an actual
5.
<PAGE> 6
determination by the Company (including its Board of Directors, its shareholders
or independent legal counsel) that such indemnification is improper shall be a
defense to the action or create a presumption that Indemnitee is not entitled to
indemnification under this Agreement or otherwise.
10. SUBROGATION. In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights or
recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
11. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Indemnitee by this
Agreement shall not be exclusive of any other right which Indemnitee may have or
hereafter acquire under any statute, provision of the Articles or Bylaws,
agreement, vote of shareholders or directors, or otherwise, both as to action in
his or her official capacity and as to action in another capacity while holding
office.
12. SURVIVAL OF RIGHTS.
(A) The rights conferred on Indemnitee by this Agreement shall
continue after Indemnitee has ceased to be a director, officer, employee or
other agent of the Company or to serve at the request of the Company as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise and shall inure
to the benefit of Indemnitee's heirs, executors and administrators.
(B) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, expressly to assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform if no such succession had
occurred.
13. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Company shall nevertheless indemnify Indemnitee
to the fullest extent provided by the Articles, the Bylaws, the Code or any
other applicable law.
14. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of California.
15. AMENDMENT AND TERMINATION. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
16. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute but one and the same Agreement. Only
one such counterpart need be produced to evidence the existence of this
Agreement.
6.
<PAGE> 7
17. HEADINGS. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction hereof.
18. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:
(a) If to Indemnitee, at the address indicated below his or her
signature hereunder.
(b) If to the Company, to
LANDA MANAGEMENT SYSTEMS CORPORATION
1072 Marauder, Suite A
Chico, CA 95973
Attention: President
or to such other address as may have been furnished to Indemnitee by the
Company.
7.
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
LANDA MANAGEMENT SYSTEMS CORPORATION
By:
---------------------------------
Title:
------------------------------
INDEMNITEE
-------------------------------------
Indemnitee Print Name and Address:
-------------------------------------
-------------------------------------
S-1
<PAGE> 1
EXHIBIT 10.2
LANDA MANAGEMENT SYSTEMS CORPORATION
1995 INCENTIVE STOCK OPTION PLAN
1. Purpose of Plan. The purpose of this Plan is to provide a means
whereby LANDA MANAGEMENT SYSTEMS CORPORATION (the "Company") may, through the
grant of options to purchase Common Stock of the Company to employees of the
Company and of any Subsidiary, attract and retain persons of ability as key
employees (including officers and directors who are also employees) and
motivate such employees to exert their best efforts on behalf of the Company
and any Subsidiary. As used herein, the term "Subsidiary" shall mean the
Company under the definition of "subsidiary corporation" in Section 425(f) of
the Internal Revenue Code of 1954 ("IRC"), as amended from time to time, or any
similar provision hereafter enacted.
2. Participation.
(a) Except as set forth in subparagraph (b) below, the following
classes of employees of the Company shall be eligible for selection to
participate in the Plan:
(i) All full-time key employees; and
(ii) All permanent part-time key employees.
(b) The following classes of persons shall not be eligible for
participation in the Plan:
(i) Any director of the Company who is not also an employee of
the Company as defined in (a) above;
(ii) Any member of the Stock Option Committee; and
(iii) Any employee who owns stock (within the meaning of IRC
Section 425(d)) of the Company possessing more than ten
percent (10%) of the total combined voting power of all
classes of stock of the Company or any of its subsidiaries,
unless at the time such option is granted to such employee
the option price is at least one hundred ten percent (110%)
of the fair market value at such time of the stock subject
to the option and such option by its terms is not
exercisable after the expiration of five (5) years from the
date such option is granted.
-1-
<PAGE> 2
3. Number of Shares Available Under Plan. Options may be granted by the
Company from time to time to qualified employees of the Company or of any
Subsidiary to purchase an aggregate of 1,047,848 shares of Common Stock of the
Company and all such shares shall be reserved for options granted under the Plan
(subject to adjustment as provided in subparagraph 6(h) below). The shares
issued upon exercise of options granted under the Plan may be authorized and
unissued shares, including shares previously acquired or to be acquired by the
Company. If any option granted under the Plan shall terminate, expire or, with
the consent of the optionee, be canceled as to any shares, the unpurchased
shares subject thereto shall again be available for purposes of this Plan.
4. Administration.
(a) The Plan shall be administered by a Stock Option Committee (the
"Committee") consisting of not less than two (2) nor more than five (5) members
appointed by the Board of Directors of the Company. Each member of the Committee
shall be a member of the Board of Directors of the Company who is not eligible
to receive any option under the Plan. Any vacancy occurring in the membership of
the Committee shall be filed by appointment of the Board of Directors of the
Company.
(b) Subject to the provisions of the Plan, the Committee shall have
the power to:
(i) Determine and designate from time to time those qualified
employees of the Company or of any Subsidiary to whom
options are to be granted and the number of shares to be
optioned to each such employee; provided, however, that
no option shall be granted after the expiration of a
period of ten (10) years from the effective date of the
Plan specified in Paragraph 11;
(ii) Authorize the granting of options which qualify as
incentive stock options within the meaning of Section 422
of the IRC as amended from time to time;
(iii) Determine, within the limitations contained in the Plan,
the number of shares subject to each option; and
(iv) Determine, within the limitations contained in the Plan,
the time or times and the manner when each option shall
be exercisable and the duration of the exercise period.
(c) The Committee may interpret the Plan, prescribe, amend, and
rescind any rules and regulations necessary or appropriate for the
administration of the Plan, and make such other determinations and take such
other action as it deems necessary or advisable,
-2-
<PAGE> 3
except as otherwise expressly reserved to the Board of Directors of the Company
in the Plan. Without limiting the generality of the foregoing sentence, the
Committee may, in its discretion, treat all or any portion of any period during
which an optionee is on active military duty or on an approved leave of absence
from the Company or Subsidiary as a period of employment of such optionee by the
Company or such Subsidiary, as the case may be, for purpose of accrual of his
rights under his option. Any interpretation, determination, or other action made
or taken by the Committee shall be final, binding, and conclusive.
5. Aggregate Fair Market Value Limitation. The aggregate fair market
value (determined as of the time the option is granted) of the stock with
respect to which incentive stock options are exercisable for the first time by
an eligible employee during any calendar year (under all such plans of the
employee's employer corporation and its parent and subsidiary corporations)
shall not exceed One Hundred Thousand Dollars ($100,000).
6. Term and Conditions. Each option granted under the Plan shall be
evidenced by an agreement, in a form approved by the Committee, which agreement
shall be subject to the following express terms and conditions and such other
terms and conditions as the Committee may deem appropriate (which need not be
identical):
(a) Option Period. Each option agreement shall specify the period
for which the option thereunder is granted (which in no event shall exceed ten
(10) years from the date of grant, and in no event shall exceed five (5) years
from the date of grant for any option granted to an optionee owning stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock either of the Company or its Subsidiaries) and shall
provide that the option shall expire at the end of such period.
(b) Option Price. The purchase price of stock subject to each option
shall be determined by the Committee but shall not be less than one hundred
percent (100%) of the fair market value of such stock at the time such option is
granted, but, notwithstanding the foregoing, the purchase price of stock subject
to each option granted to an optionee owning stock representing more than ten
percent (10%) of the total combined voting power of all classes of stock either
of the Company or its Subsidiaries shall not be less than one hundred ten
percent (110%) of the fair market value of such stock at the time such option is
granted. The fair market value of such stock shall be determined in accordance
with any reasonable valuation method, including the valuation methods described
in Treasury Regulation Section 20.2031-2.
(c) Exercise Period. The period or periods within which each option
may be exercised shall be as follows, unless the Stock Option Committee shall
determine as options are granted that some other period or periods are
appropriate:
(i) No option may be exercised prior to nine (9) months after
the date of grant;
-3-
<PAGE> 4
(ii) Between nine (9) months and fifteen (15) months after the
date of grant, an option may be exercised as to twenty-five
percent (25%) of the number of shares subject thereto;
(iii) Between fifteen (15) and twenty-one (21) months of the date
of grant, an option may be exercised as to fifty percent
(50%) of the number of shares subject thereto, including
the number of shares which became exercisable under
subparagraph 6(c)(ii) above;
(iv) Between twenty-one (21) and twenty-seven (27) months of
the date of grant, an option may be exercised as to
seventy-five percent (75%) of the number of shares subject
thereto, including the number of shares which became
exercisable under subparagraphs 6(c)(ii) and (iii) above;
or
(v) After twenty-seven (27) months of grant, the option may be
exercised as to one hundred percent (100%) of the number of
shares subject thereto.
(d) Payment of Option Price. The purchase price of the shares as to
which option shall be exercised shall be paid in cash to the Company at the
time of exercise.
(e) Exercise in the Event of Death or Termination of Employment.
Any options held by an employee at his death or upon the termination of his
employment shall be exercisable as follows:
(i) If an optionee shall die while an employee of the Company
or of a Subsidiary, or within three (3) months after
termination of his employment with the Company or
Subsidiary because of his permanent disability or because
of his retirement, his options may be exercised to the
extent that the optionee shall have been entitled to do so
at the date of his termination of employment, by the person
or persons to whom the optionee's rights under the option
pass by will or applicable law, or if no such person has
such right, by his executors or administrators, at any
time, or from time to time, within one (1) year after the
date of the optionee's death, but in no event later than
the expiration date specified in subparagraph 6(a) above or
one year after the optionee's death, whichever is earlier;
-4-
<PAGE> 5
(ii) If an optionee's employment by the Company or a
Subsidiary shall terminate because of his
permanent disability or because of his
retirement, he may exercise his option, to the
extent that he may be entitled to do so at the
date of the termination of his employment, at
any time, or from time to time, within three (3)
months of the date of termination of his
employment, but in no event later than the
expiration date specified in subparagraph 6(a)
or three (3) months after termination of
employment, whichever is earlier; or
(iii) If an optionee's employment shall terminate for
any reason other than death, permanent
disability or retirement as aforesaid, all right
to exercise his options shall terminate at the
date of such termination of employment.
(f) Nontransferability. No option granted under the Plan
shall be transferable other than by will or by the laws of descent and
distribution. During the lifetime of the optionee, an option shall be
exercisable only by him.
(g) Investment Representation. Each option agreement shall
contain an agreement that, upon demand by the Committee for such a
representation, the optionee (or any person acting on behalf of the optionee or
his estate under subparagraph 6(e) above shall deliver to the Committee at the
time of any exercise of an option a written representation that the shares to
be acquired upon such exercise are to be acquired for investment and not for
resale or with a view to the distribution thereof. Upon such demand, delivery
of such representation prior to the delivery of any shares issued under
exercise of an option and prior to the expiration of the option period shall be
a condition precedent to the right of the optionee or such other person to
purchase any shares.
(h) Adjustment. In the event of any change in the Common
Stock of the Company by reason of any stock dividend, recapitalization,
reorganization, merger, consolidation, split-up, combination, or exchange of
shares, or rights offering to purchase Common Stock at a price substantially
below fair market value, or of any similar change affecting the Common Stock,
the number and kind of shares which thereafter may be optioned and sold under
the Plan and the number and kind of shares subject to option in outstanding
option agreements and the purchase price per share thereof shall be
appropriately adjusted consistent with such change in such manner as the
Committee may deem equitable to prevent substantial dilution or enlargement of
the rights granted to, or available for, participants in the Plan.
(i) Incentive Plan. Each option agreement which provides
for the grant of an incentive stock option to a participant shall contain such
terms and provisions as the Committee may determine to be necessary or
desirable in order to qualify such option as an
- 5 -
<PAGE> 6
incentive stock option within the meaning of Section 422 of the IRC as amended
from time to time. Without limiting the generality of the foregoing, each such
agreement must provide that the term of the qualified option shall not exceed
ten (10) years from the date of grant, and in the case of a qualified option
granted to an optionee who owns stock representing more than ten percent (10%)
of the total combined voting power of all classes of stock either of the Company
or its Subsidiaries shall not exceed five (5) years from the date of grant.
(j) No Rights as Shareholder. No optionee shall have any
rights as a shareholder with respect to any shares subject to his option prior
to the date of issuance to him of a certificate or certificates of such shares:
(k) No Right to Continue Employment. Each person to whom an
option is granted must agree to remain in the continuous employ of the Company,
or its parent or subsidiary corporation, during the period beginning on the date
of grant of the option and ending on the day three (3) months before the date of
his exercise of any option granted under the Plan. No disposition of the stock
that is transferred to an optionee pursuant to the exercise of an option granted
under the Plan may be made by the optionee within two (2) years from the date of
the granting of the option nor within one (1) year after the transfer of such
share to him. Nothing contained in the Plan, or in any option granted pursuant
to the Plan, shall confer upon any employee any right to continue in the employ
of the Company or of any Subsidiary or parent corporation, or constitute any
contract or agreement of employment or interfere in any way with the right of
the Company or any Subsidiary or parent corporation to terminate the person's
employment or to change in any way the person's compensation.
7. Compliance with Other Laws and Regulations. The Plan and grant
and exercise of options thereunder, and the obligation of the Company to sell
and deliver shares under such options, shall be subject to all applicable
federal and state laws, rules and regulations and to such approvals by any
government regulatory agency as may be required. The Company shall not be
required to issue or deliver any certificates for shares of Common Stock prior
to the completion of any registration or qualification of such shares under any
federal or state law, or any ruling or regulation of any government body which
the Company shall, in its sole discretion, determine to be necessary or
advisable.
8. Amendment. The Board of Directors of the Company may from time
to time amend, suspend or discontinue the Plan; provided, however, that, subject
to the provisions of subparagraph 6(h) above, the Board of Directors of the
Company, or the Committee may not, without the approval of the shareholders:
(a) Increase the number of shares reserved for options
pursuant to Paragraph 3 above;
(b) Permit the granting of any option at the option price
less than that determined in accordance with subparagraph 6(b) above;
-6-
<PAGE> 7
(c) Shorten the period provided for in subparagraph 6(c) which must
elapse between the date of granting an option and the date on which any part of
an option may be exercised; or
(d) Permit the granting of options which expire beyond the period
provided for in subparagraph 6(a) above.
Without the written consent of an optionee, no amendment or suspension of
the Plan shall alter or impair any option previously granted to him under the
Plan.
9. Terminating Events. Not less than thirty (30) days prior to
dissolution or liquidation of the Company, or a reorganization, merger, or
consolidation of the Company with one or more corporations as a result of which
the Company will not be the surviving corporation, or a sale of substantially
all the assets and property of the Company to another person (a "Terminating
Event"), the Board of Directors of the Company shall notify each optionee of
the pendency of the Terminating Event. Upon delivery of said notice, any option
granted prior to the Terminating Event shall be exercisable in full and not
only as to those shares with respect to which installments, if any, have then
accrued, subject, however, to earlier expiration or termination of such options
as provided elsewhere in the Plan. Upon the date thirty (30) days after
delivery of said notice, any option or portion thereof not exercised shall
terminate, and upon the happening of the Terminating Event, the Plan shall
terminate, unless provision to be made in connection with the Terminating Event
for assumption of options theretofore granted, or substitution for such options
or new options covering stock of a successor employer corporation, or a parent
or subsidiary corporation, with appropriate adjustments as to number and kind
of shares and prices.
10. Shareholder Approval. This Plan shall be void and of no effect unless
approved by the shareholders of the Company within twelve (12) months before or
after the date it is adopted by the Board of Directors.
11. Effective Date. The effective date of the Plan shall be the later of
the date this Plan is adopted by the Board of Directors or the date of approval
of the Plan by stockholders of the Company holding not less than a majority of
the shares outstanding at the time of approval thereof.
12. Name of Plan. The Plan shall be known as the "LANDA MANAGEMENT
SYSTEMS CORPORATION 1995 INCENTIVE STOCK OPTION PLAN."
-7-
<PAGE> 1
EXHIBIT 10.3
LANDA MANAGEMENT SYSTEMS CORPORATION
1998 EQUITY INCENTIVE PLAN
ADOPTED JULY 29, 1998
APPROVED BY SHAREHOLDERS October 21, 1998
TERMINATION DATE: JULY 28, 2008
1. PURPOSES.
(a) ELIGIBLE STOCK AWARD RECIPIENTS. The persons eligible to receive
Stock Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.
(b) AVAILABLE STOCK AWARDS. The purpose of the Plan is to provide a
means by which eligible recipients of Stock Awards may be given an opportunity
to benefit from increases in value of the Common Stock through the granting of
the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.
(c) GENERAL PURPOSE. The Company, by means of the Plan, seeks to
retain the services of the group of persons eligible to receive Stock Awards, to
secure and retain the services of new members of this group and to provide
incentives for such persons to exert maximum efforts for the success of the
Company and its Affiliates.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary
corporation of the Company, whether now or hereafter existing, as those terms
are defined in Sections 424(e) and (f), respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in
accordance with subsection 3(c).
(e) "COMMON STOCK" means the common stock of the Company.
(f) "COMPANY" means Landa Management Systems Corporation.
(g) "CONSULTANT" means any person, including an advisor, (i) engaged
by the Company or an Affiliate to render consulting or advisory services and who
is compensated for such services or (ii) who is a member of the Board of
Directors of an Affiliate. However, the term "Consultant" shall not include
either Directors of the Company who are not compensated
1
<PAGE> 2
by the Company for their services as Directors or Directors of the Company who
are merely paid a director's fee by the Company for their services as Directors.
(h) "CONTINUOUS SERVICE" means that the Participant's service with
the Company or an Affiliate, whether as an Employee, Director or Consultant, is
not interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director of the
Company will not constitute an interruption of Continuous Service. The Board or
the chief executive officer of the Company, in that party's sole discretion, may
determine whether Continuous Service shall be considered interrupted in the case
of any leave of absence approved by that party, including sick leave, military
leave or any other personal leave.
(i) "COVERED EMPLOYEE" means the chief executive officer and the
four (4) other highest compensated officers of the Company for whom total
compensation is required to be reported to shareholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(j) "DIRECTOR" means a member of the Board of Directors of the
Company.
(k) "DISABILITY" means (i) before the Listing Date, the inability of
a person, in the opinion of a qualified physician acceptable to the Company, to
perform the major duties of that person's position with the Company or an
Affiliate of the Company because of the sickness or injury of the person and
(ii) after the Listing Date, the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(l) "EMPLOYEE" means any person employed by the Company or an
Affiliate. Mere service as a Director or payment of a director's fee by the
Company or an Affiliate shall not be sufficient to constitute "employment" by
the Company or an Affiliate.
(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(n) "FAIR MARKET VALUE" means, as of any date, the value of the
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or traded on the Nasdaq National Market System or the Nasdaq SmallCap
Market, the Fair Market Value of a share of Common Stock shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or the exchange or market with the greatest
volume of trading in the Common Stock) on the last market trading day prior to
the day of determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable.
2
<PAGE> 3
(ii) In the absence of such markets for the Common Stock, the
Fair Market Value shall be determined in good faith by the Board.
(iii) Prior to the Listing Date, the value of the Common Stock
shall be determined in a manner consistent with Section 260.140.50 of Title 10
of the California Code of Regulations.
(o) "INCENTIVE STOCK OPTION" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(p) "LISTING DATE" means the first date upon which any security of
the Company is listed (or approved for listing) upon notice of issuance on any
securities exchange or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.
(q) "NON-EMPLOYEE DIRECTOR" means a Director of the Company who
either (i) is not a current Employee or Officer of the Company or its parent or
a subsidiary, does not receive compensation (directly or indirectly) from the
Company or its parent or a subsidiary for services rendered as a consultant or
in any capacity other than as a Director (except for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K promulgated
pursuant to the Securities Act ("Regulation S-K")), does not possess an interest
in any other transaction as to which disclosure would be required under Item
404(a) of Regulation S-K and is not engaged in a business relationship as to
which disclosure would be required under Item 404(b) of Regulation S-K; or (ii)
is otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(r) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(s) "OFFICER" means (i) before the Listing Date, any person
designated by the Company as an officer and (ii) on and after the Listing Date,
a person who is an officer of the Company within the meaning of Section 16 of
the Exchange Act and the rules and regulations promulgated thereunder.
(t) "OPTION" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.
(u) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(v) "OPTIONHOLDER" means a person to whom an Option is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Option.
3
<PAGE> 4
(w) "OUTSIDE DIRECTOR" means a Director of the Company who either
(i) is not a current employee of the Company or an "affiliated corporation"
(within the meaning of Treasury Regulations promulgated under Section 162(m) of
the Code), is not a former employee of the Company or an "affiliated
corporation" receiving compensation for prior services (other than benefits
under a tax qualified pension plan), was not an officer of the Company or an
"affiliated corporation" at any time and is not currently receiving direct or
indirect remuneration from the Company or an "affiliated corporation" for
services in any capacity other than as a Director or (ii) is otherwise
considered an "outside director" for purposes of Section 162(m) of the Code.
(x) "PARTICIPANT" means a person to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.
(y) "PLAN" means this Landa Management Systems Corporation 1998
Equity Incentive Plan.
(z) "RULE 16b-3" means Rule 16b-3 promulgated under the Exchange Act
or any successor to Rule 16b-3, as in effect from time to time.
(aa) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(bb) "STOCK AWARD" means any right granted under the Plan, including
an Option, a stock bonus and a right to acquire restricted stock.
(cc) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(dd) "TEN PERCENT SHAREHOLDER" means a person who owns (or is deemed
to own pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates.
3. ADMINISTRATION.
(a) ADMINISTRATION BY BOARD. The Board shall administer the Plan
unless and until the Board delegates administration to a Committee, as provided
in subsection 3(c).
(b) POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how each Stock
Award shall be granted; what type or combination of types of Stock Award shall
be granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive stock pursuant to a Stock Award; and the number of shares with respect
to which a Stock Award shall be granted to each such person.
4
<PAGE> 5
(ii) To construe and interpret the Plan and Stock Awards
granted under it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(iii) To amend the Plan or a Stock Award as provided in
Section 12.
(iv) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company, which are not in conflict with the provisions of the Plan.
(c) DELEGATION TO COMMITTEE.
(i) GENERAL. The Board may delegate administration of the
Plan to a Committee or Committees of one or more members of the Board, and the
term "Committee" shall apply to any person or persons to whom such authority has
been delegated. If administration is delegated to a Committee, the Committee
shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board, including the power to delegate to a
subcommittee any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be to the
Committee or subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest in
the Board the administration of the Plan.
(ii) COMMITTEE COMPOSITION WHEN COMMON STOCK IS PUBLICLY
TRADED. At such time as the Common Stock is publicly traded, in the discretion
of the Board, a Committee may consist solely of two or more Outside Directors,
in accordance with Section 162(m) of the Code, and/or solely of two or more
Non-Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (i) delegate to a committee of one or
more members of the Board who are not Outside Directors the authority to grant
Stock Awards to eligible persons who are either (1) not then Covered Employees
and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (2) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code and/or) (ii)
delegate to a committee of one or more members of the Board who are not
Non-Employee Directors the authority to grant Stock Awards to eligible persons
who are not then subject to Section 16 of the Exchange Act.
4. SHARES SUBJECT TO THE PLAN.
(a) SHARE RESERVE. Subject to the provisions of Section 11 relating
to adjustments upon changes in stock, the stock that may be issued pursuant to
Stock Awards shall not exceed in the aggregate three million (3,000,000) shares
of Common Stock.
5
<PAGE> 6
(b) REVERSION OF SHARES TO THE SHARE RESERVE. If any Stock Award
shall for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full (or vested in the case of Restricted Stock), the
stock not acquired under such Stock Award shall revert to and again become
available for issuance under the Plan. If any Common Stock acquired pursuant to
the exercise of an Option shall for any reason be repurchased by the Company
under an unvested share repurchase option provided under the Plan, the stock
repurchased by the Company under such repurchase option shall not revert to and
again become available for issuance under the Plan.
(c) SOURCE OF SHARES. The stock subject to the Plan may be unissued
shares or reacquired shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) ELIGIBILITY FOR SPECIFIC STOCK AWARDS. Incentive Stock Options
may be granted only to Employees. Stock Awards other than Incentive Stock
Options may be granted to Employees, Directors and Consultants.
(b) TEN PERCENT SHAREHOLDERS. No Ten Percent Shareholder shall be
eligible for the grant of an Incentive Stock Option unless the exercise price of
such Option is at least one hundred ten percent (110%) of the Fair Market Value
of the Common Stock at the date of grant and the Option is not exercisable after
the expiration of five (5) years from the date of grant.
Prior to the Listing Date, no Ten Percent Shareholder shall be
eligible for the grant of a Nonstatutory Stock Option unless the exercise price
of such Option is at least one hundred ten percent (110%) of the Fair Market
Value of the Common Stock at the date of grant.
Prior to the Listing Date, no Ten Percent Shareholder shall be
eligible for a restricted stock award unless the purchase price of the
restricted stock is at least one hundred percent (100%) of the Fair Market Value
of the Common Stock at the date of grant.
(c) SECTION 162(m) LIMITATION. Subject to the provisions of Section
11 relating to adjustments upon changes in stock, no employee shall be eligible
to be granted Options covering more than seven hundred fifty thousand (750,000)
shares of the Common Stock during any calendar year. This subsection 5(c) shall
not apply prior to the Listing Date and, following the Listing Date, this
subsection 5(c) shall not apply until (i) the earliest of: (1) the first
material modification of the Plan (including any increase in the number of
shares reserved for issuance under the Plan in accordance with Section 4); (2)
the issuance of all of the shares of Common Stock reserved for issuance under
the Plan; (3) the expiration of the Plan; or (4) the first meeting of
shareholders at which Directors of the Company are to be elected that occurs
after the close of the third calendar year following the calendar year in which
occurred the first registration of an equity security under Section 12 of the
Exchange Act; or (ii) such other date required by Section 162(m) of the Code and
the rules and regulations promulgated thereunder.
6
<PAGE> 7
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and a separate certificate or certificates will be issued for shares
purchased on exercise of each type of Option. The provisions of separate Options
need not be identical, but each Option shall include (through incorporation of
provisions hereof by reference in the Option or otherwise) the substance of each
of the following provisions:
(a) TERM. Subject to the provisions of subsection 5(b) regarding Ten
Percent Shareholders, no Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Shareholders, the exercise
price of each Incentive Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the stock subject to the Option on the date
the Option is granted. Notwithstanding the foregoing, an Incentive Stock Option
may be granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.
(c) EXERCISE PRICE OF A NONSTATUTORY STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Shareholders, the exercise
price of each Nonstatutory Stock Option granted prior to the Listing Date shall
be not less than one hundred percent (100%) of the Fair Market Value of the
stock subject to the Option on the date the Option is granted. The exercise
price of each Nonstatutory Stock Option granted on or after the Listing Date
shall be not less than one hundred percent (100%) of the Fair Market Value of
the stock subject to the Option on the date the Option is granted.
Notwithstanding the foregoing, a Nonstatutory Stock Option may be granted with
an exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.
(d) CONSIDERATION. The purchase price of stock acquired pursuant to
an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) by (1) delivery to the
Company of other Common Stock, (2) according to a deferred payment or other
arrangement (which may include, without limiting the generality of the
foregoing, the use of other Common Stock) with the Participant or (3) in any
other form of legal consideration that may be acceptable to the Board; provided,
however, that at any time that the Company is incorporated in Delaware, payment
of the Common Stock's "par value," as defined in the Delaware General
Corporation Law, shall not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as
7
<PAGE> 8
interest, under any applicable provisions of the Code, of any amounts other than
amounts stated to be interest under the deferred payment arrangement.
(e) TRANSFERABILITY OF AN INCENTIVE STOCK OPTION. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing provisions of this
subsection 6(e), the Optionholder may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who, in
the event of the death of the Optionholder, shall thereafter be entitled to
exercise the Option.
(f) TRANSFERABILITY OF A NONSTATUTORY STOCK OPTION. A Nonstatutory
Stock Option granted prior to the Listing Date shall not be transferable except
by will or by the laws of descent and distribution and shall be exercisable
during the lifetime of the Optionholder only by the Optionholder. A Nonstatutory
Stock Option granted on or after the Listing Date shall be transferable to the
extent provided in the Option Agreement. If the Nonstatutory Stock Option does
not provide for transferability, then the Nonstatutory Stock Option shall not be
transferable except by will or by the laws of descent and distribution and shall
be exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing provisions of this subsection 6(f), the
Optionholder may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionholder, shall thereafter be entitled to exercise the Option.
(g) VESTING GENERALLY. The total number of shares of Common Stock
subject to an Option may, but need not, vest and therefore become exercisable in
periodic installments which may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares as to which an Option may be exercised.
(h) MINIMUM VESTING PRIOR TO THE LISTING DATE. Notwithstanding the
foregoing subsection 6(g), Options granted prior to the Listing Date shall
provide for vesting of the total number of shares at a rate of at least twenty
percent (20%) per year over five (5) years from the date the Option was granted,
subject to reasonable conditions such as continued employment. However, in the
case of such Options granted to Officers, Directors or Consultants, the Option
may become fully exercisable, subject to reasonable conditions such as continued
employment, at any time or during any period established by the Company; for
example, the vesting provision of the Option may provide for vesting of less
than twenty percent (20%) per year of the total number of shares subject to the
Option.
(i) TERMINATION OF CONTINUOUS SERVICE. In the event an
Optionholder's Continuous Service terminates (other than upon the Optionholder's
death or Disability), the Optionholder may exercise his or her Option (to the
extent that the Optionholder was entitled to exercise it as of the date of
termination) but only within such period of time ending on the earlier of (i)
the date three (3) months following the termination of the Optionholder's
Continuous Service (or such longer or shorter period specified in the Option
Agreement, which, for Options granted
8
<PAGE> 9
prior to the Listing Date, shall not be less than thirty (30) days, unless such
termination is for cause), or (ii) the expiration of the term of the Option as
set forth in the Option Agreement. If, after termination, the Optionholder does
not exercise his or her Option within the time specified in the Option
Agreement, the Option shall terminate.
(j) EXTENSION OF TERMINATION DATE. An Optionholder's Option
Agreement may also provide that if the exercise of the Option following the
termination of the Optionholder's Continuous Service (other than upon the
Optionholder's death or Disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements under
the Securities Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in subsection 6(a) or (ii) the
expiration of a period of three (3) months after the termination of the
Optionholder's Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.
(k) DISABILITY OF OPTIONHOLDER. In the event an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination (or such longer or shorter period specified in the
Option Agreement, which, for Options granted prior to the Listing Date, shall
not be less than six (6) months) or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified
herein, the Option shall terminate.
(l) DEATH OF OPTIONHOLDER. In the event (i) an Optionholder's
Continuous Service terminates as a result of the Optionholder's death or (ii)
the Optionholder dies within the period (if any) specified in the Option
Agreement after the termination of the Optionholder's Continuous Service for a
reason other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise the Option as of the date of death) by the
Optionholder's estate, by a person who acquired the right to exercise the Option
by bequest or inheritance or by a person designated to exercise the option upon
the Optionholder's death pursuant to subsection 6(e) or 6(f), but only within
the period ending on the earlier of (1) the date eighteen (18) months following
the date of death (or such longer or shorter period specified in the Option
Agreement, which, for Options granted prior to the Listing Date, shall not be
less than six (6) months) or (2) the expiration of the term of such Option as
set forth in the Option Agreement. If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate.
(m) EARLY EXERCISE. The Option may, but need not, include a
provision whereby the Optionholder may elect at any time before the
Optionholder's Continuous Service terminates to exercise the Option as to any
part or all of the shares subject to the Option prior to the full vesting of the
Option. Subject to the "Repurchase Limitation" in subsection 10(h), any unvested
shares so purchased may be subject to an unvested share repurchase option in
favor of the Company or to any other restriction the Board determines to be
appropriate.
9
<PAGE> 10
(n) RIGHT OF REPURCHASE. Subject to the "Repurchase Limitation" in
subsection 10(h), the Option may, but need not, include a provision whereby the
Company may elect, prior to the Listing Date, to repurchase all or any part of
the vested shares acquired by the Optionholder pursuant to the exercise of the
Option.
(o) RIGHT OF FIRST REFUSAL. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionholder of
the intent to transfer all or any part of the shares exercised pursuant to the
Option. Except as expressly provided in this subsection 6(o), such right of
first refusal shall otherwise comply with any applicable provisions of the
Bylaws of the Company.
(p) RE-LOAD OPTIONS. Without in any way limiting the authority of
the Board to make or not to make grants of Options hereunder, the Board shall
have the authority (but not an obligation) to include as part of any Option
Agreement a provision entitling the Optionholder to a further Option (a "Re-Load
Option") in the event the Optionholder exercises the Option evidenced by the
Option Agreement, in whole or in part, by surrendering other shares of Common
Stock in accordance with this Plan and the terms and conditions of the Option
Agreement. Any such Re-Load Option shall (i) provide for a number of shares
equal to the number of shares surrendered as part or all of the exercise price
of such Option; (ii) have an expiration date which is the same as the expiration
date of the Option the exercise of which gave rise to such Re-Load Option; and
(iii) have an exercise price which is equal to one hundred percent (100%) of the
Fair Market Value of the Common Stock subject to the Re-Load Option on the date
of exercise of the original Option. Notwithstanding the foregoing, a Re-Load
Option shall be subject to the same exercise price and term provisions
heretofore described for Options under the Plan.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollars ($100,000) annual limitation on exercisability of Incentive Stock
Options described in subsection 10(d) and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall
be subject to the availability of sufficient shares under subsection 4(a) and
the "Section 162(m) Limitation" on the grants of Options under subsection 5(c)
and shall be subject to such other terms and conditions as the Board may
determine which are not inconsistent with the express provisions of the Plan
regarding the terms of Options.
7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.
(a) STOCK BONUS AWARDS. Each stock bonus agreement shall be in such
form and shall contain such terms and conditions as the Board shall deem
appropriate. The terms and conditions of stock bonus agreements may change from
time to time, and the terms and conditions of separate stock bonus agreements
need not be identical, but each stock bonus agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:
10
<PAGE> 11
(i) CONSIDERATION. A stock bonus shall be awarded in
consideration for past services actually rendered to the Company for its
benefit.
(ii) VESTING. Subject to the "Repurchase Limitation" in
subsection 10(h), shares of Common Stock awarded under the stock bonus agreement
may, but need not, be subject to a share repurchase option in favor of the
Company in accordance with a vesting schedule to be determined by the Board.
(iii) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. Subject
to the "Repurchase Limitation" in subsection 10(h), in the event a Participant's
Continuous Service terminates, the Company may reacquire any or all of the
shares of Common Stock held by the Participant which have not vested as of the
date of termination under the terms of the stock bonus agreement.
(iv) TRANSFERABILITY. For a stock bonus award made before the
Listing Date, rights to acquire shares under the stock bonus agreement shall not
be transferable except by will or by the laws of descent and distribution and
shall be exercisable during the lifetime of the Participant only by the
Participant. For a stock bonus award made on or after the Listing Date, rights
to acquire shares under the stock bonus agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth in the stock
bonus agreement, as the Board shall determine in its discretion, so long as
stock awarded under the stock bonus agreement remains subject to the terms of
the stock bonus agreement.
(b) RESTRICTED STOCK AWARDS. Each restricted stock purchase
agreement shall be in such form and shall contain such terms and conditions as
the Board shall deem appropriate. The terms and conditions of the restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate restricted stock purchase agreements need not be
identical, but each restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:
(i) PURCHASE PRICE. Subject to the provisions of subsection
5(b) regarding Ten Percent Shareholders, the purchase price under each
restricted stock purchase agreement shall be such amount as the Board shall
determine and designate in such restricted stock purchase agreement. For
restricted stock awards made prior to the Listing Date, the purchase price shall
not be less than one hundred percent (100%) of the stock's Fair Market Value on
the date such award is made or at the time the purchase is consummated. For
restricted stock awards made on or after the Listing Date, the purchase price
shall not be less than one hundred percent (100%) of the stock's Fair Market
Value on the date such award is made or at the time the purchase is consummated.
(ii) CONSIDERATION. The purchase price of stock acquired
pursuant to the restricted stock purchase agreement shall be paid either: (i) in
cash at the time of purchase; (ii) at the discretion of the Board, according to
a deferred payment or other arrangement with the Participant; or (iii) in any
other form of legal consideration that may be acceptable to the Board in its
discretion; provided, however, that at any time that the Company is incorporated
in
11
<PAGE> 12
Delaware, then payment of the Common Stock's "par value," as defined in the
Delaware General Corporation Law, shall not be made by deferred payment.
(iii) VESTING. Subject to the "Repurchase Limitation" in
subsection 10(h), shares of Common Stock acquired under the restricted stock
purchase agreement may, but need not, be subject to a share repurchase option in
favor of the Company in accordance with a vesting schedule to be determined by
the Board.
(iv) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. Subject
to the "Repurchase Limitation" in subsection 10(h), in the event a Participant's
Continuous Service terminates, the Company may repurchase or otherwise reacquire
any or all of the shares of Common Stock held by the Participant which have not
vested as of the date of termination under the terms of the restricted stock
purchase agreement.
(v) TRANSFERABILITY. For a restricted stock award made
before the Listing Date, rights to acquire shares under the restricted stock
purchase agreement shall not be transferable except by will or by the laws of
descent and distribution and shall be exercisable during the lifetime of the
Participant only by the Participant. For a restricted stock award made on or
after the Listing Date, rights to acquire shares under the restricted stock
purchase agreement shall be transferable by the Participant only upon such terms
and conditions as are set forth in the restricted stock purchase agreement, as
the Board shall determine in its discretion, so long as stock awarded under the
restricted stock purchase agreement remains subject to the terms of the
restricted stock purchase agreement.
8. COVENANTS OF THE COMPANY.
(a) AVAILABILITY OF SHARES. During the terms of the Stock Awards,
the Company shall keep available at all times the number of shares of Common
Stock required to satisfy such Stock Awards.
(b) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell shares
of Common Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any stock issued or issuable pursuant to any such
Stock Award. If, after reasonable efforts, the Company is unable to obtain from
any such regulatory commission or agency the authority which counsel for the
Company deems necessary for the lawful issuance and sale of stock under the
Plan, the Company shall be relieved from any liability for failure to issue and
sell stock upon exercise of such Stock Awards unless and until such authority is
obtained.
9. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.
12
<PAGE> 13
10. MISCELLANEOUS.
(a) ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have
the power to accelerate the time at which a Stock Award may first be exercised
or the time during which a Stock Award or any part thereof will vest in
accordance with the Plan, notwithstanding the provisions in the Stock Award
stating the time at which it may first be exercised or the time during which it
will vest.
(b) SHAREHOLDER RIGHTS. No Participant shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any shares
subject to such Stock Award unless and until such Participant has satisfied all
requirements for exercise of the Stock Award pursuant to its terms.
(c) NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or
any instrument executed or Stock Award granted pursuant thereto shall confer
upon any Participant or other holder of Stock Awards any right to continue to
serve the Company or an Affiliate in the capacity in effect at the time the
Stock Award was granted or shall affect the right of the Company or an Affiliate
to terminate (i) the employment of an Employee with or without notice and with
or without cause, (ii) the service of a Consultant pursuant to the terms of such
Consultant's agreement with the Company or an Affiliate or (iii) the service of
a Director pursuant to the Bylaws of the Company or an Affiliate, and any
applicable provisions of the corporate law of the state in which the Company or
the Affiliate is incorporated, as the case may be.
(d) INCENTIVE STOCK OPTION $100,000 LIMITATION. To the extent that
the aggregate Fair Market Value (determined at the time of grant) of stock with
respect to which Incentive Stock Options are exercisable for the first time by
any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.
(e) INVESTMENT ASSURANCES. The Company may require a Participant, as
a condition of exercising or acquiring stock under any Stock Award, (i) to give
written assurances satisfactory to the Company as to the Participant's knowledge
and experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Stock Award; and (ii) to give written assurances
satisfactory to the Company stating that the Participant is acquiring the stock
subject to the Stock Award for the Participant's own account and not with any
present intention of selling or otherwise distributing the stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (iii) the issuance of the shares upon the exercise or acquisition
of stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or (iv) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company,
13
<PAGE> 14
place legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the stock.
(f) WITHHOLDING OBLIGATIONS. To the extent provided by the terms of
a Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means (in addition to the Company's
right to withhold from any compensation paid to the Participant by the Company)
or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares from the shares of the Common Stock
otherwise issuable to the participant as a result of the exercise or acquisition
of stock under the Stock Award; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock.
(g) INFORMATION OBLIGATION. Prior to the Listing Date, to the extent
required by Section 260.140.46 of Title 10 of the California Code of
Regulations, the Company shall deliver financial statements to Participants at
least annually. This subsection 10(g) shall not apply to key Employees whose
duties in connection with the Company assure them access to equivalent
information.
(h) REPURCHASE LIMITATION. The terms of any repurchase option shall
be specified in the Stock Award and may be either at Fair Market Value at the
time of repurchase or at not less than the original purchase price. To the
extent required by Section 260.140.41 and Section 260.140.42 of Title 10 of the
California Code of Regulations, any repurchase option contained in a Stock Award
granted prior to the Listing Date shall be upon the terms described below:
(i) FAIR MARKET VALUE. If the repurchase option gives the
Company the right to repurchase the shares upon termination of employment at not
less than the Fair Market Value of the shares to be purchased on the date of
termination of Continuous Service, then (i) the right to repurchase shall be
exercised for cash or cancellation of purchase money indebtedness for the shares
within ninety (90) days of termination of Continuous Service (or in the case of
shares issued upon exercise of Stock Awards after such date of termination,
within ninety (90) days after the date of the exercise) or such longer period as
may be agreed to by the Company and the Participant (for example, for purposes
of satisfying the requirements of Section 1202(c)(3) of the Code regarding
"qualified small business stock") and (ii) the right terminates when the shares
become publicly traded.
(ii) ORIGINAL PURCHASE PRICE. If the repurchase option gives
the Company the right to repurchase the shares upon termination of Continuous
Service at the original purchase price, then (i) the right to repurchase at the
original purchase price shall lapse at the rate of at least twenty percent (20%)
of the shares per year over five (5) years from the date the Stock Award is
granted (without respect to the date the Stock Award was exercised or became
exercisable) and (ii) the right to repurchase shall be exercised for cash or
cancellation of purchase money indebtedness for the shares within ninety (90)
days of termination of Continuous Service (or in the case of shares issued upon
exercise of Options after such date of termination, within ninety (90) days
after the date of the exercise) or such longer period as may
14
<PAGE> 15
be agreed to by the Company and the Participant (for example, for purposes of
satisfying the requirements of Section 1202(c)(3) of the Code regarding
"qualified small business stock").
11. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) CAPITALIZATION ADJUSTMENTS. If any change is made in the stock
subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the maximum number of securities subject to
award to any person pursuant to subsection 5(c), and the outstanding Stock
Awards will be appropriately adjusted in the class(es) and number of securities
and price per share of stock subject to such outstanding Stock Awards. The
Board, the determination of which shall be final, binding and conclusive, shall
make such adjustments. (The conversion of any convertible securities of the
Company shall not be treated as a transaction "without receipt of consideration"
by the Company.)
(b) CHANGE IN CONTROL--DISSOLUTION OR LIQUIDATION. In the event of a
dissolution or liquidation of the Company, then such Stock Awards shall be
terminated if not exercised (if applicable) prior to such event.
(c) CHANGE IN CONTROL--ASSET SALE, MERGER, CONSOLIDATION OR REVERSE
MERGER. In the event of (i) a sale of fifty percent (50%) or more of the assets
of the Company, (ii) a merger or consolidation in which the Company is not the
surviving corporation, or (iii) a reverse merger in which the Company is the
surviving corporation but the shares of Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise, then any surviving
corporation or acquiring corporation shall assume any Stock Awards outstanding
under the Plan or shall substitute similar stock awards for those outstanding
under the Plan (including an award to acquire the same consideration paid to the
shareholders in the transaction described in this subsection 11(c)). In the
event any surviving corporation or acquiring corporation refuses to assume such
Stock Awards or to substitute similar stock awards for those outstanding under
the Plan, then with respect to Stock Awards held by Participants whose
Continuous Service has not terminated, the vesting of such Stock Awards (and, if
applicable, the time during which such Stock Awards may be exercised) shall be
accelerated in full, and the Stock Awards shall terminate if not exercised (if
applicable) at or prior to such event. With respect to any other Stock Awards
outstanding under the Plan, such Stock Awards shall terminate if not exercised
(if applicable) prior to such event.
(d) CHANGE IN CONTROL--SECURITIES ACQUISITION. After the Listing
Date, in the event of an acquisition by any person, entity or group within the
meaning of Section 13(d) or 14(d) of the Exchange Act, or any comparable
successor provisions (excluding any employee benefit plan, or related trust,
sponsored or maintained by the Company or an Affiliate) of the beneficial
15
<PAGE> 16
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act,
or comparable successor rule) of securities of the Company representing at least
fifty percent (50%) of the combined voting power entitled to vote in the
election of directors, then any surviving corporation or acquiring corporation
shall assume any Stock Awards outstanding under the Plan or shall substitute
similar stock awards for those outstanding under the Plan. In the event any
surviving or acquiring corporation refuses to assume such Stock Awards or to
substitute similar stock awards for those outstanding under the Plan, then with
respect to Stock Awards held by Participants whose Continuous Service has not
terminated, the vesting of such Stock Awards (and, if applicable, the time
during which such Stock Awards may be exercised) shall be accelerated in full,
and the Stock Awards shall terminate if not exercised (if applicable) at or
prior to such event. With respect to any other Stock Awards outstanding under
the Plan, such Stock Awards shall terminate if not exercised (if applicable)
prior to such event.
12. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) AMENDMENT OF PLAN. The Board at any time, and from time to time,
may amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the shareholders of the Company to the extent shareholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.
(b) SHAREHOLDER APPROVAL. The Board may, in its sole discretion,
submit any other amendment to the Plan for shareholder approval, including, but
not limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.
(c) CONTEMPLATED AMENDMENTS. It is expressly contemplated that the
Board may amend the Plan in any respect the Board deems necessary or advisable
to provide eligible Employees with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options and/or to bring the Plan and/or
Incentive Stock Options granted under it into compliance therewith.
(d) NO IMPAIRMENT OF RIGHTS. Rights under any Stock Award granted
before amendment of the Plan shall not be impaired by any amendment of the Plan
unless (i) the Company requests the consent of the Participant and (ii) the
Participant consents in writing.
(e) AMENDMENT OF STOCK AWARDS. The Board at any time, and from time
to time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.
13. TERMINATION OR SUSPENSION OF THE PLAN.
(a) PLAN TERM. The Board may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate on the day before the
tenth (10th) anniversary of the
16
<PAGE> 17
date the Plan is adopted by the Board or approved by the shareholders of the
Company, whichever is earlier. No Stock Awards may be granted under the Plan
while the Plan is suspended or after it is terminated.
(b) NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan
shall not impair rights and obligations under any Stock Award granted while the
Plan is in effect except with the written consent of the Participant.
14. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Stock
Award shall be exercised (or, in the case of a stock bonus, shall be granted)
unless and until the Plan has been approved by the shareholders of the Company,
which approval shall be within twelve (12) months before or after the date the
Plan is adopted by the Board.
17
<PAGE> 1
EXHIBIT 10.4
LANDA MANAGEMENT SYSTEMS CORPORATION
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
FEBRUARY 27, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 1. AGREEMENT TO SELL AND PURCHASE ................................ 2
1.1 Authorization of Shares ....................................... 2
1.2 Sale and Purchase ............................................. 2
SECTION 2. CLOSING, DELIVERY AND PAYMENT ................................. 2
2.1 Closing ....................................................... 2
2.2 Delivery ...................................................... 2
2.3 Contemplated Transfers ........................................ 2
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE LANGS ... 3
3.1 Organization, Good Standing and Qualification ................. 3
3.2 Capitalization; Voting Rights ................................. 3
3.3 Authorization; Binding Obligations ............................ 4
3.4 Financial Statements .......................................... 4
3.5 Liabilities ................................................... 4
3.6 Agreements; Action ............................................ 4
3.7 Obligations to Related Parties ................................ 5
3.8 Changes ....................................................... 5
3.9 Title to Properties and Assets; Liens, etc. ................... 6
3.10 Patents and Trademarks ........................................ 7
3.11 Compliance with Other Instruments ............................. 8
3.12 Litigation .................................................... 8
3.13 Tax Returns and Payments ...................................... 9
3.14 Employees ..................................................... 9
3.15 Proprietary Information and Inventions Agreements ............. 9
3.16 Obligations of Management; Stipulated Activities .............. 9
3.17 Registration Rights ........................................... 10
3.18 Compliance with Laws; Permits ................................. 10
3.19 Environmental and Safety Laws ................................. 10
3.20 Offering Valid ................................................ 10
3.21 Full Disclosure ............................................... 10
</TABLE>
i.
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
3.22 Minute Books .................................................. 11
3.23 Section 83(b) Elections ....................................... 11
3.24 Insurance ..................................................... 11
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS ............ 11
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS .............. 11
5.1 Requisite Power and Authority ................................. 12
5.2 Investment Representations .................................... 12
5.3 Transfer Restrictions ......................................... 13
SECTION 6. CONDITIONS TO CLOSING ......................................... 13
6.1 Conditions to Purchasers' Obligations at the Closing .......... 13
6.2 Conditions to Obligations of the Company ...................... 15
SECTION 7. SHAREHOLDER RELEASES; SURVIVAL; INDEMNIFICATION ............... 16
7.1 Shareholder Release ........................................... 16
7.2 Survival; Remedies ............................................ 16
7.3 Indemnification of Purchaser .................................. 16
7.4 Indemnification by Purchasers ................................. 17
7.5 Notice of Claim ............................................... 17
SECTION 8. MISCELLANEOUS ................................................. 17
8.1 Governing Law ................................................. 17
8.2 Successors and Assigns ........................................ 17
8.3 Entire Agreement .............................................. 17
8.4 Severability .................................................. 17
8.5 Amendment and Waiver .......................................... 18
8.6 Delays or Omissions ........................................... 18
8.7 Notices ....................................................... 18
8.8 Expenses ...................................................... 18
8.9 Attorneys' Fees ............................................... 18
8.10 Titles and Subtitles .......................................... 19
</TABLE>
ii.
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
8.11 Counterparts .................................................. 19
8.12 Broker's Fees ................................................. 19
8.13 Exculpation Among Purchasers .................................. 19
8.14 Pronouns ...................................................... 19
8.15 Broker's Fees ................................................. 19
8.16 California Corporate Securities Law ........................... 19
</TABLE>
iii.
<PAGE> 5
LANDA MANAGEMENT SYSTEMS CORPORATION
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES D PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
entered into as of February 27, 1998, by and among LANDA MANAGEMENT SYSTEMS
CORPORATION, a California corporation (the "Company"), and severally and not
jointly, Brack Davis ("Davis"), Hugh Curnutt ("Curnutt"), Westminster Health
Care Limited ("Westminster"), and Gilbert Lang, Beulah Lang, Beulah J.T. Lang
(the "Langs"; Davis, Curnutt, Westminster and the Langs are sometimes referred
to collectively as the "Shareholders" and each individually as a "Shareholder"),
and each of those persons and entities, severally and not jointly, whose names
are set forth on the Schedule of Purchasers attached hereto as Exhibit A-1
(which persons and entities are hereinafter collectively referred to as
"Purchasers" and each individually as a "Purchaser").
RECITALS
WHEREAS, the Company and the Shareholders have entered into an Exchange
Agreement dated as of the date hereof (the "Exchange Agreement") pursuant to
which (i) Davis and Curnutt have exchanged 21,300 shares and 20,000 shares,
respectively, of Series A Preferred Stock of the Company held by each of them
for an equal number of shares of Series D Preferred Stock of the Company
("Series D Preferred"), (ii) Westminster has exchanged 115,446 shares of Series
B Preferred Stock of the Company and 450,481 shares of Series C Preferred Stock
of the Company held by it for an aggregate of 1,125,000 shares of Series D
Preferred, and (iii) the Langs exchanged an aggregate of 178,332.5 shares of
Common Stock of the Company held by them for an aggregate of 17,833 shares of
Series D Preferred (the shares of Series D Preferred issued to each of the
Shareholders pursuant to the Exchange Agreement are referred to collectively as
the "Exchange Series D Shares");
WHEREAS, it is a condition to the willingness of Westminster to approve
the amendment to the Company's Articles of Incorporation contemplated by this
Agreement and the sale and delivery of the Exchange Series D Shares held by it
hereunder that the Company issue and deliver to Westminster warrants to purchase
250,000 shares of Common Stock of the Company (the "Westminster Warrant");
WHEREAS, the Purchasers desire to purchase from the Shareholders all of
the Exchange Series D Shares held by each of them on the terms and conditions
set forth herein;
WHEREAS, each of the Shareholders desires to sell the Exchange Series D
Shares held by it to the Purchasers on the terms and conditions set forth
herein;
WHEREAS, the Purchasers desire to purchase directly from the Company an
aggregate of 5,615,867 shares of Series D Preferred (the "Shares") on the terms
and conditions set forth herein; and;
WHEREAS, the Company desires to issue and sell the Shares to the
Purchasers on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1.
<PAGE> 6
SECTION 1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF SHARES. On or prior to the Closing (as
defined in Section 2 below), (a) (i) the Exchange Series D Shares shall have
been issued to each of the Shareholders pursuant to the Exchange Agreement and
(ii) each Shareholder, to the extent necessary, shall have authorized the sale
to the Purchasers of the Exchange Series D Shares held by it, and (b) the
Company shall have authorized (i) the sale and issuance to Purchasers of the
Shares and (ii) the issuance of such shares of Common Stock to be issued upon
conversion of the Shares (the "Conversion Shares"). The Shares, the Exchange
Series D Shares and the Conversion Shares shall have the rights, preferences,
privileges and restrictions set forth in the Amended and Restated Articles of
Incorporation of the Company, as amended, in the form attached hereto as Exhibit
B (the "Restated Articles").
1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof,
at the Closing (as hereinafter defined) (a) the Company hereby agrees to issue
and sell to each Purchaser, severally and not jointly, and each Purchaser agrees
to purchase from the Company, severally and not jointly, the number of Shares
set forth opposite such Purchaser's name on Exhibit A, and (b) each Shareholder
hereby agrees to sell to each Purchaser, severally and not jointly, and each
Purchaser agrees to Purchase from each Shareholder, severally and not jointly,
the number of Exchange Series D Shares set forth opposite such Purchaser's name
on Exhibit A, in each case at a purchase price of one dollar and twenty cents
($1.20) per share.
SECTION 2. CLOSING, DELIVERY AND PAYMENT.
2.1 CLOSING. The closing of the sale and purchase of the Shares
and the Exchange Series D Shares under this Agreement (the "Closing") shall take
place at 5:00 p.m. on the date hereof, at the offices of Cooley Godward LLP,
3000 Sand Hill Road, Building 3, Suite 230, Menlo Park, California 94025, or at
such other time or place as the Company and Purchasers may mutually agree (such
date is hereinafter referred to as the "Closing Date").
2.2 DELIVERY. At the Closing, subject to the terms and conditions
hereof, (a) the Company will deliver to the Purchasers certificates representing
the number of Shares to be purchased from the Company at the Closing by each
Purchaser, and (b) each Shareholder will deliver to the Purchasers certificates
representing the number of Exchange Series D Shares to be purchased from it at
the Closing by each Purchaser, against payment of the purchase price therefor by
check or wire transfer made payable to the order of the Company or a
Shareholder, as applicable, cancellation of indebtedness or any combination of
the foregoing.
2.3 CONTEMPLATED TRANSFERS. Notwithstanding anything herein or in
the Investor Rights Agreement (as defined below) to the contrary, Bedrock
Capital Side-By-Side, L.P. ("Bedrock Side Fund") shall be entitled, at any time
or times within one hundred eighty (180) days immediately following the Closing,
to transfer to no more than three (3) of its affiliates all, or any lesser
number as it deems appropriate, of the Shares and/or Exchange Series D Shares
purchased by it hereunder. From and after any such transfer, such transferee
shall be deemed a "Purchaser" for all purposes of this Agreement and an
"Investor" for all purposes of the Investor Rights Agreement and the Voting
Agreement (as each term is defined in Section 3.1 below).
2.
<PAGE> 7
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE LANGS.
Except as set forth on a Schedule of Exceptions delivered by the
Company and the Langs to the Purchasers at the Closing, the Company and the
Langs each hereby represent and warrant to each Purchaser as of the date of this
Agreement as follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of California. The Company has all requisite corporate power
and authority to own and operate its properties and assets, to execute and
deliver this Agreement, the Investor Rights Agreement in the form attached
hereto as Exhibit C (the "Investor Rights Agreement") and the Voting Agreement
in the form attached hereto as Exhibit D (the "Voting Agreement"; the Investor
Rights Agreement and the Voting Agreement, collectively, the "Related
Agreements" and the Agreement and the Related Agreements together, the
"Agreements"), to issue and sell the Shares and the Conversion Shares and to
carry out the provisions of the Agreements and the Restated Articles and to
carry on its business as presently conducted and as presently proposed to be
conducted. The Company is duly qualified and is authorized to do business and is
in good standing as a foreign corporation in all jurisdictions in which the
nature of its activities and of its properties (both owned and leased) makes
such qualification necessary, except for those jurisdictions in which failure to
do so would not have a material adverse effect on the Company or its business.
The Company owns no equity securities of any other corporation, limited
partnership or similar entity. The Company is not a participant in any joint
venture, partnership or similar arrangement.
3.2 CAPITALIZATION; VOTING RIGHTS. The authorized capital stock of
the Company, immediately prior to the Closing, consists of Fifteen Million
(15,000,000) shares of Common Stock, no par value share, (a) 1,025,674.76 shares
of which are issued and outstanding, (b) 1,047,848 shares of which are reserved
for future issuance to key employees pursuant to the Company's 1984 Stock Option
Plan, as amended, and the 1995 Stock Option Plan (collectively, the "Stock
Option Plans"), and (c) Eight Million (8,000,000) shares of Preferred Stock, no
par value, (i) 41,300 of which are designated Series A Preferred Stock, none of
which are issued and outstanding, (ii) 115,446 of which are designated as Series
B Preferred Stock, none of which are issued and outstanding, (iii) 450,481 of
which are designated as Series C Preferred Stock, none of which are issued and
outstanding, and (iv) 6,800,000 of which are designated Series D Preferred
Stock, 1,184,133 of which are issued and outstanding. All issued and outstanding
shares of the Company's Common Stock and Preferred Stock (A) have been duly
authorized and validly issued to the persons listed an Exhibit D hereto, (B) are
fully paid and nonassessable, and (C) were issued in compliance with all
applicable state, federal and foreign laws concerning the issuance of
securities. The rights, preferences, privileges and restrictions of the Shares
and the Exchange Series D Shares are as stated in the Restated Articles. Each
series of Preferred Stock is convertible into Common Stock on a one-for-one
basis. The Conversion Shares have been duly and validly reserved for issuance.
Other than as set forth on Exhibit E, there are no outstanding options,
warrants, rights (including conversion or preemptive rights and rights of first
refusal), proxy or shareholder agreements, or agreements of any kind for the
purchase or acquisition from the Company of any of its securities. When issued
in compliance with the provisions of this Agreement and the Restated Articles,
the Shares and the Conversion Shares will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances; provided, however,
that the Shares, the Exchange Series D Shares and the Conversion Shares may be
subject to restrictions on transfer under state and/or federal securities laws
as set forth herein or as otherwise required by such laws at the time a transfer
is proposed.
3.
<PAGE> 8
3.3 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on
the part of the Company, its officers, directors and shareholders necessary for
the authorization of the Exchange Agreement, the Agreement and each Related
Agreement, the performance of all obligations of the Company hereunder and
thereunder at the Closing and the authorization, sale, issuance and delivery of
the Shares pursuant hereto and the Conversion Shares pursuant to the Restated
Articles has been taken or will be taken prior to the Closing. The Exchange
Agreement is a valid and binding obligation of the Company, and each Agreement,
when executed and delivered, will be a valid and binding obligation of the
Company enforceable in accordance with its terms, except in each case (a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors' rights;
(b) general principles of equity that restrict the availability of equitable
remedies; and (c) to the extent that the enforceability of the indemnification
provisions in Sections 2.9 and 2.15 of the Investor Rights Agreement may be
limited by applicable laws. The sale of the Shares and the subsequent conversion
of the Shares and Exchange Series D Shares into Conversion Shares are not and
will not be subject to any preemptive rights or rights of first refusal that
have not been properly waived or complied with.
3.4 FINANCIAL STATEMENTS. Attached hereto as Exhibit F are copies
of the Company's (a) audited balance sheets as of December 31, 1996 and
September 30, 1997 and audited statement of income and cash flows for the nine
months ending September 30, 1997, and (b) its unaudited balance sheet as at
December 31, 1997 (the "Statement Date") (collectively, the "Financial
Statements"). The Financial Statements, together with the notes thereto, are
complete and correct in all material respects, have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods indicated, except as disclosed therein, and present
fairly the financial condition and position of the Company as of September 30,
1997 and the Statement Date; provided, however, that the unaudited financial
statements are subject to normal recurring year-end audit adjustments (which are
not expected to be material), and do not contain all footnotes required under
generally accepted accounting principles.
3.5 LIABILITIES. The Company has no material liabilities and, to
the best knowledge of the Company and the Langs, there are no material
contingent liabilities not disclosed in the Financial Statements, except current
liabilities incurred in the ordinary course of business subsequent to the
Statement Date which have not been, either in any individual case or in the
aggregate, materially adverse to the Company. The Company has not assumed, by
contract, agreement, operation or law or otherwise, any material obligations of
Landacorp UK Ltd.
3.6 AGREEMENTS; ACTION.
(a) Except for agreements explicitly contemplated hereby
and described on the Schedule of Exceptions, and agreements between the Company
and its employees with respect to the sale of the Company's Common Stock, there
are no agreements, understandings or proposed transactions between the Company
and any of its officers, directors, affiliates or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or, to the knowledge of the Company or the Langs, by
which the Company is bound which may involve (i) obligations (contingent or
otherwise) of, or payments to, the Company in excess of $15,000 (other than
obligations of, or payments to, the Company arising from purchase or sale
agreements entered into in the ordinary course of business), or (ii) the license
of any patent, copyright, trade secret or other proprietary right to or from the
Company (other than licenses arising from the purchase of "off the shelf" or
other standard products), or (iii)
4.
<PAGE> 9
provisions restricting or affecting the development, manufacture or distribution
of the Company's products or services, or (iv) indemnification by the Company
with respect to infringements of proprietary rights (other than indemnification
obligations arising from purchase or sale agreements entered into in the
ordinary course of business).
(c) The Company has not (i) declared or paid any
dividends, or authorized or made any distribution upon or with respect to any
class or series of its capital stock, (ii) incurred any indebtedness for money
borrowed or any other liabilities (other than with respect to dividend
obligations, distributions, indebtedness and other obligations incurred in the
ordinary course of business or as disclosed in the Financial Statements)
individually in excess of $15,000 or, in the case of indebtedness and/or
liabilities individually less than $15,000, or in excess of $25,000 in the
aggregate, (iii) made any loans or advances to any person, other than ordinary
advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of
any of its assets or rights, other than the sale of its inventory in the
ordinary course of business.
(d) For the purposes of subsections (b) and (c) above,
all indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same person or entity
(including persons or entities the Company has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the individual minimum
dollar amounts of such subsections.
(e) The Company has not engaged, in the past three (3)
months, in any discussion (i) with any representative of any corporation or
corporations regarding the consolidation or merger of the Company with or into
any such corporation or corporations, (ii) with any corporation, partnership,
association or other business entity or any individual regarding the sale,
conveyance or disposition of all or substantially all of the assets of the
Company, or a transaction or series of related transactions involving the
disposition of more than fifty percent (50%) of the voting power of the Company,
or (iii) regarding any other form of acquisition, liquidation, dissolution or
winding up of the Company.
3.7 OBLIGATIONS TO RELATED PARTIES. There are no obligations of
the Company to any officer, director, shareholder, or employee of the Company
other than (a) for payment of salary for services rendered, (b) reimbursement
for reasonable expenses incurred on behalf of the Company and (c) for other
standard employee benefits made generally available to all employees (including
stock option agreements outstanding under any stock option plan approved by the
Board of Directors of the Company). No officer, director or shareholder of the
Company, nor any member of any of their immediate families, is indebted to the
Company or has any direct or indirect ownership interest in any firm or
corporation with which the Company is affiliated or with which the Company has a
business relationship, or any firm or corporation which competes with the
Company, except that officers, directors and/or shareholders of the Company may
own stock in publicly traded companies which may compete with the Company. No
officer, director or shareholder, nor any member of any of their immediate
families, is, directly or indirectly, interested in any material contract with
the Company (other than such contracts as relate to any such person's ownership
of capital stock or other securities of the Company). Except as may be disclosed
in the Financial Statements, the Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
3.8 CHANGES. Since the Statement Date, there has not been, to the
knowledge of the Company or the Langs;
(a) Any change in the assets, liabilities, financial
condition or operations of the Company from that reflected in the Financial
Statements, other than changes in the ordinary course of
5.
<PAGE> 10
business, none of which individually or in the aggregate has had or is expected
to have a material adverse effect on such assets, liabilities, financial
condition or operations of the Company;
(b) Any resignation or termination of any key officer of
the Company; and the Company, to the best knowledge of the Company and the
Langs, does not know of the impending resignation or termination of employment
of any such officer;
(c) Any material change, except in the ordinary course of
business, in the contingent obligations of the Company by way of guaranty,
endorsement, indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether of not
covered by insurance, materially and adversely affecting the properties,
business or prospects or financial condition of the Company;
(e) Any waiver by the Company of a valuable right or of a
material debt owed to it;
(f) Any direct or indirect loans made by the Company to
any shareholder, employee, officer or director of the Company, other than
advances made in the ordinary course of business;
(g) Any material change in any compensation arrangement
or agreement with any employee, officer, director or shareholder;
(h) Any declaration or payment of any dividend or other
distribution of the assets of the Company;
(i) Any labor organization activity;
(j) Any debt, obligation or liability incurred, assumed
or guaranteed by the Company, except those for immaterial amounts and for
current liabilities incurred in the ordinary course of business;
(k) Any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets;
(1) Any change in any material agreement to which the
Company is a party or by which it is bound which materially and adversely
affects the business, assets, liabilities, financial condition, operations or
prospects of the Company, including compensation agreements with the Company's
employees;
(m) Any threatened discontinuance, or proposed material
amendment to the terms of, any agreement of the Company, with (i) any creditor
of the Company, to which the Company's annual obligations exceed $20,000, or
(ii) any customer of the Company under which payments to the Company on an
annual basis exceed $20,000; or
(n) Any other event or condition of any character that,
either individually or cumulatively, has materially and adversely affected the
business, assets, liabilities, financial condition, operations or prospects of
the Company.
3.9 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has
good and marketable title to its properties and assets, including the properties
and assets reflected in the most recent balance sheet
6.
<PAGE> 11
included in the Financial Statements, and good title to its leasehold estates,
in each case subject to no mortgage, pledge, lien, lease, encumbrance or
charge, other than (a) those resulting from taxes which have not yet become
delinquent, (b) minor liens and encumbrances which do not materially detract
from the value of the property subject thereto or materially impair the
operations of the Company, and (c) those that have otherwise arisen in the
ordinary course of business. All facilities, machinery, equipment, fixtures,
vehicles and other properties owned, leased or used by the Company are in good
operating condition and repair and are reasonably fit and usable for the
purposes for which they are being used. The Company is in compliance with all
material terms of each lease to which it is a party or is otherwise bound.
3.10 PATENTS AND TRADEMARKS.
(a) The Company owns or possesses sufficient legal rights
to all patents, trademarks, service marks, trade names, copyrights, trade
secrets, information and other proprietary rights and processes necessary for
its business as now conducted and as proposed to be conducted, without any
infringement of the rights of others.
(b) There is no outstanding, nor has the Company ever
entered into, any option, license or agreement of any kind relating to any
patents, trademarks, service marks, trade names, copyrights, trade secrets,
information or other proprietary rights or processes that grant any form of an
exclusive right or license to any third party.
(c) No trade secret, confidential, proprietary or other
non-public information relating to, contained in, or used by or in connection
with, the computer software program commonly referred to as, and marketed by the
Company under the name of, Maxsys II ("Maxsys II") is contained in or may be
derived from Prizm (as hereinafter defined).
(d) No part of the Source Code (as hereinafter defined)
of Prizm has been released or made available to any third party except the
following hospitals located in the United Kingdom: St. Thomas' and Guys
Hospital, Hastings Hospital, Brighton Hospital, Worthings and Southlands
Hospital and Bromley Hospital (collectively, the "Hospitals"). For purposes of
this Agreement, "Source Code" shall mean any computer software program which is
not in machine readable format, and is not suitable for machine execution
without the intervening steps of interpretation or compilation, but including
any accompanying documentation, manuals or supporting materials. For purposes of
this Agreement, "Prizm" shall mean the computer software program commonly
referred to as Prizm and developed by the Company pursuant to the Development
Agreement of August 11, 1989 between the South East Thames Regional Health
Authority and Landa Management Systems Corporation.
(e) The Company has granted to the Hospitals a
non-exclusive, non-transferable license (without the right to grant sublicenses)
to use the Source Code of Prizm solely for maintenance of Prizm and for no other
reason (the "License"). The License provides that the Source Code of Prizm must
be treated as the confidential information of the Company, may not be disclosed
to third parties, and may not be used in a manner inconsistent with the License.
To the best knowledge of the Company and the Langs, the Hospitals are not now,
and have not at any time been, in breach of the License.
(f) Neither the Company nor the Langs have received any
communication alleging that the Company has violated or, by conducting its
business as proposed, would violate any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other proprietary rights of
any other person or entity.
7.
<PAGE> 12
(g) The Company has taken all reasonable measures and
precautions necessary to protect and maintain the confidentiality and secrecy of
the Company's patents, trademarks, service marks, trade names, copyrights, trade
secrets, information and other proprietary rights and processes and otherwise to
maintain and protect the value thereof and has obtained from all current and
former employees and from all current and former consultants and independent
contractors signed agreements appropriately assigning to the Company, and
restricting the use and disclosure of, such patents, trademarks, service marks,
trade names, copyrights, trade secrets, information and other proprietary rights
and processes.
(h) No employee of the Company is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with his or her duty to the Company
or that would conflict with the Company's business as proposed to be conducted.
(i) Neither the execution nor delivery of this Agreement,
nor the carrying on of the Company's business by the employees of the Company,
not the conduct of the Company's business as proposed, will conflict with or
result in a breach of the terms, conditions or provisions of, or constitute a
default under, any contract, covenant or instrument under which any Company
employee is now obligated.
(j) It will not be necessary to utilize any inventions,
trade secrets or proprietary information of any of the Company's employees made
prior to their employment by the Company, except for inventions, trade secrets
or proprietary information that have been assigned to the Company.
3.11 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default of any term of its Restated Articles or Bylaws, or of any
provision of any mortgage, indenture, contract, agreement, instrument or
contract to which it is party or by which it is bound or of any judgment,
decree, order, writ or, to the knowledge of the Company or the Langs, any
statute, rule or regulation applicable to the Company which would materially and
adversely affect the business, assets, liabilities, financial condition,
operations or prospects of the Company. The execution, delivery, and performance
of and compliance with this Agreement and each Related Agreement, and the
issuance and sale of the Shares pursuant hereto and of the Conversion Shares
pursuant to the Restated Articles, will not, with or without the passage of time
or giving of notice, result in any such material violation, or be in conflict
with or constitute a default under any such term, or result in the creation of
any mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company or the suspension, revocation, impairment, forfeiture or
nonrenewal of any permit license, authorization or approval applicable to the
Company, its business or operations or any of its assets or properties.
3.12 LITIGATION. There is no action, suit, proceeding or
investigation pending, or to the knowledge of the Company or the Langs currently
threatened, against the Company that questions the validity of this Agreement,
or any related Agreement or the right of the Company to enter into any of such
agreements, or to consummate the transactions contemplated hereby or thereby, or
which might result, either individually or in the aggregate, in any material
adverse change in the assets, condition, affairs or prospects of the Company,
financially or otherwise, or any change in the current equity ownership of the
Company, nor are the Company or the Langs aware that there is any basis for the
foregoing. The foregoing includes, without limitation, actions pending or
threatened (or any basis therefor known to the Company or the Langs) involving
the prior employment of any of the Company's employees, their use in connection
with the Company's business of any information or techniques allegedly
proprietary to any of their former employers, or their obligations under any
agreements with prior employers. The Company is neither a party nor subject to
the provisions of any order, writ, injunction, judgment or decree of any court
or
8.
<PAGE> 13
government agency or instrumentality. There is no action, suit, proceeding or
investigation by the Company currently pending or which the Company intends to
initiate.
3.13 TAX RETURNS AND PAYMENTS. The Company has timely filed all tax
returns (foreign, federal, state and local) required to be filed by it. All
taxes shown to be due and payable on such returns, any assessments imposed, and
to the knowledge of the Company and the Langs, all other taxes due and payable
by the Company on or before the Closing have been paid or will be paid prior to
the time they become delinquent. Neither the Company nor the Langs have been
advised (a) that any of the Company's returns, foreign, federal, state or other,
have been or are being audited as of the date hereof, or (b) of any deficiency
in assessment or proposed judgment to the Company's foreign, federal, state or
other taxes. Neither the Company nor the Langs has knowledge of any liability
for any tax to be imposed upon the Company's properties or assets as of the date
of this Agreement for which the Company has not adequately provided.
3.14 EMPLOYEES. The Company has no collective bargaining agreement
with any of its employees. There is no labor union organizing activity pending
or, to the knowledge of the Company or the Langs, threatened with respect to the
Company. No employee has any agreement or contract, written or verbal, regarding
his employment. The Company is not a party to or bound by any currently
effective employment contract, deferred compensation arrangement, bonus plan,
incentive plan, profit sharing plan, retirement agreement or other employee
compensation plan or agreement. To the knowledge of the Company and the Langs,
no employee of the Company, nor any consultant with whom the Company has
contracted, is in violation of any term of any employment contract, proprietary
information agreement or any other agreement relating to the right of any such
individual to be employed by, or to contract with, the Company because of the
nature of the business to be conducted by the Company, and to the knowledge of
the Company and the Langs, the continued employment by the Company of its
present employees, and the performance of the Company's contracts with its
independent contractors, will not result in any such violation. Neither the
Company nor the Langs has received any notice alleging that any such violation
has occurred. No employee of the Company has been granted the right to continued
employment by the Company or to any material compensation following termination
of employment with the Company. Neither the Company nor the Langs is aware that
any officer or key employee, or that any group of key employees, intends to
terminate his, her or their employment with the Company, nor does the Company
have a present intention to terminate the employment of any officer, key
employee or group of key employees.
3.15 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. Each
current employee, officer and consultant of the Company has executed a
Proprietary Information and Inventions Agreement in the form of Exhibit G
attached hereto, and each former employee, officer and consultant of the Company
has executed a "proprietary information and inventions agreement" in a form
satisfactory to the Purchasers. No current employee, officer or consultant of
the Company has excluded works or inventions made prior to his or her
employment with the Company from his or her assignment of inventions pursuant to
such employee, officer or consultant's Proprietary Information and Inventions
Agreement.
3.16 OBLIGATIONS OF MANAGEMENT; STIPULATED ACTIVITIES. Each
officer of the Company is currently devoting one hundred percent (100%) of his
or her business time to the conduct of the business of the Company. Neither the
Company nor the Langs is aware that any officer or key employee of the Company
plans to work less than full time at the Company in the future. Exhibit H hereto
sets forth a complete and accurate list of all "Stipulated Activities" of each
senior officer of the Company (each a "Principal"). The term "Stipulated
Activity" shall mean any of the following as to each Principal: (a) being
9.
<PAGE> 14
the beneficial owner of (i) more than 5% of the outstanding equity securities of
any entity other than the Company or (ii) securities (including debt securities
and guarantees of indebtedness, but excluding securities traded on a national
securities exchange or in the over-the-counter market and securities issued by
money market or similar funds) of any entity other than the Company with an
original cost, fair market value and/or obligation on the part of such
Principal, contingent or otherwise (even if the obligation is evidenced by
non-recourse debt or guaranty), in excess of $100,000; or (b) being an employee,
officer, director or general partners of, or consultant to, any person or entity
other than that Company. For purposes of determining Stipulated Activities, any
actions taken by the spouse, children or entities controlled by each Principal
will be imputed to be activities conducted by such Principal.
3.17 REGISTRATION RIGHTS. Except as required pursuant to the
Investor Rights Agreement, the Company is presently not under any obligation,
and has not granted any rights, to register (as defined in Section 1.1 of the
Investor Rights Agreement) any of the Company's presently outstanding securities
or any of its securities that may hereinafter be issued.
3.18 COMPLIANCE WITH LAWS; PERMITS. To the knowledge of the Company
and the Langs, the Company is not in violation of any applicable statute, rule,
regulation, order or restriction of any domestic or foreign government or any
instrumentality or agency thereof in respect of the conduct of its business or
the ownership of its properties, which violation would materially and adversely
affect the business, assets, liabilities, financial condition, operations or
prospects of the Company. No governmental order, permission, consent, approval
or authorization is required to be obtained and no registration or declaration
is required to be filed in connection with the execution and delivery of this
Agreement and the issuance of the Shares or the Conversion Shares, except such
as has been duly and validly obtained or filed, or with respect to any filing
that must be made after the Closing, as will be filed in a timely manner. The
Company has all franchises, permits, licenses and any similar authority
necessary for the conduct of its business as now being conducted by it, the lack
of which could materially and adversely affect the business, properties,
prospects or financial condition of the Company and the Company and the Langs
believe the Company can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted.
3.19 ENVIRONMENTAL AND SAFETY LAWS. To the knowledge of the Company
and the Langs, the Company is not in violation of any applicable statute, law or
regulation relating to the environment or occupational health and safety, and to
their knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law or regulation.
3.20 OFFERING VALID. Assuming the accuracy of the representations
and warranties of the Purchasers contained in Section 5.2 hereof, the offer,
sale and issuance of the Shares and the Conversion Shares will be exempt from
the registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws. Neither the
Company nor any agent on its behalf has solicited or will solicit any offers to
sell or has offered to sell or will offer to sell all or any part of the Shares
to any person or persons so as to bring the sale of such Shares by the Company
within the registration provisions of the Securities Act or any state securities
laws.
3.21 FULL DISCLOSURE. This Agreement, the Exhibits hereto, the
Investor Rights Agreement and all other documents delivered by the Company to
Purchasers or their attorneys or agents in connection herewith of therewith or
with the transactions contemplated hereby or thereby, do not contain any untrue
10.
<PAGE> 15
statement of a material fact nor, to the knowledge of the Company or the Langs,
omit to state a material fact, necessary in order to make the statements
contained herein or therein not misleading. To the knowledge of the Company and
the Langs, there are no facts which (individually or in the aggregate)
materially adversely affect the business, assets, liabilities, financial
condition, prospects or operations of the Company that have not been set forth
in the Agreement, the Exhibits hereto, any Related Agreement or in other
documents delivered to Purchasers or their attorneys or agents in connection
herewith.
3.22 MINUTE BOOKS. The minute books of the Company provided to the
Purchasers contain a complete summary of all meetings of directors and
shareholders since the time of its incorporation.
3.23 SECTION 83(b) ELECTIONS. To the knowledge of the Company and
the Langs, all elections and notices permitted by Section 83(b) of the Code and
any analogous provisions of applicable state tax laws have been timely filed by
all employees who have purchased shares of the Company's common stock under
agreements that provide for the vesting of such shares.
3.24 INSURANCE. The Company has fire and casualty insurance
policies with coverage customary for companies similarly situated to the
Company.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.
4.1 AUTHORIZATION. This Agreement constitutes the valid and
binding obligation of each Shareholder, enforceable in accordance with its
terms.
4.2 TITLE TO SERIES D EXCHANGE SHARES. Each Shareholder represents
that it has good, valid and absolute title to, and beneficial ownership of the
Exchange Series D Shares being sold by it hereunder, and neither such shares nor
the rights of such Shareholder to such shares have been assigned, transferred,
hypothecated, pledged or otherwise disposed of, in whole or in part. The
Exchange Series D Shares, when sold and delivered by each Shareholder to the
Purchasers as contemplated by this Agreement, will transfer to the Purchasers
good, valid and absolute title to, and beneficial ownership of, the Exchange
Series D Shares, free and clear of all liens and encumbrances. The Exchange
Series D Shares being sold and delivered by each Shareholder to the Purchasers
pursuant to this Agreement constitute all of the equity securities of the
Company held by each such Shareholder (including, without limitation, options,
warrants, and other securities convertible or exercisable into equity securities
of the Company).
4.3 SHAREHOLDER INVESTMENT DECISION. Each Shareholder has entered
into this Agreement based on his, her or its own investigation and analysis and
that of advisors retained by such Shareholder. Each Shareholder understands that
the Company's plans for the future, if successful, may result in an increase in
the value of the Exchange Series D Shares being sold by it hereunder, and that
the future value of the Exchange Series D Shares could exceed the amounts
payable to each Shareholder hereunder. Neither any Purchaser nor any Releasee
(as defined below) has made any representation to the Shareholder about the
advisability of the decision to sell his, her or its Exchange Series D Shares.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser hereby represents and warrants to the Company and the
Shareholders as follows (such representations and warranties do not lessen or
obviate the representations and warranties of the Company and the Shareholders
set forth in this Agreement):
11.
<PAGE> 16
5.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver this Agreement and each Related Agreement and to carry out their
provisions. All action on Purchaser's part required for the lawful execution and
delivery of this Agreement and each Related Agreement have been or will be
effectively taken prior to the Closing. Upon their execution and delivery, this
Agreement and the Related Agreement will be valid and binding obligations of
Purchaser, enforceable in accordance with their terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights, (b) general
principles of equity that restrict the availability of equitable remedies, and
(c) to the extent that the enforceability of the indemnification provisions of
Sections 2.9 and 2.15 of the Investor Rights Agreement may be limited by
applicable laws.
5.2 INVESTMENT REPRESENTATIONS. Purchaser understands that
neither the Shares, the Exchange Series D Shares nor the Conversion Shares have
been registered under the Securities Act. Purchaser also understands that the
Shares are being offered and sold pursuant to an exemption from registration
contained in the Securities Act based in part upon Purchaser's representations
contained in the Agreement. Purchaser hereby represents and warrants as follows:
(a) PURCHASER BEARS ECONOMIC RISK. Purchaser has
substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company so that it is
capable of evaluating the merits and risks of its investment in the Company and
has the capacity to protect its own interests. Purchaser must bear the economic
risk of this investment indefinitely unless the Shares and the Exchange Series
D Shares (or the Conversion Shares) are registered pursuant to the Securities
Act, or an exemption from registration is available. Purchaser understands that
the Company has no present intention of registering the Shares, the Exchange
Series D Shares, the Conversion Shares or any shares of its Common Stock.
Purchaser also understands that there is no assurance that any exemption from
registration under the Securities Act will be available and that, even if
available, such exemption may not allow Purchaser to transfer all or any
portion of the Shares, the Exchange Series D Shares or the Conversion Shares
under the circumstances, in the amounts or at the times Purchaser might propose.
(b) ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring
the Shares, the Exchange Series D Shares and the Conversion Shares for
Purchaser's own account for investment only, and not with a view towards their
distribution.
(c) PURCHASER CAN PROTECT ITS INTEREST. Purchaser
represents that by reason of its, or of its management's business or financial
experience, Purchaser has the capacity to protect its own interests in
connection with the transactions contemplated in this Agreement and the
Investor Rights Agreement. Further, Purchaser is aware of no publication of any
advertisement in connection with the transactions contemplated in the Agreement.
(d) ACCREDITED INVESTOR. Purchaser represents that it is
an accredited investor within the meaning of Regulation D under the Securities
Act.
(e) COMPANY INFORMATION. Purchaser has received and read
the Financial Statements and has had an opportunity to discuss the Company's
business, management and financial affairs with directors, officers and
management of the Company and has had the opportunity to review the Company's
operations and facilities. Purchaser has also had the opportunity to ask
questions of and
12.
<PAGE> 17
receive answers from, the Company and its management regarding the terms and
conditions of this investment.
(f) RULE 144. Purchaser acknowledges and agrees that the
Shares and the Exchange Series D Shares, and, if issued, the Conversion Shares
must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Purchaser
has been advised or is aware of the provisions of Rule 144 promulgated under
the Securities Act as in effect from time to time, which permits limited resale
of shares purchased in a private placement subject to the satisfaction of
certain conditions, including, among other things: the availability of certain
current public information about the Company, the resale occurring following
the required holding period under Rule 144 and the number of shares being sold
during any three-month period not exceeding specified limitations.
(g) RESIDENCE. If the Purchaser is an individual, then the
Purchaser resides in the state or province identified in the address of the
Purchaser set forth on Exhibit A-1; if the Purchaser is a partnership,
corporation, limited liability company or other entity, then the office or
offices of the Purchaser in which its investment decision was made is located
at the address or addresses of the Purchaser set forth on Exhibit A-1.
5.3 TRANSFER RESTRICTIONS. Each Purchaser acknowledges and agrees
that the Shares and the Exchange Series D Shares, if issued, the Conversion
Shares are subject to restrictions on transfer as set forth in the Investor
Rights Agreement.
SECTION 6. CONDITIONS TO CLOSING.
6.1 CONDITION TO PURCHASERS' OBLIGATIONS AT THE CLOSING.
Purchasers' obligations to purchase the Shares and the Exchange Series D Shares
at the Closing are subject to the satisfaction or waiver, at or prior to the
Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company and the
Langs in Section 3 hereof, and the representations and warranties made by each
Shareholder in Section 4 hereof, shall be true and correct in all material
respects as of the Closing Date with the same force and effect as if they had
been made as of the Closing Date, and the Company and each of the Shareholders
shall have performed all obligations and conditions herein required to be
performed or observed by each of them on or prior to the Closing.
(b) LEGAL INVESTMENT. On the Closing Date, the sale and
issuance of the Shares and the Exchange Series D Shares and the proposed
issuance of the Conversion Shares shall be legally permitted by all laws and
regulations to which Purchasers, the Company and the Shareholders are subject.
(c) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits, and waivers necessary or appropriate
for consummation of the transactions contemplated by the Agreement and the
Related Agreements (except for such as may be properly obtained subsequent to
the Closing).
(d) FILING OF RESTATED ARTICLES. The Restated Articles
shall have been filed with the Secretary of the State of California.
13.
<PAGE> 18
(e) CORPORATE DOCUMENTS. The Company shall have delivered
to Purchasers or their counsel, copies of all corporate documents of the
Company as Purchasers shall reasonably request.
(f) RESERVATION OF CONVERSION SHARES. The Conversion
Shares issuable upon conversion of the Shares and the Exchange Series D Shares
shall have been duly authorized and reserved for issuance upon such conversion.
(g) COMPLIANCE CERTIFICATE. The Company shall have
delivered to Purchasers a Compliance Certificate, executed by the President of
the Company, dated the date of the Closing, to the effect that the conditions
specified in subsections (a), (c), (d) and (f) of this Section 6.1 have been
satisfied.
(h) INVESTOR RIGHTS AGREEMENT. An Investor Rights
Agreement substantially in the form attached hereto as Exhibit C shall have
been executed and delivered by the parties thereto.
(i) VOTING AGREEMENT. A Voting Agreement substantially in
the form attached hereto as Exhibit D shall have been executed and delivered by
the Company, each Purchaser and holders of no less than sixty percent (60%) of
all Common Stock outstanding as of the Closing.
(j) BOARD OF DIRECTORS. Upon the Closing, the authorized
size of the Board of Directors of the Company shall be five (5) members and the
Board shall consist of Jason Rosenbluth, Howard Cox, Tom Stephenson, Bryan
Lang and Gene Cattarina.
(k) LEGAL OPINION. The Purchasers shall have received from
legal counsel to the Company and opinion addressed to them, dated as of the
Closing Date, in substantially the form attached hereto as Exhibit I.
(l) EXCHANGES. The Exchange Agreement shall have been
entered into by the Company and the Shareholders and all transactions
contemplated thereby shall have been consummated.
(m) LOAN REPAYMENT. The Company and each of the Langs
shall have entered into an agreement in form and substance satisfactory to
the Purchasers pursuant to which, in exchange for payment by the Company of
$1,692,600.00 (the "Loan Redemption Agreement") and issuance to the Langs of
warrants to purchase 100,000 shares of the Company's Common Stock in
substantially the form attached hereto as Exhibit J (the "Warrant"), all
obligations of the Company under all demand and other debt instruments dated
prior to February 27, 1998 shall be satisfied, and the Company and the Langs
shall be prepared to effect such transactions simultaneous with the
transactions contemplated hereby.
(n) WESTMINSTER WARRANT. The Company shall have delivered
to Westminster the Westminster Warrant in substantially the form attached
hereto as Exhibit J.
(o) CAPITALIZATION CERTIFICATE. The Company shall have
delivered to the Purchasers a Capitalization Certificate, executed by the
President and the Chief Operating Officer of the Company, dated the date of
Closing, certifying as to the number, form and ownership of all outstanding
equity securities of the Company (including, without limitation, options,
warrants and other securities convertible or exercisable into equity
securities).
(p) TAX PAYMENTS. The Company shall have provided evidence
satisfactory to each of the Purchasers of the amounts of all tax obligations
(foreign, federal, state and local) of the Company,
14.
<PAGE> 19
together with evidence satisfactory to the Purchasers that all such tax
obligations shall be satisfied immediately following the Closing.
(q) BYLAWS. The Company shall have adopted Amended and
Restated Bylaws in the form attached hereto as Exhibit L.
(r) PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. Each
employee, and each consultant of the Company requested by the Purchasers to do
so, shall have entered into a Proprietary Information and Inventions Agreement.
(s) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby and all documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to the Purchasers and their
special counsel, and the Purchasers and their special counsel shall have
received all such counterpart originals or certified or other copies of such
documents as they may reasonably request.
6.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to issue and sell the Shares and the obligations of each Shareholder
to sell the Exchange Series D Shares held by it, at the Closing is subject to
the satisfaction or waiver, on or prior to the Closing, of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties made by the Purchasers acquiring Shares in
Section 4 hereof shall be true and correct in all material respects at the date
of the Closing, with the same force and effect as if they had been made on and
as of such date.
(b) PERFORMANCE OF OBLIGATIONS. The Purchasers shall have
performed and complied with all agreements and conditions herein required to be
performed or complied with by the Purchasers on or before the Closing.
(c) FILING OF RESTATED ARTICLES. The Restated Articles
shall have been filed with the Secretary of State of the State of California.
(d) INVESTOR RIGHTS AGREEMENT. An Investor Rights
Agreement substantially in the form attached hereto as Exhibit C shall have
been executed and delivered by the Purchasers.
(e) VOTING AGREEMENT. A Voting Agreement substantially in
the form attached hereto as Exhibit D shall have been executed and delivered by
the Company, each Purchaser and holders of no less than sixty percent (60%) of
all Common Stock outstanding as of the Closing.
(f) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement and the Investor
Rights Agreement (except for such as may be properly obtained subsequent to the
Closing).
15.
<PAGE> 20
SECTION 7. SHAREHOLDER RELEASES; SURVIVAL; INDEMNIFICATION.
7.1 SHAREHOLDER RELEASE.
(a) Each Shareholder hereby discharges and releases each
Purchaser and each of its officers, directors, employees, agents, attorneys,
parents, subsidiaries and affiliates, and their respective partners, former
partners, members and former members (collectively, the "Releasees") from all
rights, claims, obligations, debts liabilities and relationships of whatever
kind or nature, known or unknown, past, present, or future, whether contractual
or fiduciary, arising out of such Shareholders' investment in, and ownership
and sale to the Purchasers of the Exchange Series D Shares sold by it hereunder.
(b) Each Shareholder has considered the possibility that
he, she or it may not now fully know the nature or value of the claims which
are released pursuant to subsection (a) above. Nevertheless, each Shareholder
intends to assume the risk of releasing such unknown claims. TO THAT END, EACH
SHAREHOLDER EXPRESSLY WAIVES ITS RIGHTS UNDER SECTION 1542 OF THE CALIFORNIA
CIVIL CODE, WHICH PROVIDES:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
7.2 SURVIVAL; REMEDIES.
(a) The parties hereto agree that the representations,
warranties, obligations and covenants contained in this Agreement shall survive
the Closing Date for a period of five (5) years thereafter; provided, however,
that in the event a claim for indemnification is made or a notice of claim is
given prior to the expiration date, the indemnification obligation shall
continue until the applicable claim has been finally resolved.
(b) In addition to any other remedy to which any Purchaser
shall be entitled, whether at law or in equity, and notwithstanding any
applicable statute of limitations, each Purchaser shall have the right to
rescind the purchase of Series D Shares and/or Exchange Series D Shares from
the Company and/or any Shareholder, at a price per share of $1.20, in the event
of any material breach by the Company and/or such Shareholder of any
representation and warranty made by it hereunder.
7.3 INDEMNIFICATION OF PURCHASER. Subject to the provisions of
this Section 7, the Shareholders and the Company hereby agree that each
Purchaser shall be held harmless from, protected against and reimbursed for any
and all Loss (as defined below), resulting from the inaccuracy or breach of any
representation, warranty, obligation or covenant made or given by it in or
pursuant to this Agreement; provided, however, that for purposes of this
Section 7.3, the final sentence of Section 3.10(e) shall be interpreted without
regard to the initial clause thereof. Each Shareholder and the Company shall be
obligated to satisfy such party's pro rata portion of the indemnification
obligation to the Purchasers determined by dividing the indemnification
obligation by the total number of Exchange Series D Shares and Series D Shares
and multiplying the result by the number of Exchange Series D Shares and Series
D Shares owned by it. Except as set forth in the immediately succeeding
sentence, in no event shall a Shareholder be obligated hereunder for an amount
exceeding the amount paid to it hereunder for its Exchange Series D Shares. The
aggregate amount the Langs shall be obligated to pay hereunder shall not
16.
<PAGE> 21
exceed $1,750,000, representing the aggregate amount paid to it in
consideration of the Exchange Series D Shares sold by it hereunder and under
the Loan Redemption Agreement. As used in this Agreement, the term "Loss" means
any cost, damage, disbursement, expense, liability, loss, deficiency,
diminution in value, penalty, fine, assessment or settlement of any kind or
nature, whether foreseeable or unforeseeable, including but not limited to,
interest or other carrying costs, penalties, legal, accounting or other
professional fees or expenses incurred in the investigation, collection,
prosecution or defense of claims, inquiries, hearings or other legal or
administrative proceedings and amounts paid in settlement, that may be imposed
on or otherwise incurred or suffered by any Purchaser. The parties agree that,
notwithstanding anything herein contrary, with respect to any claim or
indemnification for any Loss brought by any Purchaser against any Shareholder,
such Shareholder shall have no right of contribution against the Company.
7.4 INDEMNIFICATION BY PURCHASERS. Each Purchaser shall indemnify
and hold harmless the Company and its Shareholders from and against any Loss
resulting from the inaccuracy or breach of any representation, warranty,
obligation or covenant made or given by it in or pursuant to this Agreement.
7.5 NOTICE OF CLAIM. An indemnified party shall give an
indemnifying party prompt written notice of any threatened, potential or actual
claim or the commencement of any action by a third party in respect of which
indemnification may be sought hereunder. For purposes hereof, any notice to be
given by a Purchaser hereunder shall be given to each of the Shareholders and
the Company. The indemnifying party shall have the right to participate in or
control any such action at its own expense and the indemnified party shall have
the right (but not the duty) to participate in the defense thereof, which shall
be at the indemnifying party's expense, unless it is finally determined that
the indemnified party was not entitled to indemnification. Whether or not an
indemnifying party chooses to control the defense of any indemnified party's
action, each party hereto and their respective successors and assigns will
cooperate in the defense and shall take all actions in connection with such
defense as may be reasonably requested.
SECTION 8. MISCELLANEOUS.
8.1 GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of California as such laws are applied to
agreements between California residents entered into and performed entirely in
California.
8.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
8.3 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto, the Investor Rights Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and no party shall be
liable or bound to any other in any manner by any representations, warranties,
covenants and agreements except as specifically set forth herein and therein.
8.4 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
17.
<PAGE> 22
8.5 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and holders of at least a majority of the Shares
and Exchange Series D Shares (treated as if converted and including any
Conversion Shares into which the Shares and/or Exchange Series D Shares have
been converted that have not been sold to the public) and each Shareholder
adversely affected by any such proposed amendment.
(b) The obligations of the Company, each Shareholder and
the rights of the holders of the Shares, the Exchange Series D Shares and the
Conversion Shares under the Agreement may be waived only with the written
consent of the holders of at least a majority of the Shares and/or Exchange
Series D Shares (treated as if converted and including any Conversion Shares
into which the Shares have been converted that have not been sold to the public)
and each Shareholder adversely affected by any such proposed amendment.
8.6 DELAYS OR OMISSIONS. It is agreed that no delay or omission
to exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement, the Investor
Rights Agreement or the Restated Articles, shall impair any such right, power or
remedy, nor shall it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of or in any similar breach,
default or noncompliance thereafter occurring. It is further agreed that any
waiver, permit, consent or approval of any kind or character on any Purchaser's
part of any breach, default or noncompliance under this Agreement, the Investor
Rights Agreement or under the Restated Articles or any waiver on such party's
part of any provisions or conditions of the Agreement, the Investor Rights
Agreement, or the Restated Articles must be in writing and shall be effective
only to the extent specifically set forth in such writing. All remedies, either
under this Agreement, the Related Agreements, the Restated Articles, by law, or
otherwise afforded to any party, shall be cumulative and not alternative.
8.7 NOTICES. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (a) upon personal delivery to
the party to be notified; (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day; (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the
Company at the address as set forth on the signature page hereof, to Purchaser
at the address set forth on Exhibit A-1 attached hereto and to the Shareholder
at the address set forth on Exhibit A-2 attached hereto or at such other address
as the Company, a Purchaser or a Shareholder may designate by ten (10) days
advance written notice to the other parties hereto.
8.8 EXPENSES. The Company shall pay all costs and expenses that
it incurs with respect to the negotiation, execution, delivery and performance
of the Agreement. The Company shall, at the Closing, reimburse the reasonable
fees and expenses of the Purchasers, including the fees and expenses of Cooley
Godward LLP, special counsel for the Purchasers incurred in connection with the
negotiation, execution, delivery and performance of this Agreement; provided,
however, that the Company's obligations hereunder shall not exceed $50,000
without the Company's prior written consent.
8.9 ATTORNEYS' FEES. In the event that any dispute among the
parties to this Agreement should result in litigation, the prevailing party in
such dispute shall be entitled to recover from the losing party all
18.
<PAGE> 23
fees, costs and expenses of enforcing any right of such prevailing party under
or with respect to this Agreement, including without limitation, such
reasonable fees and expenses of attorneys and accountants, which shall include,
without limitation, all fees, costs and expenses of appeals.
8.10 TITLES AND SUBTITLES. The titles of the sections and subsections
of the Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
8.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
8.12 BROKER'S FEES. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 8.12 being untrue.
8.13 EXCULPATION AMONG PURCHASERS. Each Purchaser acknowledges that it
is not relying upon any person, firm, or corporation, other than the Company and
its officers and directors, in making its investment or decision to invest in
the Company. Each Purchaser agrees that no Purchaser, nor any respective
controlling person, officer, director, partner, agent, or employee of any
Purchaser, shall be liable for any action heretofore or hereafter taken or
omitted to be taken by any of them in connection with the Shares, the Series D
Exchange Shares and Conversion Shares.
8.14 PRONOUNS. All pronouns contained herein, and any variations
thereof, shall be deemed to refer to the masculine, feminine or neutral,
singular or plural, as to the identity of the parties hereto may require.
8.15 BROKER'S FEES. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 8.15 being untrue.
8.16 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION OR IN THE ABSENCE OF AN EXEMPTION FROM SUCH
QUALIFICATION IS UNLAWFUL. PRIOR TO ACCEPTANCE OF SUCH CONSIDERATION BY THE
COMPANY, THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION FROM SUCH QUALIFICATION
BEING AVAILABLE.
19.
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have executed the SERIES D PREFERRED
STOCK PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: PURCHASERS:
LANDA MANAGEMENT SYSTEMS CORPORATION BEDROCK CAPITAL PARTNERS I, L.P.
By: /s/ [ILLEGIBLE] By:
-------------------------------- -------------------------------
Title: [ILLEGIBLE] Title:
----------------------------- ----------------------------
SHAREHOLDERS: BEDROCK CAPITAL SIDE-BY-SIDE, L.P.
By:
-------------------------------
-----------------------------------
BRACK DAVIS Title:
----------------------------
-----------------------------------
HUGH CURNUTT GREYLOCK IX LIMITED PARTNERSHIP
By: GREYLOCK IX GP LIMITED PARTNERSHIP
ITS GENERAL PARTNER
WESTMINSTER HEALTH CARE LIMITED By:
-------------------------------
By:
-------------------------------- SEQUOIA CAPITAL VII,
Its: A CALIFORNIA LIMITED PARTNERSHIP
------------------------------- BY: SC VII-A MANAGEMENT, LLC A
CALIFORNIA LIMITED LIABILITY
/s/ GILBERT H. LANG COMPANY,
----------------------------------- ITS GENERAL PARTNER
GILBERT H. LANG
By:
-------------------------------
Managing Member
-----------------------------------
BEULAH T. LANG
SEQUOIA TECHNOLOGY PARTNERS VII
A CALIFORNIA LIMITED PARTNERSHIP
By: SC VII-A MANAGEMENT, LLC A
CALIFORNIA LIMITED LIABILITY
----------------------------------- COMPANY,
GILBERT H. and BEULAH T. LANG ITS GENERAL PARTNER
By:
-------------------------------
Managing Member
-----------------------------------
BEULAH J.T. LANG
SIGNATURE PAGE TO SERIES D PREFERRED STOCK PURCHASE AGREEMENT
<PAGE> 25
SQP 1997
By: SC VII-A Management, LLC A California
Limited Liability Company,
Its General Partner
By:
---------------------------------------
Managing Member
SEQUOIA 1997 LLC
By: SC VII-A Management, LLC A California
Limited Liability Company,
Its General Partner
By:
---------------------------------------
Managing Member
SEQUOIA INTERNATIONAL PARTNERS
By: SC VII-A Management, LLC A California
Limited Liability Company,
Its General Partner
By:
---------------------------------------
Managing Member
------------------------------------------
GENE CATTARINA
------------------------------------------
JOHN KARLEN
SIGNATURE PAGE TO SERIES D PREFERRED STOCK PURCHASE AGREEMENT
<PAGE> 1
EXHIBIT 10.5
LANDA MANAGEMENT SYSTEMS CORPORATION
INVESTOR RIGHTS AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. GENERAL..........................................................1
1.1 Definitions.................................................1
2. REGISTRATION; RESTRICTIONS ON TRANSFER...........................2
2.1 Restrictions on Transfer....................................2
2.2 Demand Registration.........................................3
2.3 Piggyback Registrations.....................................4
2.4 Form S-3 Registration.......................................5
2.5 Expenses of Registration....................................6
2.6 Obligations of the Company..................................7
2.7 Termination of Registration Rights..........................8
2.8 Delay of Registration; Furnishing Information...............8
2.9 Indemnification.............................................8
2.10 Assignment of Registration Rights..........................10
2.11 Amendment of Registration Rights...........................10
2.12 Limitation on Subsequent Registration Rights...............10
2.13 "Market Stand-Off" Agreement...............................10
2.14 Rule 144 Reporting.........................................11
2.15 Indemnification and Contribution...........................11
3. COVENANTS OF THE COMPANY........................................12
3.1 Basic Financial Information and Reporting..................12
3.2 Inspection Rights..........................................13
3.3 Confidentiality of Records.................................13
3.4 Reservation of Common Stock................................13
3.5 Key Man Insurance..........................................13
3.6 Proprietary Information and Inventions Agreement...........13
3.7 Related Party Transactions.................................13
3.8 Board of Directors Approval................................13
3.9 Directors' Liability and Indemnification...................14
3.10 Reincorporation............................................14
3.11 Executive Compensation.....................................14
3.12 Real Property Holding Corporation..........................15
</TABLE>
<PAGE> 3
3.13 Stipulated Activities.............................................. 15
3.14 Termination of Covenants........................................... 15
4. MISCELLANEOUS........................................................... 15
4.1 Governing Law...................................................... 15
4.2 Survival........................................................... 15
4.3 Successors and Assigns............................................. 15
4.4 Entire Agreement................................................... 16
4.5 Severability....................................................... 16
4.6 Amendment and Waiver............................................... 16
4.7 Delays or Omissions................................................ 16
4.8 Notices............................................................ 16
4.9 Attorneys' Fees.................................................... 16
4.10 Titles and Subtitles............................................... 17
4.11 Counterparts....................................................... 17
Attachment A Schedule of Investors A-1
Attachment B Form of Indemnity Agreement B-1
<PAGE> 4
LANDA MANAGEMENT SYSTEMS CORPORATION
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (the "Agreement") is entered into as
of the 27th day of February, 1998, by and among LANDA MANAGEMENT SYSTEMS
CORPORATION, a California corporation (the "Company"), and the purchasers of
the Company's Series D Preferred Stock ("Series D Stock") set forth on Exhibit
A-1 of that certain Series D Preferred Stock Purchase Agreement of even date
herewith (the "Purchase Agreement") and Attachment A hereto. The purchasers of
the Series D Stock shall be referred to hereinafter as the "Investors" and each
individually as an "Investor."
RECITALS
WHEREAS, pursuant to the Purchase Agreement, the Investors propose to
purchase an aggregate of Six Million Eight Hundred Thousand (6,800,000) shares
of the Company's Series D Stock, of which Five Million Six Hundred Fifteen
Thousand Eight Hundred Sixty-Seven (5,615,867) shall be issued and sold by the
Company to the Investors and an aggregate of One Million One Hundred
Eighty-Four Thousand One Hundred Thirty-Three (1,184,133) shall be sold to the
Investors by certain holders of outstanding shares of Series D Stock (the
"Shareholders"), which shares represent all shares of Series D Stock currently
held by such Shareholders; and
WHEREAS, as a condition of entering into the Purchase Agreement, the
Investors have requested that the Company extend to them registration rights,
information rights and other rights as set forth below.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and in the Purchase Agreement, the parties mutually agree as follows:
1. GENERAL.
1.1 DEFINITIONS. As used in this Agreement the following terms shall have
the following respective meanings:
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FORM S-3" means such form under the Securities Act as in effect on
the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"HOLDER" means any person owning of record Registrable Securities
that have not been sold to the public or any assignee of record of such
Registrable Securities in accordance with Section 2.10 hereof.
"INITIAL OFFERING" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the
Securities Act.
1.
<PAGE> 5
"REGISTER," "REGISTERED," AND "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"REGISTRABLE SECURITIES" means (a) Common Stock of the Company issued
or issuable upon conversion of the Shares; (b) Common Stock of the Company
issued or issuable upon exercise of that certain Warrant to purchase 250,000
shares of Common Stock issued to Westminster Health Care Limited and dated as of
the date hereof; and (c) any Common Stock of the Company issued as (or issuable
upon the conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, such above-described securities. Notwithstanding the
foregoing, Registrable Securities shall not include any securities sold by a
person to the public either pursuant to a registration statement or Rule 144 or
sold in a private transaction in which the transferror's rights under Section 2
of this Agreement are not assigned.
"REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (a) are then issued and
outstanding or (b) are issuable pursuant to then exercisable or convertible
securities.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements not
to exceed Fifteen Thousand Dollars ($15,000) of a single special counsel for the
Holders, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
"SEC" OR "COMMISSION" means the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"SHARES" shall mean (i) the Company's Series D Stock issued and sold
by the Company and (ii) the Company's Series D Stock sold by the Shareholders
pursuant to the Purchase Agreement, and held by the Investors listed on Exhibit
A hereto and their permitted assigns.
2. REGISTRATION; RESTRICTIONS ON TRANSFER.
2.1 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all or any
portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
2.
<PAGE> 6
(ii) (A) The transferee has agreed in writing to be bound by
the terms of this Agreement, (B) such Holder shall have notified the Company of
the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (C) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company,
that such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(iii) Notwithstanding the provisions of paragraphs (i) and (ii)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by a Holder which is (A) a partnership to its partners or former
partners in accordance with partnership interests, (B) a corporation to its
shareholders in accordance with their interest in the corporation, (C) a
limited liability company to its members or former members in accordance with
their interest in the limited liability company, or (D) to the Holder's family
member or trust for the benefit of an individual Holder; provided that in each
case the transferee will be subject to the terms of this Agreement to the same
extent as if he were an original Holder hereunder.
(b) Each certificate representing Shares or Registrable Securities
shall (unless otherwise permitted by the provisions of the Agreement) be
stamped or otherwise imprinted with a legend substantially similar to the
following (in addition to any legend required under applicable state securities
laws or as provided elsewhere in this Agreement):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION
IS NOT REQUIRED.
(c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 DEMAND REGISTRATION.
(a) Subject to the conditions of this Section 2.2, if the Company
shall receive a written request from the Holders of more than thirty percent
(30%) of the Registrable Securities then outstanding (the "Initiating Holders")
that the Company file a registration statement under the Securities Act
covering the registration of Registrable Securities having an aggregate
offering price to the public in excess of $15,000,000 (a "Qualified Public
Offering"), then the Company shall, within thirty (30) days of the receipt
thereof, give written notice of such request to all Holders, and subject to the
limitations of this Section 2.2, use its best efforts to effect, as soon as
practicable, the registration under the Securities Act of all Registrable
Securities that the Holders request to be registered.
3.
<PAGE> 7
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 2.2
or any request pursuant to Section 2.4 and the Company shall include such
information in the written notice referred to in Section 2.2(a) or Section
2.4(a), as applicable. In such event, the right of any Holder to include its
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting by a
majority in interest of the Initiating Holders (which underwriter or
underwriters shall be reasonably acceptable to the Company). Notwithstanding
any other provision of this Section 2.2 or Section 2.4, if the underwriter
advises the Company that marketing factors require a limitation of the number
of securities to be underwritten (including Registrable Securities) then the
Company shall so advise all Holders of Registrable Securities which would
otherwise be underwritten pursuant hereto, and the number of shares that may be
included in the underwriting shall be allocated to the Holders of such
Registrable Securities on a pro rata basis based on the number of Registrable
Securities held by all such Holders (including the Initiating Holders). Any
Registrable Securities excluded or withdrawn from such underwriting shall be
withdrawn from the registration.
(c) The Company shall not be required to effect a registration
pursuant to this Section 2.2:
(i) prior to the second anniversary of the date of this
Agreement; or
(ii) after the Company has effected two (2) registrations
pursuant to this Section 2.2, and such registrations have been declared or
ordered effective; or
(iii) during the period starting with the date of filing of, and
ending on the date one hundred eighty (180) days following the effective date
of the registration statement pertaining to the Initial Offering; provided that
the Company makes reasonable good faith efforts to cause such registration
statement to become effective;
(iv) if within thirty (30) days of receipt of a written request
from Initiating Holders pursuant to Section 2.2(a), the Company gives notice to
the Holders of the Company's intention to make its Initial Offering within
ninety (90) days; or
(v) if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 2.2, a certificate signed by
the Chairman of the Board stating that in the good faith judgment of the Board
of Directors of the Company, it would be seriously detrimental to the Company
and its shareholders for such registration statement to be effected at such
time, in which event the Company shall have the right to defer such filing for
a period of not more than ninety (90) days after receipt of the request of the
Initiating Holders; provided that such right to delay a request shall be
exercised by the Company not more than twice in any twelve (12) month period.
2.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least thirty (30) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act) and will afford each such Holder an opportunity
to
4.
<PAGE> 8
include in such registration statement all or part of such Registrable
Securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within fifteen (15) days after the above-described notice from the
Company, so notify the Company in writing. Such notice shall state the intended
method of disposition of the Registrable Securities by such Holder. If a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(a) UNDERWRITING. If the registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 2.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; second, to the Holders on a pro rata
basis based on the total number of Registrable Securities held by the Holders;
and third, to any shareholder of the Company (other than a Holder) on a pro rata
basis. No such reduction shall reduce the securities being offered by the
Company for its own account to be included in the registration and underwriting
or (ii) reduce the amount of securities of the selling Holders included in the
registration below twenty-five (25%) of the total amount of securities included
in such registration, unless such offering is the Initial Offering and such
registration does not include shares of any other selling shareholders, in which
event any or all of the Registrable Securities of the Holders may be excluded in
accordance with the immediately preceding sentence. In no event will shares of
any other selling shareholder be included in such registration which would
reduce the number of shares which may be included by Holders without the written
consent of Holders of not less than a majority of the Registrable Securities
proposed to be sold in the offering.
(b) RIGHT TO TERMINATE REGISTRATION. The Company shall have the right
to terminate or withdraw any registration initiated by it under this Section 2.3
prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration. The Registration Expenses of
such withdrawn registration shall be borne by the Company in accordance with
Section 2.5 hereof.
2.4 FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 (or any successor to Form S-3) or
any similar short-form registration statement and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
5.
<PAGE> 9
all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within fifteen (15) days after receipt of such written notice from the Company,
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4:
(i) if Form S-3 (or any successor or similar form) is not
available for such offering by the Holders, or
(ii) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose
to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public of less than $500,000, or
(iii) if the Company shall furnish to the Holders a certificate
signed by the Chairman of the Board of Directors of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such Form S-3
Registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement for a
period of not more than ninety (90) days after receipt of the request of the
Holder or Holders under this Section 2.4; provided, that such right to delay a
request shall be exercised by the Company not more than once in any twelve (12)
month period, or
(iv) if the Company has, within the twelve (12) month period
preceding the date of such request, already effected two (2) registrations on
Form S-3 for the Holders pursuant to this Section 2.4, or
(v) in any particular jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All such Registration Expenses incurred in
connection with registrations requested pursuant to this Section 2.4 after the
first two (2) registrations shall be paid by the selling Holders pro rata in
proportion to the number of shares sold by each.
2.5 EXPENSE OF REGISTRATION. Except as specifically provided herein, all
Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration under
Section 2.3 or Section 2.4 herein shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder, shall be
borne by the holders of the securities so registered pro rata on the basis of
the number of shares so registered. The Company shall not, however, be required
to pay for expenses of any registration proceeding begun pursuant to Section
2.2 or 2.4, the request of which has been subsequently withdrawn by the
Initiating Holders unless (a) the withdrawal is based upon material adverse
information concerning the Company of which the Initiating Holders were not
aware at the time of such request or (b) the Holders of a majority of
Registrable Securities agree to forfeit their right to one requested
registration pursuant to Section 2.2 or Section 2.4, as applicable, in which
event such right shall be forfeited by all Holders). If the Holders are
required to pay the Registration Expenses, such expenses shall be borne by the
holders of securities (including Registrable Securities) requesting such
registration in proportion to the number of shares for which registration was
requested. If the Company is required to pay the Registration Expenses of a
withdrawn offering pursuant to clause (a) above, then the Holders shall not
forfeit their rights pursuant to Section 2.2 or Section 2.4 to a demand
registration.
6.
<PAGE> 10
2.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to ninety (90) days or, if
earlier, until the Holder or Holders have completed the distribution related
thereto.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such registration statement.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in
order to facilitate the disposition of Registrable Securities owned by them.
(d) Use all reasonable efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable Securities
are delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities and (ii) a letter
dated as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and if permitted by
applicable accounting standards, to the Holders requesting registration of
Registrable Securities.
7.
<PAGE> 11
2.7 TERMINATION OF REGISTRATION RIGHTS. All registration rights granted
under this Section 2 shall terminate and be of no further force and effect five
(5) years after the date of the Company's Initial Offering. In addition, a
Holder's registration rights shall expire if (a) the Company has completed its
Initial Offering and is subject to the provisions of the Exchange Act, (b) such
Holder (together with its affiliates, partners and former partners, members and
former members) holds less than 1% of the Company's outstanding Common Stock
(treating all share of convertible Preferred Stock on an as converted basis) and
(c) all Registrable Securities held by and issuable to such Holder (and its
affiliates, partners and former partners) may be sold under Rule 144 during any
ninety (90) day period.
2.8 DELAY OF REGISTRATION; FURNISHING INFORMATION.
(a) No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the selling
Holders shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as shall be required to effect the registration of their
Registrable Securities.
(c) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if, due to the
operation of subsection 2.2(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's
obligation to initiate such registration as specified in Section 2.2 or Section
2.4, whichever is applicable.
2.9 INDEMNIFICATION. In the event any Registrable Securities are included
in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers, directors and legal counsel
of each Holder, any underwriter (as defined in the Securities Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Securities Act or the Exchange Act, against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation") by the
Company: (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the
statements therein not misleading, or (iii) any violation or alleged violation
by the Company of the Securities Act, the Exchange Act, any state securities
law or any rule or regulation promulgated under the Securities Act, the
Exchange Act or any state securities law in connection with the offering
covered by such registration statement; and the Company will reimburse each
such Holder, partner, officer, director, legal counsel, underwriter or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided however, that the indemnity agreement contained in
this Section 2.9(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company, which consent shall not be
8.
<PAGE> 12
unreasonably withheld, nor shall the Company be liable in any such case for any
such loss, claim, damage, liability or action to the extent that it arises out
of or is based upon a Violation which occurs in reliance upon and in conformity
with written information furnished expressly for use in connection with such
registration by such Holder, partner, officer, director, legal counsel,
underwriter or controlling person of such Holder.
(b) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration qualifications or compliance is being effected, indemnify and hold
harmless the Company, each of its directors, its officers, and legal counsel
and each person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's partners, directors
or officers or any person who controls such Holder, against any losses, claims,
damages or liabilities (joint or several) to which the Company or any such
director, officer, controlling person, underwriter or other such Holder, or
partner, director, officer or controlling person of such other Holder may
become subject under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Holder under
an instrument duly executed by such Holder and stated to be specifically for
use in connection with such registration, and each such Holder will reimburse
any legal or other expenses reasonably incurred by the Company or any such
director, officer, legal counsel, controlling person, underwriter or other
Holder, or partner, officer, director, legal counsel or controlling person of
such other Holder in connection with investigating or defending any such loss,
claim, damage, liability or action if it is judicially determined that there
was such a Violation; provided, however, that the indemnity agreement contained
in this Section 2.9(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Holder, which consent shall not be unreasonably withheld;
provided further, that in no event shall any indemnity under this Section 2.9
exceed the proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
2.9 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2.9, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.9, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such
9
<PAGE> 13
indemnified party as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the Violation(s) that resulted in such loss, claim, damage or
liability, as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by a court of law by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a material
fact relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
provided, that in no event shall any contribution by a Holder hereunder exceed
the proceeds from the offering received by such Holder.
(e) The obligations of the Company and the Holders under this Section
2.9 shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this agreement. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation.
2.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to
register Registrable Securities pursuant to this Section 2 may be assigned by a
Holder to a transferee or assignee of Registrable Securities which (a) is a
subsidiary, parent, general partner, limited partner or retired partner, member
or former member of a Holder, (b) is a Holder's family member or trust for the
benefit of an individual Holder, or (c) acquires at least two hundred fifty
thousand (250,000) shares of Registrable Securities (as adjusted for stock
splits and combinations); provided, however, (i) the transferor shall, within
ten (10) days after such transfer, furnish to the Company written notice of the
name and address of such transferee or assignee and the securities with respect
to which such registration rights are being assigned and (ii) such transferee
shall agree to be subject to all restrictions set forth in this Agreement.
Notwithstanding the foregoing, and transfer effected pursuant to Section 2.3 of
the Stock Purchase Agreement shall not be subject to the limitation set forth in
subsection (c) above.
2.11 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of at least a majority of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this Section 2.11 shall be binding upon each Holder and the
Company. By acceptance of any benefits under this Article II, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.
2.12 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date of this
Agreement, the Company shall not, without the prior written consent of the
Holders of a majority of the Registrable Securities then outstanding, enter
into any agreement with any holder or prospective holder of any securities of
the Company that would grant such holder registration rights senior to those
granted to the Holders hereunder.
2.13 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees that
such Holder shall not sell or otherwise transfer or dispose of any Common Stock
(or other securities) of the Company held by such Holder (other than those
included in the registration) for a period specified by the representative of
the underwriters of Common Stock (or other securities) of the Company not to
exceed one hundred eighty (180) days following the effective date of a
registration statement of the Company filed under the Securities Act, provided
that:
10.
<PAGE> 14
(i) such agreement shall apply only to the Company's Initial
Offering; and
(ii) all officers and directors of the Company and holders of
at least one percent (1%) of the Company's voting securities enter into similar
agreements.
Each Holder agrees to execute and deliver such other agreements as may be
reasonably requested by the Company or the underwriter which are consistent
with the foregoing or which are necessary to give further effect thereto. The
obligations described in this Section 2.13 shall not apply to a registration
relating solely to employee benefit plans on Form S-1 or Form S-8 or similar
forms that may be promulgated in the future, or a registration relating solely
to a Commission Rule 145 transaction on Form S-4 or similar forms that may be
promulgated in the future. The Company may impose stop-transfer instructions
with respect to the shares of Common Stock (or other securities) subject to the
foregoing restriction until the end of said one hundred eighty (180) day period.
2.14 RULE 144 REPORTING. With a view to making available to the
Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities
to the general public;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act;
(c) So long as a Holder owns any Registrable Securities, furnish to
such Holder forthwith upon request: a written statement by the Company as to
its compliance with the reporting requirements of said Rule 144 of the
Securities Act, and of the Exchange Act (at any time after it has become
subject to such reporting requirements); a copy of the most recent annual or
quarterly report of the Company; and such other reports and documents as a
Holder may reasonably request in availing itself of any rule or regulation of
the SEC allowing it to sell any such securities without registration.
2.15 INDEMNIFICATION AND CONTRIBUTION. In addition to the
indemnification obligations of the Company pursuant to Sections 2.9 and 3.9
hereto:
(a) The Company agrees to indemnify and hold harmless each Investor
and its general partners (collectively, the "Indemnitees") against any
investigations, proceedings, claims, or actions and for any expenses, damages,
liabilities, or losses (joint or several) arising out of any such
investigation, proceeding, claim or action, to which any such Investor may
become subject under the Securities Act and any rules or regulation promulgated
thereunder, the Exchange Act and any rules or regulations promulgated
thereunder, or any state law or regulation, or common law, arising out of,
related to or in any way attributable to an Indemnitee's investment in the
Company that arise out of or are based upon (i) any breach of any
representation, warranty, agreement or covenant of the Company contained herein
or in the Purchase Agreement, (ii) any untrue statement or alleged omission to
state a material fact in any registration statement filed by the Company or any
amendment or supplement thereto, or (iii) any untrue statement or alleged
untrue statement of any material fact or the omission or alleged omission to
state a material fact in any prospectus distributed by the Company or any
amendment or supplement thereto or (iv) any round of financing of the Company
(including but not limited to non-participation or non-pro rata
11.
<PAGE> 15
participation), or (v) any statement by or on behalf of the Company or action
taken by or on behalf of the Company. Upon written request, the Company agrees
to reimburse each Indemnitee for any legal or other expenses reasonably
incurred in connection with investigating or defending any such investigation,
proceeding, claim, or action, as such expenses or other costs are incurred;
provided, however, each Indemnitee shall reimburse the Company for any such
sums paid to it if it is ultimately determined by final judgment of a court of
competent jurisdiction that such Indemnitee is not entitled to indemnification.
The Indemnitees, collectively, may select their own counsel. This indemnity
agreement shall extend upon the same terms and conditions to, and shall inure
to the benefit of, each person, if any, who controls any Indemnitee within the
meaning of the Securities Act or the Exchange Act.
3. COVENANTS OF THE COMPANY.
3.1 BASIC FINANCIAL INFORMATION AND REPORTING.
(a) The Company will maintain true books and records of account in
which full and correct entries will be made of all its business transactions
pursuant to a system of accounting established and administered in accordance
with generally accepted accounting principles consistently applied, and will
set aside on its books all such proper accruals and reserves as shall be
required under generally accepted accounting principles consistently applied.
(b) As soon as practicable after the end of each fiscal year of the
Company, and in any event within one hundred twenty (120) days thereafter, the
Company will furnish each Investor a consolidated balance sheet of the Company,
as at the end of such fiscal year, and a consolidated statement of income and a
consolidated statement of cash flows of the Company, for such year, all
prepared in accordance with generally accepted accounting principles
consistently applied and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail. Such financial
statements shall be accompanied by a report and opinion thereon by independent
public accountants of national standing selected by the Company's Board of
Directors.
(c) The Company will furnish each Investor, as soon as practicable
after the end of the first, second and third quarterly accounting periods in
each fiscal year of the Company, and in any event within forty-five (45) days
thereafter, a consolidated balance sheet of the Company as of the end of each
such quarterly period, and a consolidated statement of income and a
consolidated statement of cash flows of the Company for such period and for the
current fiscal year to date, prepared in accordance with generally accepted
accounting principles, with the exception that no notes need be attached to such
statements and year-end audit adjustments may not have been made.
(d) So long as an Investor (with its affiliates) shall own not less
than two hundred fifty thousand (250,000) shares of Registrable Securities (as
adjusted for stock splits and combinations) (a "Major Investor"), the Company
will furnish each such Major Investor (i) at least thirty (30) days prior to
the beginning of each fiscal year an annual budget and operating plans for such
fiscal year (and as soon as available, any subsequent revisions thereto); and
(ii) as soon as practicable after the end of each month, and in any event
within twenty (20) days thereafter, a consolidated balance sheet of the Company
as of the end of each such month, and a consolidated statement of income and a
consolidated statement of cash flows of the Company for such month and for the
current fiscal year to date, including a comparison to plan figures for such
period, prepared in accordance with generally accepted accounting principles
consistently applied, with the exception that no notes need be attached to such
statements and year-end audit adjustments may not have been made.
12.
<PAGE> 16
3.2 INSPECTION RIGHTS. Each Major Investor shall have the right to visit
and inspect any of the properties of the Company or any of its subsidiaries,
and to discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested at all such reasonable times and as often as may be reasonably
requested; provided, however, that the Company shall not be obligated under
this Section 3.2 with respect to a competitor of the Company or with respect to
information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed.
3.3 CONFIDENTIALITY OF RECORDS. Each Investor agrees to use, and to use
its best efforts to insure that its authorized representatives use, the same
degree of care as such Investor uses to protect its own confidential
information to keep confidential any information furnished to it which the
Company identifies as being confidential or proprietary (so long as such
information is not in the public domain), except that such Investor may
disclose such proprietary or confidential information to any partner,
subsidiary or parent of such Investor for the purpose of evaluating its
investment in the Company as long as such partner, subsidiary or parent is
advised of the confidentiality provisions of this Section 3.3.
3.4 RESERVATION OF COMMON STOCK. The Company will at all times reserve and
keep available, solely for issuance and delivery upon the conversion of the
Series D Stock, all Common Stock issuable from time to time upon such
conversion.
3.5 KEY MAN INSURANCE. Subject to the approval of the Board of Directors,
the Company will use its best efforts to obtain and maintain in full force and
effect term life insurance in the amount of two million dollars ($2,000,000) on
the lives of each of Bryan Lang, Stephen Kay and one million dollars
($1,000,000) on the life of Brandon L. Raines, naming the Company as
beneficiary.
3.6 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. The Company shall
require all employees and consultants to execute and deliver a Proprietary
Information and Inventions Agreement in the form attached to the Purchase
Agreement.
3.7 RELATED PARTY TRANSACTIONS. The Company shall not enter into any
agreement with any shareholder, officer or director of the Company, or any
"affiliate" or "associate" of any such person (as such terms are defined in the
rules and regulations promulgated under the Securities Act), including without
limitation any agreement or other arrangement providing for the furnishing of
services by, rental of real or personal property from, or otherwise requiring
payments to, any such person or entity, without the consent of at least a
majority of the members of the Company's Board of Directors having no interest
in such agreement or arrangement.
3.8 BOARD OF DIRECTORS APPROVAL. The Company shall not, without the
approval of a majority of the Board of Directors with all Directors voting,
take any of the following actions:
(a) repurchase or redeem any equity securities, pay or declare a
dividend, whether in cash or property, or otherwise authorize any distribution
to shareholders (except for acquisitions of common stock by the Company
pursuant to agreements which permit the company to repurchase such shares upon
termination of employment, the exercise of the Company's right of first refusal
upon a proposed transfer, or as set forth in Company's Articles of
Incorporation in connection with the rights preferences and privileges of the
Series D Stock);
(b) purchase equity securities of, loan to or invest in any business
entity more than one hundred thousand ($100,000) dollars;
13.
<PAGE> 17
(c) incur any debt in any twelve month period in excess of one
hundred thousand ($100,000) dollars, except pursuant to short term commercial
lending arrangements of six months or less for working capital purposes or in
accordance with the company's budget as previously approved by the company's
Board of Directors or otherwise in the ordinary course of business in accordance
with the Company's past practices;
(d) sell or otherwise transfer securities of any of its subsidiaries
to any third party;
(e) except as required by law in the event of an employee's
termination, pay any deferred salaries or fees except for those employees' and
directors' salaries and fees incurred from October 1, 1997 to the date hereof;
or
(f) make any fundamental change in the operations of the Company as
now conducted or as proposed to be conducted.
3.9 DIRECTORS' LIABILITY AND INDEMNIFICATION. The Company's Articles of
Incorporation and Bylaws shall provide (a) for elimination of the liability of
director to the maximum extent permitted by law and (b) for indemnification of
directors for acts on behalf of the Company to the maximum extent permitted by
law. In addition, the Company shall enter into and use its best efforts to at
all times maintain indemnification contracts substantially in the form attached
as Attachment B hereto with each of its directors to indemnify such directors to
the maximum extent permissible under California law.
3.10 REINCORPORATION. Subject to the approval of the Board of Directors and
the shareholders of the Company, the Company shall, within six (6) months of the
date hereof, reincorporate the Company in the State of Delaware. In the event of
any delay, the Company shall use its best efforts to effect such reincorporation
as promptly as possible following the expiration of such six (6) month period.
3.11 EXECUTIVE COMPENSATION. Subject to the approval of the Board of
Directors of the Company, promptly following the date hereof, (a) the Company
and Bryan Lang ("Lang") shall enter into an agreement which shall include,
without limitation, provision for (i) Lang's waiver of all prospective bonuses
or commissions that may otherwise be due under agreements between Lang and the
Company as of the date hereof, (ii) bonuses to be paid to Lang based upon
performance criteria mutually agreed upon by Lang and the Company, and (iii) a
waiver of all deferred compensation owed to Lang by the Company as of the date
hereof in exchange for the right to receive, as a performance bonus, $335,000
upon an Initial Offering, or a change of control (as defined below) in which the
aggregate proceeds payable to the Company and/or its Shareholders exceeds Forty
Million Dollars ($40,000,000) and (b) the Company and Stephen Kay ("Kay") shall
enter into an agreement which shall include, without limitation, provision for
(i) Kay's waiver of all prospective bonuses or commissions that may otherwise be
due under agreements between Kay and the Company as of the date hereof and (ii)
bonuses to be paid to Kay based upon performance criteria mutually agreed upon
by Kay and the Company.
A "Change in Control" shall be deemed to have occurred if (i) a tender
offer shall be made and consummated for the ownership of more than fifty percent
(50%) of the outstanding voting securities of the Company, (ii) the Company
shall be merged or consolidate with another corporation and as a result of such
merger or consolidation less than fifty percent (50%) of the outstanding voting
securities of the surviving or resulting corporation shall be owned in the
aggregate by the former shareholders of the Company, as the same shall have
existed immediately prior to such merger or consolidation, (iii) the Company
shall sell all or substantially all of its assets to another corporation which
is not a wholly-owned subsidiary, or (iv) a person within the meaning of Section
3(a)(9) or Section 13(d)(3) (as in effect on the date hereof) of the
14.
<PAGE> 18
Securities and Exchange act of 1934 ("Exchange Act"), shall acquire more than
fifty percent (50%) of the outstanding voting securities of the Company
(whether directly, indirectly, beneficially or of record). For purposes hereof,
ownership of voting securities shall take into account and shall including
ownership as determined by applying the provisions of Rule 13d-3(d)(1)(i) (as
in effect on the date hereof) pursuant to the Exchange Act.
3.12 REAL PROPERTY HOLDING CORPORATION. The Company covenants that it will
operate in a manner such that it will not become a "United States real property
holding corporation" as that term is defined in Section 897(c)(2) of the
Internal Revenue Code of 1986, as amended, and the regulations thereunder
("FIRPTA"). The Company agrees to make determinations as to its status as a
USRPHC, and will file statements concerning those determinations with the
Internal Revenue Service, in the manner and at the times required under Reg.
Section 1.897-2(h), or any supplementary or successor provision thereto. Within
30 days of a request from an Investor or any of its partners, the Company will
inform the requesting party, in the manner set forth in Reg. Section
1.897-2(h)(1)(iv) or any supplementary or successor provision thereto, whether
that party's interest in the Company constitutes a United States real property
interest (within the meaning of Internal Revenue Code Section 897(c)(1) and the
regulations thereunder) and whether the Company has provided to the Internal
Revenue Service all required notices as to its USRPHC status.
3.13 STIPULATED ACTIVITIES. Each senior officer of the Company (each, a
"Principal") shall, within ten (10) days of the occurrence thereof, provide the
Board of Directors of the Company with a list and description of each
Stipulated Activity (as defined in the Purchase Agreement) in which such
Principal is engaged or otherwise involved which has commenced, expired or been
modified since such Principal delivered the most recent such list and
description to the Board of Directors.
3.14 TERMINATION OF COVENANTS. All covenants of the Company contained in
Section 3 of this Agreement shall expire and terminate as to each Investor on
the effective date of the registration statement pertaining to the Initial
Offering.
4. MISCELLANEOUS.
4.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
4.2 SURVIVAL. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by any Holder and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
4.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person who shall
be a holder of Registrable Securities from time to time; provided, however,
that prior to the receipt by the Company of adequate written notice of the
transfer of any Registrable Securities specifying the full name and address of
the transferee, the Company may deem and treat the person listed as the holder
of such shares in its records as the absolute owner and holder of such shares
for all purposes, including the payment of dividends or any redemption price.
15.
<PAGE> 19
4.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules hereto,
the Purchase Agreement and the other documents delivered pursuant thereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
4.5 SEVERABILITY. In case any provision of the Agreement shall be invalid,
illegal, or unenforceable, the validity, legality, and unenforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
4.6 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of at least a majority of the Registrable Securities.
(b) Except as otherwise expressly provided, the obligations of the
Company and the rights of the Holders under this Agreement may be waived only
with the written consent of the holders of at least a majority of the
Registrable Securities.
(c) Notwithstanding the foregoing, this Agreement may be amended with
only the written consent of the Company to include additional purchasers of
Shares as "Investors," "Holders" and parties hereto.
4.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default, or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
4.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the party
to be notified at the address as set forth on the signature pages hereof or
Exhibit A hereto or at such other address as such party may designate by ten
(10) days advance written notice to the other parties hereto.
4.9 ATTORNEYS' FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
16.
<PAGE> 20
4.10 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
4.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
17.
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have executed this INVESTOR RIGHTS
AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: INVESTORS:
LANDA MANAGEMENT SYSTEMS CORPORATION BEDROCK CAPITAL PARTNERS I, L.P.
By: /s/ [ILLEGIBLE] By:
--------------------------------- --------------------------------
Title: [ILLEGIBLE] Title:
------------------------------ -----------------------------
BEDROCK CAPITAL SIDE-BY-SIDE, L.P.
By:
--------------------------------
Title:
-----------------------------
GREYLOCK IX LIMITED PARTNERSHIP
BY: GREYLOCK IX GP LIMITED
PARTNERSHIP,
ITS GENERAL PARTNER
By: /s/ [ILLEGIBLE]
--------------------------------
SEQUOIA CAPITAL VII
A CALIFORNIA LIMITED PARTNERSHIP
BY: SC VII-A MANAGEMENT, LLC A
CALIFORNIA LIMITED LIABILITY
COMPANY,
ITS GENERAL PARTNER
By:
--------------------------------
Managing Member
SEQUOIA TECHNOLOGY PARTNERS VII
A CALIFORNIA LIMITED PARTNERSHIP
BY: SC VII-A MANAGEMENT, LLC A
CALIFORNIA LIMITED LIABILITY
COMPANY,
ITS GENERAL PARTNER
By:
--------------------------------
Managing Member
SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT
<PAGE> 22
SQP 1997
BY: SC VII-A MANAGEMENT, LLC A
CALIFORNIA LIMITED LIABILITY
COMPANY,
ITS GENERAL PARTNER
By:
--------------------------------
Managing Member
SEQUOIA 1997 LLC
BY: SC VII-A MANAGEMENT, LLC A
CALIFORNIA LIMITED LIABILITY
COMPANY,
ITS GENERAL PARTNER
By:
--------------------------------
Managing Member
SEQUOIA INTERNATIONAL PARTNERS
BY: SC VII-A MANAGEMENT, LLC A
CALIFORNIA LIMITED LIABILITY
COMPANY,
ITS GENERAL PARTNER
By:
--------------------------------
Managing Member
-----------------------------------
GENE CATTARINA
-----------------------------------
JOHN KARLEN
SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT
<PAGE> 1
EXHIBIT 10.6
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT (THIS "SUBLEASE") is made and entered into this ______
day of October 1998, by and between LANDA MANAGEMENT CORPORATION, a California
corporation (the "Sublessee") and UNISYS CORPORATION, a Delaware corporation,
(the Sublessor").
WHEREAS, Lincoln P.C. Associates ("Landlord") and Unisys Corporation ("Tenant")
entered into a lease dated September 1, 1991 (the "Lease") whereby Landlord
leased to Tenant certain premises consisting of approximately one hundred ten
thousand one hundred eight (110,108) rentable square feet of space (the
"Premises") in the building located at 4151 Ashford Dunwoody Road, Atlanta,
Georgia 30319 (the "Building") commencing September 1, 1991 and expiring August
31, 2001: and
WHEREAS, the Lease was amended by First Amendment to Lease dated August 5, 1994
by and between Atlanta U.K. Partners, Ltd., a Georgia limited partnership (the
"Landlord"), successor to Lincoln P.C. Associates and Unisys Corporation, a
Delaware corporation to reflect Tenant's relocation of certain suites within
the Premises: and
WHEREAS, the Lease, as amended, was amended by Second Amendment to Lease dated
September 24, 1994 to expand the Premises: and
WHEREAS, the Lease, as amended, was amended by Third Amendment to Lease dated
January 26, 1995 to expand the Premises: and
WHEREAS, the Lease, First Amendment to Lease, Second Amendment to Lease and
Third Amendment to Lease shall hereby be referred to as the "Lease": and
WHEREAS, Glenborough Properties, L.P. is the successor in interest to Atlanta
U.K. Partners, Ltd.
WHEREAS, Sublessor has agreed to sublease Suite 505 consisting of approximately
Three Thousand Six Hundred Seventy-one (3,671) rentable square feet of the
Premises (3,165 usable square feet) as depicted on Exhibit "A" (the Subleased
Premises") to Sublessee on the terms and conditions hereinafter set forth. The
total square footage of the Subleased Premises is hereby stipulated by Sublessor
and Sublessee to be three Thousand Six Hundred Seventy-one (3,671) rentable
square feet.
NOW THEREFORE, in consideration of the rents, covenants, agreements,
stipulations and provisions contained herein to be paid, kept and performed by
both Sublessee and Sublessor, the parties do hereby agree as follows:
1. TERM: Sublessor does hereby sublease the Subleased Premises to Sublessee
and Sublessee does hereby sublease from the Sublessor Suite 505 of the
Subleased Premises commencing on the later of the 1st day of December, 1998 or
upon delivery of the certificate of occupancy (the "Commencement Date"). The
Sublease shall expire on the 31st day of August, 2001 (the "Term").
1
<PAGE> 2
2. USE: The Subleases Premises shall be used for Sublessee's office use, and
for no other use whatsoever.
3. RENT: Sublessee covenants and agrees to pay to Sublessor, without
deduction or set off, minimum monthly rental (the "Minimum Monthly Rent") due
and payable on the first day of each month ("Due Date") for the Term beginning
on the Commencement Date according to the following rent schedule:
<TABLE>
<CAPTION>
LEASE YEAR RENT/RSF MINIMUM MONTHLY RENT
---------- -------- --------------------
<S> <C> <C>
12/01/98 -- 12/31/99 $17.00 $5,200.58
01/01/00 -- 12/31/00 $17.50 $5,333.54
01/01/01 -- 08/31/01 $18.00 $5,506.50
</TABLE>
4. ADDITIONAL RENT: In addition to the Minimum Monthly Rent Sublessee
covenants and agrees to pay to Sublessor with the payment of the Minimum Monthly
Rent additional rent (the ""Additional Rent") based upon the then current
rentable square footage of the Subleased Premises in the amount of $0.25 Dollars
per rentable square foot per annum on the first day of each month. The
Additional Rent for the Subleased Premises shall be Seventy-six and 48/100
Dollars ($76.48) per month to include all operating expenses defined in the
Lease which shall include utilities, janitorial services, taxes and insurance
(excluding taxes and insurance which are required by Sublessee), except that
Sublessee shall be responsible for the procurement and payment of any HVAC
charges in excess of those provided during the standard building hours.
5. SECURITY DEPOSIT: Sublessee hereby deposits with Sublessor on the date
hereof the sum of one months Minimum Monthly Rental of Five Thousand Two
Hundred and 58/100 Dollars ($5,200.58), which sum shall be held by Sublessor,
without obligation for interest, as security for the fully, timely and faithful
performance of Sublessee's covenants and obligations under this Sublease. It is
understood and agreed that such deposit is not an advance rental deposit or a
measure of Sublessor's damages in case of Sublessee's default. Upon the
occurrence of any default or event of default by Sublessee. Sublessor may, from
time to time, without prejudice to any other remedy provided herein or provided
by law, use such funds to the extent necessary to make good any arrears of rent
or other payments due Sublessor hereunder, and any other damage, injury,
expense or liability caused by an event of sublessee's default. Sublessee shall
pay to Sublessor on demand the amount so applied in order to restore the
security deposit to its original amount. Although the security deposit shall be
deemed the property of Sublessor, any remaining balance of such deposit shall
be returned by Sublessor to Sublessee or Sublessee's last permitted assignee at
such time after termination of this Sublease when Sublessor shall have
determined that all Sublessee's obligations under this Sublease have been
fulfilled. Sublessor shall not be required to keep any security deposit
separate from its general funds. Upon the occurrence of any events of default
or default as described in this Sublease, said security deposit shall become
due and payable to Sublessor.
2
<PAGE> 3
6. TIME AND PLACE OF PAYMENT: With the exception of the payment of the first
month's Minimum Monthly Rent which shall be delivered by Sublessee to Sublessor
upon Sublessee's execution of this Sublease, all payments of Minimum Monthly
Rent shall be made, in advance, without notice, on the first (1st) day of each
month during the Term, payable to the order of "UNISYS CORPORATION" and
addressed to UNISYS CORPORATION, P.O. BOX 5585, BISMARCK, NORTH DAKOTA
58502-5585 ATTN: LEASE ADMINISTRATION or to such other person or at such other
place as Sublessor may from time to time designate in writing.
7. BUSINESS PRIVILEGE TAXES, BUSINESS USE TAXES AND OCCUPANCY TAXES:
Sublessee agrees to pay any revenue tax or charge, occupancy tax, business
privilege tax, business use tax or any other tax that may be levied against the
Subleases Premises or Sublessee's specific use or occupancy thereof during the
Term.
8. RIGHT OF ENTRY: Following the date of this Sublease and prior to the
Commencement Date, Sublessee shall have access to the Subleased Premises, upon
reasonable prior notice to Sublessor, for the purpose of evaluating what
alterations, repairs or improvements are needed to modify the Subleased
Premises for its use. Sublessee may not commence any such alteration, repair
or improvement until Sublessor and Landlord shall have consented thereto
pursuant to Paragraph 10 and Landlord shall have consented to this Sublease.
sublessee's access to the Subleases Premises prior to the Commencement Dates
shall be subject to all of the terms and conditions of this Sublease, except
for the payment of Rent. Sublessee hereby agrees to indemnify and hold harmless
Sublessor and Landlord from any and all liability, claims, demands, expenses,
damages and judgments arising as a result of Sublessee's access to the
Subleased Premises pursuant to this Paragraph 8.
9. ACCEPTANCE AND SURRENDER OF SUBLEASED PREMISES:
Sublessee shall accept the Subleased Premises in its "as is" condition.
Sublessor shall provide a Tenant Improvement Allowance, as herein defined, up
to $8.30 per rentable square foot of the original Subleased Premises, up to a
maximum of Thirty Thousand Four Hundred Sixty-nine and 30/100 ($30,469.30) for
design, construction, demising (including fire rating of the demising walls),
for improvements to the Subleased Premises. All costs of improvements shall be
an expense chargeable against the Tenant Improvement Allowance. Sublessor shall
complete all improvements to the Premises in accordance with the Work Letter
and Space Plan, as made a part hereto as Exhibit "B". Sublessor's general
contractor shall provide a bid sheet ("Bid Sheet") to include all costs for
construction and the alternatives to Sublessee prior to commencement of the
Tenant Improvements. All costs and alternatives selected by Sublessee in excess
of the Tenant Improvement Allowance shall be approved by and paid for by
Sublessee to Sublessor prior to commencement of improvements.
10. ALTERATIONS AND MODIFICATIONS: Sublessee agrees to obtain Sublessor's and
Landlord's prior written approval for those alterations, modifications, repairs
or renovations to be made to the Subleased Premises after installation of the
initial Tenant Improvements covered by the Work Letter. Sublessor agrees that
it shall
3
<PAGE> 4
promptly review plans and drawings submitted and that it will not unreasonably
delay or deny approval with respect to non-structural alterations.
Notwithstanding the foregoing, Sublessor's consent to such alterations shall be
subject to Landlord's consent thereto. Any alterations, modifications or
renovations of or to the Subleased Premises, except for those alterations,
modifications or renovations pursuant to the Work Letter, shall be limited to
partition changes (non-bearing walls), electrical and telephone relocations, and
decorating. The structural integrity of the Building will not be disturbed in
any way. Sublessee shall provide Sublessor with a waiver of liens prior to the
commencement of any alterations or modifications to the Subleased Premises and a
release of liens at the completion of any alterations or modifications to the
Subleased Premises executed by all contractors who performed such alterations or
modifications. In addition, Sublessee agrees that all work performed upon the
Subleased Premises shall be done in a good and workmanlike manner and shall be
in accordance with all applicable law. All alterations, modifications and
renovations, upon completion of construction thereof, shall become part of the
Subleased Premises and the property of Sublessor without payment therefore by
Sublessor and shall be surrendered to Sublessor at the end of the Term or upon
sooner termination of this Sublease pursuant to the terms hereof, provided
however, that, if requested by Sublessor, at the same time Sublessor gives its
consent for the alterations, modifications and renovations, Sublessee shall, at
Sublessee's sole cost and expense, remove all such alterations, modifications
and renovations, or any part or parts thereof specified by Sublessor, from the
Subleased Premises and shall repair all damage caused by installation and
removal.
11. REPAIRS/MAINTENANCE: The Sublease Agreement and the Lease are intended to
be full service in which the Landlord provides all services provided for in the
Lease and includes all operating expenses as outlined in the Lease, however
Sublessee shall, throughout the Term, at its sole cost and expense, keep the
Subleased Premises clean, keep waste and drain pipes open and generally
maintain the Subleased Premises and the improvements now or hereafter
comprising all or any part of the Subleased Premises and the fixtures and
appurtenances thereto in good order, repair and condition reasonable wear and
tear only excepted. If caused by Sublessee's negligence, Sublessee shall
promptly, at Sublessee's own cost and expense, make all repairs necessary to
maintain such good order, repair and condition. In addition, Sublessee shall,
at its sole cost and expense, promptly repair all damage or injury to the
Subleased Premises, making replacements, if necessary, caused by (a) the
negligence or willful misconduct of Sublessee or its employees, agents,
invitees, licensees, subtenants or contractors; (b) the act of moving in or out
of the Subleased Premises; and/or (c) the installation and/or removal of any
furniture, fixtures or other property.
12. LEASE CONTROLLING: Except as herein provided, Sublessee agrees to comply
with all of the terms and conditions set forth in the Lease, a copy of which is
attached hereto as Exhibit "C" and made a part hereof as the same relates to
the Subleased Premises (excluding the payments of Sublessor's Rent) and as are
to be performed by Sublessor as Tenant thereunder. All of the terms and
conditions of the Lease shall apply in the same manner to Sublessee as they are
expressed therein to apply to Sublessor as Tenant thereunder except as modified
or deleted pursuant to the terms of this Sublease.
4
<PAGE> 5
13. LEASE IN EFFECT: Sublessor warrants and represents, to the best of
Sublessor's knowledge, information and belief, that the Lease is subsisting and
is in full force and effect. Sublessor is not in default thereunder, and all
rents, additional rents and charges due thereunder are and will be paid.
14. SUBLETTING OR ASSIGNMENT: Sublessee covenants that it will not assign its
interest in this Sublease, in whole or in part, or permit the subletting of the
Subleased Premises or any part thereof without the prior written consent of
Sublessor whose consent shall not be unreasonably withheld or delayed, provided
that Sublessor may withhold consent if Landlord fails to consent, even if such
failure to consent is unreasonable. Sublessee shall collect no monies from any
sub-sublessee in excess of the rent and additional rent hereunder. In the event
Sublessee elects to sub-sublease the Subleased Premises. Sublessor may, at
Sublessor's sole option, terminate this Sublease and enter into a direct
Sublease with the identified sub-subtenant. If Sublessor elects to terminate
this Sublease agreement, Sublessee shall pay to sublessor a penalty of any
broker's commissions due to sub-sublessee's procuring broker and the Minimum
Monthly Rent and Additional Rent until the commencement date of the
sub-sublessee's sublease agreement.
15. INSURANCE AND INDEMNITY: Sublessee agrees to indemnify and hold harmless
both sublessor and Landlord from and against all liability, claims, demands,
expenses, damages and judgments arising from property damage or injury to third
parties (including wrongful death) upon the Subleased Premises during the Term
or any extension thereof, unless due to the gross negligence or willful
misconduct of Sublessor. Sublessee agrees, at its own cost and expense, to keep
the Subleased Premises insured under a public liability policy against claims
for property damage and personal injury to third parties (including wrongful
death). The minimum amounts of such insurance coverage shall not be less than
the amounts required by the Lease. Upon execution of this Sublease by Sublessee
and at least thirty (30) days prior to the expiration date of such policies,
Sublessee shall furnish to Landlord and Sublessor a certificate or certificates
of insurance confirming that the required insurance is in full force and effect
with all premiums paid current. Sublessee further agrees to indemnify and hold
harmless Sublessor and Landlord from all liability arising out of the filing of
any mechanic's or materialman's lien against the Subleased Premises by reason of
any act or omission of Sublessee.
16. PERSONAL PROPERTY: Sublessee agrees to assume full responsibility for its
personal property located at the Subleased Premises, and to indemnify and hold
harmless Sublessor and Landlord against damage sustained by fire, theft or other
casualty loss.
5
<PAGE> 6
17. NOTICES: All notices required shall be given by registered or certified
mail, postage prepaid, return receipt requested or via a commercial overnight
delivery service.
Notice to the Sublessee shall be addressed to:
Landacorp
4151 Ashford Dunwoody Road
Suite 505
Atlanta, Georgia 30319
Notice to Sublessor shall be addressed to:
Unisys Corporation
P.O. Box 500
Blue Bell, PA 19424
ATTN: Real Estate Administration
All notices shall be deemed received two (2) days after mailing or upon the next
business if sent via a commercial overnight delivery service.
19. HOLD OVER. Notwithstanding any provision of law or any judicial decision to
the contrary, no notice shall be required to terminate the Term on the date
herein specified as the end of the Term, and the Term shall expire on the date
herein mentioned without notice being required from either party. In the event
that Sublessee remains beyond the expiration date of the Term, it is the
intention of the parties and it is hereby agreed that a tenancy at sufferance
shall arise at a monthly rent equal to twice the monthly Minimum Rent in effect
at the expiration of the Term plus any amounts charged against Sublessor as
Tenant under the Lease for holdover rent or penalty. It is further agreed that
Sublessee shall indemnify and hold harmless Sublessor from and against any and
all liability, claims, demands, expenses, damages and judgments incurred by
Sublessor as a result of Sublessee's retaining possession.
20. SUBLESSEE DEFAULT: The occurrence of any one or more of the following
events shall constitute a default under this Sublease by Sublessee:
a. The vacation or abandonment of the Subleased Premises by Sublessee
without the payment of Minimum Monthly Rent.
b. The failure by Sublessee to make any payment of Minimum Rent or any
other payment required to be made by Sublessee hereunder on the date due where
such failure shall continue for a period of five (5) business days after the
same shall become due and payable.
c. The failure by Sublessee to observe or perform any of the covenants,
conditions or provisions of this Sublease other than as described in the
immediately preceding paragraph and/or the failure by Sublessee to observe or
perform any of the covenants, conditions or provisions of the Lease to which
Sublessee has agreed to be
6
<PAGE> 7
bound pursuant to the terms of this Sublease, where such failure continue for a
period of fifteen (15) days after written notice thereof from Sublessor to
Sublessee.
d. The making by Sublessee of any general arrangement of assignment for
the benefit of creditors: Sublessee becomes a 'debtor' as defined in 11 U.S.C.
101 or any successor statue thereto (unless, in the case of a petition filed
against Sublessee, the same be dismissed within sixty (60) days): the
appointment of a trustee or receiver to take possession of all or substantially
all of Sublessee's assets or of Sublessee's interest in this Sublease, where
possession is not restored to Sublessee within thirty (30) days: or the
attachment, execution or other judicial seizure of all or substantially all of
Sublessee's assets or of Sublessee's interest in this Sublease, where such
seizure is not discharged within thirty (30) days.
21. REMEDIES: In the event of any such default by Sublessee, Sublessor may
at any time thereafter, without limiting Sublessor in the exercise of any right
or remedy which Sublessor may have by reason of such default or breach:
a. Terminate Sublessee's right to possession of the Subleased Premises
by any lawful means, in which case this Sublease shall terminate and Sublessee
shall immediately surrender possession of the Subleased Premises to Sublessor.
In such event, Sublessor shall be entitled to recover from Sublessee all damages
permitted to be recovered by a landlord pursuant to the laws of the jurisdiction
where the Subleased Premises are located, together with all damages incurred by
Sublessor by reason of Sublessee's default, including, but not limited to, the
cost of recovering possession of the Subleased Premises, reasonable attorneys
fees, and any real estate commission actually paid.
b. Maintain Sublessee's right to possession in which case this Sublease
shall continue in effect whether or not Sublessee shall have vacated or
abandoned the Subleased Premises. In such event, sublessor shall be entitled to
enforce all of sublessor's rights and remedies under this Sublease, under the
laws of the jurisdiction where the Subleased Premises are located at law and
equity, including the right to recover the Minimum Monthly Rent and all other
sums due hereunder as the same become due.
c. Declare the entire balance of Minimum Rent and all other sums
payable hereunder during the remaining Term of this Sublease to be immediately
due, payable and in arrears as if by the terms and provisions of this Sublease
said balance of Minimum Rent and other sums were on that date payable in
advance. Any such acceleration by Sublessor shall not constitute a waiver of any
right or remedy of Sublessor.
d. Pursue any other remedy now or hereafter available to Sublessor
under the laws of the jurisdiction where the Subleased Premises are located or
in equity.
e. Pursue any remedy enforceable by Landlord under the Lease.
7
<PAGE> 8
All remedies available to Sublessor hereunder shall be cumulative and
concurrent. No waiver or delay in enforcement by Sublessor of any breach of
Sublessee's obligations hereunder shall constitute a waiver of any such breach
or any subsequent breach.
22. INTEREST: In the event that any sums due and payable to Sublessor
pursuant to the terms of this Sublease are not paid when due, other than the
Minimum Monthly Rent and Additional Rent which shall begin bearing interest on
the sixth (6th) business day following the Due Date, such sums shall bear
interest at the rate of twelve percent (12%) per year, from the due date until
actually paid, unless that rate is usurious as applied to Sublessee in which
event the rate shall be reduced to the highest non-usurious rate. Neither the
accrual nor the payment of interest shall cure any default by Sublessee under
this Sublease.
23. BROKERS: Sublessor and Sublessee represent, warrant and agree that each
has not dealt with any broker, agent, finder or other intermediary in
connection with the subletting of the Subleased Premises except Ackerman & Co.
(the "Listing Broker") and Grubb & Ellis (the "Participating Broker").
Sublessor shall be solely liable for any commission due to the Listing Broker.
The Listing Broker shall be solely liable for any commission due to the
Participating Broker. Sublessor and Sublessee agree to indemnify, defend and
hold the other harmless from and against any claims against the other resulting
from a breach or inaccuracy of the foregoing representation, warranty and
agreement which shall survive expiration, cancellation or other termination of
this Sublease.
24. PARKING: Sublessor shall provide fifteen (15) unreserved parking spaces
and access cards to Sublessee for the use of its employees in the building
parking lot. Additional access cards may be purchased from the Landlord at
Sublessee's sole cost and expense.
25. COMPLIANCE WITH LAWS: Sublessee shall, throughout the Term of this
Sublease, observe and comply with all statutes, laws, ordinances, notices,
orders, rules, regulations and requirements of all federal, state and municipal
governments and appropriate departments, commissions, boards and officers
thereof, and notices, orders, rules and regulations of the National Board of
Fire Underwriters, or any other body now or hereafter constituted exercising
similar functions, relating to the Subleased Premises, foreseen or unforeseen,
ordinary as well as extraordinary, or to the use or manner of use of the
Subleased Premises, or to the fixtures and equipment thereof.
25. AUTHORITY: The parties executing this Sublease represent and warrant
that they have the full right and lawful authority to execute this Sublease for
the Term, in the manner and upon the conditions and provisions herein contained.
26. FURTHER DOCUMENTS: Each party agrees to execute and deliver to the
other all instruments which may reasonably be required to carry out all terms
and provisions of this Sublease.
8
<PAGE> 9
27. RECOVERY OF FEES: If either party is successful in enforcing against the
other any legal or equitable remedy for a breach of any provision of this
Sublease, the successful party shall be entitled to recover its expenses and
reasonable attorney's fees as determined by the court as part of the judgement
or decree.
28. BINDING EFFECT: This Sublease shall be binding upon the successors and
permitted assigns of Sublessee and Sublessor.
29. INTEGRATED DOCUMENT: This instrument embodies all of the agreements between
the parties with respect to the Subleased Premises, and no oral agreements,
prior correspondence or other prior writings shall be held to vary the
provisions hereof. Any subsequent changes or modifications shall become
effective only by a written instrument duly executed by Sublessee and Sublessor.
30. LESSOR'S CONSENT: This Sublease is contingent upon, and shall have no force
or effect until receipt of, the Landlord's written consent hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Sublease Agreement as
of the day and year first above written.
SUBLESSEE:
Landa Management Systems Corporation
By: /s/ EUGENE SAUTER CALLAWIER
--------------------------------
Its: Chief Executive Officer
--------------------------------
SUBLESSOR:
Unisys Corporation
By: /s/ RICHARD J. L'ECUYER
--------------------------------
Richard J. L'Ecuyer
Corporate Director
Real Estate Operations
9
<PAGE> 10
EXHIBIT "B"
To the Sublease dated __________________, made between UNISYS CORPORATION
("Sublessor"), and Landa Management Systems Corporation ("Sublessee"), and to
which this Exhibit is attached and made a part of.
WORKLETTER
To induce the Sublessee to enter into this Lease and without limiting either the
obligations of the Sublessor or the rights and privileges of the Sublessee set
forth in this Lease, the Sublessor and the Sublessee, in consideration of the
mutual covenants hereinafter contained, agree as follows:
1. Plans, Working Drawings and Specifications
A. Sublessor to provide 1/8" scale drawing(s) which will show the type
and location of partitions, doors, electrical and telephone outlets, cabinets,
lighting and HVAC diffusers indicating all work to be done by the Sublessor,
whether at the Sublessor's expense or the Sublessee's expense. The Sublessor
will submit a breakdown of cost for all work to be done by the Sublessor
indicating what portion will be the Sublessee's expense. Only upon written
authorization may the Sublessor proceed with the work.
B. Sublessor will provide to Sublessee samples of finish items to be
selected by Sublessee such as carpet, paint, wall coverings, etc., as
specified in schedule.
C. Sublessee will be responsible for the design cost associated with any
special requirements, e.g. non-standard wiring, HVAC, wall covering,
cabinetwork and millwork or changes to the plan due to changes in Sublessee
requirements, etc. Following the initial design planning meeting with the
Sublessee, the Sublessor will notify the Sublessee of any added design fees and
will not start that part of the design until the Sublessee has approved the
cost.
D. After receipt of the Drawings, the Sublessee shall approve or
disapprove the same. If the Sublessee does not approve the Working Drawings and
Specifications as submitted, the Sublessee shall approve those portions which
are acceptable to the Sublessee and shall disapprove those portions which are
not acceptable to it, specifying the reasons for such disapproval. The
Sublessor shall then, at its sole cost and expense, correct the Drawings and
resubmit them for the Sublessee's review and approval.
E. Sublessor shall use its best effort to ensure that the structure and
detail of the utilities and mechanical and electrical system are in accordance
with working drawings and that all of the work meets applicable federal, state
and local laws, codes, rules and regulations. Sublessee is responsible for
making the Sublessor aware of all of the Sublessee's requirements before the
working drawings are prepared.
F. The Sublessee is responsible for working with the designers to
provide approved plans and finish selections on the dates indicated. Failure
to do so will constitute a day-for-day delay to the scheduled completion
without delaying the commencement date of rent payments.
G. Special requirements, i.e. non-standard fit-up items, may have
ordering and delivery times that will require total completion of the space
after the occupancy date. In some cases, this cannot be determined until the
order is placed for the material. The Sublessor will advise the Sublessee
immediately upon becoming aware of this situation and assist the Sublessee in
providing alternate solutions. The Sublessee will be responsible for any cost
associated with working overtime required to provide special finishes before or
after the occupancy date, if the Sublessor advises the Sublessee of overtime as
part of the alternate solutions to delivery problems.
1
<PAGE> 11
2. Schedule
The Sublessor and the Sublessee shall comply with the following Schedule:
(All days to be considered working days.)
<TABLE>
<CAPTION>
Party
Responsible Due Date
----------- --------
<S> <C> <C>
a. Sublessee,
Sublessor Lease Execution
Lessor Lessor's Consent
b. Sublessee Sublessee's approval of construction
Documents and approval of any Within 5
additional cost. days of 2.a.
c. Sublessor Construction started by Sublessor. Within 5 days
of 2.b.
d. Sublessor Construction completed by Sublessor. Within 30
days of 2.c.
</TABLE>
Sublessor agrees to provide one day's free rent for every day of delay
beyond the above occupancy date when due to no fault of the Sublessee. Delays
caused by Sublessee may delay the occupancy date but will not delay the
commencement date. The Sublessee understands that if changes are made in the
initial requirements given to the Sublessor, then a period of delay may be
incurred. If delays are incurred due to Sublessee-initiated changes or
Sublessee-required holdups to evaluate changes, the commencement date shall not
be adjusted.
NOTE: All correspondence to be sent by overnight service or local courier
as required.
3. The Work
The Sublessor shall furnish, install and perform completely all of the
work shown on the Drawings unless otherwise noted. The Sublessor shall be fully
responsible for all matters that must be accomplished to complete the work in
accordance with provisions of the Lease, filing plans and other required
documentation with the proper governmental authorities, securing all necessary
permits and monitoring all aspects of the work.
4. Sublessor's Building Standard Improvements
A. Building Standard Partitions
The Building Standard partition assembly for interior spaces extends to
the underside of the suspended ceiling. It consists of 3 5/8 metal studs 24" on
center, with one layer of 1/2" drywall prepared for painting on each side of
studs. All partitions between tenants and exit corridors shall extend to the
underside of the floor structure above with suitable openings to accommodate
air conditioning and pipework. Sublessee shall only bear the costs for one-half
of the demising wall to the Subleased Premises. Demising partitions consist of 3
5/8" metal studs 24" on center, with one layer of drywall prepared for painting
on each side of studs and sound attenuation blankets. Existing partitions as per
the Drawings shall remain.
2
<PAGE> 12
B. Ceilings
Building Standard ceilings provided by Sublessor are 2' x 2' suspended
acoustical ceiling tile with an exposed slotted profile grid element.
Replacement of broken or damaged ceiling tiles shall be an expense chargeable
against the Improvement Allowance.
C. Doors and Frames
Entrance Doors are full height, 3'0" wide veneer solid core wood
doors, fire rated as required. The door will be stained and finished with
polyurethane and the frame will be painted. The doors are undercut to allow
for the Building Standard carpet.
Interior doors are similar to the entrance doors, but non-rated and
installed in knockdown metal frames or welded frames as currently exists in the
Subleased Premises. Sublessor shall provide doors for the Subleased Premises
which are in reasonably the same condition as currently exists in the Subleased
Premises at no additional cost to Sublessee.
D. Hardware
The latch set is design lever handle in polished chrome. Each Sublessee
entry door shall be provided with four four-ball bearing polished chrome butt
hinges and a wall stop. On lockset, keyed to the building master key system,
shall be provided for each entrance door. Two keys will be provided for each
entrance door; additional keys may be purchased by Sublessee from the Lessor.
All entrance doors to public corridors shall have surface mounted door closers.
E. Flooring
The Sublessee has the option of selecting from the Building Standard
carpet, furnished and installed (glued down) at the Sublessor's expense. Four
inch high vinyl wall base is included along all partitioning.
F. Painting
All partitions, door frames and column enclosures shall be painted. All
non-metallic surfaces shall receive one coat of primer and one flat finish
coat, except doors which receive a stain and a coat of polyurethane. All metal
surfaces have a factory applied shop coat which shall receive an enamel primer
and an enamel semi-gloss finish coat. Colors in the Sublessee space shall be
selected by Sublessee from the Building Standard samples with no more than two
(2) color breaks in any one room.
G. Window Covering
Thin-type (1") horizontal blinds currently exist in each window.
H. Electrical Outlets
120v Duplex outlets installed in partitions shall be provided in locations
designated by the Sublessee. Under-floor electrical outlets can be provided at
the expense of the Sublessee.
I. Communications Wiring
Telephone outlets installed in partitions shall be provided in locations
designated by Sublessee. Telephone outlets have empty conduit terminating above
the suspended ceiling. Under-floor telephone outlets can be provided at the cost
of the Sublessee.
3
<PAGE> 13
All communications wiring shall be done by the Sublessee's communications
contractor at the direction and expense of the Sublessee. Sublessor has no
responsibility for said work which must, however, (1) meet Building Standard
criteria and local codes and not conflict with the progress of the building and
(2) be performed by installers who are licensed for the installation of
communications system. Any damage caused by Sublessee's contractor shall be the
liability of the Sublessee. Any additional communications conduit required shall
be installed by the Sublessor's contractor at the Sublessee's expense.
J. Lighting
Building Standard light fixtures currently exist in the Subleased
Premises. All lighting shall be in accordance with Building Standard as
outlined by the Architect.
K. HVAC
Provided that the allowance for interior partitioning is not exceeded, all
engineering and installation of heating and cooling systems for standard office
space will be provided by the Sublessor. If additional HVAC diffusers are
required due to partitioning quantities in excess of typical office layouts or
due to special requirements such as heat producing equipment, then provisions
will be made at the Sublessee's expense for special needs such as computer
installations served by the Building Standard HVAC.
L. Fire Protection System
The building is equipped throughout with a fire protection sprinkler
system, installed in grid pattern. Should the partition layout needed by the
Sublessee require relocation of existing sprinkler heads, then the Sublessor
will provide four relocations and four additions per 1000 square feet of usable
space. Relocations to additions in excess of the allowance will be at the
expense of the Sublessee.
5. Sublessee Improvement Costs
Sublessor shall provide all improvements as shown on the construction drawings
to be approved by Sublessee. Sublessor shall provide an allowance of up to
Thirty Thousand Four Hundred Sixty-nine and 30/100 Dollars ($30,469.30)
("Sublessor Contribution") to be applied toward cost of improvements. All costs
of improvements to Premises shall be an expense chargeable against the
improvement allowance. All working drawings shall be approved in writing by
Sublessee prior to commencement of construction. Any modifications or changes
to the working drawings or work in progress made by Sublessee that result in
additional costs shall be approved in writing by Sublessee before any change is
made, and shall be paid for by Sublessee prior to occupancy of the Premises.
Sublessee shall pay Sublessor all costs in excess of Sublessor Contribution
("Sublessee Contribution") prior to commencement of improvements.
4
<PAGE> 14
UNISYS SUBLEASE
ASHFORD PERIMETER BUILDING
[FIFTH FLOOR DIAGRAM]
4151 ASHFORD DUNWOODY RD.
ATLANTA, GA 30319
<PAGE> 15
THE LEASE
THIS LEASE AGREEMENT, hereinafter referred to as the "Lease", made and
entered into as of the 1st of September 1991, between LINCOLN P.C. ASSOCIATES
hereinafter referred to as "Landlord" and UNISYS CORPORATION hereinafter
referred to as "Tenant".
WITNESSETH
1. Summary of Lease. The following is a summary of certain portions of
the Lease:
Landlord: LINCOLN P.C. ASSOCIATES
Landlord's Address: 3405 Piedmont Road, Suite 100
Atlanta, Georgia 30305
Tenant: UNISYS CORPORATION
Building Address: 4151 Ashford-Dunwoody Road
Atlanta, Georgia 30319
Floor(s) upon which the Premises are Located: 1 - 6
Term: 10 Years and 0 Months
---- ---
Commencement Date: September 1, 1991
-----------------
Expiration Date: August 31, 2001
---------------
Rent Start Date: September 1, 1991
-----------------
Base Rent Per Year: $2,036,998.00, subject to
increase as set forth herein
----------------------------
Base Rent Per Month: $169,749.83
-----------
Approximate Rentable
Square Feet
Within Premises: 110,108
-------
Approximate Rentable
Square Feet
Within Project: 285,773
-------
Tenant's Percentage: 38.53%
------
Security Deposit: None
----
Broker: None
----
It is understood that the foregoing is intended as a summary of the Lease for
convenience only and if there is a conflict between the above summary and any
provisions of this Lease hereinafter set forth, the latter shall control.
2. Definitions.
(a) "Building" means the office building located upon certain real
property located in Land Lot 33, 18th District, DeKalb County, Georgia, the
address of which is 4151 Ashford-Dunwoody Road, Atlanta, Georgia 30319.
(b) "Premises" means the office space which is located in the Building
in accordance with the drawing attached hereto as Exhibit "A".
(c) "Base Rental" means the initial minimum sum of $2,036,998.00 per
annum, as the same may be increased from time to time as follows:
<PAGE> 16
<TABLE>
<CAPTION>
Lease Annual Rent Rate
Year Per Square Foot Annual Rent Monthly Rent
------------------------------------------------------------------------
<S> <C> <C> <C>
1 $18.50 $?,???,???.?? $169,749.83
2 $18.50 $?,???,???.?? $169,749.83
3 $18.50 $?,???,???.?? $169,749.83
4 $19.12 $?,???,???.?? $1?2,302.00
5 $19.12 $?,???,???.?? $187,372.05
6 $20.32 $?,???,???.?? $192,356.85
7 $21.45 $2,352,233.17 $196,857.76
8 $21.39 $2,421,350.50 $201,779.21
9 $22.54 $2,481,384.27 $206,823.69
10 $23.10 $2,543,931.27 $211,994.28
</TABLE>
(d) "Commencement Date" means September 1, 1991.
(e) "Security Deposit" has been waived by Landlord and Tenant.
(f) "Common Areas" means those areas of the Building devoted to corridors,
elevator foyers, restrooms, mechanical rooms, janitorial closets, electrical and
telephone closets, vending areas and other similar facilities provided for the
common use or benefit of tenants generally or of the public. Common Areas shall
be measured from and to the inside finished surface of exterior Building walls,
and from and to the center of any partition walls which separate Common Areas
from tenant spaces, including the Premises, and from Service Areas.
(g) "Service Areas" means those areas within the Building outside walls
used for elevator, building stairs, fire towers, elevator shafts, flues, vents,
stacks, pipe shafts and vertical ducts (but shall not include any such areas
provided or reserved for the exclusive use of a particular tenant). Service
areas shall be measured from and to the inside finished surface of exterior
Building walls, and from and to the center of any partition walls which
separate Service Areas from tenant spaces, including the Premises, and from
Common Areas.
(h) "Exterior Common Areas" means all areas not located within the
Building provided and maintained for the common use and benefit of Landlord and
tenants of the Building (or multi-building project) generally, and the
employees, invitees and licensees of Landlord and such tenants, including,
without limitation, parking areas whether enclosed or not, streets, sidewalks,
and landscaped areas.
(i) "Rentable Area" of the Premises means (1) the gross area thereof as
measured from and to the inside surface of the outer glass of the exterior
Building walls, and from and to the center of any partition walls which
separate the Premises from adjoining tenant, Common Areas, and Service Areas;
and (2) the pro rata part of the Common Areas of the Building applicable to the
Premises in the proportion that the area of the Premises as calculated by the
method described in (1) above bears to the total Rentable Area of the Building
as calculated by the same method. Rentable Area shall not include Service Areas.
(j) "Basic Costs" as used herein means all expenses, costs and
disbursements (but not repayment of debt or replacement of capital investment
items other than those elsewhere herein expressly included, nor specific costs
especially billed to and paid by other tenants of the Building) of every kind
and nature which Landlord shall pay or become obligated to pay because of, or
in connection with, the ownership and operation of the Building and the
Exterior Common Areas, including but not limited to the following: (i) Wages
and salaries, including payroll taxes, workers' compensation, insurance
premiums, and all other employment costs to Landlord of all employees engaged in
-2-
<PAGE> 17
operating and maintaining the Building, and that part of central accounting
costs which are applicable to the Building; (ii) cost of all supplies and
materials used in operation and maintenance of the Building; (iii) cost of all
utilities for the Building including the cost of water, sewer, gas, oil and
electric and other power (but excluding any utility costs reimbursed directly by
tenants to Landlord other than in the nature of additional rental payments
similar to those required by Tenant under this Lease); (iv) cost of all
maintenance and service agreements for the Building and the equipment therein,
including, but not limited to security service, window cleaning, janitorial
service, elevator maintenance, maintenance of heating, ventilation and
air-conditioning equipment, plumbing, controls, locks, alarms and all other
parts of the Building; (v) cost of all insurance relating to the Building or
rents therefrom including, but not limited to, the cost of casualty and
liability insurance applicable to the Building and to Landlord's personal
property used in connection with the Building; (vi) charges, whether federal,
state, county or municipal, and whether they be by taxing districts, or taxes,
and assessments, attributable to the Building, its operation, or any tax in the
nature of a gross receipts tax imposed on rentals (but excluding fines and
penalties resulting from the failure of Landlord to make timely payment of the
same); (vii) cost of repairs and general maintenance (excluding repairs and
general maintenance paid by proceeds of insurance or by Tenant or other third
parties, and alteration attributable solely to tenants of the Building, other
than Tenant); (viii) amortization of the cost of installation of capital
improvements or other capital items which are primarily for the purpose of
reducing operating costs or which may be required by governmental authority, as
reasonably amortized by Landlord and (ix) management fees. The Basic Costs of
the Building shall be computed on the accrual basis and shall be all Basic Costs
incurred by Landlord to maintain all facilities of the Building in operation
during all or part of the Base Year, together with such additional or substitute
facilities in subsequent years as may be determined by Landlord to be necessary.
In determining the amount of Basic Costs (for 1993 and any subsequent year), for
the purpose of this Paragraph, in the event that less than 95% of the Rentable
Area of the Building shall have been occupied by tenants and fully used by them
at any time during the year, Basic Costs shall be increased to an amount equal
to the like operating expense which would normally be expected to be incurred
had such occupancy been 95% of the Rentable Area and had such full utilization
been made during the entire period.
3. Lease Grant. Subject to and upon the terms herein set forth, Landlord
leases to Tenant and Tenant leases from Landlord the Premises for the Lease
Term. Tenant is hereby granted only a usufruct, not subject to levy or sale; no
estate for years nor other estate shall pass from Landlord on account thereof.
The Premises are stipulated for all purposes to contain 110,108 square feet of
Rentable Area.
4. Lease Term. This Lease Term is for a term or period of time commencing
at 12:01 a.m. on the Commencement Date, and continuing thereafter for the next
10 years thereafter.
5. Use. The Premises shall be used for office purposes, and for
demonstration, training and general storage purposes incidental thereto, and for
no other purpose. Tenant agrees not to use, or permit the use of, the Premises
for any purpose which is illegal, or which constitutes or creates a nuisance, or
which would increase the cost of insurance coverage with respect to the
Building, or which tends to reduce the value of the Building or reduce the
attractiveness of the Building to other tenants. Landlord represents to Tenant
that as of the date of this Lease, the Building is zoned under an appropriate
zoning
-3-
<PAGE> 18
classification under the zoning ordinance of DeKalb County, Georgia that allows
use of the Building for office use.
6. Base Rents.
(a) Tenant agrees to pay to Landlord, without any demand, setoff or
reduction whatsoever, the Base Rental and all such other sums of money as shall
become due hereunder as traditional rent, all of which are sometimes hereinafter
collectively called "rent". In advance in equal monthly installments on the
first day of each calendar month during the Lease Term to Landlord at
Landlord's address provided herein (or such other address as may be designated
by Landlord in writing from time to time). If the term of this Lease commences
on a day other than the first day of a month or terminates on a day other than
the last day of a month then the amount of the installments of Base Rental and
any adjustments thereto for such month or months shall be prorated, based on
the number of days the Lease is in effect during such month.
(b) All installments of rent not paid within five (5) days after the
date when due shall bear interest at the rate of one and one-half percent
(1-1/2%) per month, or the maximum rate permitted by law, whichever is lower.
7. Additional Rent.
(a) The Rentable Area in the building is stipulated to be 285,773
square feet. Tenant shall, from time to time during the term of the Lease, pay
as additional rent hereunder, an amount, per each square foot of Rentable Area
within the Premises, equal to the excess ("Excess") in actual Basic Costs, over
the actual 1993 Basic Costs per square foot of Rentable Area in the Building.
Commencing on the fourth (4th) anniversary of the date of this Lease, Tenant
shall begin paying the Excess in accordance with the provisions of this
paragraph.
(b) Landlord shall also have the right to make a good faith estimate
of the Excess for each upcoming calendar year and upon thirty (30) days' notice
to Tenant to require the monthly payment by Tenant of one-twelfth (1/12th) of
such estimated Excess, but in no event shall any such estimate be based on Basic
Costs which exceed the actual Basic Costs for the previous calendar year.
(c) By April 1 of each calendar year following the year during which
the Lease Term begins, or as soon thereafter as practical, Landlord shall
furnish to Tenant a statement of Landlord's actual Basic Costs for the previous
calendar year, and Landlord shall notify Tenant of the amount of the Excess
owing by Tenant to Landlord, showing the calculations thereof which result from
such statement. Tenant agrees to promptly pay Landlord, as additional rent, all
Excess which has not been previously paid as estimated Excess. If for any
calendar year additional rent collected for the prior year, as a result of
Landlord's estimate of Excess, is greater than the additional rent actually due
during such prior year, then Landlord shall refund to Tenant any such
overpayment.
(d) Notwithstanding the foregoing provisions of this Lease to the
contrary, for purposes of calculating the Excess under this Lease, in no event
shall Controllable Basic Costs be increased in any calendar year after 1993 by
more than five (5%) of the Controllable Basic Costs for the previous calendar
year. For purposes hereof, "Controllable Basic Costs" shall mean all Basic Costs
other than those enumerated in subsections (iii), (v), (vi) and (viii) of
paragraph 2(j) of this Lease.
-4-
<PAGE> 19
9. Services to be Furnished by Landlord. Landlord agrees to furnish
Tenant the following services, subject to any limitations which may be imposed
thereon from time to time by any governmental authority:
(a) Hot and cold water at those points of supply provided for
general use of other tenants in the Building, and heating and air
conditioning in season, at such temperatures, and during such business
hours as are deemed standard by Landlord from time to time; however,
heating and air-conditioning services at times other than for normal
business hours for the Building (which for purposes of this Lease shall be
7:00 o'clock a.m. to 6:00 o'clock p.m. Monday through Friday, excluding
holidays, and 8:00 o'clock a.m. to 12:00 o'clock noon on Saturday,
excluding holidays) shall be furnished only at Landlord's discretion upon
the written request of Tenant delivered to Landlord prior to 3:00 p.m. at
least three (3) days in advance of the date such usage is requested. Tenant
shall bear the entire cost of such requested additional service, but such
cost shall not exceed Landlord's actual cost, which cost shall not be
increased except as a result of the increase in the cost of utilities
supplied by the applicable utility company.
(b) Routine maintenance and electric lighting service for all Common
Areas and Service Areas of the Building in the manner and to the extent
deemed by Landlord to be standard.
(c) Janitor service, Mondays through Fridays, but exclusive of normal
business holidays substantially in accordance with Landlord's Building
Standard specifications; except that, if Tenant's floor covering or other
improvements require special treatment, Tenant shall pay the additional
cleaning cost attributable thereto as additional rent upon presentation of
a statement therefore by Landlord.
(d) Subject to the provisions of Paragraph 13, Building Standard
facilities to provide electrical current sufficient to illuminate the
Premises and for the operation of small office machines by Tenant in its
use and occupancy of the Premises.
(e) All Building Standard fluorescent bulb replacement in the
Premises and fluorescent and incandescent bulb replacement in the Common
Areas and Service Areas.
(f) Access to the Building may be regulated during other than normal
business hours in such manner as Landlord deems appropriate; however,
Tenant and its employees shall have access to the Premises 24 hours a day,
7 days a week. Landlord, however, shall have no liability to Tenant, its
employees, agents, invitees or licensees for losses due to theft or
burglary, or for damages or injuries done by unauthorized persons on the
Premises and neither shall Landlord be required to insure against any such
losses. Tenant shall cooperate fully in Landlord's efforts to regulate
access to the Building.
The failure by Landlord to any extent to furnish, or the interruption
or termination of, the above-described services in whole or in part resulting
from causes beyond the reasonable control of Landlord shall not render Landlord
liable in any respect, not be construed as an eviction of Tenant, nor cause an
abatement of rent, nor relieve Tenant from the obligation to fulfill any
covenant or agreement hereof. Should any of the equipment or machinery used in
the provision of such services for any cause cease to function properly, Tenant
shall have no claim for offset or abatement of rent or damages on account of an
-5-
<PAGE> 20
interruption in service occasioned thereby or resulting therefrom.
Notwithstanding the foregoing, in the event of any interruption or termination
or the electrical or heating and air conditioning services to be provided by
Landlord under this Lease, and as a result any portion of the Premises is
untenantable for a period of more than fifteen (15) consecutive business days,
then all Base Rent with respect to such portion of the Premises so rendered
untenantable shall abate until such time as such services are restored to the
extent such portion of the Premises is once again tenantable.
9. Monument Sign. Landlord shall cause to be constructed, subject to
and in accordance with applicable laws, a monument sign to be located along
Ashford-Dunwoody Road, the size, location and design of such monument sign to be
mutually approved by Landlord and Tenant, such approvals not to be unreasonably
withheld or delayed. In no event, however, shall Landlord be obligated to expend
more than $10,000.000 for the design, construction and installation of such
monument sign. Upon the completion of construction and installation of such
monument sign, Landlord shall be entitled to remove and dispose of the signage
of Tenant located on the exterior of the Building.
10. Graphics. Landlord shall provide and install, at Tenant's cost,
all letters or numerals on doors in the Premises, all such letters and numerals
shall be in the standard graphics for the Building and no others shall be used
or permitted on the Premises without Landlord's prior written consent, such
consent not to be unreasonably withheld.
11. Care of Premises by Tenant. Tenant agrees not to commit or allow
any waste to be committed on any portion of the Premises, and at the termination
of this Lease to deliver up the Premises to Landlord in as good condition as at
the Commencement Date, ordinary wear and tear excepted.
12. Repairs and Alterations by Tenant. Tenant covenants and agrees
with Landlord, at Tenant's own cost and expense and with prior notice from
Landlord to Tenant for the need for such repair, to repair or replace any damage
done to the Building, or any part thereof, caused by Tenant or Tenant's agents,
employees, or contractors, and such repairs shall restore the Building to as
good a condition as it was in prior to such damage, and shall be effected in
compliance with all applicable laws; provided, however, that if Tenant fails to
make such repairs or replacements promptly, the Landlord may, at its option,
make repairs or replacements, and Tenant shall pay the cost thereof to the
Landlord on demand as additional rent. Tenant agrees with Landlord not to make
or allow to be made any alterations to the Premises, install any vending
machines on Premises, or place signs on the Premises, which are visible from
outside the Premises, without first obtaining the written consent of Landlord in
each such instance, which consent may be given on such conditions as Landlord
may elect; provided, however, that Landlord shall not unreasonably withhold such
consent with respect to (i) vending machines wholly within the Premises and not
visible from public areas of the Building and (ii) alternations that do not
affect the structural components or the mechanical, plumbing or electrical
systems of the Building. Any and all alterations to the Premises shall become
the property of Landlord upon the expiration or earlier termination of this
Lease (but not for movable equipment, trade fixtures or furniture owned by
Tenant), but Landlord may, nonetheless, require Tenant to remove any and all
fixtures, equipment and other improvements installed by Tenant on the Premises
upon the expiration or earlier termination of this Lease; provided, however,
that with respect to any improvements, Landlord shall not have the right to
require Tenant to remove any improvements installed by Tenant unless such
improvements were installed without the consent of Landlord or at the time of
the consent Landlord notified Tenant that such improvements would be required to
be removed at the end
-6-
<PAGE> 21
of the Lease Term. In the event that Landlord so elects, and Tenant fails to
remove such improvements, Landlord may remove such improvements at Tenant's
cost, and Tenant shall pay Landlord on demand the cost of restoring the Premises
to Building Standard.
13. Use of Electrical Services by Tenant. Tenant's use of electrical
services furnished by Landlord shall not exceed, either in voltage, rated
capacity or overall load that which Landlord deems to be Building Standard.
Building Standard does not include electricity used to operate any item of
electrical equipment which singly consumes more than 0.25 kilowatts at rated
capacity or which requires a voltage other than 120 volts single phase. In the
event Tenant shall request that it be allowed to consume electrical services in
excess of that deemed by Landlord to be Building Standard, Landlord may refuse
to consent to such usage if the electrical systems of the Building are not
capable of sustaining such usage, or may consent upon such conditions as
Landlord reasonably elects, including the requirement that submeters be
installed at Tenant's expense, that Tenant pay the cost of the excess
electricity used, and, if the operation of such equipment requires modification
to the Building systems or additional air-conditioning capacity above that
provided by the Building Standard systems then the cost of such modifications
and any additional air-conditioning installation and operation costs shall be
paid by Tenant.
14. Parking. During the Lease Term, Tenant shall have the non-exclusive
use in common with Landlord, other tenants of the Building (or project in which
the Building is located in a multi-building project), their guests and invitees,
of the nonreserved common automobile parking areas, driveways, and footways,
subject to rules and regulations for the use thereof as prescribed from time to
time by Landlord. Notwithstanding the foregoing, fourteen (14) parking spaces
shall be designated by Landlord, at Tenant's expense, for the exclusive use of
Tenant and Tenant's invitees, in substantially the location set forth on Exhibit
"B" hereto.
15. Laws and Regulations. Tenant agrees to comply with all applicable
laws, ordinances, rules and regulations of any governmental entity or agency
having jurisdiction of Premises.
16. Building Rules. Tenant will comply with the rules of the Building as
set forth herein as adopted and amended by Landlord from time to time, and will
cause all of its agents, employees, and contractors to do so.
17. Entry by Landlord. Tenant agrees to permit Landlord or its agents or
representatives to enter into and upon any part of the Premises at all
reasonable hours upon prior reasonable notice (and in emergencies at all times)
to inspect the same, or to show the Premises to prospective purchasers,
mortgagees, tenants or insurers, to clean or make repairs, alterations, or
additions thereto, and Tenant shall not be entitled to any abatement or
reduction of rent by reason thereof.
18. Assignment and Subletting.
(a) Tenant covenants that it will not assign, sublease, transfer or
encumber this Lease or any interest therein without the prior written consent of
Landlord, which consent shall not be unreasonably withheld.
(b) Fifty percent (50%) of all cash or other proceeds of any assignment,
sale or sublease of Tenant's interest in this Lease in excess of the rent
required to be paid by Tenant hereunder (on a per square foot basis), shall be
paid to Landlord, whether consented to by Landlord or not, unless Landlord
agrees
-7-
<PAGE> 22
to the contrary in writing, and Tenant hereby assigns all rights it might have
or ever acquire in any such proceeds to Landlord. Tenant may deduct from such
proceeds (prior to calculating the split of such proceeds as provided above)
reasonable, ordinary and necessary costs and expenses incurred in connection
with the negotiation of a sublease, assignment or sale of Tenant's interest
including any reasonable leasing commission if actually incurred by Tenant and
paid to a licensed real estate broker which is unaffiliated with Tenant. The
above notwithstanding, the rent due under this lease shall in no event be
reduced.
19. Mechanic's Liens. Tenant covenants that it will not permit any
mechanic's lien or liens to be placed upon the Premises or the Building.
Nothing in this Lease shall be deemed or construed in any way as constituting
the consent or request of Landlord, express or implied, by inference or
otherwise, to any person for the performance of any labor or the furnishing of
any material to the Premises, or any part thereof, nor as giving Tenant any
right, power, or authority to contract for or permit the rendering of any
services or the furnishing of any materials that would give rise to any
mechanic's or other liens against the Premises. In the event any such lien is
attached to the Premises and is not removed of record by payment or by bonding
in accordance with Georgia law within fifteen (15) days after the date Tenant
becomes aware of the same, then, in addition to any other right or remedy of
Landlord, Landlord may, but shall not be obligated to, discharge the same. Any
amount paid by Landlord for any of the aforesaid purposes shall be paid by
Tenant to Landlord on demand as additional rent.
20. Property Insurance. Landlord shall maintain fire and extended
coverage insurance on the Building and the Premises in such amounts as
Landlord's mortgagees shall require. Such insurance shall be maintained at the
expense of Landlord (as a part of the Basic Costs), and payments for losses
thereunder shall be made solely to Landlord or the mortgagees of Landlord as
their interests shall appear. Tenant shall maintain at its expense, in an
amount equal to full replacement cost, fire and extended coverage insurance on
all of its personal property including removable trade fixtures, located in the
Premises, in such additional amounts as are required to meet Tenant's
obligations pursuant to Paragraph 22 hereof. Tenant shall, at Landlord's
request from time to time, provide Landlord with current certificates of
insurance evidencing Tenant's compliance with this Paragraph 20 and Paragraph
21. Tenant shall obtain the agreement of Tenant's insurers to notify Landlord
that a policy is due to contain waiver of subrogation clauses as to the other
party.
21. LIABILITY INSURANCE. Tenant and Landlord shall, each at its own
expense, maintain a policy or policies of comprehensive general liability
insurance with respect to the respective activities of each in the Building,
and the Exterior Common Areas (or within the project if the Building is
located in a multi-building project) with the premiums thereto fully paid on or
before due date, issued by and binding upon some insurance company approved by
Landlord, such insurance to afford minimum protection of not less than
$1,000,000.00 combined single limit coverage for death or bodily injury, and
$100,000.00 for property damage.
22. Indemnity. Landlord shall not be liable to Tenant, or to
Tenant's agents, servants, employees, customers, or invitees for any injury to
person or damage to property caused by any act, omission, or neglect of Tenant,
its agents, servants or employees, invitees, licensees or any other person
entering the Building under the invitation of Tenant or arising out of the use
of the Premises by Tenant and Tenant hereby indemnifies and agrees to hold
Landlord harmless from all liability and claims for any such damage or injury.
Tenant shall not be liable to
-8-
<PAGE> 23
Landlord or to Landlord's agents, servants, employees, customers or invitees
for any injury to person or damage to property caused by any act, omission or
neglect of Landlord, its agents, servants or employees, and Landlord hereby
indemnifies and agrees to hold Tenant harmless from all liability and claims
for any such injury or damage; provided, however, that the foregoing
indemnification of Landlord shall not be deemed or construed to deny Landlord
the benefit of the insurance required to be carried by Tenant for the benefit
of Landlord and Tenant pursuant to Paragraph 21 above with respect to any such
claim or liability.
23. Waiver of Subrogation Rights. Anything in this Lease to the
contrary notwithstanding, Landlord and Tenant each hereby waives any and all
rights of recovery, claim, action, or cause of action, against the other, its
agents, officers, or employees, for any loss or damage that may occur to the
Premises, or any improvements thereto, or the Building of which the Premises
are a part, or any improvements thereto, or any personal property of such party
therein, by reason of fire, the elements, or any other cause(s) which are
insured against under the terms of the standard fire and extended coverage
insurance policies referred to herein, regardless of cause or origin, including
negligence of the other party hereto, its agents, officers, or employees.
24. Casualty Damage. If the Premises or any part thereof shall be
damaged by fire or other casualty, Tenant shall give prompt written notice
thereof to Landlord. In case the Building shall be so damaged that, in
Landlord's good faith estimation, the time required to repair and reconstruct
the Building shall exceed one hundred eighty (180) days from the date of the
casualty (whether or not the Premises shall have been damaged by such
casualty), or in the event any mortgagee of Landlord's should require that the
insurance proceeds payable as a result of a casualty be applied to the payment
of the mortgage debt, or in the event of any material loss to the Building that
would not be covered by fire and extended coverage insurance commonly carried
for commercial properties such as the Building, Landlord may, at its option,
terminate this Lease by notifying Tenant in writing of such termination within
sixty (60) days of the date of the casualty.
If Landlord does not thus elect to terminate this Lease, Landlord
shall commence and proceed with reasonable diligence to restore the Building to
substantially the same condition in which it was immediately prior to the
happening of the casualty, except that Landlord shall not be required to spend
for such work an amount in excess of the insurance proceeds actually received
by Landlord as a result of the casualty.
Landlord shall not be liable for any inconvenience or annoyance to
Tenant or injury to the business of Tenant resulting in any way from such
damage or the repair thereof, except that, subject to the provisions of the
next sentence, Landlord shall allow Tenant a proportional diminution of rent
during the time and to the extent the Premises are unfit for occupancy. If the
Premises or any other portion of the Building be damaged by fire or other
casualty resulting from the fault or negligence of Tenant or any of Tenant's
agents, employees, or invitees, the rent hereunder shall not be diminished
during the repair of such damage and Tenant shall be liable to Landlord for the
cost of the repair and restoration of the Building caused thereby to the extent
such cost and expense is not covered by insurance proceeds.
25. Condemnation. If the whole or substantially the whole of the
Building or the Premises should be taken for any public or quasi-public use, by
right of eminent domain or otherwise, or should be sold in lieu of
condemnation, then this Lease shall terminate as of the date when physical
possession of
-9-
<PAGE> 24
the Building or the Premises is taken by the condemning authority. If less than
the whole or substantially the whole of the Building or the Premises is thus
taken or sold. (Landlord whether or not the Premises are affected thereby) may
terminate this Lease by giving written notice thereof to Tenant: in which event
this Lease shall terminate as of the date when physical possession of such
portion of the Building or Premises is taken by the condemning authority. If
this Lease is not so terminated upon any such taking or sale, the Base Rental
payable hereunder shall be diminished by an equitable amount, and Landlord shall
restore the Building and the Premises as much as possible to substantially their
former condition, to the extent condemnation proceeds are made available by the
holder of any mortgage or deed to secure debt on the Building, but Landlord
shall in no event be required to spend for such work an amount in excess of the
amount received by Landlord as compensation for such damage. All amounts awarded
upon a taking of any part or all of the Building or the Premises shall belong to
Landlord, and Tenant shall not be entitled to and expressly waives all claims to
any such compensation.
26. Damages from Certain Causes. Landlord shall not be liable to Tenant
for any loss or damage to any property or person occasioned by theft, fire, act
of God, public enemy, injunction, riot, strike, insurrection, war, casualty,
water damage of whatsoever nature, vandalism, court order, requisition, or order
of governmental body or authority or by any other cause beyond the control of
Landlord, nor shall Landlord be liable for any damage or inconvenience which may
arise through repair or alteration of any part of the Building, Exterior Common
Areas, or Premises so long as Tenant continues to have access to and from the
Premises (unless such continued access during such repair would endanger persons
in the Premises).
27. Events of Default/Remedies.
(a) The following events shall be deemed to be events of default by Tenant
under this Lease: (i) Tenant shall fail to promptly pay any rent or other sum of
money due hereunder within five (5) days after receipt of written notice from
Landlord to Tenant of such failure; (ii) Tenant shall fail to comply with any
other provision of this Lease within thirty (30) days after receipt of written
notice from Landlord to Tenant of such failure or, if such failure shall be
incapable of cure within thirty (30) days, Tenant shall not commence to cure
such failure within such thirty (30) day period and continuously prosecute the
performance of the same to completion with due diligence; (iii) the leasehold
hereunder demised shall be taken on execution or other process of law in any
action against Tenant; (iv) a default or event of default shall occur under that
certain Lease dated August 29, 1984 between Landlord and Tenant, as amended by
the ten (10) amendments thereof existing as of the date of this Lease, and as
thereafter amended; (v) Tenant shall fail to promptly move into and take
possession of the Premises when the Premises are ready for occupancy, or shall
abandon any substantial portion of the Premises; (vi) Tenant shall become
insolvent or unable to pay its debts as they become due, or Tenant notifies
Landlord that it anticipates either condition; (vii) Tenant takes any action to,
or notifies Landlord that Tenant intends to file a petition under section or
chapter of the National Bankruptcy Act, as amended, or under any similar law or
statute of the United States or any State thereof; or a petition shall be filed
against Tenant under any such statute; or (viii) a receiver or trustee shall be
appointed for Tenant's leasehold interest in the Premises or for all or a
substantial part of the assets of Tenant. If Landlord shall not be permitted to
terminate this Lease as hereinabove provided because of the provisions of Title
II, of the United States Code relating to Bankruptcy as amended ("Bankruptcy
Code"), then Tenant or any trustee for Tenant agrees promptly, within no more
than sixty (60) days upon request by Landlord to the Bankruptcy Court, to assume
or reject this Lease. In such
-10-
<PAGE> 25
event. Tenant or any trustee of Tenant may assume this Lease only if it (i)
cures or provides adequate assurance that the trustee will promptly cure any
default hereunder and (ii) compensates or provides adequate assurance that
Tenant will promptly compensate Landlord for any actual pecuniary loss to
Landlord resulting from Tenant's default.
(b) Upon the occurrence of any event or events of default by Tenant,
whether enumerated in this Paragraph or not, Landlord shall have the option to
pursue any one or more of the following remedies without being deemed to have
made an election of remedies and without any further notice or demand for
possession whatsoever (and without limiting the generality of the foregoing,
Tenant hereby specifically waives notice and demand for payment of rent or other
obligations due and waives any and all other notices or demand requirements
imposed by applicable law); (i) terminate this Lease in which Tenant shall
immediately surrender the Premises to Landlord; (ii) terminate Tenant's right to
occupy the Premises (without terminating this Lease); (iii) enter upon the
Premises and do whatever Tenant is obligated to do under the terms of this
Lease; and Tenant agrees to reimburse Landlord on demand for any expenses which
Landlord may incur in effecting compliance with Tenant's obligations under this
Lease; and (iv) exercise all other remedies available to Landlord at law or in
equity, including, without limitation, injunctive relief of all varieties.
In the event Landlord elects to reenter or take possession of the Premises
after Tenant's default, Tenant hereby waives notice of such reentry or
repossession and of Landlord's intent to reenter or retake possession, Landlord
may, without prejudice to any other remedy which he may have for possession or
arrearages in rent, expel or remove Tenant and any other person who may be
occupying said Premises or any part thereof. All Landlord's remedies shall be
cumulative and not exclusive. Forbearance to enforce one or more of the
remedies herein provided upon an event of default shall not be deemed or
construed to constitute a waiver of such default, or of any future defaults, or
to limit Landlord's right to require strict compliance by Tenant with the
provisions of this Lease.
(c) Tenant hereby covenants that, prior to the exercise of any such
remedies, it will give the mortgagees holding mortgages on the Building notice
and a reasonable time to cure any default by Landlord provided Tenant has been
furnished with the name and address of such mortgagees.
(d) If this Lease is terminated by Landlord pursuant to the provisions of
Paragraph 27, Tenant shall pay to Landlord as damages, either:
(i) a sum which represents the then excess, if any, of (a) the
aggregate amount of the rental due and reserved hereunder from the date of
Tenant's default to the expiration date of the fully stated term hereof
over (b) the aggregate rental value of the Premises for the same period as
reduced by the estimated cost of reletting the Premises, including attorneys'
fees, commission, alterations and repair costs; or
(ii) sums equal to the rent which would have been payable by Tenant
had this Lease not been so terminated, or had Landlord not so reentered the
Premises, payable upon the due dates therefor specified herein, provided,
however, that if Landlord shall relet the Premises during said period,
Landlord shall credit Tenant with the net rents received by Landlord from
such reletting such net rents to be determined by first deducting from the
gross rents as and when received by Landlord from such reletting the expenses
incurred or paid by Landlord in terminating this Lease and/or in
<PAGE> 26
reentering the Premises and in securing possession thereof, as well as the
expenses of reletting, including, without limitation, altering and
preparing the Premises for new tenants, brokers' commissions, legal fees,
and all other expenses properly chargeable against the Premises and the
rental therefrom, it being understood that any such reletting may be for a
period shorter or longer than the remaining term of this lease; but in no
event shall Tenant be entitled to a credit for any net rents from a
re-letting, except to the extent set forth hereinabove.
In the event of such termination of this Lease by Landlord as set
forth above, Landlord shall make reasonable good faith efforts to mitigate its
damages, but "reasonable good faith efforts" shall be deemed to have been made
if Landlord includes the Premises within Landlord's customary marketing
activities for Landlord's other vacant space in the Building. Nothing contained
herein shall require Landlord to give priority or preference to re-letting the
Premises ahead of other vacant space (either in the Building or in other
Buildings) owned or controlled by Landlord or its affiliates.
28. Peaceful Enjoyment. Tenant shall, and may peacefully have, hold,
and enjoy the Premises, subject to the other terms hereof, provided that Tenant
pays the rent and other sums herein recited to be paid by Tenant and performs
all of Tenant's covenants and agreements herein contained. This covenant and any
and all other covenants of Landlord shall be binding upon Landlord and its
successors only with respect to breaches occurring during its or their
respective period of ownership of the Building.
29. Surrender of Premises. Upon termination of this Lease for any
reason whatsoever, Tenant shall surrender the premises and keys thereof to
Landlord in the same condition as at commencement of the term, natural wear and
tear only excepted. Should Tenant refuse or fail to surrender the Premises upon
the expiration of the lease term or earlier termination thereof, Tenant shall be
a tenant at sufferance and shall pay to Landlord on demand each month a sum
equal to 135% of the rent due hereunder during such holdover period; provided
that there shall be no renewal of this Lease by operation of law.
If Tenant remains in possession after the expiration of the term
hereof with Landlord's acquiescence and without any distinct agreement of
parties, Tenant shall be a tenant at will, and there shall be no renewal of this
Lease by operation of law. Notwithstanding the notice provision of O.C.G.A.
Section 44-7-7, as the same may be now or hereafter amended, such tenancy at
will may be terminated upon sixty (60) days notice from Landlord.
30. Subordination, Estoppel, Attornment. This Lease shall be subject
and subordinate to any mortgage, deed to secure debt or other lien presently
existing or hereafter arising upon the Premises or upon the Building, or the
exterior Common Areas, and to any renewals, refinancing and extensions thereof
(each, a "Mortgage"). At the request of any successor to the title or interests
of Landlord, Tenant shall attorn to such successor. The subordination of this
Lease to any Mortgage, and the attornment of Tenant to the holder of any
Mortgagee, is conditioned upon an express agreement contained in such Mortgage,
or in a separate instrument to be recorded, that enforcement of such Mortgage
shall not terminate this Lease or disturb Tenant in the possession and use of
the Premises (except in the case where Tenant is in default beyond the period,
if any, provided in this Lease to remedy such default), that any party
succeeding to the interest of Landlord as a result of the enforcement of any
Mortgage shall be bound to Tenant, and Tenant shall be bound to it, under all
the terms, covenants, and conditions of this Lease for the balance of the term
of this Lease with the same force and
-21-
<PAGE> 27
effect as if such party were the original Landlord under this Lease; provided,
however, that such party shall not be liable (i) for any act or omission of any
prior Landlord, or (ii) subject to any offsets or defenses which Tenant may have
had against any prior Landlord, or (iii) bound by any monies which Tenant might
have paid for more than the current month's rent or any prepaid estimates of the
excess to any prior Landlord, or (iv) bound by any amendment or modification of
this Lease made without the prior written consent of the holder of the Mortgage.
Upon the request of Landlord, Tenant agrees to execute a subordination,
nondisturbance and attornment agreement incorporating the provisions set forth
above and otherwise in form reasonably acceptable to Landlord and Tenant. Tenant
agrees that it will from time to time upon request by Landlord execute and
deliver to such persons as Landlord shall request a statement in recordable form
certifying that this Lease is unmodified and in full force and effect (or if
there have been modifications, that the same is in full force and effect as so
modified), stating the dates to which rent and other charges payable under this
Lease have been paid, stating that Landlord is not in default hereunder (or if
Tenant alleges a default stating the nature of such alleged default) and further
stating such other matters as may be reasonably requested.
31. No Implied Waiver. The failure of Landlord to insist at any time upon
the strict performance of any covenant or agreement or to exercise any option,
right, power or remedy contained in this Lease shall not be construed as a
waiver or relinquishment thereof for the future. No payment by Tenant or receipt
by Landlord of a lesser amount than the monthly installment of rent due under
this Lease shall be deemed to be other than on account of the earliest rent due
hereunder, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment as rent be deemed an accord and satisfaction,
and Landlord's right to recover the balance of such rent or pursue any other
remedy in this lease provided.
32. Security Deposit. [INTENTIONALLY OMITTED].
33. Notice. Any notice in this Lease provided for must be in writing, and
may be given or be served either by depositing the same in the United States
mail, postpaid and certified and addressed to the party to be notified, with
return receipt requested, or by actually delivering the same addressed to the
party to be notified at the address stated below or at such other address as may
from time to time be designated by the addressee by notice given in accordance
herewith. Notice deposited in the mail in the manner hereinabove described shall
be deemed received upon the date of receipt as indicated on the return receipt.
In the event delivery by mail cannot be made or is refused, the date of mailing
shall be deemed to be the date of receipt of the notice.
34. Severability. If any term or provision of this Lease, or the
application thereof to any person or circumstance shall, to any extent be
invalid or unenforceable, the remainder of this Lease, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby and each term
and provision of this Lease shall be valid and enforced to the fullest extent
permitted by law.
35. Governing Law. This lease and the rights and obligations of the
parties hereto shall be interpreted, construed, and enforced in accordance with
the laws of the State of Georgia.
36. Force Majeure. Whenever a period of time is herein prescribed for the
taking of any action by Landlord,
-13-
<PAGE> 28
Landlord shall not be liable or responsible for, and there shall be excluded
from the computation of such period of time, any delays due to strikes, riots,
fire, acts of God, shortages of labor or materials, war, governmental laws,
regulations or restrictions, or any other cause whatsoever beyond the control of
Landlord.
37. Time of the Essence. Time is of the essence of this Lease.
38. Transfers by Landlord. Landlord shall have the right to transfer
and assign, in whole or in part, all its rights and obligations hereunder and in
the Building and property referred to herein, and in such event and upon such
transfer Landlord shall be released from any further obligations hereunder, and
Tenant agrees to look solely to such successor in interest of Landlord for the
performance of such obligations.
39. Commissions. Landlord and Tenant hereby indemnify and hold each
other harmless against any loss, claim, expense or liability with respect to any
commissions or brokerage fees claimed on account of the execution and/or renewal
of this lease due to any action of the indemnifying party.
40. Liability. Landlord shall have no personal liability with respect
to its obligations under this Lease. Tenant shall look solely to Landlord's
equity in the Building and exterior Common Areas for satisfaction of Tenant's
remedies. In no event shall Landlord's liability exceed such equity.
41. Hazardous Substances. Tenant shall not cause or permit any
hazardous, toxic or dangerous substances (as defined or described in any
applicable federal, state or local statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating to, or imposing liability or
standards of conduct concerning hazardous, toxic or dangerous substances) to be
brought upon, kept or used in or about the Premises or the Building. Tenant
shall indemnify and hold Landlord harmless from and against any and all claims,
judgments, demands, penalties, fines, losses and costs and expenses incurred by
Landlord during or after the term of this Lease as a result of such hazardous,
toxic or dangerous substances that Tenant causes or permits to be brought upon,
kept or used in or about the Premises or the Building during the term of this
Lease. Landlord represents to Tenant, to Landlord's actual knowledge and based
solely upon Landlord's review of its existing Phase I environmental audit of the
Building prepared by BCM, dated February 1991, that no radon, asbestos or other
material defined as hazardous under any existing applicable local, state or
federal laws or regulations as of the date hereof is contained within the
Premises of the Building or upon the land on which the Building is located.
42. Option With Respect to Basement Space. Tenant shall have the
option to lease from Landlord, commencing on November 1, 1994, approximately
5,230 square feet of storage space in the basement of the Building at an annual
rent of $8.00 per square foot of space for the then remaining term of this
Lease. Such rent shall be payable in advance in equal monthly installments in
the same manner as Base Rent is paid. Such option may be exercised by Tenant's
giving written notice to Landlord at any time before October 1, 1994. In the
event Tenant so exercises the option contained in this paragraph, Tenant shall
have the right at any time after November 1, 1994, by written notice to
Landlord, to cancel Tenant's use of such basement space upon no less than ninety
(90) days prior written notice to Landlord.
43. Satellite Dish. The provisions attached hereto as Exhibit "D"
regarding Tenant's satellite dish are incorporated herein by reference.
-14-
<PAGE> 29
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease in
multiple counterparts each of which shall be deemed an original as of the day
and year first above written.
ADDRESS: LANDLORD:
The Lincoln Property Company LINCOLN P.C. ASSOCIATES
1405 Piedmont Road, Suite 110
Atlanta, Georgia 30305 By: Lincoln Atlanta No. 3,
Attn: Property Manager Ltd., its general partner
By /s/ [SIGNATURE ILLEGIBLE]
--------------------------
Title:
ADDRESS: TENANT:
Unisys Corporation UNISYS CORPORATION
P.O. Box 500
Township Line & Union
Meeting Roads By: [SIGNATURE ILLEGIBLE]
Blue Bell, Pennsylvania 19424 -------------------------
Attn: Lease Administrator Title:
With a copy to: ATTEST:
Unisys Corporation
P.O. Box 500 By: [SIGNATURE ILLEGIBLE]
Township Line & Union --------------------------
Meeting Roads Title: Assistant Secretary
Blue Bell, Pennsylvania 19424
Attn: Law Department (CORPORATE SEAL)
<PAGE> 30
[SITE MAP]
(i)
<PAGE> 31
[SITE MAP]
(ii)
<PAGE> 32
[SITE MAP]
(iii)
<PAGE> 33
[SITE MAP]
(iv)
<PAGE> 34
[SITE MAP]
(v)
<PAGE> 35
[SITE MAP]
EXHIBIT "B"
<PAGE> 36
EXHIBIT "C"
SATELLITE DISH AGREEMENT
1. During the term of this Lease, Tenant shall have the right to use
the space currently used by Tenant on the roof of the Building (the "Satellite
Communications Space") for the continued use, operation and maintenance of the
satellite communications dish currently located thereon and the necessary
ancillary equipment for two-way satellite communication systems (all of which is
hereafter called the "System") with Tenant's operations under this Lease.
Landlord reserves the right to relocate at Landlord's expense, the Satellite
Communications Space and System within the confines of the Building upon thirty
(30) days written notice to Tenant.
2. Tenant shall pay to Landlord any costs and expenses, including
taxes, insurance and utilities incurred by Landlord as a result of Tenant's
installation of the System.
3. Landlord and/or its contractors, agents and subcontractors shall
have access to that part of the System which is located outside of Tenant's
Leased Premises upon notification to Tenant. All installation, servicing or
removal of the System shall be coordinated with Landlord's property manager. In
addition, said installation, servicing or removal of the System shall be done in
the manner approved by Landlord and Landlord's property manager and in such a
way so as to protect Landlord's property. No installation, servicing or removal
of the System which affects the roof of the Building shall be done without
Landlord's direction. Tenant's contractors shall maintain liability, workman's
compensation insurance and other insurance as Landlord may reasonably require.
Said contractors shall furnish proof of same to Landlord upon request.
4. Landlord shall have the right to use or allow others to use other
roof or ground space on the Building or surrounding land for the purpose of
transmitting and receiving broadcast radio, television, cable television,
one-way and two-way communications, microwave transmission and weather radio
antenna. Tenant's System shall be installed so as not to interfere with the use
or operation of other communications equipment previously installed on the
Building by others. Landlord shall use its best efforts to cause such equipment
subsequently installed on the Building by others to be installed so as not to
interfere with the use or operation of Tenant's System.
5. Prior to installing the System, Tenant shall supply to Landlord a
detailed set of plans and specifications for Tenant's System and its
installation. The installation of the System shall be with Landlord's prior
written approval of the plans and specifications, which approval shall not be
unreasonably withheld or delayed. All costs for the installation including
costs of electrical equipment, antennas, mounting, fixtures and engineering
studies, required by Tenant hereunder or which are required to comply with
Landlord's site engineering or rival engineering standards, will be at Tenant's
sole cost and expense. All equipment or other fixtures attached to or otherwise
brought into or onto the Building shall at all times be the personal property of
the Tenant except for permanent modifications to Landlord's property which shall
become property of the Landlord upon termination of the Lease or this Lease
Agreement. Tenant assumes full responsibility for the installation, engineering
and maintenance of all equipment installed. Tenant shall indemnify and save
harmless Landlord from and against any and all loss, cost (including reasonable
attorneys' fees and expenses) damages, expenses and liability, including
statutory liability, liability under the workmen's compensation laws and
mechanics liens in connection with claims
C-1
<PAGE> 37
or damages as a result of injury or death or any person property damage due to
any acts or negligence of Tenant. Tenant's agents, employees, customers,
invitees, contractors and subcontractors under this Agreement. Prior to the
installation of its System and at all times subsequent thereto, Tenant shall, at
its sole cost and expense, obtain and maintain any and all municipal, state or
federal permits, and/or licenses required of it for its operations, and Landlord
shall not be responsible for any signal interference or signal strain that may
result from Tenant's use of its equipment except as provided in Paragraph 4
above. Prior to the installation of its System, Tenant shall provide to
Landlord, in addition to a copy of its plans and specifications, all requisite
approvals of any municipal, state or federal governments required for its
operations. Periodically throughout the term of this Agreement upon written
request of Landlord, Tenant shall provide to Landlord a copy of its permits or
licenses.
6. During the term of this Lease, Tenant shall keep the Satellite
Communications Space in good condition and repair and allow no waste thereon.
Upon termination or expiration of this Lease, Tenant will surrender the
Satellite Communications Space to Landlord in good condition, damage by fire or
other insurable casualty excepted and shall remove all of its equipment (except
permanent modifications as provided for in Paragraph 5 above), and weather seal
any and all holes left by the removal of said equipment. In addition, in the
event that Tenant fails to occupy the Leased Premises for its business under the
Lease Agreement for more than thirty (30) days, Tenant shall remove all of its
equipment as provided for above.
C-2
<PAGE> 38
9. The Building shall be open to Tenant, its employees, and
business visitors during such business hours as are deemed standard by Landlord
from time to time on all days except Saturdays and Sundays and holidays. At all
other times every person, including Tenant, its employees and visitors entering
and leaving the Building may be questioned by a watchman as to that person's
business therein, and may be required to sign such person's name on a form
provided by Landlord for registering such person.
10. Tenant shall not employ any person other than Landlord's
contractor or employees for the purpose of cleaning and taking care of the
Premises.
11. All decoration of the Premises, including design, color
selection, and finish work of the Premises which is visible from any corridor,
elevator or other such common area, shall be made only with specific written
approval from Landlord, and in the absence of such approval Landlord may
require Tenant to remove undesirable decoration and restore the Premises to its
former condition.
12. This edition of Rules and Regulations shall be effective on and
after January 1, 1991, as from time to time later supplemented and amended by
Landlord.
13. Landlord will provide one listing in the Building Directory to
Tenant at Landlord's expense, and Landlord will provide one sign for Tenant to
identify its space at Landlord's expense. Other listings and signs must be first
approved by Landlord and obtained at Tenant's expense.
14. Smoking Policy - Lincoln Perimeter does not allow smoking in the
common areas of the building, including all restrooms, elevator lobbies,
elevator cabs or anywhere within the atrium of the building. If your company
has implemented a no smoking policy, it is requested that you provide a smoking
lounge within your suite for your employees. Anyone found smoking in the common
areas of the building will be asked by the Building Management or Security to
move or extinguish their cigarette.
-2-
<PAGE> 39
<TABLE>
<CAPTION>
Lease Annual Rent Rate
Year Per Square Foot Annual Rent Monthly Rent
------------------------------------------------------------------
<S> <C> <C> <C>
1 $18.50 $2,036,998.00 $169,749.83
2 $18.50 $2,036,998.00 $169,749.83
3 $18.50 $2,036,998.00 $169,749.83
4 $19.92 $2,193,624.05 $182,802.00
5 $20.42 $2,248,464.65 $187,372.05
6 $20.93 $2,304,676.27 $192,056.36
7 $21.45 $2,362,293.17 $196,857.76
8 $21.99 $2,421,350.50 $201,779.21
9 $22.54 $2,481,884.27 $206,823.69
10 $23.10 $2,543,931.37 $211,994.28
</TABLE>
(d) "Commencement Date" means September 1, 1991.
(e) "Security Deposit" has been waived by Landlord and Tenant.
(f) "Common Areas" means those areas of the Building devoted to
corridors, elevator foyers, restrooms, mechanical rooms, janitorial closets,
electrical and telephone closets, vending areas and other similar facilities
provided for the common use or benefit of tenants generally or of the public.
Common Areas shall be measured from and to the inside finished surface of
exterior Building walls, and from and to the center of any partition walls
which separate Common Areas from tenant spaces, including the Premises, and
from Service Areas.
(g) "Service Areas" means those areas within the Building outside
walls used for elevator, building stairs, fire towers, elevator shafts, flues,
vents, stacks, pipe shafts and vertical ducts (but shall not include any such
areas provided or reserved for the exclusive use of a particular tenant).
Service areas shall be measured from and to the inside finished surface of
exterior Building walls, and from and to the center of any partition walls which
separate Service Areas from tenant spaces, including the Premises, and from
Common Areas.
(h) "Exterior Common Areas" means all areas not located within the
Building provided and maintained for the common use and benefit of Landlord and
tenants of the Building (or multi-building project) generally, and the
employees, invitees and licensees of Landlord and such tenants, including,
without limitation, parking areas whether enclosed or not, streets, sidewalks,
and landscaped areas.
(i) "Rentable Area" of the Premises means (1) the gross area thereof
as measured from and to the inside surface of the outer glass of the exterior
Building walls, and from and to the center of any partition walls which
separate the Premises from adjoining tenant, Common Areas, and Service Areas;
and (2) the pro rata part of the Common Areas of the Building applicable to the
Premises in the proportion that the area of the Premises as calculated by the
method described in (1) above bears to the total Rentable Area of the Building
as calculated by the same method. Rentable Area shall not include Service Areas.
(j) "Basic Costs" as used herein means all expenses, costs and
disbursements (but not repayment of debt or replacement of capital investment
items other than those elsewhere herein expressly included, nor specific costs
especially billed to and paid by other tenants of the Building) of every kind
and nature which Landlord shall pay or become obligated to pay because of, or
in connection with, the ownership and operation of the Building and the Exterior
Common Areas, including but not limited to the following: (i) Wages and
salaries, including payroll taxes, workers' compensation, insurance premiums,
and all other employment costs to Landlord of all employees engaged in
-2-
<PAGE> 40
operating and maintaining the Building, and that part of central accounting
costs which are applicable to the Building; (ii) cost of all supplies and
materials used in operation and maintenance of the Building; (iii) cost of all
utilities for the Building including the cost of water, sewer, gas, oil and
electric and other power (but excluding any utility costs reimbursed directly by
tenants to Landlord other than in the nature of additional rental payments
similar to those required of Tenant under this Lease); (iv) cost of all
maintenance and service agreements for the Building and the equipment therein,
including, but not limited to security service, window cleaning, janitorial
service, elevator maintenance, maintenance of heating, ventilation and
air-conditioning equipment, plumbing, controls, locks, alarms and all other
parts of the Building; (v) cost of all insurance relating to the Building or
rents therefrom including, but not limited to, the cost of casualty and
liability insurance applicable to the Building and to Landlord's personal
property used in connection with the Building; (vi) charges, whether federal,
state, county or municipal, and whether they be by taxing districts, or taxes,
and assessments, attributable to the Building, its operation, or any tax in the
nature of a gross receipts tax imposed on rentals (but excluding fines and
penalties resulting from the failure of Landlord to make timely payment of the
same); (vii) cost of repairs and general maintenance (excluding repairs and
general maintenance paid by proceeds of insurance or by Tenant or other third
parties, and alteration attributable solely to tenants of the Building, other
than Tenant); (viii) amortization of the cost of installation of capital
improvements or other capital items which are primarily for the purpose of
reducing operating costs or which may be required by governmental authority, as
reasonably amortized by Landlord and (ix) management fees. The Basic Costs of
the Building shall be computed on the accrual basis and shall be all Basic Costs
incurred by Landlord to maintain all facilities of the Building in operation
during all or part of the Base Year, together with such additional or substitute
facilities in subsequent years as may be determined by Landlord to be necessary.
In determining the amount of Basic Costs (for 1993 and any subsequent year), for
the purpose of this Paragraph, in the event that less than 95% of the Rentable
Area of the Building shall have been occupied by tenants and fully used by them
at any time during the year, Basic Costs shall be increased to an amount equal
to the like operating expense which would normally be expected to be incurred
had such occupancy been 95% of the Rentable Area and had such full utilization
been made during the entire period.
3. Lease Grant. Subject to and upon the terms herein set forth, Landlord
leases to Tenant and Tenant leases from Landlord the Premises for the Lease
Term. Tenant is hereby granted only a usufruct, not subject to levy or sale; no
estate for years nor other estate shall pass from Landlord on account thereof.
The Premises are stipulated for all purposes to contain 110,108 square feet of
Rentable Area.
4. Lease Term. This Lease Term is for a term or period of time commencing
at 12:01 a.m. on the Commencement Date, and continuing thereafter for the next
10 years thereafter.
5. Use. The Premises shall be used for office purposes, and for
demonstration, training and general storage purposes incidental thereto, and for
no other purpose. Tenant agrees not to use, or permit the use of, the Premises
for any purpose which is illegal, or which constitutes or creates a nuisance, or
which would increase the cost of insurance coverage with respect to the
Building, or which tends to reduce the value of the Building or reduce the
attractiveness of the Building to other tenants. Landlord represents to Tenant
that as of the date of this Lease, the Building is zoned under an appropriate
zoning
-3-
<PAGE> 41
classification under the Zoning Ordinance of DeKalb County, Georgia that allows
use of the Building for office use.
6. Base Rental.
(a) Tenant agrees to pay to Landlord, without any demand, setoff or
deduction whatsoever, the Base Rental and all such other sums of money as shall
become due hereunder as additional rent, all of which are sometimes hereinafter
collectively called "rent", in advance in equal monthly installments on the
first day of each calendar month during the Lease Term to Landlord at
Landlord's address provided herein (or such other address as may be designated
by Landlord in writing from time to time). If the term of this Lease commences
on a day other than the first day of a month or terminates on a day other than
the last day of a month then the amount of the installments of Base Rental and
any adjustments thereto for such month or months shall be prorated, based on
the number of days the Lease is in effect during such month.
(b) All installments of rent not paid within five (5) days after the date
when due shall bear interest at the rate of one and one-half percent (1- 1 1/2%)
per month, or the maximum rate permitted by law, whichever is lower.
7. Additional Rent.
(a) The Rentable Area in the Building is stipulated to be 285,773 square
feet. Tenant shall, from time to time during the term of the Lease, pay as
additional rent hereunder, an amount, per each square foot of Rentable Area
within the Premises, equal to the excess ("Excess") in actual Basic Costs, over
the actual 1993 Basic Costs per square foot of Rentable Area in the Building.
Commencing on the fourth (4th) anniversary of the date of this Lease, Tenant
shall begin paying the Excess in accordance with the provisions of this
paragraph.
(b) Landlord shall also have the right to make a good faith estimate of
the Excess for each upcoming calendar year and upon thirty (30) days' notice to
Tenant to require the monthly payment by Tenant of one-twelfth (1-12th) of such
estimated Excess, but in no event shall any such estimate be based on Basic
Costs which exceed the actual Basic Costs for the previous calendar year.
(c) By April 1 of each calendar year following the year during which the
Lease Term begins, or as soon thereafter as practical, Landlord shall furnish
to Tenant a statement of Landlord's actual Basic Costs for the previous
calendar year, and Landlord shall notify Tenant of the amount of the Excess
owing by Tenant to Landlord, showing the calculations thereof which result from
such statement. Tenant agrees to promptly pay Landlord, as additional rent, all
Excess which has not been previously paid as estimated Excess. If for any
calendar year additional rent collected for the prior year, as a result of
Landlord's estimate of Excess, is greater than the additional rent actually due
during such prior year, then Landlord shall refund to Tenant any such
overpayment.
(d) Notwithstanding the foregoing provisions of this Lease to the
contrary, for purposes of calculating the Excess under this Lease, in no event
shall Controllable Basic Costs be increased in any calendar year after 1993 by
more than five percent (5%) of the Controllable Basic Costs for the previous
calendar year. For purposes hereof, "Controllable Basic Costs" shall mean all
Basic Costs other than those enumerated in subsections (iii), (v), (vi) and
(viii) of paragraph 2(j) of this Lease.
-4-
<PAGE> 42
8. Services to be Furnished by Landlord. Landlord agrees to furnish
Tenant the following services, subject to any limitations which may be imposed
thereon from time to time by any governmental authority:
(a) Hot and cold water at those points of supply provided for general
use of other tenants in the Building, and heating and air conditioning in
season, at such temperatures, and during such business hours as are deemed
standard by Landlord from time to time; however, heating and
air-conditioning services at times other than for normal business hours for
the Building (which for purposes of this Lease shall be 7:00 o'clock a.m.
to 6:00 o'clock p.m. Monday through Friday, excluding holidays, and 8:00
o'clock a.m. to 12:00 o'clock noon on Saturday, excluding holidays) shall
be furnished only at Landlord's discretion upon the written request of
Tenant delivered to Landlord prior to 3:00 p.m. at least three (3) days in
advance of the date such usage is requested. Tenant shall bear the entire
cost of such requested additional service, but such cost shall not exceed
Landlord's actual cost, which cost shall not be increased except as a
result of the increase in the cost of utilities supplied by the applicable
utility company.
(b) Routine maintenance and electric lighting service for all Common
Areas and Service Areas of the Building in the manner and to the extent
deemed by Landlord to be standard.
(c) Janitor service, Mondays through Fridays, but exclusive of normal
business holidays substantially in accordance with Landlord's Building
Standard specifications; except that, if Tenant's floor covering or other
improvements require special treatment, Tenant shall pay the additional
cleaning cost attributable thereto as additional rent upon presentation of
a statement therefore by Landlord.
(d) Subject to the provisions of Paragraph 13, Building Standard
facilities to provide electrical current sufficient to illuminate the
Premises and for the operation of small office machines by Tenant in its
use and occupancy of the Premises.
(e) All Building Standard fluorescent bulb replacement in the
Premises and fluorescent and incandescent bulb replacement in the Common
Areas and Service Areas.
(f) Access to the Building may be regulated during other than normal
business hours in such manner as Landlord deems appropriate; however,
Tenant and its employees shall have access to the Premises 24 hours a day,
7 days a week. Landlord, however, shall have no liability to Tenant, its
employees, agents, invitees or licensees for losses due to theft or
burglary, or for damages or injuries done by unauthorized persons on the
Premises and neither shall Landlord be required to insure against any such
losses. Tenant shall cooperate fully in Landlord's efforts to regulate
access to the Building.
The failure by Landlord to any extent to furnish, or the interruption
or termination of, the above-described services in whole or in part resulting
from causes beyond the reasonable control of Landlord shall not render Landlord
liable in any respect, not be construed as an eviction of Tenant, nor an
abatement of rent, nor relieve Tenant from the obligation to fulfill any
covenant or agreement hereof. Should any of the equipment or machinery used in
the provision of such services for any cause cease to function properly, Tenant
shall have no claim for offset or abatement of rent or damages on account of an
-5-
<PAGE> 43
interruption in service occasioned thereby or resulting therefrom.
Notwithstanding the foregoing, in the event of any interruption or termination
of the electrical or heating and air conditioning services to be provided by
Landlord under this Lease, and as result any portion of the Premises is
untenantable for a period of more than fifteen (15) consecutive business days,
then all Base Rent with respect to such portion of the Premises so rendered
untenantable shall abate until such time as such services are restored to the
extent such portion of the Premises is once again tenantable.
9. MONUMENT SIGN. Landlord shall cause to be constructed, subject to and
in accordance with applicable laws, a monument sign to be located along
Ashford-Dunwoody Road, the size, location and design to such monument sign to be
mutually approved by Landlord and Tenant, such approvals not to be unreasonably
withheld or delayed. In no event, however, shall Landlord be obligated to expend
more than $10,000.00 for the design, construction and installation of such
monument sign. Upon the completion of construction and installation of such
monument sign, Landlord shall be entitled to remove and dispose of the signage
of Tenant located on the exterior of the Building.
10. GRAPHICS. Landlord shall provide and install, at Tenant's cost, all
letters or numerals on doors in the Premises, all such letters and numerals
shall be in the standard graphics for the Building and no others shall be used
or permitted on the Premises without Landlord's prior written consent, such
consent not to be unreasonably withheld.
11. CARE OF PREMISES BY TENANT. Tenant agrees not to commit or allow any
waste to be committed on any portion of the Premises, and at the termination of
this Lease to deliver up the Premises to Landlord in as good condition as at the
Commencement Date, ordinary wear and tear excepted.
12. REPAIRS AND ALTERATIONS BY TENANT. Tenant covenants and agrees with
Landlord, at Tenant's own cost and expense and with prior notice from Landlord
to Tenant for the need for such repair, to repair or replace any damage done to
the Building, or any part thereof, caused by Tenant or Tenant's agents,
employees, or contractors, and such repairs shall restore the Building to as
good a condition as it was in prior to such damage, and shall be effected in
compliance with all applicable laws; provided, however, that if Tenant fails to
make such repairs or replacements promptly, then Landlord may, at its option,
make repairs or replacements, and Tenant shall pay the cost thereof to the
Landlord on demand as additional rent. Tenant agrees with Landlord not to make
or allow to be made any alterations to the Premises, install any vending
machines on Premises, or place signs on the Premises, which are visible from
outside the Premises, without first obtaining the written consent of Landlord in
each such instance, which consent may be given on such conditions as Landlord
may elect; provided, however, that Landlord shall not unreasonably withhold such
consent with respect to (i) vending machines wholly within the Premises and not
visible from public areas of the Building and (ii) alterations that do not
affect the structural components or the mechanical, plumbing or electrical
systems of the Building. Any and all alterations to the Premises shall become
the property of Landlord upon the expiration or earlier termination of this
Lease (but not for movable equipment, trade fixtures or furniture owned by
Tenant), but Landlord may, nonetheless, require Tenant to remove any and all
fixtures, equipment and other improvements installed by Tenant on the Premises
upon the expiration or earlier termination of this Lease; provided, however,
that with respect to any improvements, Landlord shall not have the right to
require Tenant to remove any improvements installed by Tenant unless such
improvements were installed without the consent of Landlord or at the time of
the consent Landlord notified Tenant that such improvements would be required to
be removed at the end
-6-
<PAGE> 44
of the Lease Term. In the event that Landlord so elects, and Tenant fails to
remove such improvements, Landlord may remove such improvements at Tenant's
cost, and Tenant shall pay Landlord on demand the cost of restoring the
Premises to Building Standard.
13. Use of Electrical Services by Tenant. Tenant's use of electrical
services furnished by Landlord shall not exceed, either in voltage, rated
capacity or overall load that which Landlord deems to be Building Standard.
Building Standard does not include electricity used to operate any item of
electrical equipment which singly consumes more than 0.25 kilowatts at rated
capacity or which requires a voltage other than 120 volts single phase. In the
event Tenant shall request that it be allowed to consume electrical services in
excess of that deemed by Landlord to be Building Standard, Landlord may refuse
to consent to such usage if the electrical systems of the Building are not
capable of sustaining such usage, or may consent upon such conditions as
Landlord reasonably elects, including the requirement that submeters be
installed at Tenant's expense, that Tenant pay the cost of the excess
electricity used, and, if the operation of such equipment requires modification
to the Building systems or additional air-conditioning capacity above that
provided by the Building Standard systems then the cost of such modifications
and any additional air-conditioning installation and operation costs shall be
paid by Tenant.
14. Parking. During the Lease Term, Tenant shall have the non-exclusive
use in common with Landlord, other tenants of the Building (or project in which
the Building is located in a multi-building project), their guests and
invitees, of the nonreserved common automobile parking areas, driveways, and
footways, subject to rules and regulations for the use thereof as prescribed
from time to time by Landlord. Notwithstanding the foregoing, fourteen (14)
parking spaces shall be designated by Landlord, at Tenant's expense, for the
exclusive use of Tenant and Tenant's invitees, in substantially the location
set forth on Exhibit "B" hereto.
15. Laws and Regulations. Tenant agrees to comply with all applicable
laws, ordinances, rules, and regulations of any governmental entity or agency
having jurisdiction of the Premises.
16. Building Rules. Tenant will comply with the rules of the Building as
set forth herein as adopted and amended by Landlord from time to time, and will
cause all of its agents, employees, and contractors to do so.
17. Entry by Landlord. Tenant agrees to permit Landlord or its agents or
representatives to enter into and upon any part of the Premises at all
reasonable hours upon prior reasonable notice (and in emergencies at all times)
to inspect the same, or to show the Premises to prospective purchasers,
mortgagees, tenants or insurers, to clean or make repairs, alterations, or
additions thereto, and Tenant shall not be entitled to any abatement or
reduction of rent by reason thereof.
18. Assignment and Subletting.
(a) Tenant convenants that it will not assign, sublease, transfer or
encumber this Lease or any interest therein without the prior written consent
of Landlord, which consent shall not be unreasonably withheld.
(b) Fifty percent (50%) of all cash or other proceeds of any assignment,
sale or sublease of Tenant's interest in this Lease in excess of the rent
required to be paid by Tenant hereunder (on a per square foot basis) shall be
paid to Landlord, whether consented to by Landlord or not, unless Landlord
agrees
-7-
<PAGE> 45
to the contrary in writing, and Tenant hereby assigns all rights it might have
or ever acquire in any such proceeds to Landlord. Tenant may deduct from such
proceeds (prior to calculating the split of such proceeds as provided above)
reasonable, ordinary and necessary costs and expenses incurred in connection
with the negotiation of a sublease, assignment or sale of Tenant's interest
(including any reasonable leasing commission if actually incurred by Tenant and
paid to a licensed real estate broker which is unaffiliated with Tenant). The
above notwithstanding, the rent due under this Lease shall in no event be
reduced.
19. Mechanic's Liens. Tenant covenants that it will not permit any
mechanic's lien or liens to be placed upon the Premises or the Building.
Nothing in this Lease shall be deemed or construed in any way as constituting
the consent or request of Landlord, express or implied, by inference or
otherwise, to any person for the performance of any labor or the furnishing of
any materials to the Premises, or any part thereof, nor as giving Tenant any
right, power, or authority to contract for or permit the rendering of any
services or the furnishing of any materials that would give rise to any
mechanic's or other liens against the Premises. In the event any such lien is
attached to the Premises and is not removed of record by payment or by bonding
in accordance with Georgia law within fifteen (15) days after the date Tenant
becomes aware of the same, then, in addition to any other right or remedy of
Landlord, Landlord may, but shall not be obligated to, discharge the same. Any
amount paid by Landlord for any of the aforesaid purposes shall be paid by
Tenant to Landlord on demand as additional rent.
20. Property Insurance. Landlord shall maintain fire and extended
coverage insurance on the Building and the Premises in such amounts as
Landlord's mortgagees shall require. Such insurance shall be maintained at the
expense of Landlord (as a part of the Basic Costs), and payments for losses
thereunder shall be made solely to Landlord or the mortgagees of Landlord as
their interests shall appear. Tenant shall maintain at its expense, in an
amount equal to full replacement cost, fire and extended coverage insurance on
all of its personal property, including removable trade fixtures, located in
the Premises, in such additional amounts as are required to meet Tenant's
obligations pursuant to Paragraph 22 hereof. Tenant shall, at Landlord's
request from time to time, provide Landlord with current certificates of
insurance evidencing Tenant's compliance with this Paragraph 20 and Paragraph
21. Tenant shall obtain the agreement of Tenant's insurers to notify Landlord
that a policy is due to contain waiver of subrogation clauses as to the other
party.
21. Liability Insurance. Tenant and Landlord shall, each at its own
expense, maintain a policy or policies of comprehensive general liability
insurance with respect to the respective activities of each in the Building,
and the Exterior Common Areas (or within the project if the Building is located
in a multi-building project) with the premiums thereto fully paid on or before
due date, issued by and binding upon some insurance company approved by
Landlord, such insurance to afford minimum protection of not less than
$1,000,000.00 combined single limit coverage for death or bodily injury, and
$100,000.00 for property damage.
22. Indemnity. Landlord shall not be liable to Tenant, or to Tenant's
agents, servants, employees, customers, or invitees for any injury to person or
damage to property caused by any act, omission, or neglect of Tenant, its
agents, servants or employees, invitees, licensees or any other person entering
the Building under the invitation of Tenant or arising out of the use of the
Premises by Tenant and Tenant hereby indemnifies and agrees to hold Landlord
harmless from all liability and claims for any such damage or injury. Tenant
shall not be liable to
-8-
<PAGE> 46
Landlord or to the Landlord's agents, servants, employees, customers or
invitees for any injury to person or damage to property caused by any act,
omission or neglect of Landlord, its agents, servants or employees, and
Landlord hereby indemnifies and agrees to hold Tenant harmless from all
liability and claims for any such injury or damage; provided, however, that the
foregoing indemnification of Landlord shall not be deemed or construed to deny
Landlord the benefit of the insurance required to be carried by Tenant for the
benefit of Landlord and Tenant pursuant to Paragraph 21 above with respect to
any such claim or liability.
23. Waiver of Subrogation Rights. Anything in this Lease to the contrary
notwithstanding, Landlord and Tenant each hereby waives any and all rights of
recovery, claim, action, or cause of action, against the other, its agents,
officers, or employees, for any loss or damage that may occur to the Premises,
or any improvements thereto, or the Building of which the Premises are a part,
or any improvements thereto, or any personal property of such party therein, by
reason of fire, the elements, or any other cause(s) which are insured against
under the terms of the standard fire and extended coverage insurance policies
referred to herein, regardless of cause or origin, including negligence of the
other party hereto, its agents, officers, or employees.
24. Casualty Damage. If the Premises or any part thereof shall be
damaged by fire or other casualty, Tenant shall give prompt written notice
thereof to Landlord. In case the Building shall be so damaged that, in
Landlord's good faith estimation, the time required to repair and reconstruct
the Building shall exceed one hundred eighty (180) days from the date of the
casualty (whether or not the Premises shall have been damaged by such
casualty), or in the event any mortgagee of Landlord's should require that the
insurance proceeds payable as a result of a casualty be applied to the payment
of the mortgage debt, or in the event of any material loss to the Building
that would not be covered by fire and extended coverage insurance commonly
carried for commercial properties such as the Building, Landlord may, at its
option, terminate this Lease by notifying Tenant in writing of such termination
within sixty (60) days of the date of the casualty.
If Landlord does not thus elect to terminate this Lease, Landlord shall
commence and proceed with reasonable diligence to restore the Building to
substantially the same condition in which it was immediately prior to the
happening of the casualty, except that Landlord shall not be required to spend
for such work an amount in excess of the insurance proceeds actually received
by Landlord as a result of the casualty.
Landlord shall not be liable for any inconvenience or annoyance to Tenant
or injury to the business of Tenant resulting in any way from such damage or
the repair thereof, except that, subject to the provisions of the next
sentence, Landlord shall allow Tenant a proportional diminution of rent during
the time and to the extent the Premises are unfit for occupancy. If the
Premises or any other portion of the Building be damaged by fire or other
casualty resulting from the fault or negligence of Tenant or any of Tenant's
agents, employees, or invitees, the rent hereunder shall not be diminished
during the repair of such damage and Tenant shall be liable to Landlord for the
cost of the repair and restoration of the Building caused thereby to the extent
such cost and expense is not covered by insurance proceeds.
25. Condemnation. If the whole or substantially the whole of the
Building or the Premises should be taken for any public or quasi-public use, by
right of eminent domain or otherwise, or should be sold in lieu of
condemnation, then this Lease shall terminate as of the date when physical
possession of
-9-
<PAGE> 47
the Building or the Premises is taken by the condemning authority. If less than
the whole or substantially the whole of the Building or the Premises is thus
taken or sold, Landlord (whether or not the Premises are affected thereby) may
terminate this Lease by giving written notice thereof to Tenant; in which event
this Lease shall terminate as of the date when physical possession of such
portion of the Building or Premises is taken by the condemning authority. If
this Lease is not so terminated upon any such taking or sale, the Base Rental
payable hereunder shall be diminished by an equitable amount, and Landlord
shall restore the Building and the Premises as much as possible to substantially
their former condition, to the extent condemnation proceeds are made available
by the holder of any mortgage or deed to secure debt on the Building, but
Landlord shall in no event be required to spend for such work an amount in
excess of the amount received by Landlord as compensation for such damage. All
amounts awarded upon a taking of any part or all of the Building or the
Premises shall belong to Landlord, and Tenant shall not be entitled to and
expressly waives all claims to any such compensation.
26. Damages from Certain Causes. Landlord shall not be liable to Tenant
for any loss or damage to any property or person occasioned by theft, fire,
act of God, public enemy, injunction, riot, strike, insurrection, war, casualty,
water damage of whatsoever nature, vandalism, court order, requisition, or
order of governmental body or authority or by any other cause beyond the
control of Landlord, nor shall Landlord be liable for any damage or
inconvenience which may arise through repair or alteration of any part of the
Building, Exterior Common Areas, or Premises so long as Tenant continues to
have access to and from the Premises (unless such continued access during such
repair would endanger persons in the Premises).
27. Events of Default/Remedies.
(a) The following events shall be deemed to be events of default by Tenant
under this Lease: (i) Tenant shall fail to promptly pay any rent or other sum of
money due hereunder within five (5) days after receipt of written notice from
Landlord to Tenant of such failure; (ii) Tenant shall fail to comply with any
other provision of this Lease within thirty (30) days after receipt of written
notice from Landlord to Tenant of such failure or, if such failure shall be
incapable of cure within thirty (30) days, Tenant shall not commence to cure
such failure within such thirty (30) day period and continuously prosecute the
performance of the same to completion with due diligence; (iii) the leasehold
hereunder demised shall be taken on execution or other process of law in any
action against Tenant; (iv) a default or event of default shall occur under that
certain Lease dated August 29, 1984 between Landlord and Tenant, as amended by
the ten (10) amendments thereof existing as of the date of this Lease, and as
thereafter amended; (v) Tenant shall fail to promptly move into and take
possession of the Premises when the Premises are ready for occupancy, or shall
abandon any substantial portion of the Premises; (vi) Tenant shall become
insolvent or unable to pay its debts as they become due, or Tenant notifies
Landlord that it anticipates either condition; (vii) Tenant takes any action to,
or notifies Landlord that Tenant intends to file a petition under section or
chapter of the National Bankruptcy Act, as amended, or under any similar law or
statute of the United States or any state thereof; or a petition shall be filed
against Tenant under any such statute; or (viii) a receiver or trustee shall be
appointed for Tenant's leasehold interest in the Premises or for all or a
substantial part of the assets of Tenant. If Landlord shall not be permitted to
terminate this Lease as hereinabove provided because of the provisions of Title
II, of the United States Code relating to Bankruptcy as amended ("Bankruptcy
Code"), then Tenant or any trustee for Tenant agrees promptly, within no more
than sixty (60) days upon request by Landlord to the Bankruptcy Court, to assume
or reject this Lease. In such
-10-
<PAGE> 48
event, Tenant or any trustee of Tenant may assume this Lease only if it (i)
cures or provides adequate assurance that the trustee will promptly cure any
default hereunder, and (ii) compensates or provides adequate assurance that
Tenant will promptly compensate Landlord for any actual pecuniary loss to
Landlord resulting from Tenant's default.
(b) Upon the occurrence of any event or events of default by Tenant,
whether enumerated in this Paragraph or not, Landlord shall have the option to
pursue any one or more of the following remedies without being deemed to have
made an election of remedies and without any further notice or demand for
possession whatsoever (and without limiting the generality of the foregoing,
Tenant hereby specifically waives notice and demand for payment of rent or
other obligations due and waives any and all other notices or demand
requirements imposed by applicable law); (i) terminate this Lease in which
Tenant shall immediately surrender the Premises to Landlord; (ii) terminate
Tenant's right to occupy the Premises (without terminating this Lease); (iii)
enter upon the Premises and do whatever Tenant is obligated to do under the
terms of this Lease; and Tenant agrees to reimburse Landlord on demand for any
expenses which Landlord may incur in effecting compliance with Tenant's
obligations under this Lease; and (iv) exercise all other remedies available to
Landlord at law or in equity, including, without limitation, injunctive relief
of all varieties.
In the event Landlord elects to reenter or take possession of the Premises
after Tenant's default, Tenant hereby waives notice of such reentry or
repossession and of Landlord's intent to reenter or retake possession, Landlord
may, without prejudice to any other remedy which he may have for possession or
arrearages in rent, expel or remove Tenant and any other person who may be
occupying said Premises or any part thereof. All Landlord's remedies shall be
cumulative and not exclusive. Forbearance to enforce one or more of the
remedies herein provided upon an event of default shall not be deemed or
construed to constitute a waiver of such default, or of any future defaults, or
to limit Landlord's right to require strict compliance by Tenant with the
provisions of this Lease.
(c) Tenant hereby covenants that, prior to the exercise of any such
remedies, it will give the mortgagees holding mortgages on the Building notice
and a reasonable time to cure any default by Landlord provided Tenant has been
furnished with the name and address of such mortgagees.
(d) If this Lease is terminated by Landlord pursuant to the provisions of
Paragraph 27, Tenant shall pay to Landlord as damages, either:
(i) a sum which represents the then excess, if any, of (a) the
aggregate amount of the rental due and reserved hereunder from the date of
Tenant's default to the expiration date of the fully stated term hereof
over (b) the aggregate rental value of the Premises for the same period as
reduced by the estimated cost of reletting the Premises, including
attorneys' fees, commission, alterations and repair costs; or
(ii) sums equal to the rent which would have been payable by Tenant
had this Lease not been so terminated, or had Landlord not so reentered the
Premises, payable upon the due dates therefor specified herein, provided,
however, that if Landlord shall relet the Premises during said period,
Landlord shall credit Tenant with the net rents received by Landlord from
such reletting such net rents to be determined by first deducting from the
gross rents as and when received by Landlord from such reletting the
expenses incurred or paid by Landlord in terminating this Lease and/or in
-11-
<PAGE> 49
reentering the Premises and in securing possession thereof, as well as the
expenses of reletting, including, without limitation, altering and
preparing the Premises for new tenants, brokers' commissions, legal fees,
and all other expenses properly chargeable against the Premises and the
rental therefrom, it being understood that any such reletting may be for a
period shorter or longer than the remaining term of this Lease; but in no
event shall Tenant be entitled to a credit for any net rents from a
reletting, except to the extent set forth hereinabove.
In the event of such termination of this Lease by Landlord as set forth
above, Landlord shall make reasonable good faith efforts to mitigate its
damages, but "reasonable good faith efforts" shall be deemed to have been made
if Landlord includes the Premises within Landlord's customary marketing
activities for Landlord's other vacant space in the Building. Nothing contained
herein shall require Landlord to give priority or preference to re-letting the
Premises ahead of other vacant space (either in the Building or in other
Buildings) owned or controlled by Landlord or its affiliates.
28. Peaceful Enjoyment. Tenant shall, and may peacefully have, hold, and
enjoy the Premises, subject to the other terms hereof, provided that Tenant
pays the rent and other sums herein recited to be paid by Tenant and performs
all of Tenant's covenants and agreements herein contained. This covenant and
any and all other covenants of Landlord shall be binding upon Landlord and its
successors only with respect to breaches occurring during its or their
respective period of ownership of the Building.
29. Surrender of Premises. Upon termination of this Lease for any reason
whatsoever, Tenant shall surrender the premises and keys thereof to Landlord in
the same condition as at commencement of the term, natural wear and tear only
excepted. Should Tenant refuse or fail to surrender the Premises upon the
expiration of the lease term or earlier termination thereof, Tenant shall be a
tenant at sufferance and shall pay to Landlord on demand each month a sum equal
to 135% of the rent due hereunder during such holdover period; provided that
there shall be no renewal of this Lease by operation of law.
If Tenant remains in possession after the expiration of the term hereof
with Landlord's acquiescence and without any distinct agreement of parties,
Tenant shall be a tenant at will, and there shall be no renewal of this Lease
by operation of law. Notwithstanding the notice provision of O.C.G.A. Section
44-7-7, as the same may be now or hereafter amended, such tenancy at will may
be terminated upon sixty (60) days notice from Landlord.
30. Subordination, Estoppel, Attornment. This Lease shall be subject and
subordinate to any mortgage, deed to secure debt or other lien presently
existing or hereafter arising upon the Premises or upon the Building, or the
exterior Common Areas, and to any renewals, refinancing and extensions thereof
(each, a "Mortgage"). At the request of any successor to the title or interests
of Landlord, Tenant shall attorn to such successor. The subordination of this
Lease to any Mortgage, and the attornment of Tenant to the holder of any
Mortgagee, is conditioned upon an express agreement contained in such Mortgage,
or in a separate instrument to be recorded, that enforcement of such Mortgage
shall not terminate this Lease or disturb Tenant in the possession and use of
the Premises (except in the case where Tenant is in default beyond the period,
if any, provided in this Lease to remedy such default), that any party
succeeding to the interest of Landlord as a result of the enforcement of any
Mortgage shall be bound to Tenant, and Tenant shall be bound to it, under all
the terms, covenants, and conditions of this Lease for the balance of the term
of this Lease with the same force and
-12-
<PAGE> 50
effect as if such party were the original Landlord under this Lease; provided,
however, that such party shall not be liable (i) for any act or omission of any
prior landlord, or (ii) subject to any offsets or defenses which Tenant may
have had against any prior landlord, or (iii) bound by any monies which Tenant
might have paid for more than the current month's rent or any prepaid estimates
of the Excess to any prior landlord, or (iv) bound by any amendment or
modification of this Lease made without the prior written consent of the holder
of the Mortgage. Upon the request of Landlord, Tenant agrees to execute a
subordination, nondisturbance and attornment agreement incorporating the
provisions set forth above and otherwise in form reasonably acceptable to
Landlord and Tenant. Tenant agrees that it will from time to time upon request
by Landlord execute and deliver to such persons as Landlord shall request a
statement in recordable form certifying that this Lease is unmodified and in
full force and effect (or if there have been modifications, that the same is in
full force and effect as so modified), stating the dates to which rent and
other charges payable under this Lease have been paid, stating that Landlord is
not in default hereunder (or if Tenant alleges a default stating the nature of
such alleged default) and further stating such other matters as may be
reasonably requested.
31. No Implied Waiver. The failure of Landlord to insist at any time upon
the strict performance of any covenant or agreement or to exercise any option,
right, power or remedy contained in this Lease shall not be construed as a
waiver or a relinquishment thereof for the future. No payment by Tenant or
receipt by Landlord of a lesser amount than the monthly installment of rent due
under this Lease shall be deemed to be other than on account of the earliest
rent due hereunder, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment as rent be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such rent or pursue any other remedy
in this lease provided.
32. Security Deposit. [INTENTIONALLY OMITTED].
33. Notice. Any notice in this Lease provided for must be in writing, and
may be given or be served either by depositing the same in the United States
mail, postpaid and certified and addressed to the party to be notified, with
return receipt requested, or by actually delivering the same addressed to the
party to be notified at the address stated below or at such other address as may
from time to time be designated by addressee by notice given in accordance
herewith. Notice deposited in the mail in the manner hereinabove described shall
be deemed received upon the date of receipt as indicated on the return receipt.
In the event delivery by mail cannot be made or is refused, the date of mailing
shall be deemed to be the date of receipt of the notice.
34. Severability. If any term or provision of this Lease, or the
application thereof to any person or circumstance shall, to any extent be
invalid or unenforceable, the remainder of this Lease, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Lease shall be valid and enforced to the fullest
extent permitted by law.
35. Governing Law. This lease and the rights and obligations of the
parties hereto shall be interpreted, construed, and enforced in accordance with
the laws of the State of Georgia.
36. Force Majeure. Whenever a period of time is herein prescribed for the
taking of any action by Landlord,
13
<PAGE> 51
Landlord shall not be liable or responsible for, and there shall be excluded
from the computation of such period of time, any delays due to strikes, riots,
fire, acts of God, shortages of labor or materials, war, governmental laws,
regulations or restrictions, or any other cause whatsoever beyond the control
of Landlord.
37. Time Of The Essence. Time is of the essence of this Lease.
38. Transfers By Landlord. Landlord shall have the right to transfer and
assign, in whole or in part, all its rights and obligations hereunder and in the
Building and property referred to herein, and in such event and upon such
transfer Landlord shall be released from any further obligations hereunder, and
Tenant agrees to look solely to such successor in interest of Landlord for the
performance of such obligations.
39. Commissions. Landlord and Tenant hereby indemnify and hold each other
harmless against any loss, claim, expense or liability with respect to any
commissions or brokerage fees claimed on account of the execution and/or renewal
of this lease due to any action of the indemnifying party.
40. Liability. Landlord shall have no personal liability with respect to
its obligations under this Lease. Tenant shall look solely to Landlord's equity
in the Building and exterior Common Areas for satisfaction of Tenant's remedies.
In no event shall Landlord's liability exceed such equity.
41. Hazardous Substances. Tenant shall not cause or permit any hazardous,
toxic or dangerous substances (as defined or described in any applicable
federal, state or local statute, law, ordinance, code, rule, regulation, order
or decree regulating, relating to, or imposing liability or standards of conduct
concerning hazardous, toxic or dangerous substances) to be brought upon, kept or
used in or about the Premises or the Building. Tenant shall indemnify and hold
Landlord harmless from and against any and all claims, judgments, demands,
penalties, fines, losses and costs and expenses incurred by Landlord during or
after the term of this Lease as a result of such hazardous, toxic or dangerous
substances that Tenant causes or permits to be brought upon, kept or used in or
about the Premises or the Building during the term of this Lease. Landlord
represents to Tenant, to Landlord's actual knowledge and based solely upon
Landlord's review of its existing Phase I environmental audit of the Building
prepared by BCM, dated February 1991, that no radon, asbestos or other material
defined as hazardous under any existing applicable local, state or federal laws
or regulations as of the date hereof is contained within the Premises of the
Building or upon the land on which the Building is located.
42. Option With Respect To Basement Space. Tenant shall have the option to
lease from Landlord, commencing on November 1, 1994, approximately 5,230 square
feet of storage space in the basement of the Building at an annual rent of $5.00
per square foot of space for the then remaining term of this Lease. Such rent
shall be payable in advance in equal monthly installments in the same manner as
Base Rent is paid. Such option may be exercised by Tenant's giving written
notice to Landlord at any time on or before October 1, 1994. In the event Tenant
so exercises the option contained in this paragraph, Tenant shall have the right
at any time after November 1, 1994, by written notice to Landlord, to cancel
Tenant's use of such basement space upon no less than ninety (90) days prior
written notice to Landlord.
43. Satellite Dish. The provisions attached hereto as Exhibit "D" regarding
Tenant's satellite dish are incorporated herein by reference.
-14-
<PAGE> 52
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease in
multiple counterparts each of which shall be deemed an original as of the day
and year first above written.
ADDRESS: LANDLORD:
c/o Lincoln Property Company LINCOLN P.C. ASSOCIATES
3405 Piedmont Road, Suite 100
Atlanta, Georgia 30305 By: Lincoln Atlanta No. 8,
Attn: Property Manager Ltd., its general partner
By: /s/ ELLIS SHAMBURG III
-------------------------------
Title:
ADDRESS: TENANT:
Unisys Corporation UNISYS CORPORATION
P.O. Box 500
Township Line & Union
Meeting Roads By: /s/ [ILLEGIBLE]
Blue Bell, Pennsylvania 19424 ------------------------------------
Attn: Lease Administrator Title:
with a copy to: ATTEST:
Unisys Corporation By: /s/ [ILLEGIBLE]
P.O. Box 500 ------------------------------------
Township Line & Union Title: [ILLEGIBLE]
Meeting Roads
Blue Bell, Pennsylvania 19424 [CORPORATE SEAL]
Attn: Law Department
<PAGE> 53
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE the First Amendment is entered into this ??th day
of ?? 1994 by and between ATLANTA ?? PARTNERS, LTD., a Georgia limited
partnership (the "Landlord"), successor to Lincoln P.C. Associates ("Lincoln
P.C.") and UNISYS CORPORATION, a Delaware corporation (the "Tenant").
W I T N E S S E T H
WHEREAS, Lincoln P.C. and Tenant entered into that certain lease agreement dated
September 1, 1991 (the Lease) whereby Lincoln P.C. leased to Tenant certain
premises consisting of approximately One Hundred Ten Thousand, One Hundred
Eight (110,108) rentable square feet of space (the "Premises"), a portion of
which consisted of certain space commonly known as Suite 410 (the "Suite 410
Space"), in the building located at 1451 Ashford Dunwoody Road, Atlanta,
Georgia 30319 (the "Building") for a term commencing on September 1, 1991 and
expiring on August 31, 2001 (the "Term");
WHEREAS, Tenant has vacated the Suite 410 Space and is occupying space in lieu
thereof commonly known as Suite 260 of the Building, which space is depicted on
Exhibit "A" attached hereto and incorporated herein by this reference (the
"Suite 260 Space");
WHEREAS, Landlord and Tenant mutually desire to amend the Lease to reflect
Tenant's relocation from the Suite 410 Space to the Suite 260 Space, and to
amend certain terms of the Lease, as set forth herein;
NOW THEREFORE, in consideration of the mutual covenants and promises contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. Relocation of Tenant. The Lease shall be amended to delete the Suite 410
Space from the Premises and to substitute in lieu thereof the Suite 260
Space as part of the Premises. Page (iii) of Exhibit "A" shall be deleted
from the Lease, and Exhibit "A" attached to this First Amendment shall be
substituted therefor. The square footage of the Premises shall remain the
same and Tenant's rental rate, except as otherwise provided below, shall
remain the same as set forth in the Lease.
2. Expansion Option. Paragraph 42 of the Lease shall be amended to reflect
that Tenant shall have the option (the "Expansion Option") to lease up to
Five Thousand, Two Hundred Thirty (5,230) square feet of space located in
the basement of the Building (the "Basement Space"). Tenant must comply
with the provisions of Paragraph 42 of the Lease regarding notification to
the Landlord should Tenant choose to exercise the Expansion Option. Tenant
is not required to lease the entire square footage of the Basement Space,
provided that (i) Tenant may not lease an amount of square footage or a
configuration which would leave the remaining Basement Space unusable by
Landlord; (ii) Tenant's exercise of the Expansion Option shall be
contingent upon Landlord's prior written approval of the proposed
configuration of the portion of the Basement Space which will be taken by
Tenant; and (iii) all costs, including labor and material, of constructing
any demising wall or other construction required in order to delineate
Tenant's chosen portion of the Basement Space shall be borne by Tenant.
Within fifteen (15) days after Tenant exercises the Expansion Option,
Tenant and Landlord shall execute an amendment to the Lease reflecting the
addition of the Basement Space to the Premises. Once Tenant has exercised
the Expansion Option, Tenant shall have no further option to lease any
additional portion of the Basement Space. All other provisions of Paragraph
42 shall remain in full force and effect. The term of Tenant's Lease of all
or any portion of the Basement Space shall expire upon expiration of the
Term of the Lease, unless sooner terminated by Tenant in accordance with
Paragraph 42 of the Lease. If Tenant does not exercise the Expansion Option
on or before October 1, 1994, it shall expire automatically.
3. Lease of Telephone Room. Effective November 1, 1994, and ending August 31,
2001, the Premises shall be expanded to include additional space consisting
of 632 rentable square feet of space located in Suite 120 of the Building
(the "Telephone Room"). Exhibit "B" attached to this First Amendment
depicts Suite 120, the Telephone Room. The rental rate for the Telephone
Room shall be $12.00 per rentable square foot, resulting in an annual
payment of Seven Thousand, Five Hundred Eighty-four Dollars ($7,584.00)
(the "Additional Rent"), which may be paid in monthly installments of Six
Hundred Thirty-two Dollars ($632.00). The monthly installments of
Additional Rent shall be due and payable in addition to Tenant's monthly
installment of base rental, in conformance with the terms and conditions of
Paragraph 2 of the Lease. With the exception of the calculation of rent
owed by Tenant for the Telephone Room, Tenant's lease of the Telephone Room
will be subject to all terms and conditions of the Lease. Tenant accepts
the Telephone Room in its "as is" present condition.
4. Entire Agreement. This First Amendment contains the entire agreement of
Landlord and Tenant with respect to the matters addressed herein.
5. Lease in Effect. Except as provided herein, all other terms and conditions
of the Lease shall continue in full force and effect.
<PAGE> 54
IN WITNESS WHEREOF, the parties hereto have caused their respective and
authorized representatives to execute this First Amendment as of the date first
written above.
Landlord Tenant
ATLANTA U.K. PARTNERS, LTD. UNISYS CORPORATION
a Georgia limited partnership A Delaware corporation
By: The Travelers Insurance Company,
a Connecticut corporation, ?????
general partner
By: /s/ [Signature Illegible] By: /s/ RICHARD J. L'ECUYER
------------------------------ -----------------------------
Richard J. L'Ecuyer
Title: Vice President Title: Corporate Director
------------------------------ Real Estate Operations
Attest: /s/ [Signature Illegible] ----------------------
-------------------------- Attest: /s/ [Signature Illegible]
-------------------------
Title: Assistant Secretary Title: Assistant Secretary
------------------- --------------------------
[CORPORATE SEAL] [CORPORATE SEAL]
<PAGE> 55
EXHIBIT "A"
--------------------------------------------------------------------------------
LINCOLN PROPERTY COMPANY
ASHFORD PERIMETER
FLOOR 2
[DIAGRAM]
<PAGE> 56
EXHIBIT "B"
--------------------------------------------------------------------------------
LINCOLN PROPERTY COMPANY
ASHFORD PERIMETER
FLOOR 1
[DIAGRAM]
<PAGE> 57
Tenant Improvements. Tenant agrees to accept delivery of the Basement Space
in its then existing as is condition on the Occupancy Date. The parties
hereby agree that Landlord shall have no obligation to make any
improvements whatsoever to the Basement Space. Any improvements to the
Basement Space which Tenant may desire to make shall be made in strict
compliance with the ?? terms and conditions of the Lease, as previously
amended pertaining to Tenant's alterations to and modifications of the
premises. No improvements shall be made without Landlord's prior written
consent.
Notices. Any notice or other communication required or permitted to be
given under this Second Amendment must be in writing and shall be
effectively given or delivered, if hand delivered, to the addresses for the
parties stated below, or if sent by certified United States mail, return
receipt requested, or if sent by receipted overnight express service to
said addresses. Any notice mailed shall be deemed to have been received
upon the earlier of (a) actual receipt, (b) refusal thereof, or (c) three
(3) days after mailing same. Notice effected by hand delivery shall be
deemed ??????????????????.
SECOND AMENDMENT TO LEASE
This Second Amendment to Lease (the "Second Amendment") is entered as of the
24th day of September, 1994 (the "Effective Date"), by and between ATLANTA U.K.
PARTNERS, LTD., a Georgia limited partnership (the "Landlord"), successor to
Lincoln P.C. Associates ("Lincoln P.C.") and UNISYS CORPORATION, a Delaware
corporation (the "Tenant")
WITNESSETH:
WHEREAS, Lincoln P.C. and Tenant entered into that certain lease agreement dated
September 1, 1991 the Lease whereby Lincoln P.C. leased to Tenant certain
premises consisting of approximately one hundred ten (110,108) rentable square
feet of space (the "Premises") in the building located at 4151 Ashford-Dunwoody
Road, Atlanta, Georgia 30319 (the "Building") for a term commencing on September
1, 1991 and expiring on August 31, 2001 (the "Term");
WHEREAS, Landlord and Tenant entered into that certain First Amendment to Lease
dated August 5, 1994 (the "First Amendment"), whereby the Lease was amended to
reflect Tenant's relocation from Suite 410 of the Building to Suite 260 of the
Building and Tenant was offered an Expansion Option to expand into basement
space in the Building;
WHEREAS, Landlord and Tenant mutually desire to expand Tenant's Premises to
include five thousand, two hundred thirty (5,230) rentable square feet of space
located in the Basement of the Building (the "Basement Space"), pursuant to
Paragraph 42 of the Lease and the First Amendment;
NOW THEREFORE, in consideration of their respective covenants and agreements as
hereinafter set forth, the parties hereto do mutually covenant and agree with
each other as follows:
1. Basement Space. Effective November 1, 1994 (the "Occupancy Date"), Tenant
shall lease from Landlord the Basement Space, as depicted on Exhibit "A"
which is attached hereto and incorporated herein by this reference. The
Basement Space shall become part of the Premises, and all terms and
conditions of the Lease, as amended, shall apply to the Basement Space.
2. Termination Date. Tenant's right to use and occupy the Basement Space shall
terminate on August 31, 2001 (the "Termination Date"), unless sooner
terminated by Tenant in accordance with the terms of Paragraph 8 of this
Second Amendment.
3. Rentable Square Feet. Effective on the Occupancy Date, Paragraph 1 of the
Lease shall be amended by substituting the definition set forth below for
the existing definition in the Lease:
<PAGE> 58
Entire Agreement. This Second Amendment contains the entire agreement by and
between the parties relating to the subject matter hereof and supersedes all
prior negotiations and agreements relating thereto.
Governing Law. This Second Amendment shall be construed in accordance with and
governed by the laws of the state of Georgia.
IN WITNESS WHEREOF the parties hereunto set their hands and affixed their seals
effective date and year first written above.
LANDLORD TENANT
ATLANTA V. K. PARTNERS, LTD., UNISYS CORPORATION,
a Georgia limited partnership a Delaware corporation
By The Travelers insurance Company, a By /s/ RICHARD J. L'ECUYER
Connecticut corporation, its sole -----------------------------
general partner RICHARD J. L'ECUYER
Title: Corporate Director
------------------------
Real Estate Operations
By /s/ [Signature Illegible] Attest: /s/ RONALD C. ANDERSON
--------------------------- ------------------------
RONALD C. ANDERSON
Title: Vice President Title: Assistant Secretary
--------------------------- ------------------------
[CORPORATE SEAL]
Attest: /s/ [Signature Illegible]
Title: Assistant Secretary
---------------------------
[CORPORATE SEAL]
-3-
<PAGE> 59
THIRD AMENDMENT TO LEASE
This Third Amendment to Lease (the Third Amendment) is entered into this 26th
day of January 1995, by and between ATLANTA U.K. PARTNERS, LTD., a Georgia
limited partnership and Landlord, successor ???? and UNISYS CORPORATION, a
Delaware corporation (the Tenant).
WITNESSETH
WHEREAS, Lincoln P.C. and Tenant entered into that certain lease agreement dated
September 1, 1991 (the "Lease") whereby Lincoln P.C. leased to Tenant certain
premises consisting of approximately one hundred ten thousand, one hundred
eight (110,108) rentable square feet of space (the "Premises"), a portion of
which consisted of certain space commonly known as Suite 399, in the building
located at 4151 Ashford-Dunwoody Road, Atlanta, Georgia 30319 (the "Building")
for a term commencing on September 1, 1991 and expiring on August 21, 2001 (the
"Term").
WHEREAS, Landlord and Tenant entered into that certain First Amendment to Lease
dated August 5, 1994, whereby the Lease was amended to reflect Tenant's
relocation from Suite 410 of the Building to Suite 260 of the Building;
WHEREAS, Landlord and Tenant entered into that certain Second Amendment to
lease dated September 27, 1994, whereby the Lease was amended to reflect
Tenant's lease extension of the basement space in accordance with Paragraph 42
of the Lease and by the First Amendment to lease dated August 5, 1994.
WHEREAS, Landlord and Tenant mutually desire to terminate Tenant's rights to
Suite 399 of the Building, consisting of approximately seven thousand, three
hundred seventy-six rentable square feet (7,376) (the "Relinquished Space"),
effective January 31, 1995 (the "Terminate Date"), as is more particularly
described herein;
WHEREAS, Landlord and Tenant mutually desire to amend the Lease to expand
Tenant's Premises to include Suite 525 and Suite 575 of the Building;
NOW THEREFORE, in consideration of their respective covenants and agreements as
hereinafter set forth, the parties hereto do mutually covenant and agree with
each other as follows:
1. Termination Date. Tenant shall surrender possession of the Relinquished
Space effective as of 11:59 p.m. on the Termination Date. Tenant shall be
obligated for the payment of rent and all other charges as provided in the
Lease which accrue up to the Termination Date.
2. Surrender of the Relinquished Space. Effective on the Termination Date, all
rights of Tenant to the Relinquished Space, including, but not limited to,
Tenant's rights to use and occupy the Relinquished Space, are terminated.
Tenant shall surrender possession of the Relinquished Space to Landlord on
or before 11:59 p.m. on the Termination Date, in compliance with Paragraph
29 of the Lease. Tenant shall surrender the Relinquished Space unto
Landlord in the same condition as received, broom-clean and free of debris,
ordinary wear and tear excepted.
3. First Expansion Space. Effective February 1, 1995 (the "First Expansion
Date"), the Premises shall be expanded to include Suite 575 of the Building
(the "First Expansion Space"). The First Expansion Space is depicted on
Exhibit "A" which is attached hereto and incorporated herein by reference.
The First Expansion Space shall become part of the Premises and all terms
and conditions of the Lease, as amended, shall apply to the First Expansion
Space.
4. Second Expansion Space. Effective March 1, 1995 (the "Second Expansion
Date"), the Premises shall be expanded to include Suite 525 of the Building
(the "Second Expansion Space"). The Second Expansion Space is depicted on
Exhibit "B" which is attached hereto and incorporated herein by reference.
The Second Expansion Space shall become part of the Premises and all terms
and conditions of the Lease, as amended, shall apply to the Second
Expansion Space.
5. As Is. Tenant agrees to accept Suite 525 and Suite 575 "as is." Landlord
will construct for Tenant a cased opening connecting Tenant's existing
Premises with Suite 525 prior to delivery of the Premises. Landlord shall
have no obligation to make any other improvements to either suite.
6. Base Rental. Tenant's Base Rental obligation under the Lease shall remain
unmodified irrespective of any increase or decrease in Tenant's total
square footage created by Tenant a surrender of the Relinquished Space and
Tenant's expansion into the First Expansion Space and the Second Expansion
Space. Tenant will, however, receive a rent abatement equal to $5,712.06
per month for each month
<PAGE> 60
beyond February 1, 1995 that Landlord delays in delivering the Second
Expansion Space to Tenant. The Premises shall be deemed delivered upon
written notification by Landlord that the Second Expansion Space is ready
for occupancy. Both Tenant's Monthly Rent and Annual Rent, as specified in
Paragraph ?? of the Lease for Lease Years 4 through 10, shall remain the
same, except for the abatement stated in this section.
Rentable Square Feet. Tenants' Approximate Rentable Square feet within
the Premises, as set forth in Paragraph 1 of the Lease, shall remain
unmodified irrespective of any increase or decrease in Tenant's total
square footage created by Tenant's surrender of the Relinquished Space and
Tenant's expansion into the First Expansion Space and the Second Expansion
Space.
Lease in Effect. Except as expressly amended herein, all terms and
conditions of the Lease shall remain in full force and effect, and the
Lease, as modified and amended, is hereby ratified and affirmed by
Landlord and Tenant.
Entire Agreement. This Third Amendment supersedes any and all prior
discussions and agreements, either oral or written, by and between
Landlord and Tenant with respect to the Relinquished Space, and this Third
Amendment contains the sole and entire agreement between Landlord and
Tenant with respect to the Relinquished Space.
10. Governing Law. This Third Amendment shall be construed in accordance with
and governed by the laws of the State of Georgia.
IN WITNESS WHEREOF the parties hereunto set their hands and affixed their seals
effective the date and year first written above.
LANDLORD TENANT
ATLANTA U.K. PARTNERS, LTD. UNISYS CORPORATION.
a Georgia limited partnership a Delaware corporation
By: The Travelers Insurance Company, a By: /s/ RICHARD J. L'ECUYER
Connecticut corporation, its sole ------------------------------
general partner RICHARD J. L'ECUYER
By: /s/ [Signature Illegible] Title: Corporate Director
---------------------------------- --------------------------
Real Estate Operations
Title: Director WITNESS: /s/ [Signature Illegible]
------------------------------- --------------------------
Title: REGIONAL DIRECTOR
Attest: /s/ [Signature Illegible]
------------------------------
Title: Assistant Secretary
------------------------------
[CORPORATE SEAL]
-2-
<PAGE> 61
EXHIBIT "A"
First Expansion Space
[FLOOR PLAN]
Third Amendment to Lease to be entered into by, between and among ATLANTA U.K.
PARTNERS, LTD., a Georgia limited partnership, and UNISYS CORPORATION, a
Delaware Corporation.
<PAGE> 62
EXHIBIT "B"
Second Expansion Space
[FLOOR PLAN]
Third Amendment to Lease to be entered into by, between and among ATLANTA U.K.
PARTNERS, LTD., a Georgia limited partnership, and UNISYS CORPORATION, a
Delaware Corporation.
<PAGE> 63
EXHIBIT "A"
Basement Space
[FLOOR PLAN]
SECOND AMENDMENT TO LEASE BY AND BETWEEN ATLANTA U.K. PARTNERS, LTD., A GEORGIA
LIMITED PARTNERSHIP, SUCCESSOR TO LINCOLN P.C. ASSOCIATES, AND UNISYS
CORPORATION, A DELAWARE CORPORATION.
<PAGE> 64
EXHIBIT A
[FLOOR PLAN]
<PAGE> 1
EXHIBIT 10.7
Landa Management Systems Corp.
LEASE
FORTRESS DEVELOPMENT GROUP
a California Corporation
NEC FORTRESS STREET & CONVAIR AVENUE
CHICO, CALIFORNIA
THIS LEASE, made and entered into this Eighth, day of March, 1999, by and
between FORTRESS DEVELOPMENT GROUP, a California Corporation, hereinafter
referred to as Landlord and LANDA MANAGEMENT SYSTEMS CORPORATION, hereinafter
referred to as Tenant, without regard to number or gender.
1. USE AND PREMISES: Landlord hereby leases to Tenant and Tenant hereby
hires from Landlord, for the purpose of conducting thereon
those certain premises described as THE MOST EASTERLY 17,470 SQUARE FEET
hereinafter referred to as the "demised premises", being the premises outlined
in red on the attached plot plan Exhibit A having an approximate floor area of
17,470 SQUARE FEET.
2. TERM: The term of this lease shall be for a period of SEVEN (7.0) YEARS
Tenant is given an option to renew this lease for UP TO TWO ADDITIONAL
CONSECUTIVE TERMS OF FIVE YEARS each at the expiration of the term of this
lease, under terms and conditions shown. An additional term can be added upon
agreement to terms and conditions by the parties. Tenant shall give Landlord
written notice of exercising this option no less than 90 day before the end of
the term preceding the option term. At no time and under no conditions will this
lease be renewed or options exercised if the Tenant is in default of this or any
other paragraph of this lease.
The term of this lease, and Tenant's obligation to pay rent, SHALL
COMMENCE WITHIN TEN DAYS OF LANDLORD RECEIVING A CERTIFICATE OF OCCUPANCY OR
WHEN TENANT OPENS FOR BUSINESS IN THE DEMISED PREMISES WHICHEVER COMES FIRST.
Should such earlier date not occur on the first day of a calendar month, the
term hereunder shall begin on the first day of the next succeeding calendar
month. In that event, however, the Tenant shall pay rent for the fractional
month on a per day basis (calculated on the basis of thirty day month) until the
first day of the month when the term hereunder commences and thereafter the
minimum rent shall be paid in equal monthly installments on the first day of
each and every month in advance.
3. BASE RENTAL: Tenant shall pay to Landlord during the term of this lease
as base monthly rental for the demised premises the sum OF ELEVEN THOUSAND THREE
HUNDRED FIFTY-FIVE AND 50/100 DOLLARS ($11,355.50) EACH calendar month, which
sum shall be paid in advance on the first day of each calendar month. All rental
to be paid BY Tenant to Landlord shall be in lawful money of the United States
of America and shall be paid without deduction or offset, prior to notice or
demand at an address to be designated by Landlord.
4. REAL ESTATE TAXES: In addition to all rentals reserved in this lease,
Tenant shall pay to Landlord an amount equal to Tenant's pro rata share of real
estate taxes and assessments levied upon the building including rentable areas,
common areas, and all other areas of the property in
<PAGE> 2
which the demised premises are located. Tenant's pro rata share of such real
estate taxes shall be determined as specified in Article 9 Pro Rata Share below.
The term "real estate taxes" as used herein shall be deemed to mean all taxes
imposed upon the real property and permanent improvements constituting the
demised premises, and all assessments levied against said premises, but shall
not include personal income tax, personal property taxes, inheritance taxes, or
franchise taxes levied against Landlord, but not directly against said property,
even though such taxes shall become a lien against said property.
5. INSURANCE-FIRE: Landlord shall maintain fire and extended coverage
insurance throughout the term of this lease in an amount equal to at least
ninety (90%) percent of the replacement value of the building which includes the
demised premises and lost rents, together with such other insurance as may be
required by Landlord's lender or by any governmental agency, Tenant hereby
waives any right of recovery from Landlord, its officers, or employees, for any
loss or damage (including consequential loss) resulting from any of the perils
insured against in the standard form fire insurance policy with extended
coverage endorsement. Tenant agrees to pay to Landlord its pro rata share of the
cost of said insurance as specified in Article 9 below.
6. INSURANCE-LIABILITY: During the entire term of this lease, the Landlord
shall maintain general public liability insurance against claims for personal
injury, death or property damage occurring in, upon, or about the demised
premises and on any sidewalks directly adjacent to the demised premises. The
limitation of liability of such insurance shall be not less than One Million and
No/100 Dollars ($1,000,000) in respect to any one accident and to the limit of
not less than Fifty Thousand and No/100 Dollars ($50,000) in respect to
property damage. Tenant agrees to pay to Landlord its pro rata share of the cost
of this insurance as specified in Article 9 below.
The Landlord will periodically review the limits on the insurance provided
for in this Article, and Landlord may, at his option, revise those limits as
required to meet reasonable needs for coverage. The Tenant will be solely
responsible for the cost of these changes.
7. UTILITIES: Tenant, from the date entry into the demised premises is
made for the purpose of preparing for occupancy, or from the date of the
commencement of the term of this lease, whichever comes first, shall pay before
delinquent for all water, burglar alarm, gas, heat, electricity, power, sewage,
telephone, janitorial, garbage, and all other services supplied to or consumed
in or on the premises. Tenant shall not allow refuse, garbage, or trash to
accumulate outside the demised premises in any open area or common area
available to the sight or access of the public, except on the date of scheduled
pickup service, and then only in areas designated for such by Landlord.
8. COMMON AREA: The Common Area shall consist of all areas, except for the
areas where buildings or areas are constructed for leasing to Tenants. Landlord
shall maintain the Common Area in good order, condition, and repair, and shall
provide adequate lighting whenever the center is open for business. Tenant shall
reimburse Landlord for Tenants proportionate share of the total maintenance cost
of the Common Area as specified in Article 9 below. Maintenance cost shall
include all costs incurred in keeping the Common Area neat, clean, orderly, and
well lighted. This shall include sweeping, striping, lighting, landscape
maintenance, janitorial, and other expenses related to the operation and
maintenance of the Common Area. The maintenance of the Common Area shall be at
the sole discretion of the Landlord.
Tenant, its employees, customers, and invitees shall have the
non-exclusive right to use the Common Area in conjunction with all other Tenants
in the Center, and their employees, customers, and invitees. Landlord shall have
the right to publish reasonable rules and regulations for the use of
<PAGE> 3
the common Area, including designating areas where Tenant and Tenant's employees
shall be required to park.
Tenant will keep Common Area free of merchandise, displays, and any other
item that could constitute a safety hazard.
9. PRO RATA SHARE: Those expenses for which Tenant is responsible under
the terms of this agreement which are separately metered, billed, or assessed
shall be paid directly by Tenant before delinquent. Those expenses which are not
metered, billed, or assessed separately will be paid for by the Landlord and the
Tenant will reimburse to the Landlord its pro rata share. Tenants pro rata share
shall be SIXTY-TWO AND NINETY-THREE ONE HUNDREDTHS PERCENT (62.93%). Tenants pro
rata share shall be payable monthly with the Base Rental as specified in Article
3 above.
10. SECURITY DEPOSIT: Upon listing below the amount, check number, date,
or other appropriate information, the Landlord acknowledges the receipt of the
following security deposit:
Until receipt of a security deposit of THIRTEEN THOUSAND FOUR HUNDRED AND 001100
DOLLARS ($13,400.00) This lease shall not be binding on the Landlord. The
security deposit is given to secure the faithful performance by the Tenant of
all of the terms, covenants, and conditions of this lease by Tenant to be kept
and performed during the term hereof. Tenant agrees that if the Tenant shall
fail to pay the rent herein reserved promptly when due, said deposit may, at the
option of the Landlord (but Landlord shall not be required to), be applied to
any rent due and unpaid, and if the Tenant violates any of the other terms,
covenants, and conditions of this lease, said deposit may be applied to any
damages suffered by Landlord as a result of Tenant's default to the extent of
the amount of damages suffered.
Nothing contained in this Article shall in any way diminish or be
construed as waiving any of Landlord's other remedies as provided in this lease
or by law or in equity. Should the entire security deposit, or any portion
thereof, be appropriated and applied by Landlord for the payment of overdue rent
or other sums due and payable to Landlord by Tenant hereunder, then Tenant
shall, on the written demand of Landlord, forthwith remit to Landlord a
sufficient amount of cash within ten (10) days after receipt of such demand, or
it shall constitute a breach of this lease. Should Tenant comply with all of the
terms and covenants and conditions of this lease and promptly pay all of the
rental herein provided for as it falls due, and all other sums payable to
Landlord by Tenant hereunder, said security deposit shall be returned in full to
Tenant after the end of the term of this lease. In no event shall Landlord be
deemed to be a trustee of the security deposit, and Tenant shall not be entitled
to interest on any sums deposited under this section.
11. LIQUIDATED DAMAGES: In addition to any breach of the lease, Tenants
slow or nonpayment of rent may cause Landlord to additionally levy the following
liquidated damages:
A) LATE PAYMENT: Any payment due from Tenant not received by the fourth
working day following its becoming due will be subject to liquidated
damages of 1.5 percent or TWENTY AND NO/100 dollars whichever is
larger each month or part of a month it remains unpaid.
B) RETURNED CHECKS: Any check returned unpaid for non-sufficient
funds, missing signature, or other reason not caused by Landlord
will be subject to liquidated damages of TWENTY AND NO/100 each and
every time it is returned.
<PAGE> 4
C) NON-PAYMENT: All liquidated damages above shall apply to non-
payment of rent until award of judgment by a court having
jurisdiction. If allowable by the court, the liquidated damages
shall continue after award of judgment until payment in full.
12. PERSONAL PROPERTY TAXES: During the term hereof Tenant shall pay prior
to delinquency all taxes assessed against and levied upon fixtures, equipment,
furnishings, and all other personal property of Tenant contained in the demised
premises, and when possible, Tenant shall cause said fixtures, furnishings,
equipment and all other personal property to be assessed and billed separately
from the real property of Landlord. In the event any or all of the Tenant's
fixtures, furnishings, equipment and other personal property is assessed with
Landlord's real property, the Tenant shall pay to Landlord its share of such
taxes within ten (10) days after delivery to Tenant by Landlord of a statement
in writing setting forth the amount of such taxes applicable to Tenant's
property.
13. INSURANCE-TENANT: Tenant shall, during the entire term of this lease,
maintain general public liability insurance against claims for personal injury,
death, or property damage occurring in, upon, or about the demised premises for
the benefit of Tenant, with limitations as set forth in Article 6. Tenant shall
be solely responsible for the cost of such policies, and policies of insurance
or copies thereof shall be delivered to the Landlord and certification made that
the policy or policies are fully paid to date and in full force. If, during the
term of this lease, the policy or policies lapse due to non-payment of premium
or any other cause and are not reinstated or replaced by a like policy or
policies, approved by the Landlord, within ten (10) days, will constitute a
breach of this lease, at the option of the Landlord.
The Landlord will periodically review the liability limits on the
insurance provided for in Article 6 of this lease and the Landlord may, at his
option revise those limits as required to meet the reasonable needs for coverage
at that time. The Tenant will be solely responsible for any cost this change in
liability limits may cause and will pay such amounts as provided above.
14. MAINTENANCE AND REPAIR: Tenant shall, subject to Landlord's
obligations hereinafter provided, at all times during the term hereof, and at
Tenant's sole cost and expense, keep maintain and repair the demised premises in
good and sanitary order and condition (except as hereinafter provided). Tenant
hereby waives all rights to make repairs at the expense of Landlord, provided
that Landlord is in substantial compliance with his obligations to repair under
the provisions of this lease. By entering into the demised premises, Tenant
shall be deemed to have accepted the demised premises as being in good and
sanitary order, condition and repair and Tenant agrees on the last day of said
term or sooner termination of this lease, to surrender the demised premises with
appurtenances, in the same condition as when received, reasonable use and wear
thereof and damage by fire, act of God or by the elements excepted.
Landlord shall maintain in good repair the exterior walls, roof,
sidewalks, and common areas. Tenant is responsible for all other item including
but not limited to the heating and air conditioning system, electrical system,
plumbing (including pluggage and stoppage of sanitary sewer system), glass,
light bulbs, fluorescent tubes, and supplemental fixtures. The provisions of
this article are in no way intended to affect Tenant's responsibility for Common
Area maintenance expense as specified by Articles 8 and 9 above. Tenant agrees
that it will not, nor will it authorize any person to go onto the roof of the
building of which the demised premises are a part, without the prior written
consent of Landlord. Landlord shall not be required to make any repairs unless
and until Tenant has notified Landlord in writing of the need for such repairs
and Landlord shall have a reasonable period of time thereafter to commence and
complete said repairs.
15. ALTERATIONS AND FIXTURES: Tenant shall not make, or suffer to be made,
any alterations of the demised premises, or any part thereof, without the prior
written consent of Landlord, and any additions to, or alterations of, said
premises, except movable furniture and trade fixtures, shall become at once a
part of the realty and belong to Landlord, and upon expiration or sooner
termination of the term of this lease, at Landlord's election, Tenant shall
remove and all damage caused by such removal shall be repaired by Tenant at its
sole cost and with due diligence,
<PAGE> 5
or the additions and alterations of the premises shall be left in good condition
and repair for the Landlord's future use. Any such alterations shall be in
conformance with requirements of all municipal, state and federal authorities.
Tenant agrees to promptly fixturize the space in a manner comparable to an
office space of similar nature.
16. WASTE: Tenant shall not commit, or suffer to be committed, any waste
upon the demised premises, or any nuisance or other act or thing which may
disturb the quiet enjoyment of any other tenant in the building or complex of
buildings in which the demised premises may be located.
17. SIGNS AND AUCTIONS: Tenant shall not place or permit to be placed any
sign upon the exterior or in the windows of the demised premises without
Landlord's prior written consent, nor shall Tenant change the color or exterior
appearance of the demised premises without the Landlord's prior written consent.
Tenant shall at its sole cost and expense prepare sign construction
drawings which shall be submitted to Landlord for Landlord's written approval.
Tenant agrees to install a sign in accordance with approved sign construction
drawings within thirty (30) days after the commencement of the term of this
lease.
Tenant will not without Landlord's prior written consent display or sell
merchandise outside the defined exterior walls and permanent doorways of the
demised premises. Tenant shall not conduct or permit to be conducted any sale by
auction in, upon or from the demised premises, whether said auction be
voluntary, involuntary, pursuant to any assignment for the payment of creditors
or pursuant to any bankruptcy or other solvency proceeding.
18. COMPLIANCE WITH LAWS: Tenant shall, at his sole cost and expense,
comply with all of the requirements of all municipal, state and federal
authorities now in force or which may hereafter be in force pertaining to the
use of said premises, and shall faithfully observe in said use all municipal
ordinances and state and federal statutes now in force or which shall
hereinafter be in force. The judgment of any court of competent jurisdiction, or
the admission of Tenant in any action or proceeding against Tenant, whether
Landlord be a party thereto or not, that Tenant has violated any such order or
statute in said use, shall be conclusive of that fact as between the Landlord
and Tenant.
19. USES PROHIBITED: Tenant shall not use, or permit said premises, or any
part thereof, to be used for any purpose or purposes other than the purpose or
purposes for which said premises are hereby leased; and no use shall be made or
permitted to be made of said premises, nor acts done, which will increase the
existing rate of insurance upon the building in which said premises may be
located once said rate is established), or cause a cancellation of any insurance
policy covering said building or any part thereof, nor shall Tenant sell or
permit to be kept, used or sold in or about said premises any article which may
be prohibited by standard form fire insurance policies. Tenant shall, at his
sole cost, comply with any and all requirements, pertaining to the use of said
premises, of any insurance organization or company necessary for the maintenance
of reasonable fire and public liability insurance covering said building and
appurtenances. Tenant will not sell or lease goods or services if Landlord has
given an exclusive right to another Tenant in the complex to sell or lease the
same goods or services.
20. ASSIGNMENT AND SUBLETTING: Tenant shall not assign this lease or any
interest herein, and shall not sublet the demised premises or any part thereof
or right or privilege appurtenant thereto, or permit any other person (the
agents and servants of Tenant excepted) to occupy or use the demised premises,
or any portion thereof, without first obtaining the written consent of Landlord
such consent not to be unreasonably witheld. Consent by Landlord to one
assignment, subletting, occupation or use by another person shall not be deemed
to be a consent to any subsequent assignment, subletting, occupation, or use by
another person. Consent to an
<PAGE> 6
assignment shall not release the original named Tenant from liability for the
continued performance of the terms and provisions on the part of Tenant to be
kept and performed, unless Landlord specifically releases the original Tenant
from said liability. Any assignment or subletting without the prior written
consent of Landlord shall be void, and shall, at the option of Landlord
terminate this lease. Neither this lease nor any interest therein shall be
assignable, as to the interest of Tenant, by operation of law, without the prior
written consent of Landlord.
21. SALE OF PREMISES BY LANDLORD: In the event of any sale of the demised
premises by Landlord, Landlord shall be and is hereby entirely freed and
relieved of all liability under and all of its covenants and obligations
contained in or derived from this lease arising out of any act, occurrence or
omission occurring after the consummation of such sale; and the purchaser, at
such sale or any subsequent sale of the demised premises shall be deemed,
without any further agreement between the parties or their successors in
interest or between the parties and by such purchaser, to have assumed and
agreed to carry out all of the covenants and obligations of the landlord under
this lease. Further, Tenant agrees to attorn to the new owner upon any such sale
and recognize such purchaser as the Landlord under this lease.
22. SUCCESSORS IN INTEREST: All the terms, covenants, and conditions
hereof shall be binding upon and inure to the benefit of the heirs, executors,
administrators, successors and assigns of the parties hereto provided that
nothing in this paragraph shall be deemed to permit any assignment, subletting,
subletting occupancy, or use contrary to the provisions of Paragraph 20. No
assignee for the benefit of creditors, trustee, receiver, or referee in
bankruptcy shall acquire any rights under this lease by virtue of this
paragraph.
23. INDEMNIFICATION OF LANDLORD: Tenant, as a material part of the
consideration to be rendered to Landlord under this lease, hereby waives all
claims against Landlord for damage to goods, wares, and merchandise in, upon, or
about said premises and for injuries to persons in or about said premises, from
any cause arising at any time except for Landlords gross negligence; and Tenant
will hold Landlord exempt and harmless from any damage or injury to any person,
or the goods, wares, and merchandise of any person arising from the use of the
premises by Tenant, or from the failure of Tenant to keep the premises in good
condition and repair, as herein provided.
24. FREE FROM LIENS: Tenant shall keep the demised premises and the
property in which the demised premises are situated free from any liens arising
out of any work performed, materials furnished, or obligation incurred by
Tenant. Fifteen days before work is performed, materials supplied, or obligation
incurred, Tenant will notify Landlord in writing to enable him to post a notice
of non-responsibility.
25. DEFAULT: If Tenant fails to make any payment required by the provisions
of this lease, when due, or fails within three (3) days after written notice
thereof to correct any breach or default of the other covenants, terms, or
conditions of this lease, or if Tenant breaches this lease and abandons the
property before the end of the term, Landlord shall have the right at any time
thereafter to elect to terminate this lease and Tenant's right of possession
thereunder. Upon such termination, Landlord shall have the right to recover
against Tenant:
A. The worth at the time of award of the unpaid rent which has been earned
at the time of termination;
B. The worth at the time of award of the amount of which the unpaid rent
which would have been earned after termination until the time of award exceeds
the amount of such rental loss that the Tenant proves could have been reasonable
avoided;
C. The worth at the time of award of the amount by which the unpaid rent
for the balance of the term after the time of award exceeds the amount of such
rental loss that the Tenant proves could have been reasonably avoided; and
<PAGE> 7
D. Any other amount necessary to compensate the Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligations
under the lease or which in the ordinary course of things would be likely to
result therefrom.
E. All liquidated damages, late fees, and other charges specified by any
part of this lease.
Such efforts as Landlord may make to mitigate the damages caused by
Tenant's breach of this lease shall not constitute a waiver of Landlord's right
to recover damages against Tenant hereunder, nor shall anything herein contained
affect Landlord's right to indemnification against Tenant for any liability
arising prior to the termination of this lease for personal injuries or property
damage, and Tenant hereby agrees to indemnify and hold Landlord harmless for any
such injuries and damages, including all attorney's fees and cost incurred by
Landlord in defending any action brought against Landlord for any recovery
thereof, and in enforcing the terms and provisions against Tenant.
26. INSOLVENCY OF TENANT: Tenant agrees that in the event all or
substantially all of its assets be placed in the hands of a receiver or trustee,
and in the event such receivership or trusteeship continues for a period of ten
(110) days, or should Tenant make as assignment for the benefit of creditors,
or be adjudicated as bankrupt, or should Tenant institute any proceedings under
any state or federal bankruptcy act wherein Tenant seeks to be adjudicated as
bankrupt, or seeks to be discharged of its debts, or should any voluntary
proceeding be filed against Tenant under such bankruptcy laws and Tenant
consents thereto or acquiesces therein by pleading or default, then this lease
or any interest therein and to the demised premises shall not become as asset in
any of such proceedings and, in any such events and in addition to any and all
rights or remedies of Landlord hereunder or as provided by law, it shall be
lawful for Landlord, at his option, to declare the term hereof ended and to
re-enter the demised premises and to take possession thereof and remove all
persons therefrom and Tenant shall have no further claim therein or hereunder.
27. ABANDONMENT: Tenant shall not vacate, abandon, or not keep the demised
premises open for business for more than five (5) consecutive normal business
days (customary for like businesses in the area of the demised premises),
provided that Tenant's business is not temporarily discontinued therein on
account of strikes, lockouts, or similar causes beyond the responsibility of
Tenant, at any time during the term of this lease; and if Tenant shall abandon,
vacate or surrender the demised premises or be dispossessed by process of law or
otherwise, any personal property belonging to Tenant and left on the demised
premises shall be deemed to be abandoned, at the option of Landlord, except such
property as may be mortgaged to Landlord. Any such abandonment shall immediately
be considered a default on the lease and Landlord may at his option enforce all
applicable Articles of this lease.
28. SURRENDER: The voluntary or other surrender of this lease by Tenant,
or a mutual termination thereof between Landlord and Tenant shall not result in
a merger, but shall, at the option of Landlord, operate either as an assignment
to Landlord of any and all existing subleases and subtenancies, or as
termination of all or any existing subleases or subtenancies.
29. ENTRY AND INSPECTION: Tenant shall permit Landlord and his agents to
enter into and upon the demised premises at all reasonable times for the purpose
of inspecting the same or for the purpose of maintaining the building in which
said premises are situated, or for the purpose of making repairs, alterations,
or additions to any other portion of said building, including the erection and
maintenance of such scaffolding, canopy, fences and props as may be required or
for the purpose of posting notices of non-responsibility for alterations,
additions, or repairs. Landlord shall be permitted to do any of the above
without any rebate or rent and without any liability to Tenant for any loss of
occupation or quiet enjoyment of the premises thereby occasioned. Tenant shall
permit Landlord, at any time within thirty (30) days prior to the expiration of
this lease, to place upon said premises any usual or ordinary "For Lease" signs
and during such thirty (30) day period, Landlord or his agents may, during
normal business hours, enter upon said premises and exhibit same to prospective
tenants.
<PAGE> 8
30. DAMAGE AND DESTRUCTION OF PREMISES: In the event of (a) partial
destruction of said premises or the building containing same during the term of
this lease, which requires repairs either to demised premises or said building;
or (b) the demised premises or said building being declared unsafe or unfit for
occupancy by any authorized public authority for any reason other than Tenant's
act, use or occupation, which declaration requires to repair either the demised
premises or said building, Landlord shall forthwith make the repairs, provided
Tenant gives to Landlord thirty (30) days written notice of the necessity
thereof. No such partial destruction (including any destruction necessary in
order to make repairs required by any declaration made by any public authority)
shall in any way nullify or void this lease except that Tenant shall be entitled
to a proportionate reduction of base rental while the repairs are being made.
Such proportionate reduction to be based upon the extent to which the making of
such repairs shall interfere with the business carried on by Tenant in demised
premises. However, if during the term of this lease, the building is damaged as
a result of fire or any other insured casualty to an extent in excess of
twentyfive (25%) per cent of its then replacement cost, (excluding
foundations(s)), Landlord may within thirty (30) days following the date such
damage occurs, terminate this lease by written notice to Tenant. If Landlord,
however, elects to make said repairs, and provided Landlord uses due diligence
in making repairs, this lease shall continue in full force and effect and the
base rental shall be proportionately reduced as hereinafter provided. If
Landlord elects to terminate this lease, all rentals shall be prorated between
Landlord and Tenant as of the date of such destruction.
In respect to any partial destruction (including any destruction necessary
in order to make repairs required by any such declaration of any authorized
public authority) which Landlord is obligated to repair or may elect to repair
under the terms of this Article, Tenant waives any statutory right it may have
to cancel this lease as a result of such destruction.
31. CONDEMNATION: If the whole or any part of the premises or common areas
are taken for public or quasi-public use by the exercise or the threat of the
exercise of the right to eminent domain, with or without litigation or by
judgment or agreement, then as to the portion of the premises or common area
taken, this Lease shall terminate as of the date that title vests in the
condemning authority.
If the portion of the Premises remaining after such taking is susceptible
of occupation and use by Tenant for the purpose described in this Lease, then
Landlord shall have the option for a period of thirty (30) days after said
taking either to terminate this lease or to elect to continue this Lease in full
force and effect, in which event Landlord, at its sole expense, promptly shall
restore the Premises to an architectural unit as comparable as practicable to
the condition existing immediately prior to such taking, and Tenant shall do
likewise, at Tenant's sole expense, with respect to all exterior signs, trade
fixtures, equipment, display cases, furniture, furnishings and other
installations of Tenant. During the period said repairs are being effected, the
minimum rent payable by Tenant during said period shall be reduced equitably to
the degree the repair work interferes with the normal business conducted on the
premises. However, the obligation of Tenant to pay tax increase, and any other
additional rental shall remain in full force and effect.
If the portion of the Premises remaining after such a taking is not
susceptible of occupation and use by Tenant for the purpose described in this
lease, then this Lease shall terminate as of the date title vests in the
condemning authority.
Landlord shall receive all the proceeds of any damages, award or
settlement paid for any such taking.
In the event this Lease is terminated pursuant to any provision of this
Section 31, or in the event Tenants business is in any manner affected by reason
of repairs or restoration Landlord elects to make, then Tenant hereby waives any
and all claims or demands against Landlord arising from or related to such
condemnation, lease termination, or said repairs or restoration, except,
however, that Landlord shall make an equitable refund of any advance rent paid
by Tenant and not yet earned.
<PAGE> 9
A voluntary sale by Landlord to any public or quasi-public body, agency or
person, corporate or otherwise, having the power of eminent domain, either under
threat of condemnation or while condemnation proceedings are pending, shall be
deemed to be a taking by eminent domain.
32. ATTORNEY'S FEES: If Landlord is involuntarily made a party defendant
to any litigation concerning this lease or the demised premises by reason of any
act or omission of Tenant, then, Tenant shall hold harmless Landlord from all
liabilities by reason thereof, including reasonable attorney's fees and all
reasonable costs incurred by Landlord in such litigation.
If either Landlord or Tenant shall commence any legal proceedings against
the other with respect to any of the terms and conditions of this lease, the
non-prevailing party therein shall pay to the other all reasonable expenses of
said litigation, including a reasonable attorney's fees as may be fixed by the
court having jurisdiction over the matter. The parties hereto agree that the
State of California is the proper jurisdiction for litigation of any matters
relating to this lease and service mailed to the address of Tenant set forth
herein shall be adequate service for such litigation.
33. NOTICES: Wherever in this lease it shall be required or permitted that
notice-or demand be given by either party of this lease to or on the other, such
notice or demand shall be given or served and shall not be deemed to have been
duly given or served unless in writing and forwarded by certified mail,
addressed as follows:
TO: FORTRESS DEVELOPMENT GROUP TO: LANDA MANAGEMENT SYSTEMS
AT: 3753 Morehead Avenue AT: Fortress Avenue
Chico, CA 95928 Chico, CA 95973
Telephone: 916-893-3333 Telephone: (530) 891-5281
Either party may change such address by written notice by certified mail
to the other.
34. PARTIAL INVALIDITY: If any term, covenant, condition, or provision of
this lease is held by court of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the provisions hereof shall remain in full force
and effect and shall in no way be affected, impaired or invalidated thereof,
35. MARGINAL CAPTIONS: The various headings and numbers herein and the
grouping of the provisions of this lease into separate articles and paragraphs
are for the purpose of convenience only and shall not be considered a part
hereof.
36. TIME: Time is of the essence of this lease.
37. SUBORDINATION, ATTORNMENT: This lease, at Landlord's option, shall be
subordinate to the lien of any deed of trust or mortgage now in place or
subsequently placed upon the real property of which the demised premises are a
part, and to any and all advances made on the security thereof, and to all
renewals, modifications, consolidations, replacements and extensions thereof.
In the event any proceedings are brought for foreclosure, or in the event
of the exercise of the power of sale under any mortgage or deed of trust made by
the Landlord covering the demised premises, Tenant shall attorn to the purchaser
upon any such foreclosure or sale and recognize such purchaser as the Landlord
under this lease.
Within ten (10) days after request by Landlord, or in the event that upon
any sale, assignment or financing of the demised premises or any portion be
requested of Tenant, Tenant agrees to deliver such financial statement and to
deliver such estoppel certificate (in recordable form) addressed to any such
proposed mortgagee or purchaser or to the Landlord certifying the requested
information, including among other things the dates of commencement and
termination of this lease, the amounts of security deposits, and that this lease
is in full force and effect (if such be the case) and that there are no
differences, offsets or defaults of Landlord, or noting such
<PAGE> 10
differences, offsets or defaults as actually exist. Tenant shall be liable for
any loss or liability resulting from any incorrect information certified, and
such mortgagee and purchaser shall have the right to rely on such estoppel
certificate and financial statement. All of this will be done free of charge by
Tenant.
38. NO ORAL AGREEMENTS: This lease covers in full each and every agreement
of every kind or nature whatsoever between the parties hereto concerning this
lease, and all preliminary negotiations and agreements of whatsoever kind or
nature are merged herein, and there are no oral agreements or implied covenants.
39. NO MODIFICATIONS: This lease covers in full each and every agreement
between the parties. No future modifications of terms shall be binding in any
way unless made in writing and made a part of this lease.
40. COVENANT OF FAIR DEALING: Each party to this lease agrees to cooperate
fully and in good faith and covenants to deal fairly with the other to insure
that the terms and conditions of this lease are carried out to the fullest
possible extent for the best interest of the parties.
41. CONDITIONS OF THE LEASE: This lease is conditional on the Owner
completing financing and obtaining approvals from the appropriate governmental
authorities and utility providers under terms and conditions acceptable to
Owner.
42. ADDENDA: In addition to the above numbered Articles, this lease shall
be specifically subject to the provisions of the Addenda
PERIODIC CHANGE OF BASE RENTAL
IN WITNESS WHEREOF, the parties have duly executed this lease together
with the herein referred to Exhibits and Addenda which are attached hereto, on
the day and year first written above.
LANDLORD: TENANT:
FORTRESS DEVELOPMENT GROUP LANDA MANAGEMENT SYSTEMS CORP.
a California Corporation:
By /s/ HOWARD H. SLATER By /s/ STEPHEN KAY
------------------------------- --------------------------------------
Howard H. Slater, Pres. Stephen Kay, C.O.O.-C.F.O.
<PAGE> 11
ADDENDA
Periodic Change of Base Rental
By mutual agreement of the parties to this lease, the Base Monthly Rental stated
in Article 3 above will change according to the schedule of consecutive periods
below:
<TABLE>
<S> <C>
1st 36 Months $11,335.50 Month
2nd 36 Months $12,015.00 Month
3rd 36 Months $12,735.00 Month
4th 36 Months $13,500.00 Month
5th 36 Months $14,310.00 Month
last 24 Months $15,170.00 Month
</TABLE>
IN WITNESS WHEREOF, the parties have duly executed this Addendum and made
it a part of the above lease.
LANDLORD: TENANT:
FORTRESS DEVELOPMENT GROUP LANDA MANAGEMENT SYSTEMS CORP.
a California Corporation
BY /s/ HOWARD H. SLATER BY /s/ STEPHEN KAY
------------------------------- ---------------------------------------
Howard H. Slater, Pres. Stephen Kay, C.O.O. - C.F.O.
<PAGE> 1
EXHIBIT 10.08
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made this day 17th
March 1999 by and between LANDA MANAGEMENT SYSTEMS CORPORATION, a California
corporation (the "Company"), and Eugene Santa Cattarina, ("Purchaser").
WITNESSETH:
WHEREAS, Purchaser holds a stock option dated October 20th, 1998 to
purchase shares of common stock of the Company (the "Option") pursuant to the
Company's 1998 Equity Incentive Plan (the "Plan") which Purchaser desires to
exercise; and
WHEREAS, Purchaser wishes to take advantage of the early exercise
provision of the Option, and therefore to enter into this Agreement.
NOW, THEREFORE, IT IS AGREED between the parties as follows:
1. Purchaser hereby agrees to purchase from the Company, and the
Company hereby agrees to sell to Purchaser, an aggregate of eight hundred and
five thousand, five hundred and fifty shares (805,550) of common stock (the
"Stock") of the Company, for a purchase price of 12/100 US dollars ($0.12) per
share (total purchase price: Ninety six thousand, six hundred and sixty six
00/100 US dollars ($96,666.00)), payable as follows:
<TABLE>
<S> <C>
Cash at Closing $ 0.00
Promissory Note in the form
of Exhibit D (the "Note") $ 96,666.00
-----------
Total Purchase Price $ 96,666.00
===========
</TABLE>
The closing hereunder shall occur at the offices of the Company on the date of
this Agreement or at such other time and place as the parties may mutually
agree upon in writing.
At the closing, Purchaser shall deliver two (2) stock assignments in
the form of Exhibit B, duly endorsed (with date and number of shares left
blank), joint escrow instructions (the "Joint Escrow Instructions") in the form
of Exhibit C, duly executed by Purchaser, and the total purchase price
(including an executed Note in the form of Exhibit D if a portion of the total
purchase price is to be paid by promissory note and an executed pledge
agreement in the form of Exhibit E (the "Pledge Agreement") under which all
shares of the Stock acquired by Note shall be pledged as collateral security
for the payment of the indebtedness represented by the Note.
At the closing or as soon thereafter as practicable, the Company shall
deliver to the Escrow Agent (as defined in paragraph 8 below) share
certificates for all of the Stock that is to be subject to the Purchase Option
(as defined in paragraph 2 below), and shall deliver share certificates to
Purchaser for all of the Stock, if any, that is not to be subject to the
Purchase Option or the Pledge
1
<PAGE> 2
Agreement. The certificates for all of the Stock that is subject to the Pledge
Agreement but not the Purchase Option shall be retained by the Company as
security pursuant to the Pledge Agreement.
2. The Stock to be purchased by Purchaser pursuant to this Agreement
shall be subject to the following option ("Purchase Option"):
(a) In the event that Purchaser's Continuous Service (as that
term is defined in the Plan) shall terminate for any reason (including
Purchaser's death), or no reason, with or without cause, the Purchase Option
may be exercised. The Company shall have the right at any time within ninety
(90) days after such termination of Continuous Service, or such longer period
as may determined by the Company if such later repurchase is deemed necessary
by the Company for treatment of its stock as Qualified Small Business Stock
under Section 1202 of the Internal Revenue Code of 1986, as amended, and
regulations promulgated thereunder, to exercise its option to repurchase from
Purchaser or his personal representative, as the case may be, at the price per
share paid by Purchaser pursuant to this Agreement ("Option Price"), up to but
not exceeding the number of unvested shares of the Stock set forth on Exhibit A
hereto, which is incorporated herein by this reference.
(b) In addition, and without limiting the foregoing Purchase
Option, if at any time during the term of the Purchase Option there occurs a
transaction described in Section 11(b) or 11(c) of the Plan (e.g., a
dissolution, liquidation, asset sale, merger, consolidation or reverse merger
of the Company), then: (i) the Company shall exercise the Purchase Option to
the same extent that the unvested portion of the Option would have terminated
pursuant to Section 11(b) or 11(c) of the Plan if the Option had not been
exercised pursuant to this Agreement, (ii) the Purchase Option shall lapse to
the same extent that the unvested portion of the Option would have
automatically accelerated pursuant to Section 11(c) of the Plan if the Option
had not been exercised pursuant to this Agreement or (iii) the Purchase Option
may be assigned to any successor to the Company to the same extent that the
unvested portion of the Option would have been assumed or substituted by such
successor if the Option had not been exercised pursuant to this Agreement, in
which case the Purchase Option shall apply on the same basis as set forth above
to the Stock or to the consideration received for the Stock by the Purchaser in
the transaction (as the case may be) if Purchaser's Continuous Service with
such successor terminates for any reason. The continuing or surviving entity
shall be deemed to be the successor to the Company for purposes of this
Agreement, and references herein to the "Company" shall be deemed to refer to
such successor.
(c) The Company shall be entitled to pay for any of the Stock
purchased pursuant to its Purchase Option at the Company's option in cash, by
offset against any indebtedness owing to the Company by Purchaser including
without limitation any note given in payment for the Stock, or a combination of
both.
(d) This Agreement is not an employment contract and nothing
in this Agreement shall be deemed to create in any way whatsoever any
obligation on the part of Purchaser to continue in the employ of the Company or
any Affiliate (as defined in the Plan) thereof, or of the Company or any
Affiliate thereof to continue Purchaser in its employ. In addition, nothing in
this Agreement shall obligate the Company or any Affiliate thereof, their
2
<PAGE> 3
respective stockholders, boards of directors, officers or employees to continue
any relationship that you might have as a director or consultant for the
Company or any Affiliate thereof.
3. The Purchase Option may be exercised by giving written notice of
exercise delivered or mailed as provided in paragraph 14. Upon providing of
such notice and payment or tender of the purchase price, the Company shall
become the legal and beneficial owner of the Stock being purchased and all
rights and interests therein or related thereto.
4. If from time to time during the term of the Purchase Option there
is any stock dividend or liquidating dividend or distribution of cash and/or
property, stock split or other change in the character or amount of any of the
outstanding securities of the Company, then, in such event, any and all new,
substituted or additional securities or other property to which Purchaser is
entitled by reason of his ownership of Stock will be immediately subject to the
Purchase Option and be included in the word "Stock" for all purposes of the
Purchase Option with the same force and effect as the shares of Stock then
subject to the Purchase Option. While the total Option Price shall remain the
same after each such event, the Option Price per share of Stock upon exercise
of the Purchase Option shall be appropriately adjusted.
5. All certificates representing any shares of Stock of the Company
subject to the provisions of this Agreement shall have endorsed thereon legends
in substantially the following form:
(a) "The shares represented by this certificate are subject
to an option set forth in an agreement between the Company and the registered
holder, or registered holder's predecessor in interest, a copy of which is on
file at the principal office of this Company. Any transfer or attempted
transfer of any shares subject to such option is void without the prior express
written consent of the issuer of these shares."
(b) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale, pledged or
hypothecated in the absence of an effective registration statement as to the
securities under said Act or an opinion of counsel satisfactory to the Company
that such registration is not required."
(c) "The shares represented by this certificate are subject to
a right of first refusal option in favor of the Company and/or its assignee(s)
as provided in the Bylaws of the Company."
(d) "Any legend required to be placed thereon by the
California Commissioner of Corporations.
6. Purchaser acknowledges that he or she is aware that the Stock to be
issued to him or her by the Company pursuant to this Agreement has not been
registered under the Securities Act of 1933, as amended (the "Act"), on the
basis that no distribution or public offering of the Stock is to be effected,
and in this connection acknowledges that the Company is relying on the
following representations. In this connection, Purchaser warrants and
represents to the Company that he or she is acquiring the Stock for investment
and not with a view to or for sale in
3
<PAGE> 4
connection with any distribution of the Stock or with any present intention of
distributing or selling the Stock and he or she does not presently have reason
to anticipate any change in circumstances or any particular occasion or event
which would cause him or her to sell the Stock. Purchaser recognizes that the
Stock must be held indefinitely unless it is subsequently registered under the
Act or an exemption from such registration is available and, further,
recognizes that the Company is under no obligation to register the Stock or to
comply with any exemption from such registration.
7. Purchaser is aware that the Stock may not be sold pursuant to Rule
144 adopted under the Act unless certain conditions are met and until Purchaser
has held the Stock for the applicable holding period set forth in Rule 144.
Among the conditions for use of Rule 144 is the availability of specified
current public information about the Company. Purchaser recognizes that the
Company presently has no plans to make such information available to the
public.
Whether or not the Purchase Option is exercised or has lapsed,
Purchaser further agrees not to make any disposition of any of the Stock in any
event unless and until:
(a) There is then in effect a registration statement under
the Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) (i) Purchaser shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii)
Purchaser shall have given the Company an opinion of counsel, which opinion and
counsel shall be satisfactory to the Company, to the effect that such
disposition will not require registration of the Stock under the Act.
8. As security for his faithful performance of the terms of this
Agreement and to insure the availability for delivery of Purchaser's Stock upon
exercise of the Purchase Option herein provided for, Purchaser agrees, at the
closing hereunder (or as soon thereafter as practicable), to deliver (or have
the Company deliver on the Purchaser's behalf) to and deposit with the
Secretary of the Company ("Escrow Agent"), as Escrow Agent in this transaction,
two (2) stock assignments duly endorsed (with date and number of shares left
blank) in the form attached hereto as Exhibit B, together with a certificate or
certificates evidencing all of the Stock subject to the Purchase Option; said
documents are to be held by the Escrow Agent and delivered by said Escrow Agent
pursuant to the Joint Escrow Instructions of the Company and Purchaser set
forth in Exhibit C attached hereto and incorporated herein by this reference,
which instructions shall also be delivered to the Escrow Agent at the closing
hereunder (or as soon thereafter as practicable).
9. Purchaser shall not sell or transfer any of the Stock subject to
the Purchase Option or any interest therein so long as such Stock is subject to
the Purchase Option. In addition, the Purchaser agrees that the Company (or a
representative of the underwriters) may, in connection with the first
underwritten registration of the offering of any securities of the Company
under the Act, require that Purchaser not sell, dispose of, transfer, make any
short sale of, grant any option for the purchase of, or enter into any hedging
or similar transaction with the same economic
4
<PAGE> 5
effect as a sale, any of the Stock or other securities of the Company held by
you, for a period of time specified by the underwriter(s) (not to exceed one
hundred eighty (180) days) following the effective date of the registration
statement of the Company filed under the Act.
10. The Company shall not be required (a) to transfer on its books any
shares of Stock of the Company which shall have been sold or transferred in
violation of any of the provisions set forth in this Agreement or (b) to treat
as owner of such shares or to accord the right to vote as such owner or to pay
dividends to any transferee to whom such shares shall have been so transferred.
11. Subject to the provisions of paragraphs 9 and 10 above, Purchaser
(but not any unapproved transferee) shall, during the term of this Agreement,
exercise all rights and privileges of a stockholder of the Company with respect
to the Stock.
12. The shares of Stock purchased under the terms of this Agreement
are subject to the right of first refusal provided for in the Bylaws of the
Company.
13. The parties agree to execute such further instruments and to take
such further action as reasonably may be necessary to carry out the intent of
this Agreement.
14. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in any United States Post Office Box, by registered or certified mail
with postage and fees prepaid, addressed to the other party hereto at his
address hereinafter shown below his signature or at such other address as such
party may designate by ten (10) days' advance written notice to the other party
hereto.
15. This Agreement shall bind and inure to the benefit of the
successors and assigns of the Company and, subject to the restrictions on
transfer herein set forth, inure to the benefit of and be binding upon
Purchaser, his heirs, executors, administrators, successors, and assigns.
Without limiting the generality of the foregoing, the Purchase Option of the
Company hereunder shall be assignable by the Company at any time or from time
to time, in whole or in part.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement as of the day and year first set forth above.
LANDA MANAGEMENT SYSTEMS CORPORATION
By: /s/ STEPHEN P. KAY
--------------------------------
Its: COO/CFO
-------------------------------
Address: 1072 Marauder Street, Suite A
Chico, CA 95973
/s/ EUGENE SANTA CATTARINA
-----------------------------------
EUGENE SANTA CATTARINA
Address:
ATTACHMENTS:
Exhibit A Vesting Schedule
Exhibit B Assignment Separate from Certificate
Exhibit C Joint Escrow Instructions
Exhibit D Promissory Note
Exhibit E Pledge Agreement
6
<PAGE> 7
EXHIBIT A
VESTING SCHEDULE
<TABLE>
<CAPTION>
IF CONTINUOUS SERVICE NUMBER OF UNVESTED SHARES
TERMINATES: SUBJECT TO PURCHASE OPTION:
<S> <C>
Before 19th July 1999 805,550.0 shares
After 19th July 1999
but before 19th August 1999 604,162.5 shares
After 19th August 1999
but before 19th September 1999 587,380.2 shares
After 19th September 1999
but before 19th October 1999 570,597.9 shares
After 19th October 1999
but before 19th November 1999 553,815.6 shares
After 19th November 1999
but before 19th December 1999 537,033.3 shares
After 19th December 1999
but before 19th January 2000 520,251.0 shares
After 19th January 2000
but before 19th February 2000 503,468.7 shares
After 19th February 2000
but before 19th March 2000 486,686.4 shares
After 19th March 2000
but before 19th April 2000 469,904.1 shares
After 19th April 2000
but before 19th May 2000 453,121.8 shares
</TABLE>
1
<PAGE> 8
EXHIBIT A (CONTINUED)
VESTING SCHEDULE
<TABLE>
<CAPTION>
IF CONTINUOUS SERVICE NUMBER OF UNVESTED SHARES
TERMINATES: SUBJECT TO PURCHASE OPTION:
<S> <C>
After 19th May 2000
but before 19th June 2000 436,339.5 shares
After 19th June 2000
but before 19th July 2000 419,557.2 shares
After 19th July 2000
but before 19th August 2000 402,774.9 shares
After 19th August 2000
but before 19th September 2000 385,992.6 shares
After 19th September 2000
but before 19th October 2000 369,210.3 shares
After 19th October 2000
but before 19th November 2000 352,428.0 shares
After 19th November 2000
but before 19th December 2000 335,645.7 shares
After 19th December 2000
but before 19th January 2001 318,863.4 shares
After 19th January 2001
but before 19th February 2001 302,081.1 shares
After 19th February 2001
but before 19th March 2001 285,298.8 shares
</TABLE>
2.
<PAGE> 9
EXHIBIT A (CONTINUED)
VESTING SCHEDULE
<TABLE>
<CAPTION>
IF CONTINUOUS SERVICE NUMBER OF UNVESTED SHARES
TERMINATES: SUBJECT TO PURCHASE OPTION:
<S> <C>
After 19th March 2001
but before 19th April 2001 268,516.5 shares
After 19th April 2001
but before 19th May 2001 251,734.2 shares
After 19th May 2001
but before 19th June 2001 234,951.9 shares
After 19th June 2001
but before 19th July 2001 218,169.6 shares
After 19th July 2001
but before 19th August 2001 201,387.3 shares
After 19th August 2001
but before 19th September 2001 184,605.0 shares
After 19th September 2001
but before 19th October 2001 167,822.7 shares
After 19th October 2001
but before 19th November 2001 151,040.4 shares
After 19th November 2001
but before 19th December 2001 134,258.1 shares
After 19th December 2001
but before 19th January 2002 117,475.8 shares
</TABLE>
3
<PAGE> 10
EXHIBIT A (CONTINUED)
VESTING SCHEDULE
<TABLE>
<CAPTION>
IF CONTINUOUS SERVICE NUMBER OF UNVESTED SHARES
TERMINATES: SUBJECT TO PURCHASE OPTION:
<S> <C>
After 19th January 2002
but before 19th February 2002 100,693.5 shares
After 19th February 2002
but before 19th March 2002 83,911.2 shares
After 19th March 2002
but before 19th April 2002 67,128.9 shares
After 19th April 2002
but before 19th May 2002 50,346.6 shares
After 19th May 2002
but before 19th June 2002 33,564.3 shares
After 19th June 2002
but before 19th July 2002 16,782.0 shares
After 19th July 2002 0.0 shares
</TABLE>
4
<PAGE> 11
EXHIBIT B
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Stock Purchase
Agreement dated as of 17th March 1999, (the "Agreement") Eugene Santa Cattarina
hereby sells, assigns and transfers unto Landa Management Systems Corporation
____________________(___)shares of common stock of Landa Management Systems
Corporation, a California corporation, standing in the undersigned's name on the
books of said corporation represented by Certificate No. _____ herewith, and
does hereby irrevocably constitute and appoint __________________ attorney to
transfer the said stock on the books of the said corporation with full power of
substitution in the premises. This Assignment may be used only in accordance
with and subject to the terms and conditions of the Agreement, in connection
with the repurchase of shares of Common Stock issued to the undersigned pursuant
to the Agreement, and only to the extent that such shares remain subject to the
Company's Purchase Option under the Agreement.
Dated:
------------------
/s/ EUGENE SANTA CATTARINA
---------------------------------
[Signature]
Eugene Santa Cattarina
---------------------------------
[INSTRUCTION: Please do not fill in any blanks other than the signature line.
The purpose of this Assignment is to enable the Company to exercise its
repurchase option set forth in the Agreement without requiring additional
signatures on the part of Purchaser.]
<PAGE> 12
EXHIBIT B
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Stock Purchase
Agreement dated as of 17th March 1999, (the "Agreement") Eugene Santa Cattarina
hereby sells, assigns and transfers unto Landa Management Systems Corporation
____________________(___)shares of common stock of Landa Management Systems
Corporation, a California corporation, standing in the undersigned's name on the
books of said corporation represented by Certificate No. _____ herewith, and
does hereby irrevocably constitute and appoint __________________ attorney to
transfer the said stock on the books of the said corporation with full power of
substitution in the premises. This Assignment may be used only in accordance
with and subject to the terms and conditions of the Agreement, in connection
with the repurchase of shares of Common Stock issued to the undersigned pursuant
to the Agreement, and only to the extent that such shares remain subject to the
Company's Purchase Option under the Agreement.
Dated:
------------------
/s/ EUGENE SANTA CATTARINA
---------------------------------
[Signature]
Eugene Santa Cattarina
---------------------------------
[INSTRUCTION: Please do not fill in any blanks other than the signature line.
The purpose of this Assignment is to enable the Company to exercise its
repurchase option set forth in the Agreement without requiring additional
signatures on the part of Purchaser.]
<PAGE> 13
EXHIBIT C
JOINT ESCROW INSTRUCTIONS
Stephen P. Kay, Company Secretary
Landa Management Systems Corporation
1072 Marauder, Suite A
Chico, CA 95973
Dear Sir:
As Escrow Agent for both Landa Management Systems Corporation, a
California corporation ("Company"), and the undersigned purchaser of stock of
the Company ("Purchaser"), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Stock Purchase
Agreement ("Agreement"), dated 17TH MARCH 1999, to which a copy of these Joint
Escrow Instructions is attached as Exhibit C in accordance with the following
instructions:
1. In the event the Company or an assignee shall elect to exercise the
Purchase Option set forth in the Agreement, the Company or its assignee will
give to Purchaser and you a written notice specifying the number of shares of
stock to be purchased, the purchase price, and the time for a closing hereunder
at the principal office of the Company. Purchaser and the Company hereby
irrevocably authorize and direct you to close the transaction contemplated by
such notice in accordance with the terms of said notice.
2. At the closing you are directed (a) to date any stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company against the
simultaneous delivery to you of the purchase price (which may include suitable
acknowledgment of cancellation of indebtedness) of the number of shares of stock
being purchased pursuant to the exercise of the Purchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as specified in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as his
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities and other property all documents of assignment and/or
transfer and all stock certificates necessary or appropriate to make all
securities negotiable and complete any transaction herein contemplated.
4. This escrow shall terminate upon expiration or exercise in full of
the Purchase Option, whichever occurs first.
1.
<PAGE> 14
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of same to Purchaser and shall be discharged of all
further obligations hereunder; provided, however, that if at the time of
termination of this escrow you are advised by the Company that the property
subject to this escrow is the subject of a pledge or other security agreement,
you shall deliver all such property to the pledgeholder or other person
designated by the Company.
6. Except as otherwise provided in these Joint Escrow Instructions,
your duties hereunder may be altered, amended, modified or revoked only by a
writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as
are specifically set forth herein and may rely and shall be protected in relying
or refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties or
their assignees. You shall not be personally liable for any act you may do or
omit to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while
acting in good faith and any act done or omitted by you pursuant to the advice
of your own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law, and are hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case you obey or comply with any such order, judgment or decree of any
court, you shall not be liable to any of the parties hereto or to any other
person, firm or corporation by reason of such compliance, notwithstanding any
such order, judgment or decree being subsequently reversed, modified, annulled,
set aside, vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authority or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under any
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. Your responsibilities as Escrow Agent hereunder shall terminate if
you shall cease to be Secretary of the Company or if you shall resign by written
notice to each party. In the event of any such termination, the Company may
appoint any officer or assistant officer of the Company as successor Escrow
Agent and Purchaser hereby confirms the appointment of such successor or
successors as his attorney-in-fact and agent to the full extent of your
appointment.
12. If you reasonably require other or further instruments in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.
13. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities, you are authorized and
2.
<PAGE> 15
directed to retain in your possession without liability to anyone all or any
part of said securities until such dispute shall have been settled either by
mutual written agreement of the parties concerned or by a final order, decree or
judgment of a court of competent jurisdiction after the time for appeal has
expired and no appeal has been perfected, but you shall be under no duty
whatsoever to institute or defend any such proceedings.
14. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery, including
delivery by express courier or five days after deposit in the United States Post
Office, by registered or certified mail with postage and fees prepaid, addressed
to each of the other parties hereunto entitled at the following addresses, or at
such other addresses as a party may designate by ten days' advance written
notice to each of the other parties hereto:
COMPANY: Stephen P. Kay, Company Secretary
Landa Management Systems Corporation
1072 Marauder, Suite A
Chico, CA 95973
PURCHASER: Eugene Santa Cattarina
ESCROW AGENT: Stephen P. Kay, Company Secretary
Landa Management Systems Corporation
1072 Marauder, Suite A
Chico, CA 95973
15. By signing these Joint Escrow Instructions you become a party
hereto only for the purpose of said Joint Escrow instructions; you do not become
a party to the Agreement.
16. You shall be entitled to employ such legal counsel and other
experts (including without limitation the firm of Cooley Godward LLP) as you may
deem necessary properly to advise you in connection with your obligations
hereunder. You may rely upon the advice of such counsel, and may pay such
counsel reasonable compensation therefor. The Corporation shall be responsible
for all fees generated by such legal counsel in connection with your obligations
hereunder.
17. This instrument shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns. It is
understood and agreed that references to "you" or "your" herein refer to the
original Escrow Agent and to any and all successor Escrow Agents. It is
understood and agreed that the Corporation may at any time or from time to time
assign its rights under the Agreement and these Joint Escrow Instructions in
whole or in part.
18. This Agreement shall be governed by and interpreted and determined
in accordance with the laws of the State of California, as such laws are applied
by California courts to contracts made and to be performed entirely in
California by residents of that state.
3.
<PAGE> 16
Very truly yours,
LANDA MANAGEMENT SYSTEM CORPORATION
/s/ STEPHEN P. KAY
By: Stephen P. Kay, Chief Financial Officer
----------------------------------------
PURCHASER
/s/ EUGENE SANTA CATTARINA
Eugene Santa Cattarina
--------------------------------------------
Escrow Agent:
/s/ STEPHEN P. KAY
---------------------------------------
Stephen P. Kay, Company Secretary
4.
<PAGE> 17
EXHIBIT D
FULL RECOURSE PROMISSORY NOTE
$96,666.00 17th MARCH 1999
FOR VALUE RECEIVED, the undersigned hereby unconditionally promises to
pay to the order of Landa Management Systems Corporation, a California
corporation (the "Company"), at Chico, California, or at such other place as the
holder hereof may designate in writing, in lawful money of the United States of
America and in immediately available funds, the principal sum of Ninety nine
thousand six hundred sixty six 00/100 Dollars ($96,666.00) together with
interest accrued from the date hereof on the unpaid principal at the rate of
6.00% per annum, or the maximum rate permissible by law (which under the laws of
the State of California shall be deemed to be the laws relating to permissible
rates of interest on commercial loans), whichever is less, as follows:
PRINCIPAL REPAYMENT. The outstanding principal amount
hereunder shall be DUE AND PAYABLE IN FULL ON MARCH l6TH, 2006.
INTEREST PAYMENTS. Interest shall be ACCRUED ANNUALLY and
shall be calculated on the basis of a 360-day year for the actual
number of days elapsed;
provided, however, that in the event that the undersigned's employment by or
association with the Company is terminated for any reason prior to payment in
full of this Note, this Note shall be accelerated and all remaining unpaid
principal and interest shall become due and payable immediately after such
termination. Moreover, the Company may, in connection with the first
underwritten registration of the offering of any securities of the Company under
the Securities Act of 1933, as amended (the "Securities Act"), require that this
Note shall be accelerated and all remaining unpaid principal and interest shall
become due and payable within two hundred ten (210) days following the effective
date of the registration statement of the Company filed under the Securities
Act.
If the undersigned fails to pay any of the principal and accrued
interest when due, the Company, at its sole option, shall have the right to
accelerate this Note, in which event the entire principal balance and all
accrued interest shall become immediately due and payable, and immediately
collectible by the Company pursuant to applicable law.
This Note may be prepaid at any time without penalty. All money paid
toward the satisfaction of this Note shall be applied first to the payment of
interest as required hereunder and then to the retirement of the principal.
This Note is a full recourse promissory note. The full amount of this
Note is secured by a pledge of shares of Common Stock of the Company, and is
subject to all of the terms and provisions of the Stock Purchase Agreement and
the Pledge Agreement, each of even date herewith between the undersigned and the
Company.
1.
<PAGE> 18
The undersigned hereby represents and agrees that the amounts due under
this Note are not consumer debt, and are not incurred primarily for personal,
family or household purposes, but are for business and commercial purposes only.
The undersigned hereby waives presentment, protest and notice of
protest, demand for payment, notice of dishonor and all other notices or demands
in connection with the delivery, acceptance, performance, default or endorsement
of this Note.
The holder hereof shall be entitled to recover, and the undersigned
agrees to pay when incurred, all costs and expenses of collection of this Note,
including without limitation, reasonable attorneys' fees.
This Note shall be governed by, and construed, enforced and interpreted
in accordance with, the laws of the State of California, excluding conflict of
laws principles that would cause the application of laws of any other
jurisdiction.
Signed /s/ EUGENE SANTA CATTARINA
-------------------------------
Eugene Santa Cattarina
2.
<PAGE> 19
EXHIBIT E
PLEDGE AGREEMENT
1. As collateral security for the payment of that certain $96,666.00
promissory note issued this date to Landa Management Systems Corporation
("Pledgee") by the undersigned (hereinafter called "indebtedness"), the
undersigned hereby assigns, transfers to and pledges with the Pledgee the
securities listed on Schedule 1 hereto which were this day delivered to be
deposited with Pledgee, together with any stock rights, rights to subscribe,
dividends paid in cash or other property in connection with the complete or
partial liquidation of Pledgee, stock dividends, dividends paid in stock, new
securities or other property except cash dividends other than liquidating
dividends to which the undersigned is or may hereafter become entitled to
receive on account of such property, and in the event that the undersigned
receives any such, the undersigned will immediately deliver it to Pledgee to be
held by Pledgee hereunder in the same manner as the property originally pledged
hereunder. All property assigned, transferred to and pledged with Pledgee under
this paragraph is hereinafter called "collateral."
At any time, without notice, and at the expense of the undersigned,
Pledgee in its name or in the name of its nominee or of the undersigned may, but
shall not be obligated to: (a) collect by legal proceedings or otherwise all
dividends (except cash dividends other than liquidating dividends), interest,
principal payments and other sums now or hereafter payable upon or on account of
said collateral; (b) enter into any extension, reorganization, deposit, merger,
or consolidation agreement, or any agreement in any way relating to or affecting
the collateral, and in connection therewith may deposit or surrender control of
such collateral thereunder, accept other property in exchange for such
collateral and do and perform such acts and things as it may deem proper, and
any money or property received in exchange for such collateral shall be applied
to the indebtedness or thereafter held by it pursuant to the provisions hereof;
(c) insure, process and preserve the collateral; (d) cause the collateral to be
transferred to its name or to the name of its nominee; (e) exercise as to such
collateral all the rights, powers, and remedies of an owner, except that so long
as the indebtedness is not in default the undersigned shall retain all voting
rights as to the collateral.
The undersigned agrees to pay prior to delinquency all taxes, charges,
liens and assessments against the collateral, and upon the failure of the
undersigned to do so Pledgee at its option may pay any of them and shall be the
sole judge of the legality or validity thereof and the amount necessary to
discharge the same.
All advances, charges, costs and expenses, including reasonable
attorneys' fees, incurred or paid by Pledgee in exercising any right, power or
remedy conferred by this agreement, or in the enforcement thereof, shall become
a part of the indebtedness secured hereunder and shall be paid to Pledgee by the
undersigned immediately and without demand.
At the option of Pledgee and without necessity of demand or notice, all
or any part of the indebtedness of the undersigned shall immediately become due
and payable irrespective of any agreed maturity, upon the happening of any of
the following events: (a) failure to keep or perform any of the terms or
provisions of this agreement; (b) default in the payment of principal or
interest when due; (c) the levy of any attachment, execution or other process
against the
1.
<PAGE> 20
collateral; or (d) the insolvency, commission of an act of bankruptcy, general
assignment for the benefit of creditors, filing of any petition in bankruptcy or
for relief under the provisions of Title 11, United States Code, Bankruptcy, of,
by, or against the undersigned.
In the event of the nonpayment of any indebtedness when due, whether by
acceleration or otherwise, or upon the happening of any of the events specified
in the last preceding paragraph, Pledgee may then, or at any time thereafter, at
its election, apply, set off, collect or sell in one or more sales, or take such
steps as may be necessary to liquidate and reduce to cash in the hands of
Pledgee in whole or in part, with or without any previous demands or demand of
performance or notice or advertisement, the whole or any part of the collateral
in such order as Pledgee may elect, and any such sale may be made either at
public or private sale at its place of business or elsewhere, or at any broker's
board or securities exchange, either for cash or upon credit or for future
delivery; provided, however, that if such disposition is at private sale, then
the purchase price of the collateral shall be equal to the public market price
then in effect, or, if at the time of sale no public market for the collateral
exists, then, in recognition of the fact that the sale of the collateral would
have to be registered under the Securities Act of 1933 and that the expenses of
such registration are commercially unreasonable for the type and amount of
collateral pledged hereunder, Pledgee and the undersigned hereby agree that such
private sale shall be at a purchase price mutually agreed to by Pledgee and the
undersigned or, if the parties cannot agree upon a purchase price, then at a
purchase price established by a majority of three independent appraisers
knowledgeable of the value of such collateral, one named by the undersigned
within 10 days after written request by the Pledgee to do so, one named by
Pledgee within such 10 day period, and the third named by the two appraisers so
selected, with the appraisal to be rendered by such body within 30 days of the
appointment of the third appraiser. The cost of such appraisal, including all
appraiser's fees, shall be charged against the proceeds of sale as an expense of
such sale. Pledgee may be the purchaser of any or all collateral so sold and
hold the same thereafter in its own right free from any claim of the
undersigned or right of redemption. Demands of performance, notices of sale,
advertisements and presence of property at sale are hereby waived, and Pledgee
is hereby authorized to sell hereunder any evidence of debt pledged to it. Any
sale hereunder may be conducted by any officer or agent of Pledgee.
The proceeds of the sale of any of the collateral and all sums received
or collected by Pledgee from or on account of such collateral shall be applied
by Pledgee to the payment of expenses incurred or paid by Pledgee in connection
with any sale, transfer or delivery of the collateral, to the payment of any
other costs, charges, attorneys' fees or expenses mentioned herein, and to the
payment of the indebtedness or any part hereof, all in such order and manner as
Pledgee in its discretion may determine. Pledgee shall pay any balance to the
undersigned.
Pledgee shall be under no duty or obligation whatsoever to make or give
any presentments, demands for performance, notices of non-performance, protests,
notices of protest or notices of dishonor in connection with any obligations or
evidences of indebtedness held by Pledgee as collateral, or in connection with
any obligations or evidences of indebtedness which constitute in whole or in
part the indebtedness secured hereunder.
Pledgee may at any time deliver the collateral or any part thereof to
the undersigned and the receipt of the undersigned shall be a complete and full
acquittance for the collateral so delivered, and Pledgee shall thereafter be
discharged from any liability or responsibility therefor.
2.
<PAGE> 21
Upon the transfer of all or any part of the indebtedness Pledgee may
transfer all or any part of the collateral and shall be fully discharged
thereafter from all liability and responsibility with respect to such collateral
so transferred, and the transferee shall be vested with all the rights and
powers of Pledgee hereunder with respect to such collateral so transferred; but
with respect to any collateral not so transferred Pledgee shall retain all
rights and powers hereby given.
Until all indebtedness shall have been paid in full the power of sale
and all other rights, powers and remedies granted to Pledgee hereunder shall
continue to exist and may be exercised by Pledgee at any time and from time to
time irrespective of the fact that the indebtedness or any part thereof may have
become barred by any statute of limitations, or that the personal liability of
the undersigned may have ceased.
Pledgee agrees that so long as the indebtedness is not in default,
shares of Landa Management Systems Corporation common stock held hereunder as
collateral for the indebtedness shall be released from pledge as the
indebtedness is paid. Such releases shall be at the rate of one share for each
$0.12 of principal amount of indebtedness paid. Release from pledge, however,
shall not result in release from the provisions of those certain Joint Escrow
Instructions, if any, of even date herewith among the parties to this Pledge
Agreement and the Escrow Agent named therein or from the Repurchase Option of
Landa Management Systems Corporation, set forth in the Stock Purchase Agreement
dated 17th March 1999, if any, between the parties to this Pledge Agreement.
The rights, powers and remedies given to Pledgee by this agreement
shall be in addition to all rights, powers and remedies given to Pledgee by
virtue of any statute or rule of law. Pledgee may exercise its Pledgee's lien or
right of setoff with respect to the indebtedness in the same manner as if the
indebtedness were unsecured. Any forbearance or failure or delay by Pledgee in
exercising any right, power or remedy hereunder shall not be deemed to be a
waiver of such right, power or remedy, and any single or partial exercise of any
right, power or remedy hereunder shall not preclude the further exercise
thereof; and every right, power and remedy of Pledgee shall continue in full
force and effect until such right, power or remedy is specifically waived by an
instrument in writing executed by Pledgee.
Dated: 17th March 1999
/s/ EUGENE SANTA CATTARINA
--------------------------------------------
Eugene Santa Cattarina
ATTACHMENT: Schedule 1
3.
<PAGE> 22
SCHEDULE 1
TO
PLEDGE AGREEMENT
805,550 shares of Common Stock in Landa Management Systems Corporation.
<PAGE> 1
EXHIBIT 10.09
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made this day 17th
March 1999 by and between LANDA MANAGEMENT SYSTEMS CORPORATION, a California
corporation (the "Company"), and Stephen P. Kay, ("Purchaser").
WITNESSETH:
WHEREAS, Purchaser holds a stock option dated October 20th, 1998 to
purchase shares of common stock of the Company (the "Option") pursuant to the
Company's 1998 Equity Incentive Plan (the "Plan") which Purchaser desires to
exercise; and
WHEREAS, Purchaser wishes to take advantage of the early exercise
provision of the Option, and therefore to enter into this Agreement.
NOW, THEREFORE, IT IS AGREED between the parties as follows:
1. Purchaser hereby agrees to purchase from the Company, and the
Company hereby agrees to sell to Purchaser, an aggregate of three hundred
thousand (300,000) shares of the common stock (the "Stock") of the Company, for
a purchase price of 12/100 US dollars ($0.12) per share (total purchase price:
Thirty six thousand 00/100 US dollars ($36,000.00)), payable as follows:
<TABLE>
<S> <C>
Cash at Closing $ 0.00
Promissory Note in the form
of Exhibit D (the "Note") $ 36,000.00
-----------
Total Purchase Price $ 36,000.00
===========
</TABLE>
The closing hereunder shall occur at the offices of the Company on the date of
this Agreement or at such other time and place as the parties may mutually
agree upon in writing.
At the closing, Purchaser shall deliver two (2) stock assignments in
the form of Exhibit B, duly endorsed (with date and number of shares left
blank), joint escrow instructions (the "Joint Escrow Instructions") in the form
of Exhibit C, duly executed by Purchaser, and the total purchase price
(including an executed Note in the form of Exhibit D if a portion of the total
purchase price is to be paid by promissory note and an executed pledge
agreement in the form of Exhibit E (the "Pledge Agreement") under which all
shares of the Stock acquired by Note shall be pledged as collateral security
for the payment of the indebtedness represented by the Note.
At the closing or as soon thereafter as practicable, the Company shall
deliver to the Escrow Agent (as defined in paragraph 8 below) share
certificates for all of the Stock that is to be subject to the Purchase Option
(as defined in paragraph 2 below), and shall deliver share certificates to
Purchaser for all of the Stock, if any, that is not to be subject to the
Purchase Option or the Pledge
1
<PAGE> 2
Agreement. The certificates for all of the Stock that is subject to the Pledge
Agreement but not the Purchase Option shall be retained by the Company as
security pursuant to the Pledge Agreement.
2. The Stock to be purchased by Purchaser pursuant to this Agreement
shall be subject to the following option ("Purchase Option"):
(a) In the event that Purchaser's Continuous Service (as that
term is defined in the Plan) shall terminate for any reason (including
Purchaser's death), or no reason, with or without cause, the Purchase Option
may be exercised. The Company shall have the right at any time within ninety
(90) days after such termination of Continuous Service, or such longer period
as may determined by the Company if such later repurchase is deemed necessary
by the Company for treatment of its stock as Qualified Small Business Stock
under Section 1202 of the Internal Revenue Code of 1986, as amended, and
regulations promulgated thereunder, to exercise its option to repurchase from
Purchaser or his personal representative, as the case may be, at the price per
share paid by Purchaser pursuant to this Agreement ("Option Price"), up to but
not exceeding the number of unvested shares of the Stock set forth on Exhibit A
hereto, which is incorporated herein by this reference.
(b) In addition, and without limiting the foregoing Purchase
Option, if at any time during the term of the Purchase Option there occurs a
transaction described in Section 11(b) or 11(c) of the Plan (e.g., a
dissolution, liquidation, asset sale, merger, consolidation or reverse merger
of the Company), then: (i) the Company shall exercise the Purchase Option to
the same extent that the unvested portion of the Option would have terminated
pursuant to Section 11(b) or 11(c) of the Plan if the Option had not been
exercised pursuant to this Agreement, (ii) the Purchase Option shall lapse to
the same extent that the unvested portion of the Option would have
automatically accelerated pursuant to Section 11(c) of the Plan if the Option
had not been exercised pursuant to this Agreement or (iii) the Purchase Option
may be assigned to any successor to the Company to the same extent that the
unvested portion of the Option would have been assumed or substituted by such
successor if the Option had not been exercised pursuant to this Agreement, in
which case the Purchase Option shall apply on the same basis as set forth above
to the Stock or to the consideration received for the Stock by the Purchaser in
the transaction (as the case may be) if Purchaser's Continuous Service with
such successor terminates for any reason. The continuing or surviving entity
shall be deemed to be the successor to the Company for purposes of this
Agreement, and references herein to the "Company" shall be deemed to refer to
such successor.
(c) The Company shall be entitled to pay for any of the Stock
purchased pursuant to its Purchase Option at the Company's option in cash, by
offset against any indebtedness owing to the Company by Purchaser including
without limitation any note given in payment for the Stock, or a combination of
both.
(d) This Agreement is not an employment contract and nothing
in this Agreement shall be deemed to create in any way whatsoever any
obligation on the part of Purchaser to continue in the employ of the Company or
any Affiliate (as defined in the Plan) thereof, or of the Company or any
Affiliate thereof to continue Purchaser in its employ. In addition, nothing in
this Agreement shall obligate the Company or any Affiliate thereof, their
2
<PAGE> 3
respective stockholders, boards of directors, officers or employees to continue
any relationship that you might have as a director or consultant for the
Company or any Affiliate thereof.
3. The Purchase Option may be exercised by giving written notice of
exercise delivered or mailed as provided in paragraph 14. Upon providing of
such notice and payment or tender of the purchase price, the Company shall
become the legal and beneficial owner of the Stock being purchased and all
rights and interests therein or related thereto.
4. If from time to time during the term of the Purchase Option there
is any stock dividend or liquidating dividend or distribution of cash and/or
property, stock split or other change in the character or amount of any of the
outstanding securities of the Company, then, in such event, any and all new,
substituted or additional securities or other property to which Purchaser is
entitled by reason of his ownership of Stock will be immediately subject to the
Purchase Option and be included in the word "Stock" for all purposes of the
Purchase Option with the same force and effect as the shares of Stock then
subject to the Purchase Option. While the total Option Price shall remain the
same after each such event, the Option Price per share of Stock upon exercise
of the Purchase Option shall be appropriately adjusted.
5. All certificates representing any shares of Stock of the Company
subject to the provisions of this Agreement shall have endorsed thereon legends
in substantially the following form:
(a) "The shares represented by this certificate are subject
to an option set forth in an agreement between the Company and the registered
holder, or registered holder's predecessor in interest, a copy of which is on
file at the principal office of this Company. Any transfer or attempted
transfer of any shares subject to such option is void without the prior express
written consent of the issuer of these shares."
(b) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale, pledged or
hypothecated in the absence of an effective registration statement as to the
securities under said Act or an opinion of counsel satisfactory to the Company
that such registration is not required."
(c) "The shares represented by this certificate are subject to
a right of first refusal option in favor of the Company and/or its assignee(s)
as provided in the Bylaws of the Company."
(d) "Any legend required to be placed thereon by the
California Commissioner of Corporations.
6. Purchaser acknowledges that he or she is aware that the Stock to be
issued to him or her by the Company pursuant to this Agreement has not been
registered under the Securities Act of 1933, as amended (the "Act"), on the
basis that no distribution or public offering of the Stock is to be effected,
and in this connection acknowledges that the Company is relying on the
following representations. In this connection, Purchaser warrants and
represents to the Company that he or she is acquiring the Stock for investment
and not with a view to or for sale in
3
<PAGE> 4
connection with any distribution of the Stock or with any present intention of
distributing or selling the Stock and he or she does not presently have reason
to anticipate any change in circumstances or any particular occasion or event
which would cause him or her to sell the Stock. Purchaser recognizes that the
Stock must be held indefinitely unless it is subsequently registered under the
Act or an exemption from such registration is available and, further,
recognizes that the Company is under no obligation to register the Stock or to
comply with any exemption from such registration.
7. Purchaser is aware that the Stock may not be sold pursuant to Rule
144 adopted under the Act unless certain conditions are met and until Purchaser
has held the Stock for the applicable holding period set forth in Rule 144.
Among the conditions for use of Rule 144 is the availability of specified
current public information about the Company. Purchaser recognizes that the
Company presently has no plans to make such information available to the
public.
Whether or not the Purchase Option is exercised or has lapsed,
Purchaser further agrees not to make any disposition of any of the Stock in any
event unless and until:
(a) There is then in effect a registration statement under
the Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) (i) Purchaser shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii)
Purchaser shall have given the Company an opinion of counsel, which opinion and
counsel shall be satisfactory to the Company, to the effect that such
disposition will not require registration of the Stock under the Act.
8. As security for his faithful performance of the terms of this
Agreement and to insure the availability for delivery of Purchaser's Stock upon
exercise of the Purchase Option herein provided for, Purchaser agrees, at the
closing hereunder (or as soon thereafter as practicable), to deliver (or have
the Company deliver on the Purchaser's behalf) to and deposit with the
Secretary of the Company ("Escrow Agent"), as Escrow Agent in this transaction,
two (2) stock assignments duly endorsed (with date and number of shares left
blank) in the form attached hereto as Exhibit B, together with a certificate or
certificates evidencing all of the Stock subject to the Purchase Option; said
documents are to be held by the Escrow Agent and delivered by said Escrow Agent
pursuant to the Joint Escrow Instructions of the Company and Purchaser set
forth in Exhibit C attached hereto and incorporated herein by this reference,
which instructions shall also be delivered to the Escrow Agent at the closing
hereunder (or as soon thereafter as practicable).
9. Purchaser shall not sell or transfer any of the Stock subject to
the Purchase Option or any interest therein so long as such Stock is subject to
the Purchase Option. In addition, the Purchaser agrees that the Company (or a
representative of the underwriters) may, in connection with the first
underwritten registration of the offering of any securities of the Company
under the Act, require that Purchaser not sell, dispose of, transfer, make any
short sale of, grant any option for the purchase of, or enter into any hedging
or similar transaction with the same economic
4
<PAGE> 5
effect as a sale, any of the Stock or other securities of the Company held by
you, for a period of time specified by the underwriter(s) (not to exceed one
hundred eighty (180) days) following the effective date of the registration
statement of the Company filed under the Act.
10. The Company shall not be required (a) to transfer on its books any
shares of Stock of the Company which shall have been sold or transferred in
violation of any of the provisions set forth in this Agreement or (b) to treat
as owner of such shares or to accord the right to vote as such owner or to pay
dividends to any transferee to whom such shares shall have been so transferred.
11. Subject to the provisions of paragraphs 9 and 10 above, Purchaser
(but not any unapproved transferee) shall, during the term of this Agreement,
exercise all rights and privileges of a stockholder of the Company with respect
to the Stock.
12. The shares of Stock purchased under the terms of this Agreement
are subject to the right of first refusal provided for in the Bylaws of the
Company.
13. The parties agree to execute such further instruments and to take
such further action as reasonably may be necessary to carry out the intent of
this Agreement.
14. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in any United States Post Office Box, by registered or certified mail
with postage and fees prepaid, addressed to the other party hereto at his
address hereinafter shown below his signature or at such other address as such
party may designate by ten (10) days' advance written notice to the other party
hereto.
15. This Agreement shall bind and inure to the benefit of the
successors and assigns of the Company and, subject to the restrictions on
transfer herein set forth, inure to the benefit of and be binding upon
Purchaser, his heirs, executors, administrators, successors, and assigns.
Without limiting the generality of the foregoing, the Purchase Option of the
Company hereunder shall be assignable by the Company at any time or from time
to time, in whole or in part.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement as of the day and year first set forth above.
LANDA MANAGEMENT SYSTEMS CORPORATION
/s/ EUGENE SANTA CATTARINA
By: Eugene Santa Cattarina
--------------------------------
Its: CEO
-------------------------------
Address: 1072 Marauder Street, Suite A
Chico, CA 95973
/s/ STEPHEN P. KAY
-----------------------------------
STEPHEN P. KAY
Address:
ATTACHMENTS:
Exhibit A Vesting Schedule
Exhibit B Assignment Separate from Certificate
Exhibit C Joint Escrow Instructions
Exhibit D Promissory Note
Exhibit E Pledge Agreement
6
<PAGE> 7
EXHIBIT A
VESTING SCHEDULE
<TABLE>
<CAPTION>
IF CONTINUOUS SERVICE NUMBER OF UNVESTED SHARES
TERMINATES: SUBJECT TO PURCHASE OPTION:
<S> <C>
Before 28th February 1999 300,000.0 shares
After 28th February 1999
but before 31st March 1999 225,000.0 shares
After 31st March 1999
but before 30th April 1999 218,750.0 shares
After 30th April 1999
but before 31st May 1999 212,500.0 shares
After 31st May 1999
but before 30th June 1999 206,250.0 shares
After 30th June 1999
but before 31st July 1999 200,000.0 shares
After 31st July 1999
but before 31st August 1999 193,750.0 shares
After 31st August 1999
but before 30th September 1999 187,500.0 shares
After 30th September 1999
but before 31st October 1999 181,250.0 shares
After 31st October 1999
but before 30th November 1999 175,000.0 shares
After 30th November 1999
but before 31st December 1999 168,750.0 shares
</TABLE>
1
<PAGE> 8
EXHIBIT A (CONTINUED)
VESTING SCHEDULE
<TABLE>
<CAPTION>
IF CONTINUOUS SERVICE NUMBER OF UNVESTED SHARES
TERMINATES: SUBJECT TO PURCHASE OPTION:
<S> <C>
After 31st December 1999
but before 31st January 2000 162,500.0 shares
After 31st January 2000
but before 28th February 2000 156,250.0 shares
After 28th February 2000
but before 31st March 2000 150,000.0 shares
After 31st March 2000
but before 30th April 2000 143,750.0 shares
After 30th April 2000
but before 31st May 2000 137,500.0 shares
After 31st May 2000
but before 30th June 2000 131,250.0 shares
After 30th June 2000
but before 31st July 2000 125,000.0 shares
After 31st July 2000
but before 31st August 2000 118,750.0 shares
After 31st August 2000
but before 30th September 2000 112,500.0 shares
After 30th September 2000
but before 31st October 2000 106,250.0 shares
</TABLE>
2
<PAGE> 9
EXHIBIT A (CONTINUED)
VESTING SCHEDULE
<TABLE>
<CAPTION>
IF CONTINUOUS SERVICE NUMBER OF UNVESTED SHARES
TERMINATES: SUBJECT TO PURCHASE OPTION:
<S> <C>
After 31st October 2000
but before 30th November 2000 100,000.0 shares
After 30th November 2000
but before 31st December 2000 93,750.0 shares
After 31st December 2000
but before 31st January 2001 87,500.0 shares
After 31st January 2001
but before 28th February 2001 81,250.0 shares
After 28th February 2001
but before 31st March 2001 75.000.0 shares
After 31st March 2001
but before 30th April 2001 68,750.0 shares
After 30th April 2001
but before 31st May 2001 62,500.0 shares
After 31st May 2001
but before 30th June 2001 56,250.0 shares
After 30th June 2001
but before 31st July 2001 50,000.0 shares
After 31st July 2001
but before 31st August 2001 43,750.0 shares
</TABLE>
3
<PAGE> 10
EXHIBIT A (CONTINUED)
VESTING SCHEDULE
<TABLE>
<CAPTION>
IF CONTINUOUS SERVICE NUMBER OF UNVESTED SHARES
TERMINATES: SUBJECT TO PURCHASE OPTION:
<S> <C>
After 31st August 2001
but before 30th September 2001 37,500.0 shares
After 30th September 2001
but before 31st October 2001 31,250.0 shares
After 31st October 2001
but before 30th November 2001 25,000.0 shares
After 30th November 2001
but before 31st December 2001 18,750.0 shares
After 31st December 2001
but before 31st January 2002 12,500.0 shares
After 31st January 2002
but before 28th February 2002 6,250.0 shares
After 28th February 2002 0.0 shares
</TABLE>
4
<PAGE> 11
EXHIBIT B
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Stock Purchase
Agreement dated as of 17th March 1999, (the "Agreement") Stephen P. Kay hereby
sells, assigns and transfers unto Landa Management Systems Corporation
__________________________ (________) shares of common stock of Landa Management
Systems Corporation, a California corporation, standing in the undersigned's
name on the books of said corporation represented by Certificate No._______
herewith, and does hereby irrevocably constitute and appoint ________________
attorney to transfer the said stock on the books of the said corporation with
full power of substitution in the premises. This Assignment may be used only in
accordance with and subject to the terms and conditions of the Agreement, in
connection with the repurchase of shares of Common Stock issued to the
undersigned pursuant to the Agreement, and only to the extent that such shares
remain subject to the Company's Purchase Option under the Agreement.
Dated:
-------------------
/s/ STEPHEN P. KAY
-----------------------------
[Signature]
Stephen P. Kay
-----------------------------
[INSTRUCTION: Please do not fill in any blanks other than the signature line.
The purpose of this Assignment is to enable the Company to exercise its
repurchase option set forth in the Agreement without requiring additional
signatures on the part of Purchaser.]
<PAGE> 12
EXHIBIT B
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Stock Purchase
Agreement dated as of 17th March 1999, (the "Agreement") Stephen P. Kay hereby
sells, assigns and transfers unto Landa Management Systems Corporation
_______________________________ (__________) shares of common stock of Landa.
Management Systems Corporation, a California corporation, standing in the
undersigned's name on the books of said corporation represented by Certificate
No. _______ herewith, and does hereby irrevocably constitute and appoint
____________________________ attorney to transfer the said stock on the books of
the said corporation with full power of substitution in the premises. This
Assignment may be used only in accordance with and subject to the terms and
conditions of the Agreement, in connection with the repurchase of shares of
Common Stock issued to the undersigned pursuant to the Agreement, and only to
the extent that such shares remain subject to the Company's Purchase Option
under the Agreement.
Dated:
-------------------
/s/ STEPHEN P. KAY
-----------------------------
[Signature]
Stephen P. Kay
-----------------------------
[INSTRUCTION: Please do not fill in any blanks other than the signature line.
The purpose of this Assignment is to enable the Company to exercise its
repurchase option set forth in the Agreement without requiring additional
signatures on the part of Purchaser.]
<PAGE> 13
EXHIBIT C
JOINT ESCROW INSTRUCTIONS
Stephen P. Kay, Company Secretary
Landa Management Systems Corporation
1072 Marauder, Suite A
Chico, CA 95973
Dear Sir:
As Escrow Agent for both Landa Management Systems Corporation, a
California corporation ("Company"), and the undersigned purchaser of stock of
the Company ("Purchaser"), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Stock Purchase
Agreement ("Agreement"), dated 17TH MARCH 1999, to which a copy of these Joint
Escrow Instructions is attached as Exhibit C in accordance with the following
instructions:
1. In the event the Company or an assignee shall elect to exercise the
Purchase Option set forth in the Agreement, the Company or its assignee will
give to Purchaser and you a written notice specifying the number of shares of
stock to be purchased, the purchase price, and the time for a closing hereunder
at the principal office of the Company. Purchaser and the Company hereby
irrevocably authorize and direct you to close the transaction contemplated by
such notice in accordance with the terms of said notice.
2. At the closing you are directed (a) to date any stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company against the
simultaneous delivery to you of the purchase price (which may include suitable
acknowledgment of cancellation of indebtedness) of the number of shares of stock
being purchased pursuant to the exercise of the Purchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as specified in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as his
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities and other property all documents of assignment and/or
transfer and an stock certificates necessary or appropriate to make all
securities negotiable and complete any transaction herein contemplated.
4. This escrow shall terminate upon expiration or exercise in full of
the Purchase Option, whichever occurs first.
1.
<PAGE> 14
5. If at the time of termination of this escrow you should have in
your possession any documents, securities, or other property belonging to
Purchaser, you shall deliver all of same to Purchaser and shall be discharged of
all further obligations hereunder; provided, however, that if at the time of
termination of this escrow you are advised by the Company that the property
subject to this escrow is the subject of a pledge or other security agreement,
you shall deliver all such property to the pledgeholder or other person
designated by the Company.
6. Except as otherwise provided in these Joint Escrow Instructions,
your duties hereunder may be altered, amended, modified or revoked only by a
writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as
are specifically set forth herein and may rely and shall be protected in relying
or refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties or
their assignees. You shall not be personally liable for any act you may do or
omit to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while
acting in good faith and any act done or omitted by you pursuant to the advice
of your own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law, and are hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case you obey or comply with any such order, judgment or decree of any
court, you shall not be liable to any of the parties hereto or to any other
person, firm or corporation by reason of such compliance, notwithstanding any
such order, judgment or decree being subsequently reversed, modified, annulled,
set aside, vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authority or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You &hall not be liable for the outlawing of any rights under any
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. Your responsibilities as Escrow Agent hereunder shall terminate if
you shall cease to be Secretary of the Company or if you shall resign by written
notice to each party. In the event of any such termination, the Company may
appoint any officer or assistant officer of the Company as successor Escrow
Agent and Purchaser hereby confirms the appointment of such successor or
successors as his attorney-in-fact and agent to the full extent of your
appointment.
12. If you reasonably require other or further instruments in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.
13. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities, you are authorized and
2.
<PAGE> 15
directed to retain in your possession without liability to anyone all or any
part of said securities until such dispute shall have been settled either by
mutual written agreement of the parties concerned or by a final order, decree or
judgment of a court of competent jurisdiction after the time for appeal has
expired and no appeal has been perfected, but you shall be under no duty
whatsoever to institute or defend any such proceedings.
14. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery, including
delivery by express courier or five days after deposit in the United States Post
Office, by registered or certified mail with postage and fees prepaid, addressed
to each of the other parties hereunto entitled at the following addresses, or at
such other addresses as a party may designate by ten days' advance written
notice to each of the other parties hereto:
COMPANY: Stephen P. Kay, Company Secretary
Landa Management Systems Corporation
1072 Marauder, Suite A
Chico, CA 95973
PURCHASER: Stephen P. Kay
ESCROW AGENT: Stephen P. Kay, Company Secretary
Landa Management Systems Corporation
1072 Marauder, Suite A
Chico, CA 95973
15. By signing these Joint Escrow Instructions you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not become
a party to the Agreement.
16. You shall be entitled to employ such legal counsel and other
experts (including without limitation the firm of Cooley Godward LLP) as you may
deem necessary properly to advise you in connection with your obligations
hereunder. You may rely upon the advice of such counsel, and may pay such
counsel reasonable compensation therefor. The Corporation shall be responsible
for all fees generated by such legal counsel in connection with your obligations
hereunder.
17. This instrument shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns. It is
understood and agreed that references to "you" or "your" herein refer to the
original Escrow Agent and to any and all successor Escrow Agents. It is
understood and agreed that the Corporation may at any time or from time to time
assign its rights under the Agreement and these Joint Escrow Instructions in
whole or in part.
18. This Agreement shall be governed by and interpreted and determined
in accordance with the laws of the State of California, as such laws are applied
by California courts to contacts made and to be performed entirely in California
by residents of that state.
3.
<PAGE> 16
Very truly yours,
LANDA MANAGEMENT SYSTEMS CORPORATION
/s/ STEPHEN P. KAY
By: Stephen P. Kay, Chief Financial Officer
---------------------------------------
PURCHASER:
/s/ STEPHEN P. KAY
Stephen P. Kay
---------------------------------------
ESCROW AGENT:
/s/ STEPHEN P. KAY
---------------------------------
Stephen P. Kay, Company Secretary
4.
<PAGE> 17
EXHIBIT D
FULL RECOURSE PROMISSORY NOTE
$36,000.00
17TH MARCH 1999
FOR VALUE RECEIVED, the undersigned hereby unconditionally promises to
pay to the order of Landa Management Systems Corporation, a California
corporation (the "Company"), at Chico, California, or at such other place as the
holder hereof may designate in writing, in lawful money of the United States of
America and in immediately available funds, the principal sum of Thirty six
thousand 00/100 Dollars ($36,000.00) together with interest accrued from the
date hereof on the unpaid principal at the rate of 6.00% per annum, or the
maximum rate permissible by law (which under the laws of the State of California
shall be deemed to be the laws relating to permissible rates of interest on
commercial loans), whichever is less, as follows:
PRINCIPAL REPAYMENT. The outstanding principal amount
hereunder shall be DUE AND PAYABLE IN FULL ON MARCH 16TH, 2006.
INTEREST PAYMENTS. Interest shall be ACCRUED ANNUALLY and
shall be calculated on the basis of a 360-day year for the actual
number of days elapsed;
provided, however, that in the event that the undersigned's employment by or
association with the Company is terminated for any reason prior to payment in
full of this Note, this Note shall be accelerated and all remaining unpaid
principal and interest shall become due and payable immediately after such
termination. Moreover, the Company may, in connection with the first
underwritten registration of the offering of any securities of the Company under
the Securities Act of 1933, as amended (the "Securities Act"), require that this
Note shall be accelerated and all remaining unpaid principal and interest shall
become due and payable within two hundred ten (210) days following the effective
date of the registration statement of the Company filed under the Securities
Act.
If the undersigned fails to pay any of the principal and accrued
interest when due, the Company, at its sole option, shall have the right to
accelerate this Note, in which event the entire principal balance and all
accrued interest shall become immediately due and payable, and immediately
collectible by the Company pursuant to applicable law.
This Note may be prepaid at any time without penalty. All money paid
toward the satisfaction of this Note shall be applied first to the payment of
interest as required hereunder and then to the retirement of the principal.
This Note is a full recourse promissory note. The full amount of this
Note is secured by a pledge of shares of Common Stock of the Company, and is
subject to all of the terms and provisions of the Stock Purchase Agreement and
the Pledge Agreement, each of even date herewith between the undersigned and
the Company.
1.
<PAGE> 18
The undersigned hereby represents and agrees that the amounts due under
this Note are not consumer debt, and are not incurred primarily for personal,
family or household purposes, but are for business and commercial purposes only.
The undersigned hereby waives presentment, protest and notice of
protest, demand for payment, notice of dishonor and all other notices or demands
in connection with the delivery, acceptance, performance, default or endorsement
of this Note.
The holder hereof shall be entitled to recover, and the undersigned
agrees to pay when incurred, all costs and expenses of collection of this Note,
including without limitation, reasonable attorneys' fees.
This Note shall be governed by, and construed, enforced and interpreted
in accordance with, the laws of the State of California, excluding conflict of
laws principles that would cause the application of laws of any other
jurisdiction.
Signed /s/ STEPHEN P. KAY
------------------------------------
Stephen P. Kay
2.
<PAGE> 19
EXHIBIT E
PLEDGE AGREEMENT
1. As collateral security for the payment of that certain $36,000.00
promissory note issued this date to Landa Management Systems Corporation
("Pledgee") by the undersigned (hereinafter called "indebtedness"), the
undersigned hereby assigns, transfers to and pledges with the Pledgee the
securities listed on Schedule 1 hereto which were this day delivered to be
deposited with Pledgee, together with any stock rights, rights to subscribe,
dividends paid in cash or other property in connection with the complete or
partial liquidation of Pledgee, stock dividends, dividends paid in stock, new
securities or other property except cash dividends other than liquidating
dividends to which the undersigned is or may hereafter become entitled to
receive on account of such property, and in the event that the undersigned
receives any such, the undersigned will immediately deliver it to Pledgee to be
held by Pledgee hereunder in the same manner as the property originally pledged
hereunder. All property assigned, transferred to and pledged with Pledgee under
this paragraph is hereinafter called "collateral."
At any time, without notice, and at the expense of the undersigned,
Pledgee in its name or in the name of its nominee or of the undersigned may, but
shall not be obligated to: (a) collect by legal proceedings or otherwise all
dividends (except cash dividends other than liquidating dividends), interest,
principal payments and other sums now or hereafter payable upon or on account of
said collateral; (b) enter into any extension, reorganization, deposit, merger,
or consolidation agreement, or any agreement in any way relating to or affecting
the collateral, and in connection therewith may deposit or surrender control of
such collateral thereunder, accept other property in exchange for such
collateral and do and perform such acts and things as it may deem proper, and
any money or property received in exchange for such collateral shall be applied
to the indebtedness or thereafter held by it pursuant to the provisions hereof;
(c) insure, process and preserve the collateral; (d) cause the collateral to be
transferred to its name or to the name of its nominee; (e) exercise as to such
collateral all the rights, powers, and remedies of an owner, except that so long
as the indebtedness is not in default the undersigned shall retain all voting
rights as to the collateral.
The undersigned agrees to pay prior to delinquency all taxes, charges,
liens and assessments against the collateral, and upon the failure of the
undersigned to do so Pledgee at its option may pay any of them and shall be the
sole judge of the legality or validity thereof and the amount necessary to
discharge the same.
All advances, charges, costs and expenses, including reasonable
attorneys' fees, incurred or paid by Pledgee in exercising any right, power or
remedy conferred by this agreement, or in the enforcement thereof, shall become
a part of the indebtedness secured hereunder and shall be paid to Pledgee by the
undersigned immediately and without demand.
At the option of Pledgee and without necessity of demand or notice, all
or any part of the indebtedness of the undersigned shall immediately become due
and payable irrespective of any agreed maturity, upon the happening of any of
the following events: (a) failure to keep or perform any of the terms
or provisions of this agreement; (b) default in the payment of principal or
interest when due; (c) the levy of any attachment, execution or other process
against the
1.
<PAGE> 20
collateral; or (d) the insolvency, commission of an act of bankruptcy, general
assignment for the benefit of creditors, filing of any petition in bankruptcy or
for relief under the provisions of Title 11, United States Code, Bankruptcy, of,
by, or against the undersigned.
In the event of the nonpayment of any indebtedness when due, whether by
acceleration or otherwise, or upon the happening of any of the events specified
in the last preceding paragraph, Pledgee may then, or at any time thereafter, at
its election, apply, set off, collect or sell in one or more sales, or take such
steps as may be necessary to liquidate and reduce to cash in the hands of
Pledgee in whole or in part, with or without any previous demands or demand of
performance or notice or advertisement, the whole or any part of the collateral
in such order as Pledgee may elect, and any such sale may be made either at
public or private sale at its place of business or elsewhere, or at any broker's
board or securities exchange, either for cash or upon credit or for future
delivery; provided, however, that if such disposition is at private sale, then
the purchase price of the collateral shall be equal to the public market price
then in effect, or, if at the time of sale no public market for the collateral
exists, then, in recognition of the fact that the sale of the collateral would
have to be registered under the Securities Act of 1933 and that the expenses of
such registration are commercially unreasonable for the type and amount of
collateral pledged hereunder, Pledgee and the undersigned hereby agree that such
private sale shall be at a purchase price mutually agreed to by Pledgee and the
undersigned or, if the parties cannot agree upon a purchase price, then at a
purchase price established by a majority of three independent appraisers
knowledgeable of the value of such collateral, one named by the undersigned
within 10 days after written request by the Pledgee to do so, one named by
Pledgee within such 10 day period, and the third named by the two appraisers so
selected, with the appraisal to be rendered by such body within 30 days of the
appointment of the third appraiser. The cost of such appraisal, including all
appraiser's fees, shall be charged against the proceeds of sale as an expense of
such sale. Pledgee may be the purchaser of any or all collateral so sold and
hold the same thereafter in its own right free from any claim of the undersigned
or right of redemption. Demands of performance, notices of sale, advertisements
and presence of property at sale are hereby waived, and Pledgee is hereby
authorized to sell hereunder any evidence of debt pledged to it. Any sale
hereunder may be conducted by any officer or agent of Pledgee.
The proceeds of the sale of any of the collateral and all sums received
or collected by Pledgee from or on account of such collateral shall be applied
by Pledgee to the payment of expenses incurred or paid by Pledgee in connection
with any sale, transfer or delivery of the collateral, to the payment of any
other costs, charges, attorneys' fees or expenses mentioned herein, and to the
payment of the indebtedness or any part hereof, all in such order and manner as
Pledgee in its discretion may determine. Pledgee shall pay any balance to the
undersigned.
Pledgee shall be under no duty or obligation whatsoever to make or give
any presentments, demands for performance, notices of non-performance, protests,
notices of protest or notices of dishonor in connection with any obligations or
evidences of indebtedness held by Pledgee as collateral, or in connection with
any obligations or evidences of indebtedness which constitute in whole or in
part the indebtedness secured hereunder.
Pledgee may at any time deliver the collateral or any part thereof to
the undersigned and the receipt of the undersigned shall be a complete and full
acquittance for the collateral so delivered, and Pledgee shall thereafter be
discharged from any liability or responsibility therefor.
2.
<PAGE> 21
Upon the transfer of all or any part of the indebtedness Pledgee may
transfer all or any part of the collateral and shall be fully discharged
thereafter from all liability and responsibility with respect to such collateral
so transferred, and the transferee shall be vested with all the rights and
powers of Pledgee hereunder with respect to such collateral so transferred; but
with respect to any collateral not so transferred Pledgee shall retain all
rights and powers hereby given.
Until all indebtedness shall have been paid in full the power of sale
and all other rights, powers and remedies granted to Pledgee hereunder shall
continue to exist and may be exercised by Pledgee at any time and from time to
time irrespective of the fact that the indebtedness or any part thereof may have
become barred by any statute of limitations, or that the personal liability of
the undersigned may have ceased.
Pledgee agrees that so long as the indebtedness is not in default,
shares of Landa Management Systems Corporation common stock held hereunder as
collateral for the indebtedness shall be released from pledge as the
indebtedness is paid. Such releases shall be at the rate of one share for each
$0.12 of principal amount of indebtedness paid. Release from pledge, however,
shall not result in release from the provisions of those certain Joint Escrow
Instructions, if any, of even date herewith among the parties to this Pledge
Agreement and the Escrow Agent named therein or from the Repurchase Option of
Landa Management Systems Corporation, set forth in the Stock Purchase Agreement
dated 17th March 1999, if any, between the parties to this Pledge Agreement.
The rights, powers and remedies given to Pledgee by this agreement
shall be in addition to all rights, powers and remedies given to Pledgee by
virtue of any statute or rule of law. Pledgee may exercise its Pledgee's lien or
right of setoff with respect to the indebtedness in the same manner as if the
indebtedness were unsecured. Any forbearance or failure or delay by Pledgee in
exercising any right, power or remedy hereunder shall not be deemed to be a
waiver of such right, power or remedy, and any single or partial exercise of any
right, power or remedy hereunder shall not preclude the further exercise
thereof; and every right, power and remedy of Pledgee shall continue in full
force and effect until such right, power or remedy is specifically waived by an
instrument in writing executed by Pledgee.
Dated: 17th March 1999
/s/ STEPHEN P. KAY
-----------------------------
Stephen P. Kay
ATTACHMENT: SCHEDULE 1
3.
<PAGE> 22
SCHEDULE 1
TO
PLEDGE AGREEMENT
300,000 shares of Common Stock in Landa Management Systems Corporation.
<PAGE> 1
EXHIBIT 10.10
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made this day 20th May
1999 by and between LANDA MANAGEMENT SYSTEMS CORPORATION, a California
corporation (the "Company"), and Bryan H. Lang, ("Purchaser").
WITNESSETH:
WHEREAS, Purchaser holds a stock option dated October 20th, 1998 to
purchase shares of common stock of the Company (the "Option") pursuant to the
Company's 1998 Equity Incentive Plan (the "Plan") which Purchaser desires to
exercise; and
WHEREAS, Purchaser wishes to take advantage of the early exercise
provision of the Option, and therefore to enter into this Agreement.
NOW, THEREFORE, IT IS AGREED between the parties as follows:
1. Purchaser hereby agrees to purchase from the Company, and the
Company hereby agrees to sell to Purchaser, an aggregate of one hundred ninety
five thousand (195,000) shares of the common stock (the "Stock") of the
Company, for a purchase price of 12/100 US dollars ($0.12) per share (total
purchase price: Twenty three thousand four hundred 00/100 US dollars
($23,400.00)), payable as follows:
<TABLE>
<S> <C>
Cash at Closing $ 0.00
Promissory Note in the form
of Exhibit D (the "Note") $ 23,400.00
-----------
Total Purchase Price $ 23,400.00
===========
</TABLE>
The closing hereunder shall occur at the offices of the Company on the date of
this Agreement or at such other time and place as the parties may mutually agree
upon in writing.
At the closing, Purchaser shall deliver two (2) stock assignments in
the form of Exhibit B, duly endorsed (with date and number of shares left
blank), joint escrow instructions (the "Joint Escrow Instructions") in the form
of Exhibit C, duly executed by Purchaser, and the total purchase price
(including an executed Note in the form of Exhibit D if a portion of the total
purchase price is to be paid by promissory note and an executed pledge agreement
in the form of Exhibit E (the "Pledge Agreement") under which all shares of the
Stock acquired by Note shall be pledged as collateral security for the payment
of the indebtedness represented by the Note.
At the closing or as soon thereafter as practicable, the Company shall
deliver to the Escrow Agent (as defined in paragraph 8 below) shares
certificates for all of the Stock that is to be subject to the Purchase Option
(as defined in paragraph 2 below), and shall deliver share certificates to
Purchaser for all of the Stock, if any, that is not to be subject to the
Purchase Option or the Pledge
1
<PAGE> 2
Agreement. The certificates for all of the Stock that is subject to the Pledge
Agreement but not the Purchase Option shall be retained by the Company as
security pursuant to the Pledge Agreement.
2. The Stock to be purchased by Purchaser pursuant to this Agreement
shall be subject to the following option ("Purchase Option"):
(a) In the event that Purchaser's Continuous Service (as that
term is defined in the Plan) shall terminate for any reason (including
Purchaser's death), or no reason, with or without cause, the Purchase Option may
be exercised. The Company shall have the right at any time within ninety (90)
days after such termination of Continuous Service, or such longer period as may
determined by the Company if such later repurchase is deemed necessary by the
Company for treatment of its stock as Qualified Small Business Stock under
Section 1202 of the Internal Revenue Code of 1986, as amended, and regulations
promulgated thereunder, to exercise its option to repurchase from Purchaser or
his personal representative, as the case may be, at the price per share paid by
Purchaser pursuant to this Agreement ("Option Price"), up to but not exceeding
the number of unvested shares of the Stock set forth on Exhibit A hereto, which
is incorporated herein by this reference.
(b) In addition, and without limiting the foregoing Purchase
Option, if at any time during the term of the Purchase Option there occurs a
transaction described in Section 11(b) or 11(c) of the Plan (e.g., a
dissolution, liquidation, asset sale, merger, consolidation or reverse merger of
the Company), then: (i) the Company shall exercise the Purchase Option to the
same extent that the unvested portion of the Option would have terminated
pursuant to Section 11(b) or 11(c) of the Plan if the Option had not been
exercised pursuant to this Agreement, (ii) the Purchase Option shall lapse to
the same extent that the unvested portion of the Option would have automatically
accelerated pursuant to Section 11(c) of the Plan if the Option had not been
exercised pursuant to this Agreement or (iii) the Purchase Option may be
assigned to any successor to the Company to the same extent that the unvested
portion of the Option would have been assumed or substituted by such successor
if the Option had not been exercised pursuant to this Agreement, in which case
the Purchase Option shall apply on the same basis as set forth above to the
Stock or to the consideration received for the Stock by the Purchaser in the
transaction (as the case may be) if Purchaser's Continuous Service with such
successor terminates for any reason. The continuing or surviving entity shall be
deemed to be the successor to the Company for purposes of this Agreement, and
references herein to the "Company" shall be deemed to refer to such successor.
(c) The Company shall be entitled to pay for any of the Stock
purchased pursuant to its Purchase Option at the Company's option in cash, by
offset against any indebtedness owing to the Company by Purchaser including
without limitation any note given in payment for the Stock, or a combination of
both.
(d) This Agreement is not an employment contract and nothing in
this Agreement shall be deemed to create in any way whatsoever any obligation on
the part of Purchaser to continue in the employ of the Company or any Affiliate
(as defined in the Plan) thereof, or of the Company or any Affiliate thereof to
continue Purchaser in its employ. In addition, nothing in this Agreement shall
obligate the Company or any Affiliate thereof, their
2
<PAGE> 3
respective stockholders, boards of directors, officers or employees to continue
any relationship that you might have as a director or consultant for the Company
or any Affiliate thereof.
3. The Purchase Option may be exercised by giving written notice of
exercise delivered or mailed as provided in paragraph 14. Upon providing of such
notice and payment or tender of the purchase price, the Company shall become the
legal and beneficial owner of the Stock being purchased and all rights and
interests therein or related thereto.
4. If from time to time during the term of the Purchase Option there is
any stock dividend or liquidating dividend or distribution of cash and/or
property, stock split or other change in the character or amount of any of the
outstanding securities of the Company, then, in such event, any and all new,
substituted or additional securities or other property to which Purchaser is
entitled by reason of his ownership of Stock will be immediately subject to the
Purchase Option and be included in the word "Stock" for all purposes of the
Purchase Option with the same force and effect as the shares of Stock then
subject to the Purchase Option. While the total Option Price shall remain the
same after each such event, the Option Price per share of Stock upon exercise of
the Purchase Option shall be appropriately adjusted.
5. All certificates representing any shares of Stock of the Company
subject to the provisions of this Agreement shall have endorsed thereon legends
in substantially the following form:
(a) "The shares represented by this certificate are subject to an
option set forth in an agreement between the Company and the registered holder,
or registered holder's predecessor in interest, a copy of which is on file at
the principal office of this Company. Any transfer or attempted transfer of any
shares subject to such option is void without the prior express written consent
of the issuer of these shares."
(b) "These securities have not been registered under the Securities
Act of 1933. They may not be sold, offered for sale, pledged or hypothecated in
the absence of an effective registration statement as to the securities under
said Act or an opinion of counsel satisfactory to the Company that such
registration is not required."
(c) The shares represented by this certificate are subject to a
right of first refusal option in favor of the Company and/or its assignee(s) as
provided in the Bylaws of the Company."
(d) Any legend required to be placed thereon by the California
Commissioner of Corporations.
6. Purchaser acknowledges that he or she is aware that the Stock to be
issued to him or her by the Company pursuant to this Agreement has not been
registered under the Securities Act of 1933, as amended (the "Act"), on the
basis that no distribution or public offering of the Stock is to be effected,
and in this connection acknowledges that the Company is relying on the following
representations. In this connection, Purchaser warrants and represents to the
Company that he or she is acquiring the Stock for investment and not with a view
to or for sale in
3
<PAGE> 4
connection with any distribution of the Stock or with any present intention of
distributing or selling the Stock and he or she does not presently have reason
to anticipate any change in circumstances or any particular occasion or event
which would cause him or her to sell the Stock. Purchaser recognizes that the
Stock must be held indefinitely unless it is subsequently registered under the
Act or an exemption from such registration is available and, further, recognizes
that the Company is under no obligation to register the Stock or to comply with
any exemption from such registration.
7. Purchaser is aware that the Stock may not be sold pursuant to Rule
144 adopted under the Act unless certain conditions are met and until Purchaser
has held the Stock for the applicable holding period set forth in Rule 144.
Among the conditions for use of Rule 144 is the availability of specified
current public information about the Company. Purchaser recognizes that the
Company presently has no plans to make such information available to the public.
Whether or not the Purchase Option is exercised or has lapsed,
Purchaser further agrees not to make any disposition of any of the Stock in any
event unless and until:
(a) There is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement; or
(b) (i) Purchaser shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (ii) Purchaser shall
have given the Company an opinion of counsel, which opinion and counsel shall be
satisfactory to the Company, to the effect that such disposition will not
require registration of the Stock under the Act.
8. As security for his faithful performance of the terms of this
Agreement and to insure the availability for delivery of Purchaser's Stock upon
exercise of the Purchase Option herein provided for, Purchaser agrees, at the
closing hereunder (or as soon thereafter as practicable), to deliver (or have
the Company deliver on the Purchaser's behalf) to and deposit with the Secretary
of the Company ("Escrow Agent"), as Escrow Agent in this transaction, two (2)
stock assignments duly endorsed (with date and number of shares left blank) in
the form attached hereto as Exhibit B, together with a certificate or
certificates evidencing all of the Stock subject to the Purchase Option; said
documents are to be held by the Escrow Agent and delivered by said Escrow Agent
pursuant to the Joint Escrow Instructions of the Company and Purchaser set forth
in Exhibit C attached hereto and incorporated herein by this reference, which
instructions shall also be delivered to the Escrow Agent at the closing
hereunder (or as soon thereafter as practicable).
9. Purchaser shall not sell or transfer any of the Stock subject to the
Purchase Option or any interest therein so long as such Stock is subject to the
Purchase Option. In addition, the Purchaser agrees that the Company (or a
representative of the underwriters) may, in connection with the first
underwritten registration of the offering of any securities of the Company under
the Act, require that Purchaser not sell, dispose of, transfer, make any short
sale of, grant any option for the purchase of, or enter into any hedging or
similar transaction with the same economic
4
<PAGE> 5
effect as a sale, any of the Stock or other securities of the Company held by
you, for a period of time specified by the underwriter(s) (not to exceed one
hundred eighty (180) days) following the effective date of the registration
statement of the Company filed under the Act.
10. The Company shall not be required (a) to transfer on its books any
shares of Stock of the Company which shall have been sold or transferred in
violation of any of the provisions set forth in this Agreement or (b) to treat
as owner of such shares or to accord the right to vote as such owner or to pay
dividends to any transferee to whom such shares shall have been so transferred.
11. Subject to the provisions of paragraphs 9 and 10 above, Purchaser
(but not any unapproved transferee) shall, during the term of this Agreement,
exercise all rights and privileges of a stockholder of the Company with respect
to the Stock.
12. The shares of Stock purchased under the terms of this Agreement are
subject to the right of first refusal provided for in the Bylaws of the Company.
13. The parties agree to execute such further instruments and to take
such further action as reasonably may be necessary to carry out the intent of
this Agreement.
14. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in any United States Post Office Box, by registered or certified mail
with postage and fees prepaid, addressed to the other party hereto at his
address hereinafter shown below his signature or at such other address as such
party may designate by ten (10) days' advance written notice to the other party
hereto.
15. This Agreement shall bind and inure to the benefit of the
successors and assigns of the Company and, subject to the restrictions on
transfer herein set forth, inure to the benefit of and be binding upon
Purchaser, his heirs, executors, administrators, successors, and assigns.
Without limiting the generality of the foregoing, the Purchase Option of the
Company hereunder shall be assignable by the Company at any time or from time to
time, in whole or in part.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement as of the day and year first set forth above.
LANDA MANAGEMENT SYSTEMS CORPORATION
By: /s/ STEPHEN P. KAY
----------------------------------
Its: COO/CFO
---------------------------------
Address: 1072 Marauder Street, Suite A
Chico, CA 95973
/s/ BRYAN H. LANG
-------------------------------------
BRYAN H. LANG
Address:
ATTACHMENTS:
Exhibit A Vesting Schedule
Exhibit B Assignment Separate from Certificate
Exhibit C Joint Escrow Instructions
Exhibit D Promissory Note
Exhibit E Pledge Agreement
6
<PAGE> 7
EXHIBIT A
VESTING SCHEDULE
<TABLE>
<CAPTION>
IF CONTINUOUS SERVICE NUMBER OF UNVESTED SHARES
TERMINATES: SUBJECT TO PURCHASE OPTION:
<S> <C>
Before 28th February 1999 195,000.0 shares
After 28th February 1999
but before 31st March 1999 146,250.0 shares
After 31st March 1999
but before 30th April 1999 142,187.5 shares
After 30th April 1999
but before 31st May 1999 138,125.0 shares
After 31st May 1999
but before 30th June 1999 134,062.5 shares
After 30th June 1999
but before 31st July 1999 130,000.0 shares
After 31st July 1999
but before 31st August 1999 125,937.5 shares
After 31st August 1999
but before 30th September 1999 121,875.0 shares
After 30th September 1999
but before 31st October 1999 117,812.5 shares
After 31st October 1999
but before 30th November 1999 113,750.0 shares
After 30th November 1999
but before 31st December 1999 109,687.5 shares
</TABLE>
1
<PAGE> 8
EXHIBIT A (CONTINUED)
VESTING SCHEDULE
<TABLE>
<CAPTION>
IF CONTINUOUS SERVICE NUMBER OF UNVESTED SHARES
TERMINATES: SUBJECT TO PURCHASE OPTION:
<S> <C>
After 31st December 1999
but before 31st January 2000 105,625.0 shares
After 31st January 2000
but before 28th February 2000 101,562.5 shares
After 28th February 2000
but before 31st March 2000 97,500.0 shares
After 31st March 2000
but before 30th April 2000 93,437.5 shares
After 30th April 2000
but before 31st May 2000 89,375.0 shares
After 31st May 2000
but before 30th June 2000 85,312.5 shares
After 30th June 2000
but before 31st July 2000 81,250.0 shares
After 31st July 2000
but before 31st August 2000 77,187.5 shares
After 31st August 2000
but before 30th September 2000 73,125.0 shares
After 30th September 2000
but before 31st October 2000 69,062.5 shares
</TABLE>
2
<PAGE> 9
EXHIBIT A (CONTINUED)
VESTING SCHEDULE
<TABLE>
<CAPTION>
IF CONTINUOUS SERVICE NUMBER OF UNVESTED SHARES
TERMINATES: SUBJECT TO PURCHASE OPTION:
<S> <C>
After 31st October 2000
but before 30th November 2000 65,000.0 shares
After 30th November 2000
but before 31st December 2000 60,937.5 shares
After 31st December 2000
but before 31st January 2001 56,875.0 shares
After 31st January 2001
but before 28th February 2001 52,812.5 shares
After 28th February 2001
but before 31st March 2001 48,750.0 shares
After 31st March 2001
but before 30th April 2001 44,687.5 shares
After 30th April 2001
but before 31st May 2001 40,625.0 shares
After 31st May 2001
but before 30th June 2001 36,562.5 shares
After 30th June 2001
but before 31st July 2001 32,500.0 shares
After 31st July 2001
but before 31st August 2001 28,437.5 shares
</TABLE>
3
<PAGE> 10
EXHIBIT A (CONTINUED)
VESTING SCHEDULE
<TABLE>
<CAPTION>
IF CONTINUOUS SERVICE NUMBER OF UNVESTED SHARES
TERMINATES: SUBJECT TO PURCHASE OPTION:
<S> <C>
After 31st August 2001
but before 30th September 2001 24,375.0 shares
After 30th September 2001
but before 31st October 2001 20,312.5 shares
After 31st October 2001
but before 30th November 2001 16,250.0 shares
After 30th November 2001
but before 31st December 2001 12,187.5 shares
After 31st December 2001
but before 31st January 2002 8,125.0 shares
After 31st January 2002
but before 28th February 2002 4,062.5 shares
After 28th February 2002 0.0 shares
</TABLE>
4
<PAGE> 11
EXHIBIT B
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Stock Purchase
Agreement dated as of 20th May 1999, (the "Agreement") Bryan H. Lang hereby
sells, assigns and transfers unto Landa Management Systems Corporation
_____________(___) shares of common stock of Landa Management Systems
Corporation, a California corporation, standing in the undersigned's name on the
books of said corporation represented by Certificate No. _____ herewith, and
does hereby irrevocably constitute and appoint _______________ attorney to
transfer the said stock on the books of the said corporation with full power of
substitution in the premises. This Assignment may be used only in accordance
with and subject to the terms and conditions of the Agreement, in connection
with the repurchase of shares of Common Stock issued to the undersigned pursuant
to the Agreement, and only to the extent that such shares remain subject to the
Company's Purchase Option under the Agreement.
Dated:
----------
/s/ BRYAN H. LANG
---------------------------------
[Signature]
Bryan H. Lang
---------------------------------
[INSTRUCTION: Please do not fill in any blanks other than the signature line.
The purpose of this Assignment is to enable the Company to exercise its
repurchase option set forth in the Agreement without requiring additional
signatures on the part of Purchaser.]
<PAGE> 12
EXHIBIT B
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Stock Purchase
Agreement dated as of 20th May 1999, (the "Agreement") Bryan H. Lang hereby
sells, assigns and transfers unto Landa Management Systems Corporation
_____________(___) shares of common stock of Landa Management Systems
Corporation, a California corporation, standing in the undersigned's name on the
books of said corporation represented by Certificate No. _____ herewith, and
does hereby irrevocably constitute and appoint _______________ attorney to
transfer the said stock on the books of the said corporation with full power of
substitution in the premises. This Assignment may be used only in accordance
with and subject to the terms and conditions of the Agreement, in connection
with the repurchase of shares of Common Stock issued to the undersigned pursuant
to the Agreement, and only to the extent that such shares remain subject to the
Company's Purchase Option under the Agreement.
Dated:
----------
/s/ BRYAN H. LANG
---------------------------------
[Signature]
Bryan H. Lang
---------------------------------
[INSTRUCTION: Please do not fill in any blanks other than the signature line.
The purpose of this Assignment is to enable the Company to exercise its
repurchase option set forth in the Agreement without requiring additional
signatures on the part of Purchaser.]
<PAGE> 13
EXHIBIT C
JOINT ESCROW INSTRUCTIONS
Stephen P. Kay, Company Secretary
Landa Management Systems Corporation
1072 Marauder, Suite A
Chico, CA 95973
Dear Sir:
As Escrow Agent for both Landa Management Systems Corporation, a California
corporation ("Company"), and the undersigned purchaser of stock of the Company
("Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Stock Purchase Agreement
("Agreement"), dated 20TH MAY 1999, to which a copy of these Joint Escrow
Instructions is attached as Exhibit C in accordance with the following
instructions:
1. In the event the Company or an assignee shall elect to exercise the
Purchase Option set forth in the Agreement, the Company or its assignee will
give to Purchaser and you a written notice specifying the number of shares of
stock to be purchased, the purchase price, and the time for a closing hereunder
at the principal office of the Company. Purchaser and the Company hereby
irrevocably authorize and direct you to close the transaction contemplated by
such notice in accordance with the terms of said notice.
2. At the closing you are directed (a) to date any stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company against the
simultaneous delivery to you of the purchase price (which may include suitable
acknowledgment of cancellation of indebtedness) of the number of shares of stock
being purchased pursuant to the exercise of the Purchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as specified in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as his
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities and other property all documents of assignment and/or
transfer and all stock certificates necessary or appropriate to make all
securities negotiable and complete any transaction herein contemplated.
4. This escrow shall terminate upon expiration or exercise in full of the
Purchase Option, whichever occurs first.
1.
<PAGE> 14
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of same to Purchaser and shall be discharged of all
further obligations hereunder; provided, however, that if at the time of
termination of this escrow you are advised by the Company that the property
subject to this escrow is the subject of a pledge or other security agreement,
you shall deliver all such property to the pledgeholder or other person
designated by the Company.
6. Except as otherwise provided in these Joint Escrow Instructions, your
duties hereunder may be altered, amended, modified or revoked only by a writing
signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties or
their assignees. You shall not be personally liable for any act you may do or
omit to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while
acting in good faith and any act done or omitted by you pursuant to the advice
of your own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In case you obey or comply with any such order, judgment or decree of any
court, you shall not be liable to any of the parties hereto or to any other
person, firm or corporation by reason of such compliance, notwithstanding any
such order, judgment or decree being subsequently reversed, modified, annulled,
set aside, vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authority or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under any
statue of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be Secretary of the Company or if you shall resign by written
notice to each party. In the event of any such termination, the Company may
appoint any officer or assistant officer of the Company as successor Escrow
Agent and Purchaser hereby confirms the appointment of such successor or
successors as his attorney-in-fact and agent to the full extent of your
appointment.
12. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
13. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities, you are authorized and
2.
<PAGE> 15
directed to retain in your possession without liability to anyone all or any
part of said securities until such dispute shall have been settled either by
mutual written agreement of the parties concerned or by a final order, decree
or judgment of a court of competent jurisdiction after the time for appeal has
expired and no appeal has been perfected, but you shall be under no duty
whatsoever to institute or defend any such proceedings.
14. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery, including
delivery by express courier or five days after deposit in the United States
Post Office, by registered or certified mail with postage and fees prepaid,
addressed to each of the other parties hereunto entitled at the following
addresses, or at such other addresses as a party may designate by ten days'
advance written notice to each of the other parties hereto:
COMPANY: Stephen P. Kay, Company Secretary
Landa Management Systems Corporation
1072 Marauder, Suite A
Chico, CA 95973
PURCHASER: Bryan H. Lang
ESCROW AGENT: Stephen P. Kay, Company Secretary
Landa Management Systems Corporation
1072 Marauder, Suite A
Chico, CA 95973
15. By signing these Joint Escrow Instructions you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
16. You shall be entitled to employ such legal counsel and other experts
(including without limitation the firm of Cooley Godward LLP) as you may deem
necessary properly to advise you in connection with your obligations hereunder.
You may rely upon the advice of such counsel, and may pay such counsel
reasonable compensation therefor. The Corporation shall be responsible for all
fees generated by such legal counsel in connection with your obligations
hereunder.
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. It is
understood and agreed that references to "you" or "your" herein refer to the
original Escrow Agent and to any and all successor Escrow Agents. It is
understood and agreed that the Corporation may at any time or from time to time
assign its rights under the Agreement and these Joint Escrow Instructions in
whole or in part.
18. This Agreement shall be governed by and interpreted and determined
in accordance with the laws of the State of California, as such laws are
applied by California courts to contracts made to be performed entirely in
California by residents of that state.
3.
<PAGE> 16
Very truly yours,
LANDA MANAGEMENT SYSTEMS CORPORATION
By: /s/ STEPHEN P. KAY
---------------------------------
Chief Financial Officer
PURCHASER:
/s/ BRYAN H. LANG
------------------------------------
ESCROW AGENT:
/s/ STEPHEN P. KAY
---------------------------------
Stephen P. Kay, Company Secretary
4.
<PAGE> 17
EXHIBIT D
FULL RECOURSE PROMISSORY NOTE
$23,400.00 20TH MAY 1999
FOR VALUE RECEIVED, the undersigned hereby unconditionally promises to
pay to the order of Landa Management Systems Corporation, a California
corporation (the "Company"), at Chico, California, or at such other place as the
holder hereof may designate in writing, in lawful money of the United States of
America and in immediately available funds, the principal sum of Twenty three
thousand four hundred 00/100 Dollars ($23,400.00) together with interest accrued
from the date hereof on the unpaid principal at the rate of 6.00% per annum, or
the maximum rate permissible by law (which under the laws of the State of
California shall be deemed to be the laws relating to permissible rates of
interest on commercial loans), whichever is less, as follows:
PRINCIPAL REPAYMENT. The outstanding principal amount
hereunder shall be DUE AND PAYABLE IN FULL ON MAY 19TH, 2006.
INTEREST PAYMENTS. Interest shall be ACCRUED ANNUALLY and
shall be calculated on the basis of a 360-day year for the actual
number of days elapsed;
provided, however, that in the event that the undersigned's employment by or
association with the Company is terminated for any reason prior to payment in
full of this Note, this Note shall be accelerated and all remaining unpaid
principal and interest shall become due and payable immediately after such
termination. Moreover, the Company may, in connection with the first
underwritten registration of the offering of any securities of the Company under
the Securities Act of 1933, as amended (the "Securities Act"), require that this
Note shall be accelerated and all remaining unpaid principal and interest shall
become due and payable within two hundred ten (210) days following the
effective date of the registration statement of the Company filed under the
Securities Act.
If the undersigned fails to pay any of the principal and accrued
interest when due, the Company, at its sole option, shall have the right to
accelerate this Note, in which event the entire principal balance and all
accrued interest shall become immediately due and payable, and immediately
collectible by the Company pursuant to applicable law.
This Note may be prepaid at any time without penalty. All money paid
toward the satisfaction of this Note shall be applied first to the payment of
interest as required hereunder and then to the retirement of the principal.
This Note is a full recourse promissory note. The full amount of this
Note is secured by a pledge of shares of Common Stock of the Company, and is
subject to all of the terms and provisions of the Stock Purchase Agreement and
the Pledge Agreement, each of even date herewith between the undersigned and the
Company.
1.
<PAGE> 18
The undersigned hereby represents and agrees that the amounts due under
this Note are not consumer debt, and are not incurred primarily for personal,
family or household purposes, but are for business and commercial purposes only.
The undersigned hereby waives presentment, protest and notice of protest,
demand for payment, notice of dishonor and all other notices or demands in
connection with the delivery, acceptance, performance, default or endorsement
of this Note.
The holder hereof shall be entitled to recover, and the undersigned agrees
to pay when incurred, all costs and expenses of collection of this Note,
including without limitation, reasonable attorneys' fees.
This Note shall be governed by, and construed, enforced and interpreted
in accordance with, the laws of the State of California, excluding conflict of
laws principles that would cause the application of laws of any other
jurisdiction.
Signed /s/ BRYAN H. LANG
----------------------
Bryan H. Lang
2.
<PAGE> 19
EXHIBIT E
PLEDGE AGREEMENT
1. As collateral security for the payment of that certain $23,400.00
promissory note issued this date to Landa Management Systems Corporation
("Pledgee") by the undersigned (hereinafter called "indebtedness"), the
undersigned hereby assigns, transfers to and pledges with the Pledgee the
securities listed on Schedule 1 hereto which were this day delivered to be
deposited with Pledgee, together with any stock rights, rights to subscribe,
dividends paid in cash or other property in connection with the complete or
partial liquidation of Pledgee, stock dividends, dividends paid in stock, new
securities or other property except cash dividends other than liquidating
dividends to which the undersigned is or may hereafter become entitled to
receive on account of such property, and in the event that the undersigned
receives any such, the undersigned will immediately deliver it to Pledgee to be
held by Pledgee hereunder in the same manner as the property originally pledged
hereunder. All property assigned, transferred to and pledged with Pledgee under
this paragraph is hereinafter called "collateral."
At any time, without notice, and at the expense of the undersigned,
Pledgee in its name or in the name of its nominee or of the undersigned may, but
shall not be obligated to: (a) collect by legal proceedings or otherwise all
dividends (except cash dividends other than liquidating dividends), interest,
principal payments and other sums now or hereafter payable upon or on account of
said collateral; (b) enter into any extension, reorganization, deposit, merger,
or consolidation agreement, or any agreement in any way relating to or affecting
the collateral, and in connection therewith may deposit or surrender control of
such collateral thereunder, accept other property in exchange for such
collateral and do and perform such acts and things as it may deem proper, and
any money or property received in exchange for such collateral shall be applied
to the indebtedness or thereafter held by it pursuant to the provisions hereof;
(c) insure, process and preserve the collateral; (d) cause the collateral to be
transferred to its name or to the name of its nominee; (e) exercise as to such
collateral all the rights, powers, and remedies of an owner, except that so long
as the indebtedness is not in default the undersigned shall retain all voting
rights as to the collateral.
The undersigned agrees to pay prior to delinquency all taxes, charges,
liens and assessments against the collateral, and upon the failure of the
undersigned to do so Pledgee at its option may pay any of them and shall be the
sole judge of the legality or validity thereof and the amount necessary to
discharge the same.
All advances, charges, costs and expenses, including reasonable
attorneys' fees, incurred or paid by Pledgee in exercising any right, power or
remedy conferred by this agreement, or in the enforcement thereof, shall become
a part of the indebtedness secured hereunder and shall be paid to Pledgee by the
undersigned immediately and without demand.
At the option of Pledgee and without necessity of demand or notice, all
or any part of the indebtedness of the undersigned shall immediately become due
and payable irrespective of any agreed maturity, upon the happening of any of
the following events: (a) failure to keep or perform any of the terms or
provisions of this agreement; (b) default in the payment of principal or
interest when due; (c) the levy of any attachment, execution or other process
against the
1.
<PAGE> 20
collateral; or (d) the insolvency, commission of an act of bankruptcy, general
assignment for the benefit of creditors, filing of any petition in bankruptcy or
for relief under the provisions of Title 11, United States Code, Bankruptcy, of,
by, or against the undersigned.
In the event of the nonpayment of any indebtedness when due, whether by
acceleration or otherwise, or upon the happening of any of the events specified
in the last preceding paragraph, Pledgee may then, or at any time thereafter, at
its election, apply, set off, collect or sell in one or more sales, or take such
steps as may be necessary to liquidate and reduce to cash in the hands of
Pledgee in whole or in part, with or without any previous demands or demand of
performance or notice or advertisement, the whole or any part of the collateral
in such order as Pledgee may elect, and any such sale may be made either at
public or private sale at its place of business or elsewhere, or at any broker's
board or securities exchange, either for cash or upon credit or for future
delivery; provided, however, that if such disposition is at private sale, then
the purchase price of the collateral shall be equal to the public market price
then in effect, or, if at the time of sale no public market for the collateral
exists, then, in recognition of the fact that the sale of the collateral would
have to be registered under the Securities Act of 1933 and that the expenses of
such registration are commercially unreasonable for the type and amount of
collateral pledged hereunder, Pledgee and the undersigned hereby agree that such
private sale shall be at a purchase price mutually agreed to by Pledgee and the
undersigned or, if the parties cannot agree upon a purchase price, then at a
purchase price established by a majority of three independent appraisers
knowledgeable of the value of such collateral, one named by the undersigned
within 10 days after written request by the Pledgee to do so, one named by
Pledgee within such 10 day period, and the third named by the two appraisers so
selected, with the appraisal to be rendered by such body within 30 days of the
appointment of the third appraiser. The cost of such appraisal, including all
appraiser's fees, shall be charged against the proceeds of sale as an expense of
such sale. Pledgee may be the purchaser of any or all collateral so sold and
hold the same thereafter in its own right free from any claim of the
undersigned or right of redemption. Demands of performance, notices of sale,
advertisements and presence of property at sale are hereby waived, and Pledgee
is hereby authorized to sell hereunder any evidence of debt pledged to it. Any
sale hereunder may be conducted by any officer or agent of Pledgee.
The proceeds of the sale of any of the collateral and all sums received
or collected by Pledgee from or on account of such collateral shall be applied
by Pledgee to the payment of expenses incurred or paid by Pledgee in connection
with any sale, transfer or delivery of the collateral, to the payment of any
other costs, charges, attorneys' fees or expenses mentioned herein, and to the
payment of the indebtedness or any part hereof, all in such order and manner as
Pledgee in its discretion may determine. Pledgee shall pay any balance to the
undersigned.
Pledgee shall be under no duty or obligation whatsoever to make or give
any presentments, demands for performance, notices of non-performance, protests,
notices of protest or notices of dishonor in connection with any obligations or
evidences of indebtedness held by Pledgee as collateral, or in connection with
any obligations or evidences of indebtedness which constitute in whole or in
part the indebtedness secured hereunder.
Pledgee may at any time deliver the collateral or any part thereof to
the undersigned and the receipt of the undersigned shall be a complete and full
acquittance for the collateral so delivered, and Pledgee shall thereafter be
discharged from any liability or responsibility therefor.
2.
<PAGE> 21
Upon the transfer of all or any part of the indebtedness Pledgee may
transfer all or any part of the collateral and shall be fully discharged
thereafter from all liability and responsibility with respect to such collateral
so transferred, and the transferee shall be vested with all the rights and
powers of Pledgee hereunder with respect to such collateral so transferred; but
with respect to any collateral not so transferred Pledgee shall retain all
rights and powers hereby given.
Until all indebtedness shall have been paid in full the power of sale
and all other rights, powers and remedies granted to Pledgee hereunder shall
continue to exist and may be exercised by Pledgee at any time and from time to
time irrespective of the fact that the indebtedness or any part thereof may have
become barred by any statute of limitations, or that the personal liability of
the undersigned may have ceased.
Pledgee agrees that so long as the indebtedness is not in default
shares of Landa Management Systems Corporation common stock held hereunder as
collateral for the indebtedness shall be released from pledge as the
indebtedness is paid. Such releases shall be at the rate of one share for each
$0.12 of principal amount of indebtedness paid. Release from pledge, however,
shall not result in release from the provisions of those certain Joint Escrow
Instructions, if any, of even date herewith among the parties to this Pledge
Agreement and the Escrow Agent named therein or from the Repurchase Option of
Landa Management Systems Corporation, set forth in the Stock Purchase Agreement
dated 20th May 1999, if any, between the parties to this Pledge Agreement.
The rights, powers and remedies given to Pledgee by this agreement
shall be in addition to all rights, powers and remedies given to Pledgee by
virtue of any statute or rule of law. Pledgee may exercise its Pledgee's lien or
right of setoff with respect to the indebtedness in the same manner as if the
indebtedness were unsecured. Any forbearance or failure or delay by Pledgee in
exercising any right, power or remedy hereunder shall not be deemed to be a
waiver of such right, power or remedy, and any single or partial exercise of any
right, power or remedy hereunder shall not preclude the further exercise
thereof; and every right, power and remedy of Pledgee shall continue in full
force and effect until such right, power or remedy is specifically waived by an
instrument in writing executed by Pledgee.
Dated: 20th May 1999
/s/ BRYAN H. LANG
--------------------------------------------
Bryan H. Lang
ATTACHMENT: Schedule 1
3.
<PAGE> 22
SCHEDULE 1
TO
PLEDGE AGREEMENT
195,000 shares of Common Stock in Landa Management Systems Corporation.
<PAGE> 1
EXHIBIT 10.11
LANDA MANAGEMENT SYSTEMS CORPORATION
VOTING AGREEMENT
THIS VOTING AGREEMENT (the "Agreement") is made and entered into this 27th
day of February, 1998, by and among LANDA MANAGEMENT SYSTEMS CORPORATION, a
California corporation (the "Company"), those certain holders of the Company's
Common Stock and options to purchase Common Stock listed on Exhibit A hereto
(the "Key Shareholders") and the persons and entries listed on Exhibit B hereto
(the "Investors").
WITNESSETH:
WHEREAS, the Key Shareholders are the beneficial owners of an aggregate
of seven hundred fifty-eight thousand four hundred seventy-seven and
eighty-three one hundredths (758,477.83) shares of Common Stock and/or options
to purchase three hundred sixty-eight thousand eight hundred forty-eight
(368,848) shares of Common Stock and/or warrants to purchase three hundred fifty
thousand (350,000) shares of Common Stock of the Company; and
WHEREAS, the Company proposes to sell shares of its Series D Preferred
Stock, (the "Series D Preferred Stock"), to the Investors pursuant to the
Series D Preferred Stock Purchase Agreement (the "Purchase Agreement") of even
date herewith (the "Financing");
WHEREAS, in connection with the consummation of the Financing, the
Company, the Key Shareholders and the Investors have agreed to provide for the
future voting of their shares of the Company's capital stock as set forth below;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
VOTING
1.1 COMMON SHARES; INVESTOR SHARES.
1.1.1 The Key Shareholders each agree to hold all shares of voting
capital stock of the Company registered in their respective names or
beneficially owned by them as of the date hereof, and any and all other
securities of the Company legally or beneficially acquired by each of the Key
Shareholders after the date hereof (including but not limited to all shares of
Common Stock issued upon exercise of options and/or warrants to purchase Common
Stock; hereinafter collectively referred to as the "Common Shares"), subject to,
and to vote the Common Shares in accordance with, the provisions of this
Agreement.
1.1.2 The Investors each agree to hold all shares of voting capital
stock of the Company now owned or hereinafter acquired by them (including but
not limited to all shares of Common Stock issued upon conversion of the
Company's Series D Preferred Stock) registered in their respective
1.
<PAGE> 2
names or beneficially owned by them as of the date hereof and any and all other
securities of the Company legally or beneficially acquired by each of the
Investors after the date hereof) (hereinafter collectively referred to as the
"Investor Shares") subject to, and to vote the Investor Shares in accordance
with, the provisions of this Agreement.
1.2 VOTING.
(a) At each election of directors in which the holders of Common
Stock and holders of Preferred Stock, voting together as a single class, are
entitled to elect directors of the Company, the Key Shareholders and Investors
shall consult each other and shall vote their respective shares of the Company's
voting stock so that at least such directors will be nominees that are mutually
acceptable to a majority in interest of the holders of Series D Preferred Stock.
It is anticipated that one of the directors to be elected pursuant to this
section will be Bryan Lang for so long as he remains an employee of the Company.
(b) Each Key Shareholder and each Investor agrees to vote its voting
stock in accordance with the voting of holders of a majority in interest of the
Series D Preferred Stock with respect to (i) the approval of any proposed
amendment to the Amended and Restated Articles of Incorporation of the Company
(the "Restated Articles"), (ii) the approval of any proposed amendment to the
Amended and Restated Bylaws of the Company, and (iii) any proposed Acquisition
or Asset Transfer (as each such term is defined in the Restated Articles).
1.3 LEGEND.
1.3.1 Concurrently with the execution of this Agreement, there
shall be imprinted or otherwise placed, on certificates representing the Common
Shares and the Investor Shares, and such legend shall be imprinted on each
Common Share issued upon exercise by a Key Shareholder of an option to purchase
Common Stock, the following restrictive legend (the "Legend"):
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO THE TERMS AND CONDITIONS OF A VOTING AGREEMENT WHICH
PLACES CERTAIN RESTRICTIONS ON THE VOTING OF THE SHARES
REPRESENTED HEREBY. ANY PERSON ACCEPTING ANY INTEREST IN
SUCH SHARES SHALL BE DEEMED TO AGREE TO AND SHALL BECOME
BOUND BY ALL THE PROVISIONS OF SUCH AGREEMENT. A COPY OF
SUCH VOTING AGREEMENT WILL BE FURNISHED TO THE RECORD HOLDER
OF THIS CERTIFICATE WITHOUT CHARGE UPON WRITTEN REQUEST
TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS."
1.3.2 The Company agrees that, during the term of this Agreement,
it will not remove, and will not permit to be removed (upon registration of
transfer, reissuance of otherwise), the Legend from any such certificate and
will place or cause to be placed the Legend on any new certificate issued to
represent Common Shares or Investor Shares theretofore represented by a
certificate carrying the Legend.
1.4 SUCCESSORS. The provisions of this Agreement shall be binding upon
the successors in interest to any of the Common Shares or Investor Shares. The
Company shall not permit the transfer of
2.
<PAGE> 3
any of the Common Shares or Investor Shares on its books or issue a new
certificate representing any of the Common Shares or Investor Shares unless and
until the person to whom such security is to be transferred shall have executed
a written Agreement, substantially in the form of this Agreement, pursuant to
which such person becomes a party to this Agreement and agrees to be bound by
all the provisions hereof as if such person were a Key Shareholder or Investor,
as applicable. Notwithstanding the foregoing, upon any transfer effected
pursuant to Section 2.3 of the Purchase Agreement, such transferee shall be
deemed to be an Investor hereunder and the shares of voting capital stock of the
Company then transferred to it and/or thereafter acquired by it shall be deemed
"Investor Shares."
1.5 OTHER RIGHTS. Except as provided by this Agreement, each key
Shareholder and Investor shall exercise the full rights of a shareholder with
respect to the Common Shares and the Investor Shares, respectively.
ARTICLE 2
TERMINATION
2.1 This Agreement shall continue in full force and effect from the date
hereof through the earliest of the following dates, on which it shall terminate
in its entirety:
2.1.1 the date of the closing of a firmly underwritten public offering
of the Company's Common Stock pursuant to a registration statement filed with,
and declared effective under the Securities Act of 1933, as amended; or
2.1.2 at such time as the Investors hold less than One Million
(1,000,000) shares of Series D Preferred Stock (as adjusted for stock splits
and the like); or
2.1.3 ten (10) years from the date of this Agreement; or
2.1.4 the date as of which the parties hereto terminate this
Agreement by written consent of a majority in interest of the Investors and a
majority in interest of the Key Shareholders.
ARTICLE 3
MISCELLANEOUS
3.1 OWNERSHIP. Each Key Shareholder represents and warrants to the
Investors that (a) he now owns the Common Shares and/or Options and/or Warrants
to purchase Common Stock of the Company set forth opposite such person's name on
Exhibit A hereto, free and clear of liens or encumbrances, and has not, prior to
or on the date of this Agreement, executed or delivered any proxy or entered
into any other voting agreement or similar arrangement other than on which has
expired or terminated prior to the date hereof, and (b) such Key Shareholder has
full power and capacity to execute, deliver and perform this Agreement, which
has been duly executed and delivered by, and evidences the valid and binding
obligation of, such Key Shareholder enforceable in accordance with its terms.
3.2 FURTHER ACTION. If and when the Common Shares are sold, each Key
Shareholder (or the personal representative of any Key Shareholder) shall do all
things and execute and deliver all documents and make all transfers, and cause
any transferee of the Common Shares to do all things and
3.
<PAGE> 4
execute and deliver all documents, as may be necessary to consummate such sale
consistent with this Agreement.
3.3 SPECIFIC PERFORMANCE. The parties hereto hereby declare that it is
impossible to measure in money the damages which will accrue to a party hereto
or to their heirs, personal representatives, or assigns by reason of a failure
to perform any of the obligations under this Agreement and agree that the terms
of this Agreement shall be specifically enforceable. If any party hereto or his
heirs, personal representatives, or assigns institutes any action of proceeding
to specifically enforce the provisions hereof, any person against whom such
action or proceeding is brought hereby waives the claim or defense therein that
such party or such personal representative has an adequate remedy at law, and
such person shall not offer in any such action or proceeding the claim or
defense that such remedy at law exists.
3.4 GOVERNING LAW. This Agreement, and the rights of the parties hereto,
shall be governed by and construed in accordance with the laws of the State of
California as such laws apply to agreements among California residents made and
to be performed entirely within the State of California.
3.5 AMENDMENT. This Agreement may be amended only by an instrument in
writing signed by the Company, a majority in interest of the Investors and a
majority in interest of the Key Shareholders.
3.6 SEVERABILITY. If any provision of this Agreement is held to be invalid
or unenforceable, the validity and enforceability of the remaining provisions of
this Agreement shall not be affected thereby.
3.7 SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, successors, assigns,
administrators, executors and other legal representatives.
3.8 ADDITIONAL SHARES. In the event that subsequent to the date of this
Agreement any shares or other securities (other than any shares or securities of
another corporation issued to the Company's shareholders pursuant to a plan of
merger) are issued on, or in exchange for, any of the Common Shares or Investor
Shares by reason of any stock dividend, stock split, consolidation of shares,
reclassification or consolidation involving the Company, such shares or
securities shall be deemed to be Common Shares or Investor Shares, as the case
may be, for purposes of this Agreement.
3.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together
shall constitute one and the same agreement.
3.10 WAIVER. No waivers of any breach of this Agreement extended by any
party hereto to any other party shall be construed as a waiver of any rights or
remedies of any other party hereto or with respect to any subsequent breach.
3.11 ATTORNEY'S FEES. In the event that any suit or action is instituted to
enforce any provision in this Agreement, the prevailing party shall be entitled
to all costs and expenses of maintaining such suit or action, including
reasonable attorneys' fees.
4.
<PAGE> 5
3.12 ENTIRE AGREEMENT. This Agreement and the Exhibits hereto, along with
the Purchase Agreement and each of the Exhibits thereto, constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof and no party shall be liable or bound to any other
in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
[THIS SPACE INTENTIONALLY LEFT BLANK]
5.
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this VOTING AGREEMENT
as of the date first above written.
COMPANY: INVESTORS:
LANDA MANAGEMENT SYSTEMS CORPORATION BEDROCK CAPITAL PARTNERS, L.L.P.
By: By:
--------------------------------- ------------------------------------
President General Partner
KEY SHAREHOLDERS: BEDROCK CAPITAL SIDE-BY-SIDE, L.P.
By:
------------------------------------ ------------------------------------
BRYAN LANG General Partner
------------------------------------ GREYLOCK IX LIMITED PARTNERSHIP
STEPHEN KAY By: Greylock IX GP Limited Partnership
Its General Partner
By:
------------------------------------ ------------------------------------
SHAREHOLDER General Partner
SEQUOIA CAPITAL VII,
A CALIFORNIA LIMITED PARTNERSHIP
By: SC VII-A Management, LLC A
California
Limited Liability Company,
Its General Partner
By:
------------------------------------
Managing Member
SEQUOIA TECHNOLOGY PARTNERS VII
A CALIFORNIA LIMITED PARTNERSHIP
By: SC VII-A Management, LLC A
California
Limited Liability Company,
Its General Partner
By:
------------------------------------
Managing Member
SIGNATURE PAGE TO VOTING AGREEMENT
<PAGE> 7
SQP 1997
BY: SC VII-A MANAGEMENT, LLC A
CALIFORNIA LIMITED LIABILITY COMPANY,
ITS GENERAL PARTNER
By:
---------------------------
Managing Member
SEQUOIA 1997 LLC
BY: SC VII-A MANAGEMENT, LLC A
CALIFORNIA LIMITED LIABILITY COMPANY,
IT'S GENERAL PARTNER
By:
---------------------------
Managing Member
SEQUOIA INTERNATIONAL PARTNERS
BY: SC VII-A MANAGEMENT, LLC A
CALIFORNIA LIMITED LIABILITY COMPANY,
IT'S GENERAL PARTNER
By:
---------------------------
Managing Member
------------------------------
GENE CATTARINA
------------------------------
JOHN KARLEN
SIGNATURE PAGE TO VOTING AGREEMENT
<PAGE> 1
EXHIBIT 10.12
LICENSING AGREEMENT
BY AND BETWEEN
INTERQUAL, INCORPORATED
AND
LANDA MANAGEMENT SYSTEMS CORPORATION
<PAGE> 2
LICENSING AGREEMENT
This Licensing Agreement made and entered into this 8th day of September,
1992, by and between INTERQUAL(R), INCORPORATED, a Delaware corporation
("InterQual") and Landa Management Systems Corporation d/b/a Landacorp
("Licensee"), STATE OF INCORPORATION.
WITNESSETH:
WHEREAS, each party is duly organized and existing as a corporation under
and pursuant to the laws of its State of Incorporation; and
WHEREAS, InterQual is the owner of the Licensed Property as defined
hereafter; and
WHEREAS, Licensee is the owner of Maxsys as defined hereafter; and
WHEREAS, InterQual desires to license the Licensed Property to Licensee
for incorporation into Maxsys on the terms and conditions provided herein.
NOW, THEREFORE, in consideration of the above and mutual covenants
contained herein and other valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto hereby agree as follows:
1. Preamble. The preamble and recitals set forth above are hereby incorporated
into and made a part of this Agreement.
2. Definitions.
2.1 Marks. "Marks" shall mean the trademarks and service marks owned by
InterQual and set forth in Exhibit 2.1 attached hereto.
2.2 Criteria. "Criteria" shall mean the proprietary criteria owned by
InterQual as set forth in Exhibit 2.2. The Criteria shall include, without
limitation, all updates, modifications, additions or deletions to the Criteria
("Modifications") by InterQual, Licensee, Sublicensee or any other party whether
or not InterQual has notice of the Modifications.
2.3 Licensed Property. "Licensed Property" shall mean the Marks and the
Criteria.
2.4 Software. "Maxsys" shall mean the proprietary software of Licensee as
described inExhibit 2.4, including any and all versions thereof, which shall
incorporate
<PAGE> 3
the Criteria as provided under this Agreement. Exhibit 2.4 shall describe the
manner in which the Criteria are to be integrated into Maxsys.
2.5 Sublicensee. "Sublicensee" shall mean any licensee of Maxsys or of any
version thereof. Licensee represents and warrants that Exhibit 2.5 contains the
list of all of its existing clients as of the date of this Agreement. Nothing
contained herein shall preclude Licensee from licensing the Maxsys without the
incorporation of the Licensed Property to any potential licensee, except that
Licensee shall, on a quarterly basis, notify InterQual in writing of the names
and addresses of all clients of Licensee who choose not to have the Licensed
Property incorporated in the Maxsys and the type of criteria said client has
elected to incorporate in the Maxsys. This information shall not be considered
Confidential Information.
2.6 Medically Appropriate. "Medically Appropriate" or "Medical
Appropriateness" means services or supplies which are determined to be: (i)
appropriate and necessary for the symptoms, diagnosis or treatment of the injury
or disease; (ii) provided for the diagnosis or direct care and treatment of the
injury or disease; (iii) preventative services as provided in a benefit plan;
(iv) within standards of good medical practice within the organized medical
community; (v) not primarily for the convenience of the patient or of any
provider providing services to the patient and (vi) an appropriate supply or
level of service needed to provide safe and adequate care.
3. License.
3.1 Grant of License.
3.1.1 InterQual hereby grants to Licensee the nontransferable,
nonexclusive right to use the Criteria for incorporation into the Maxsys
solely for the purpose of sublicensing the Criteria to Sublicensees in the
United States, Canada and the United Kingdom in the operation of their
respective businesses (the "License").
3.1.2 InterQual hereby grants to Licensee the non-exclusive right to
use the Marks solely for the purpose of identifying InterQual as creator
and owner of the Criteria in the Maxsys and in promotional, advertising
and operational materials, except that any reference to the Criteria in
such literature is subject to InterQual's review and written approval,
which shall not be unreasonably withheld. The floppy disk mailers,
screens, labels, packaging materials, and manuals contained within the
Maxsys shall include "TM" after the appropriate Marks plus a footnote
containing the language set forth below, reflecting InterQual's ownership
interest in and to its copyrights and trademarks, which language may by
revised from time to time by InterQual:
This software contains criteria created and published by InterQual,
Incorporated under its ISD-A(TM), IPM-A(TM) and SIM(TM) trademarks.
InterQual is and will remain the sole owner of copyrights in such
data and
2
<PAGE> 4
the good will symbolized by the respective system trademarks.
Licensee shall submit to InterQual for approval prior to first public use,
a sample of each program, manual, label, packaging material or other thing
which bears the ISD-A, IPM-A or SIM trademark. Such approval shall be
deemed given unless within ten (10) business days after the respective
submission, InterQual notifies Licensee in writing of InterQual's
objections to publication of same.
3.1.3 InterQual shall have the right to publicize this Licensing
Agreement with Licensee in any advertising or publicity releases, subject
to the prior written approval of Licensee which shall not be unreasonably
withheld and which approval shall be given in a timely manner.
3.2 Grant of Right to Sublicense.
3.2.1 InterQual hereby grants to Licensee the right to sublicense
the Criteria in the hospital market to Sublicensees subject to the terms
and conditions of this Agreement. All such sublicenses shall be subject to
the written approval of InterQual and Licensee shall provide InterQual
with a copy of each such sublicense prior to the execution of the
sublicense agreement between Licensee and Sublicensee. Licensee agrees to
provide, on an annual basis, written notification to InterQual of all of
the names, addresses and principal representatives of the Sublicensees.
3.2.2 All of the rights, obligations and conditions provided herein
relative to the License shall apply to the Sublicensees, and Licensee
shall cause its Sublicensees to comply with all of the terms and
provisions of this Agreement.
3.2.3 Licensee acknowledges that InterQual may have claims against a
Sublicensee for its unauthorized use of the Criteria and the Marks prior
to the execution of this Agreement, and Licensee, its employees, officers,
agents shall not represent to any Sublicensee that the execution of a
sublicense agreement between Licensee and Sublicensee in any way affects
InterQual's claims against Sublicensee regarding Sublicensee's past use of
the Criteria, or a derivative thereof, prior to the execution of this
Agreement.
3.3 Non-transferability of License. The License shall be nondivisible and
Licensee shall not sublicense, except as provided in Section 3.2, or
in any manner transfer or assign the rights granted herein without the
prior written consent of InterQual. Subject to Section 3.2, InterQual
shall have the absolute right to withhold its approval of any
sublicense.
3.4 Non-Exclusive License. The License granted herein shall be
non-exclusive and InterQual shall have the right to license the
Licensed Property to any other party for any other purpose.
3
<PAGE> 5
3.5 Updates and Modifications.
3.5.1 InterQual shall provide Modifications developed by InterQual
to the Criteria at no additional cost to Licensee, which Modifications
shall be issued by InterQual, at its sole discretion, and according to a
schedule determined by InterQual.
3.5.2 Licensee shall incorporate the Modifications of InterQual or
approved by InterQual into the Maxsys in the next annual release of the
Maxsys ("Annual Release"). Licensee shall provide InterQual with six (6)
months prior written notice of the submission date for the Modifications
for inclusion in the Annual Release.
3.5.3 Subject to this Section 3.5.3, Licensee and any Sublicensee
shall have the right to create Modifications. Licensee shall only be able
to Sublicense the Modifications in accordance with the terms of this
Agreement. During the term of this Agreement, such modifications shall be
used by Sublicensee for internal purposes only. Licensee or any
Sublicensee desiring to create a Modification shall, by written notice to
InterQual, request approval of such Modifications. InterQual shall use all
reasonable efforts to review such Modifications and to communicate its
approval or denial within thirty (30) days of the receipt of the request.
If InterQual does not approve the Modification, the Licensee and any
Sublicensee shall still be entitled to incorporate the Modification into
the Maxsys as further described in paragraph 3.5.5 hereof, provided,
however, that the Licensee and such Sublicensee shall thereafter
acknowledge, in writing, and on the Maxsys that the version of the
Criteria it uses contains user-initiated changes not specifically approved
by InterQual. After the term of this Agreement, Licensee and Sublicensee
shall not be entitled to use, sell or license the Modifications to others.
The obligations set forth in this Section 3.5.3 shall survive the
termination of this Agreement.
3.5.4 If Licensee shall charge a fee to a Sublicensee for a software
modification related to a Modification, InterQual may charge such
Sublicensee, at its current fee schedules, for reviewing, approving or
processing the Modification.
3.5.5 Licensee shall provide the following features in each copy of
a Maxsys:
(i) an automatic mark that identifies any non-InterQual
approved Modification made by a Sublicensee to the Criteria
indicating that such Modification is "User Specific"; and
(ii) an automatic notice on the title or acknowledgement
screen of a Maxsys which is activated whenever any User Specific
Modification has been implemented that indicates that the User
Specific Changes are included in the Criteria.
4
<PAGE> 6
3.5.6 Consulting and Training. In conjunction with the grant of the
License, Licensee shall inform its Sublicensees of the incorporation of
the Criteria into the Maxsys and of the availability of InterQual to
provide training and consultation services with respect to the Criteria.
InterQual shall, upon request of Licensee or Sublicensees, provide such
training and consultation services at its then current fee schedules.
Licensee shall not be entitled to any portion of the fees charged by
InterQual.
4. Licensee's Obligations/Responsibilities. Licensee will, in connection with
the sublicensing of the Criteria, in addition to its other obligations herein,
assume responsibility for the following:
4.1 Licensee shall provide, at its sole expense, to Sublicensee any
technical support including initial and ongoing maintenance (including
the inclusion of any Modifications) for the installation and
maintenance of the Criteria during the term of this Agreement.
Licensee shall provide the technical support in a professional and
workman like manner.
4.2 Licensee shall refer Sublicensee's inquiries regarding the content of
the Criteria to InterQual following software installation.
4.3 Licensee agrees to assume responsibility for its own expenses in a
mandatory annual sales meeting with InterQual to review the
relationship, assess sales and marketing strategies and identify new
opportunities.
4.4 Licensee shall keep complete, accurate and up-to-date books and
records in accordance with generally accepted accounting principles
and sound business practice covering all transactions relating to
Sublicensees, and Licensee shall no less than on a quarterly basis
provide to InterQual a written accounting of all executed and
prospective sublicense agreements. Licensee shall pay to InterQual the
license and marketing fees within thirty (30) days of the date it
receives the license fee from Sublicensee. If license and marketing
fees are not paid pursuant to the terms set forth in this paragraph
4.4, InterQual may charge, in its sole discretion, Licensee interest
at the rate of one (1%) percent per month, in addition to such other
rights as it may have. Except as provided in paragraph 11.3.4,
Licensee shall not be entitled to any refund of any license fee for
Criteria purchased by Sublicensee should a Sublicensee terminate its
agreement with Licensee for Software.
4.5 InterQual and/or its authorized representatives shall upon reasonable
notice have the right to inspect, audit, and/or copy such records in
order to determine whether all provisions of the Agreement have been
met. InterQual agrees that all information and records obtained in
such audit shall not be disclosed to authorized persons unless
required to do so by law
5
<PAGE> 7
or legal action. InterQual shall also have the right to audit as
described in this paragraph 4.4 for two years following the
termination date of this Agreement by lapse of time or otherwise.
4.6 Licensee agrees to notify InterQual promptly, in writing, of the
existence of any circumstances surrounding any unauthorized copying,
reproduction, alteration, use or distribution of the Criteria by any
entity.
4.7 Upon the execution of this Agreement, Licensee shall furnish
InterQual, without charge, with one (1) copy of the Maxsys, manuals
and documentation related thereto, and with all updates, enhancements
and improvements. InterQual shall use the Maxsys solely for inspection
and verification of the use of the Licensed Property, except to the
extent it obtains Licensee's express written approval to use the
Maxsys for demonstration purposes to existing and prospective clients
of InterQual. To the extent it is not feasible for Licensee to provide
InterQual with a copy of the Maxsys for inspection and verification
purposes (i.e. due to technical reasons including hardware
requirements and operating system requirements), Licensee may provide
InterQual with modem access to the Maxsys, during regular business
hours without charge for inspection and verification.
5. InterQual's Obligations/Responsibilities. InterQual will, in connection with
the sublicensing of the Criteria, in addition to its other obligations herein,
assume responsibility for the following:
5.1 Upon execution of this Agreement, provide Licensee with one (1) copy
of each of the following:
5.1.2 One complete set of the most current version of the Criteria
in hard copy;
5.1.3 One copy of the diskette loaded with the data files containing
the Criteria.
5.2 InterQual shall provide up to a maximum of eight (8) hours per year of
telephone support to Licensee for assistance in the integration of the
Criteria into the Software. Additional consulting support, both by
telephone and on-site is available to Licensee following the initial
eight (8) hours at InterQual's current fee schedule for its technical
support staff.
5.3 InterQual agrees to assume responsibility for its own expenses in
attending the mandatory annual sales meeting with Licensee.
6. License Fee. As consideration for the right to sublicense the Licensed
Property,
6
<PAGE> 8
Licensee shall pay to InterQual a license fee as set forth in Exhibit 6.
7. Marketing Fees. Licensee agrees to pay InterQual a ten percent (10%)
marketing fee for prospective clients who are not currently "active" clients of
Licensee ("active" meaning clients who have previously been in direct contact
with the sales force of Licensee regarding Maxsys) and who have become
interested in Maxsys because of InterQual's direct involvement and InterQual
notifies Licensee in writing of the circumstances, and without further
participation of InterQual the contact results in the execution of a license
agreement with or without the inclusion of the Criteria between the prospective
client and Licensee. To the extent the license agreement includes the Criteria,
Licensee would pay InterQual the ten percent (10%) marketing fee in addition to
that provided in Exhibit 6.
8. Title.
8.1 Ownership of Licensed Property by InterQual.
8.1.1 Licensee acknowledges and its Sublicensees shall acknowledge
InterQual's exclusive right, title and interest in and to the title to the
Licensed Property in any and all forms or embodiments thereof together
with the goodwill of the business represented by the Licensed Property.
InterQual shall have the right to obtain and hold in its own name
trademarks, copyrights, registrations or such other protections as may be
appropriate to the subject matter, and any extensions or renewals thereof.
Licensee shall provide InterQual, and any person designated by InterQual,
any reasonable assistance, at InterQual's expense, required to perfect
InterQual's rights defined in this Agreement.
8.1.2 In connection with the use of the Licensed Property, Licensee
and its Sublicensees shall not in any manner represent that they have any
ownership in the Licensed Property or registration thereof, or do any act
or thing which may in any way either impair the right of InterQual in and
to the Licensed Property or affect the validity of the Licensed Property
or depreciate the value of the Licensed Property or its established
prestige and goodwill. Licensee acknowledges and its Sublicensees shall
acknowledge that use of the Licensed Property shall not create in favor of
Licensee or its Sublicensees any right, title or interest in or to the
Licensed Property and all uses of the Licensed Property by Licensee and
its Sublicensees shall inure to the benefit of InterQual. Licensee and
Sublicensee shall assign to InterQual as such things are created, all of
Licensee's and Sublicensee's copyrights in derivative versions of the
Licensed Works prepared by or for Licensee or Sublicensee, and Licensee
and Sublicensee shall be licensed to use such derivative versions in the
same manner as provided herein as if they were Licensed Works.
8.2 Ownership of Maxsys Software by Licensee.
8.2.1 InterQual acknowledges Licensee's exclusive right, title and
interest
7
<PAGE> 9
in and to the title to the Maxsys Software. Licensee shall have the right
to obtain and hold in its own name trademarks, copyrights, registrations
or such other protections as may be appropriate to the subject matter, and
any extensions or renewals thereof. InterQual shall provide Licensee, and
any person designated by Licensee, any reasonable assistance, at
Licensee's expense, required to perfect Licensee's rights defined in this
Agreement.
8.2.2 In connection with the use of the Maxsys, InterQual shall
not in any manner represent that it has any ownership in the Maxsys or
registration thereof, and InterQual acknowledges that use of the Maxsys
shall not create in favor of InterQual any right, title or interest in or
to the Licensee and all uses of the Maxsys by InterQual shall inure to the
benefit of Licensee.
8.3 Rights Upon Termination. Upon termination of this Agreement for any
reason whatsoever, whether for cause or not for cause, whether voluntarily or
involuntarily, Licensee shall:
8.3.1 except as provided in Section 8.4.2, cease and desist from
all use of the Criteria, and any Modifications thereof, in any way, and
shall destroy all software incorporating the Criteria and Modifications
and deliver to InterQual, or its duly authorized representatives, all
materials and documents pertaining to the Criteria and Modifications; and
8.3.2 Licensee shall not adopt or use without InterQual's prior
written consent any material similar to the Marks or any word or mark
which is likely to be similar to or confusing with the Marks.
Likewise, InterQual shall cease and desist from all use of the Maxsys, and any
Modifications thereof, in any way, and shall destroy all copies of the Maxsys in
its possession and deliver to Licensee, or its duly authorized representatives,
all materials and documents pertaining to the Maxsys.
8.4 Termination and Sublicenses.
8.4.1 Upon termination of this Agreement whether for cause or not
for cause, whether voluntarily or involuntarily, the License shall be
revoked effective on the date of termination and Licensee shall not enter
into further Sublicenses. The sublicenses previously granted by Licensee
to Sublicensees shall remain in full force and effect provided that: (i)
Licensee and the Sublicensees continue to observe the terms of this
Agreement with respect to the sublicenses; (ii) Licensee continues to pay
the license fees as provided in Section 6; and (iii) Licensee continues to
provide the maintenance for the Maxsys for sublicensees as provided in
Section 4.1.
8.4.2 Upon the termination of this Agreement, during the term of
any remaining sublicenses of the Maxsys, Licensee may maintain a copy of
the Criteria
8
<PAGE> 10
and InterQual shall continue to provide Modifications as provided in
Section 3.5.1.
8.4.3 Upon termination of this Agreement, during the term of any
remaining sublicenses of the Maxsys, InterQual may maintain and Licensee
shall provide to InterQual a copy of or modem access to the Maxsys then in
use with the criteria. Upon termination of all sublicenses, InterQual
shall return all copies of the Maxsys in its possession.
9. Confidential Information.
9.1 Legal Restrictions. Neither party hereto shall be in default for
failure to supply information which such party, in good faith, believes cannot
be supplied due to prevailing law, or for supplying information which such
party, in good faith, believes is required to be supplied due to prevailing law.
9.2 Non-Disclosure of Confidential Information.
9.2.1 Each party acknowledges that (i) due to the nature of this
Agreement, each party shall have access to and acquire Confidential
Information as defined in Section 9.2.3 related to the business and
operations of each other party; (ii) all Confidential Information
constitutes confidential and proprietary information; (iii) the disclosure
of Confidential Information to third parties would cause substantial loss
to the goodwill of each party; (iv) disclosure of Confidential Information
by each party shall be made due to the position of trust and confidence
that each other party shall occupy due to the Agreement and due to the
restrictions contained herein; (v) disclosure of Confidential Information
would cause the party owning the Confidential Information irreparable
harm; and (vi) the restrictions imposed upon each party herein would not
hamper it in doing business.
9.2.2 In consideration of the acknowledgements set forth in Section
9.2.1, each party (and the respective officers, directors, employees,
agents, successors and assigns of each party) shall, during the term of
this Agreement and following the termination of this Agreement, whether
voluntarily or involuntarily, whether for cause or not for cause, hold any
and all Confidential Information in the strictest confidence as a
fiduciary, and shall not, voluntarily or involuntarily, sell, transfer,
publish, disclose, display or otherwise make available to others any
portion of the Confidential Information without the express written
consent of the other party. Each party shall use its best efforts to
protect the Confidential Information consistent with the manner in which
it protects its most confidential business information; PROVIDED, HOWEVER,
during the term of this Agreement and subsequent to the termination of
this Agreement, neither party shall be liable for unauthorized disclosure
which occurs regardless of such precautions.
9.2.3 "Confidential Information" shall mean the Licensed Property,
(software) and information of each party that shall be subject to patent,
copyright, trademark, trade name or service mark protection, or described
as confidential by
9
<PAGE> 11
each party, or not otherwise in the public domain and related to the
business and operations of each party, including, without limitation, the
information relating to earnings, volume of business, methods, systems,
practices or plans of each party, and all similar information of any kind
or nature whatsoever, which is known only to persons having a fiduciary or
confidential relationship with the party that owns proprietary rights in
or to such information.
9.3 Software Innovations or Enhancements. Any software, inventions,
innovations or enhancements that arise or result directly or indirectly from
this Agreement which Licensee creates, shall be and remain the sole and
exclusive property of Licensee and its nominees. As used, software shall include
data, designs, algorithms, flow charts, source code, object code, and other
documentation arising out of the services performed by Licensee and shall not
include any Modifications.
10. Disclosure and Inspection.
10.1 Disclosure. When required by law or in its proposals to prospective
or existing clients, Licensee or Sublicensee may disclose any or all part of the
Criteria subject to the following conditions. Each copy including any or all
part of the Criteria which is disseminated must clearly display Licensor's
copyright notice and include a legend stating the following:
Copyright(c) 1992, 1991(2), 1989(2), 1987, 1986, 1985, 1984, 1983, 1979,
1978 by InterQual(R), Incorporated . All rights reserved. Copied by
permission of InterQual solely for use by [Licensee or Sublicensee] [for
compliance with state law] [for promotional or marketing purpose]. No
portion of this document may be further copied or incorporated into other
media without InterQual's explicit written permission.
10.2 Inspection of Licensed Property' To permit InterQual to monitor
compliance by Licensee with the terms of this Agreement, upon reasonable request
by InterQual, Licensee shall furnish InterQual with a reasonable number of
representative materials and documents, pertaining to the use of the Licensed
Property from time to time.
11. Indemnification.
11.1 Acknowledgement. Licensee acknowledges and Licensee's Sublicensees
shall acknowledge that the Criteria are based upon clinical interpretation and
analyses (collectively "Analyses") and that the Analyses are secondary sources
which alone cannot resolve medical ambiguities of particular situations or
provide the sole basis for definitive decisions. As such, Licensee's
Sublicensees shall use the Criteria solely as guidelines for payment decisions
of payors with respect to Medical Appropriateness of health care services. The
Criteria shall not be used by Licensee's Sublicensees for clinical
determinations to govern the level of medical care received by a patient or in
any manner interfere with the provider-patient relationship.
10
<PAGE> 12
11.2 Indemnity by Licensee.
11.2.1 Licensee and each sublicensee shall indemnify, defend and
hold harmless InterQual, its officers, directors, employees and agents
from and against any and all claims, suits, losses, demands, damages or
expenses including reasonable attorneys' fees ("Liability") arising out of
any claim or action relating to decisions based upon the Criteria by
Licensee or Sublicensees. Licensee shall include this indemnity in favor
of InterQual in each sublicense of the Licensed Property to each
sublicensee.
11.2.2 Licensee shall indemnify, defend and hold harmless InterQual,
its officers, directors, employees and agents from Liability arising from
any breach by Licensee of its obligations hereunder or arising out of or
relating to its Sublicense of the Licensed Property or with respect to the
Maxsys.
11.3 Indemnity by InterQual.
11.3.1 InterQual shall indemnify, defend and hold harmless Licensee,
its officers, directors, employees and agents from and against Liability
arising from any breach by InterQual of its express obligations hereunder.
InterQual assumes no Liability to Sublicensee or to any third party with
respect to the Licensed Property or other products sold or the services
rendered by Sublicensee under or in connection with the Licensed Property.
11.3.2 THE CRITERIA ARE PROVIDED "AS IS". INTERQUAL DISCLAIMS ANY
OTHER WARRANTY, EXPRESS OR IMPLIED, INCLUDING AS TO MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE OR SERVICE OF THE CRITERIA, OR THE
COMPATIBILITY OF OUTPUT USING THE CRITERIA WITH ANY LAW, REGULATION OR
ORDER. IN NO EVENT SHALL INTERQUAL, ITS SUBCONTRACTORS OR AGENTS BE LIABLE
FOR SPECIAL, INCIDENTAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES IN CONNECTION
WITH OR ARISING OUT OF THIS AGREEMENT OR THE FURNISHING OF THE CRITERIA OR
PERFORMANCE OF SERVICES PROVIDED FOR HEREIN, EVEN IF ANY OF THEM HAVE BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
11.3.3 The disclaimer provided in Section 11.3.2 shall be
acknowledged by each sublicensee and included in each sublicense of the
Licensed Property.
11.3.4 InterQual shall defend at its own cost and expense any claim
or action against Licensee and its Sublicensees, for infringement of any
patent, copyright or similar property right (including, but not limited
to, misappropriation of trade secrets) based on any Criteria furnished
hereunder by InterQual. InterQual shall have the sole right to conduct the
defense of any such claim or action and all negotiations for its
settlement or compromise, unless otherwise mutually agreed upon and
expressed in writing signed by the parties hereto.
11
<PAGE> 13
In addition, InterQual shall indemnify and hold Licensee, its
Sublicensees, their directors, officers, employees and agents, harmless
from and against Liability associated with any such claim or action of
patent or copyright infringement.
If a judgment has been rendered by a court of law that such
infringement claim or action has occurred, or in InterQual's judgment, is
likely to occur, Licensee shall allow InterQual, at InterQual's option and
expense, to either: (a) procure for Licensee the right to continue using
said materials; (b) modify such materials to become non-infringing
(provided that such modification does not adversely affect the intended
use of the materials as contemplated hereunder); (c) replace said
materials with an equally suitable, compatible and functionally equivalent
non-infringing materials at no additional charge to Licensee; or (d) if
none of the foregoing alternatives is reasonably available to InterQual,
upon written request, Licensee shall return the materials in question to
InterQual and InterQual shall refund the then unearned portion of the
License Fee (including all marketing fees as set forth in Section 7
hereof) paid by Licensee in respect of such materials and accept return of
such materials.
12. Termination of Agreement.
12.1 Term. The term of this Agreement shall be for one (1) year commencing
on September 1, 1992 and terminating August 31, 1993. Thereafter, this Agreement
shall automatically renew for periods of one (1) year unless either party shall
give the other party ninety (90) days written notice of termination prior to the
end of the initial term or any renewal term.
12.2 Termination for Breach. Either party may terminate this Agreement for
cause upon breach of this Agreement by the other party not remedied within
thirty (30) days after the receipt by such other party of notice thereof from
the terminating party.
12.3 Liability. The surrender, cancellation or termination of this License
shall not effect the liability of any party for obligations accruing prior to
termination.
13. Remedies.
13.1 Injunctive Relief. Remedies at law may be inadequate and the parties
shall be entitled to equitable relief, including without limitation, injunctive
relief, specific performance or other equitable remedies in addition to all
other remedies provided hereunder or available to the parties at law or equity.
13.2 Remedies Cumulative. No remedy made available by any of the
provisions of this Agreement is intended to be exclusive of any other remedy,
and each and every remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or otherwise.
13.3 Limitation of Remedies. Anything elsewhere contained in this
Agreement
12
<PAGE> 14
to the contrary notwithstanding, the sole remedy of Licensee for any material
breach or act or omission of InterQual, other than the remedy provided in
Section 11.3.4, shall be a refund of all of the consideration paid by Licensee
to InterQual pursuant to this Agreement.
13.4 Costs. If any legal action or other proceeding is brought by any
party to this Agreement for the enforcement of this Agreement, or because of an
alleged dispute, breach, default or misrepresentation in connection with any of
the provisions of this Agreement, the prevailing party shall be entitled to
recover reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it may be entitled.
14. Miscellaneous Provisions.
14.1 Notices. All notices shall be in writing personally delivered or sent
by fax or mailed by certified mail, return receipt requested, effective on
delivery, addressed to the parties at the address specified below:
InterQual, Incorporated Landacorp:
c/o Charles M. Jacobs, c/o Michael Faubert
President Chief Executive Officer
293 Boston Post Road West 1370 Ridgewood Drive
Suite 180 Suite 7
Marlborough, MA 01752 Chico, Calif. 95926
14.2 Independent Contractors. Each party, its officers, agents and
employees are at all times independent contractors to the other party. Nothing
in this Agreement shall be construed to make or render either party or any of
its officers, agents, or employees of agent, servant, or employee of, or joint
venturer of or with, the other.
14.3 Entire Agreement. This Agreement represents the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof,
and all prior and concurrent agreements, understandings, representations and
warranties with respect to such subject matter, whether written or oral, are and
have been merged herein and superseded hereby. This Agreement may be amended in
writing, and any such amendment shall not be effective against a party to this
Agreement that shall not have signed such amendment.
14.4 Compliance with Terms. Failure to insist upon strict compliance with
any of the terms herein (by way of waiver or breach) by any party hereto shall
not be deemed to be a continuous waiver in the event of any future breach or
waiver of any condition hereunder.
14.5 Rights of Parties. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any
13
<PAGE> 15
persons other than the parties to this Agreement and to their respective
successors and assigns.
14.6 Benefits. This Agreement shall be binding upon, and shall inure to
the benefit of, the parties hereto and their respective successors and, to the
extent permitted herein, assigns.
14.7 Severability. If any portions of this Agreement shall, for any
reason, be invalid or unenforceable, such portions shall be ineffective only to
the extent of such invalidity or unenforceability, and the remaining portion or
portions shall nevertheless be valid, enforceable and of full force and effect.
14.8 Conflict of Laws. This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts without giving effect to its conflicts of law
provisions.
14.9 Exhibits. The Exhibits referenced herein are made a part of this
Agreement, and the parties to this Agreement represent and warrant that they are
true and correct in all material respects as of the date appearing thereon.
14.10 Assignment. Except as otherwise specifically provided herein, this
Agreement may not be assigned without the express written consent of the parties
hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first above written.
LANDACORP
By: /s/ F. MICHAEL FAUBERT Date: September 8, 1992
------------------------------ -----------------------------------
Title: President & CEO
---------------------------
INTERQUAL INCORPORATED
By: /s/ [Signature Illegible] Date: 9/18/92
------------------------------- -----------------------------------
Title: Executive Vice President
----------------------------
14
<PAGE> 16
Exhibit 2.1
TRADEMARKS AND SERVICE MARKS OF INTERQUAL
1. InterQual
2. SI/IS
3. ISD
4. ISD-A
5. SIM
6. SIM II
7. SIM III
8. SIM IV
9. SIM V
10. SIM-A
11. IQ/ACS
12. IPM-A
13. BBP-A
14. NIPM-A
15. Any additional trademarks and service marks as may be added from time to
time. InterQual shall provide delineation of any added marks in writing,
return receipt requested.
15
<PAGE> 17
EXHIBIT 2.2
CRITERIA
The Criteria are contained, without limitation, in the following copyrighted
works:
1 Itensification Criteria for Concurrent Utilization Review (SI/IS) (August,
1978)
2 A Guide to Systematic Utilization Monitoring: Cyclic Review ISD Screening
Criteria (December, 1979)
3 ISD Review System (December, 1980; January, 1982; June, 1988; October,
1983)
4 The ISD Review System (December, 1983)
5 The ISD-A Review Systems (January, 1984; March, 1984; August, 1984)
6 ISD-A Review System (February, 1985)
7 ISD-A Supplement (February, 1985)
8 ISD-A Review System with Adult Criteria (January, 1986)
9 ISD-A Review System with Pediatric Criteria (January, 1986)
10 The ISD-A Review System with Adult Criteria (May, 1987)
11 The ISD-A Review System with Pediatric Criteria (May, 1987)
12 The ISD-A Quick Reference with Adult Criteria (June, 1987)
13 The ISD-A Quick Reference with Pediatric Criteria (June, 1987)
14 The ISD-A Review System with Adult Criteria (January, 1989)
15 The ISD-A Review System with Adult Criteria (December, 1989)
16 The ISD-A Quick Reference with Adult Criteria (December, 1989)
17 The ISD-A Quick Reference with Pediatric Criteria (February, 1990)
18 The ISD-A Review System with Pediatric Criteria (March, 1990)
16
<PAGE> 18
19 The ISD-A Review System with Adult ISD Criteria (March, 1991)
20 The ISD-A Review System with Adult ISD Criteria (January, 1992)
21 SIM-Surgical Indications Monitoring Guidelines, Forms and Sample Criteria
(July, 1981)
22 SIM - Surgical Indications Monitoring: Volume II (July, 1983)
23 SIM II, Surgical Indications Monitoring Second Edition (October, 1987)
24 SIM III, Surgical Indications Monitoring with Pediatric Criteria (1st ed)
(October, 1987)
25 SIM IV: Surgical Indications Monitoring (Adult Edition) (March, 1990)
26 SIM IV Surgical Indications Monitoring, Pediatric Edition (August, 1990)
27 SIM-A, Surgical Indications Monitoring for Appropriateness (Adult Edition)
(May 1991)
28 SIM V: Surgical Indications Monitoring (Adult Version) (1991)
29 The ISD-A Review System with Adult ISD Criteria (1991)
30 The ISD-A Review System with Adult ISD Criteria (1992)
31 Any added copyrighted materials which shall from time to time be developed
by InterQual. Written notification of added copyrighted materials shall be
provided by InterQual in writing, return receipt requested.
17
<PAGE> 19
EXHIBIT 2.4
MAXSYS
Maxsys into which Criteria will be incorporated is a comprehensive information
system supporting, for example, quality assurance, infection control, risk
management, utilization review, medical staff recredentialing designed to
operate in the DOS operating system.
18
<PAGE> 20
EXHIBIT 2.6
LIST OF EXISTING CLIENTS
19
<PAGE> 21
EXHIBIT 6
Consideration
Licensee will pay to InterQual, on an annual basis, the applicable prices for
each sublicensee's ability to use the criteria as set forth in the attached
pricing sheet, labeled Exhibit A and incorporated herein. InterQual reserves the
right, at its sole discretion, to increase the license fee set forth on
Attachment A, on an annual basis, by an amount proportional to any increase
reflected in InterQual's current published list prices for the Criteria by
providing Licensee with sixty (60) days written notice of such increase.
20
<PAGE> 22
EXHIBIT A
ANNUAL HOSPITAL LICENSE FEES FOR
INCORPORATING INTERQUAL(R) SYSTEMS/CRITERIA INTO
COMPUTERIZED OR OTHER DERIVATIVE WORKS
NUMBER OF LICENSED BEDS
SYSTEM PRICE, <100 100-199 200-299 300-399 400+
INCLUDING:
ISD-A(TM)
SIM-A(TM)
IPM-A(TM)
NIPM-A(TM) (not currently available for distribution)
BBP-A(TM) (not currently available for distribution)
DRUGS
RAQ(TM)
================================================================================
<TABLE>
<S> <C> <C> <C> <C> <C>
Total Price: 2000 3000 4000 4500 5000
</TABLE>
NOTES:
1. A la carte discount: Subtract 10% for each criteria set not ordered.
2. Prices include all updates and maintenance.
21
<PAGE> 1
EXHIBIT 10.14
INTERQUAL(R)
SUBLICENSOR AGREEMENT
by and between
INTERQUAL(R), INCORPORATED
and
LANDA MANAGEMENT SYSTEMS,
INCORPORATED
<PAGE> 2
CRITERIA SUBLICENSOR AGREEMENT
THIS SUBLICENSOR AGREEMENT is made and entered into as of the Effective
Date set forth on the signature page by and between INTERQUAL, INCORPORATED, a
Delaware corporation ("InterQual"), and the person or entity whose name is
listed under the heading "Sublicensor" on the signature page of this Agreement
("Sublicensor").
WHEREAS, InterQual owns, develops and licenses medical review criteria
and Sublicensor owns, develops and licenses computer applications software; and
WHEREAS, InterQual desires Sublicensor to market certain of its medical
review criteria and incorporate it into the Sublicensor's computer applications
software, and Sublicensor desires to market such medical review criteria, in
accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises
and covenants herein contained and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
1. Preamble and Recitals. The preambles and recitals set forth above are
hereby incorporated and made a part of this Agreement.
2. Definitions.
2.1 Marks. "Marks" means all trade names, commercial symbols, trademarks
and service marks of InterQual, whether presently existing or later
established by InterQual, as set forth in Exhibit 2.1.
2.2 Criteria. "Criteria" means the medical review criteria owned or
later developed by InterQual and incorporated into the Software, as set
forth in Exhibit 2.2.
2.3 Criteria Manuals. "Criteria Manuals" means the medical review
criteria owned by InterQual contained in hard copy book format.
2.4 Software. "Software" means any or all of the computer software
presently owned or later developed by Sublicensor which incorporates the
Criteria.
2.5 Client. "Client" means a hospital or medical review organization
which has entered into or, during the term of this Agreement, shall
enter into an InterQual Sublicense Agreement with Sublicensor for use of
the Software.
2.6 Sublicensee. "Sublicensee" means any Client who has entered into an
InterQual Sublicense Agreement with Sublicensor for use of the Criteria
as incorporated into the Software ("InterQual Sublicense Agreement").
2.7 Criteria Updates. "Criteria Updates" means additions or deletions
for realizing operational efficiency or clinical clarity. Criteria
updates do not include Criteria modules that provide new functionality
for review of types of care not addressed by the Criteria.
1
<PAGE> 3
2.8 Modifications. "Modifications" mean client initiated changes to the
Criteria.
3. License
Grant of License to Use Criteria and to Use Marks. InterQual hereby
grants to Sublicensor a nontransferable, nonexclusive license to
incorporate the Criteria into the Software, and to use the Marks solely
for the purposes of demonstrating and identifying InterQual as the
creator and owner of the Criteria as incorporated into (i) the Software;
and (ii) promotional, advertising and operational materials of
Sublicensor relating to the incorporation of the Criteria into the
Software (collectively the "License").
4. Sublicensor Obligations.
4.1 Technical Assistance. Sublicensor, at its sole cost and expense,
shall provide Sub-Licensee with technical assistance as required for the
installation of the Software.
4.2 Referrals to InterQual. In conjunction with the grant of the License
pursuant to Section 3, Sublicensor shall refer all inquiries by Clients
regarding the Criteria and Criteria Manuals to InterQual.
4.3 Display of Marks. Sublicensor shall include notice indicating
InterQual's proprietary interest in the Criteria, Criteria Manuals and
the Marks in such form as may be determined from time to time at
InterQual's sole discretion on all promotional, advertising and
operational materials, and the initial display screen of all Software.
4.4 Copy of Software. Sublicensor, at its sole cost and expense, shall
provide InterQual with one (1) copy of the Software and the applicable
manuals, updates, enhancements, improvements and other documentation
related thereto for the purposes of reference and research to aid
Sublicensees in use of the Criteria as incorporated in the Software.
Sublicensor shall provide InterQual with all updates, enhancements,
improvements and other documentation related to the Software, as
released, without any cost to InterQual.
4.5 Distribution of InterQual Sublicense Agreements. Sublicensor shall
provide an InterQual Sublicense Agreement to each Client who desires to
become a Sublicensee. The InterQual Sublicense Agreement shall be in the
form set forth in Exhibit 4.5 or such other form as may be prescribed by
InterQual from time to time in its sole discretion.
4.6 Criteria Updates. Sublicensor shall at its sole cost and expense (i)
incorporate into the Software and related documents, as applicable, all
Criteria Updates released by InterQual; and (ii) distribute such
Software containing the Criteria Updates to Sublicensees within ninety
(90) days after receipt of the Criteria Updates to the Criteria.
5. InterQual's Obligations.
5.1 Telephone-Technical Support. InterQual shall, provide Sublicensor
with up to eight (8) hours of telephone-technical support to assist
Sublicensor in incorporating the Criteria into the Software during the
Initial Term of this Agreement. Additional support by InterQual, whether
by telephone or on-site, shall be billed to Sublicensor at InterQual's
current fee schedule for such support.
2
<PAGE> 4
5.2 Copy of Criteria. InterQual shall provide Sublicensor with one (1)
copy of the Criteria and the applicable manuals related thereto for the
purposes set forth in Section 3.
5.3 Criteria Updates. During the term of this Agreement, InterQual shall
provide Sublicensor with all Criteria Updates as released.
6. Fees
6.1 Sublicensor Fee. The Sublicensor shall pay InterQual fees in
accordance with Exhibit 6.1("Sublicense Fee").
6.2 Access. Each party shall have access, upon reasonable notice and
during normal business hours, to inspect and copy all records of the
other party in connection with the Sublicense Fee and other fees set
forth in this Section 6 to verify the accuracy of such fees. Each party
shall continue to have access to such records in accordance with this
Section 6.2 for a period of one (1) year following the termination or
non-renewal of this Agreement, and/or during the term of any Sublicense
Agreement executed prior to such termination or non-renewal.
7. Title
7.1 Warranty by InterQual. InterQual hereby warrants and represents that
it owns and has the right to license the Criteria, Criteria Manuals and
Marks.
7.2 Ownership & Use of Criteria, Criteria Manuals and Marks by
InterQual. Sublicensor acknowledges InterQual's claim to exclusive
right, title and interest in and to the Criteria, Criteria Manuals and
Marks, including all Criteria Updates and modifications to the Criteria
by Sublicensor. InterQual shall have the right to obtain and hold in its
own name trademarks, copyrights, registrations or such other protections
as may be appropriate to the subject matter, and any extensions or
renewals thereof. Sublicensor shall provide InterQual, and any person
designated by InterQual, any reasonable assistance, at InterQual's
expense, required to perfect InterQual's rights defined in this
Agreement. In connection with the use of the Criteria, Criteria Manuals
and Marks, Sublicensor shall not in any manner represent that it has any
ownership in the Criteria, Criteria Manuals or Marks or registration
thereof, and Sublicensor acknowledges that all uses and/or modifications
of the Criteria, Criteria Manuals or Marks by Sublicensor shall inure to
the benefit of InterQual.
7.3 Ownership of Sublicensor Software by Sublicensor.
InterQual acknowledges Sublicensor's claim to exclusive right, title and
interest in and to the title to the Software. Sublicensor shall have the
right to obtain and hold in its own name trademarks, copyrights,
registrations or such other protections as may be appropriate to the
subject matter, and any extensions or renewals thereof. InterQual shall
provide Sublicensor, and any person designated by Sublicensor, any
reasonable assistance, at Sublicensor's expense, required to perfect
Sublicensor's rights defined in this Agreement. InterQual shall not in
any manner represent that it has any ownership in the Software or
registration thereof. Any software, inventions, innovations or
enhancements that arise or result directly or indirectly from this
Agreement which Sublicensor creates, shall be and
3
<PAGE> 5
remain the sole and exclusive property of Sublicensor and its nominees.
As used, Software shall include data, designs, algorithms, flow charts,
source code, object code, and other documentation arising out of the
services performed by Sublicensor and shall not include any Criteria
Updates or modifications to the Criteria, Criteria Manuals or Marks by
Sublicensor or Clients.
7.4 Rights Upon Termination. Subject to Section 8, upon termination of
this Agreement with or without cause, whether voluntary or involuntary,
Sublicensor shall (i) cease and desist from all use of the Criteria,
Criteria Manuals and Marks in any way; and (ii) not adopt or use any
material similar to the Marks or any word or mark which is likely to be
similar to or confusing with the Marks without InterQual's prior written
consent.
8. Revocation of License Upon Termination. Upon termination of this
Agreement with or without cause, whether voluntary or involuntary, the
License granted pursuant to Section 3 shall be revoked effective on the
date of termination. Upon such termination (i) Sublicensor shall
continue to provide services to Sublicensees, including but not limited
to the incorporation and distribution of Criteria Updates in accordance
with Section 4.6.;(ii) any InterQual Sublicense Agreements shall remain
in full force and effect in accordance with their respective terms;
(iii) InterQual shall continue to be paid all Sublicense Fees received
by Sublicensor from Sublicensees in accordance with Section 6.
9. Confidential Information.
9.1 Non-Disclosure of Confidential Information.
9.1.1 Neither party shall be in default for failure to supply
information which such party, in good faith, believes cannot be
supplied due to prevailing law or for supplying information which
such party, in good faith, believes is required to be supplied
due to prevailing law.
9.1.2 Each party (and the respective officers, directors,
employees, agents, successors and assigns of each party) shall,
during the term of this Agreement and following the termination
of this Agreement with or without cause, whether voluntary or
involuntary, hold any and all Confidential Information as defined
in Section 9.1.3 in the strictest confidence as a fiduciary, and
shall not, voluntarily or involuntarily, sell, transfer, publish,
disclose, display or otherwise make available to others any
portion of the Confidential Information without the express
written consent of the other party. Each party shall use its best
efforts to protect the Confidential Information consistent with
the manner in which it protects its own most confidential
business information.
9.1.3 "Confidential Information" shall mean the information of
each party that shall be subject to patent, copyright, trademark,
trade secret, trade name or service mark protection, or described
in writing as confidential by each party, or not otherwise in
4
<PAGE> 6
the public domain and related to the business and operations of
each party, including, without limitation, the information
relating to earnings, volume of business, methods, systems,
practices or plans of each party, and all similar information of
any kind or nature whatsoever, which is known only to persons
having a fiduciary or confidential relationship with the party
that owns proprietary rights in or to such information.
10. Advertising or Publicity. Sublicensor may use the Marks in sales
literature, catalogues, mailings and other such materials subject to
InterQual's prior written approval of such uses, which approval shall
not be unreasonably withheld. InterQual shall have the right to
publicize the License of the Criteria to the Sublicensor in any
advertising or publicity releases with the prior written approval of
Sublicensor, which approval shall not be unreasonably withheld.
11. Indemnification.
11.1 Acknowledgements. Sublicensor acknowledges that InterQual has
advised SubLicensor: (i) that the Criteria and the Criteria Manuals are
based upon clinical interpretation and analyses (collectively
"Analyses") and that the Analyses are secondary sources which alone
cannot resolve medical ambiguities of particular situations or provide
the sole basis for definitive decisions; (ii) that the Criteria or the
Criteria Manuals should not be used for clinical determinations to
govern the level of medical care received by a patient or in any manner
interfere with the provider-patient relationship.
11.2 Indemnity by Sub-Licensor. Sublicensor shall indemnify, defend and
hold harmless InterQual, its officers, directors, employees and agents
from any and all claims, suits, losses, demands, damages or expenses
including reasonable attorneys' fees ("Liability") arising from any
breach by Sublicensor of its express obligations hereunder.
11.3 Indemnity by InterQual.
11.3.1 InterQual shall indemnify, defend and hold harmless
Sub-Licensor, its officers, directors, employees and agents from and
against Liability arising from any breach by InterQual of its express
obligations hereunder. InterQual assumes no Liability to SubLicensor or
to any third party with respect to the Criteria, Criteria Manuals or
Marks or other products sold or the services rendered by Sublicensor
under or in connection therewith.
11.3.2 THE CRITERIA AND CRITERIA MANUALS ARE PROVIDED "AS IS".
EXCEPT FOR THE LIMITED WARRANTY TO REPAIR OR REPLACE AS SET FORTH IN
SECTION 11.3.3 OF THIS AGREEMENT. INTERQUAL DISCLAIMS ANY OTHER
WARRANTY, EXPRESS OR IMPLIED, INCLUDING AS TO MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE OR SERVICE OF THE CRITERIA OR CRITERIA
MANUALS, OR THE COMPLIANCE OF OUTPUT USING THE CRITERIA OR CRITERIA
MANUALS WITH ANY LAW, REGULATION OR ORDER. IN NO EVENT
5
<PAGE> 7
SHALL INTERQUAL, ITS SUBCONTRACTORS, OFFICERS, EMPLOYEES OR AGENTS BE
LIABLE FOR SPECIAL, INCIDENTAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR THE FURNISHING OF
THE CRITERIA OR CRITERIA MANUALS OR PERFORMANCE OF SERVICES PROVIDED FOR
HEREIN, EVEN IF ANY OF THEM HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
11.3.3 InterQual shall defend at its own cost and expense any
claim or action against Sublicensor and its Clients for infringement of
any patent, copyright or similar property right (including, but not
limited to, misappropriation of trade secrets) based on any Criteria or
Criteria Manuals or modifications of the Criteria or Criteria Manuals
furnished or approved hereunder by InterQual or based on Sublicensor's
use thereof. InterQual shall have the sole right to conduct the defense
of any such claim or action and all negotiations for its settlement or
compromise, unless otherwise mutually agreed upon and expressed in
writing signed by the parties hereto.
If such infringement claim or action has occurred, or in InterQual's
judgement is likely to occur, Sublicensor shall allow InterQual and
InterQual shall, at InterQual's option and expense, either: (i) procure
for Sublicensor and Licensees the right to continue using the alleged
infringing Criteria and/or Criteria Manual(s), whichever is in question
("Infringing Criteria"); (ii) modify the Infringing Criteria to become
non-infringing (provided that such modification does not adversely
affect Sublicensor's or Licensees' intended use of the Criteria or
Criteria Manual(s) as contemplated hereunder); (iii) replace the
Infringing Criteria with equally suitable, compatible and functionally
equivalent non-infringing Criteria or Criteria Manuals, whichever is in
question, at no additional charge to Sublicensor or Sublicensees; or
(iv) if none of the foregoing alternatives is reasonably available to
InterQual, upon written request Sublicensor shall return the Infringing
Criteria to InterQual and this Agreement shall automatically terminate.
12. Term and Termination.
12.1 Term. The Initial Term of this Agreement shall be for three (3)
year(s) commencing on the Effective Date set forth on the signature
page. Thereafter, this Agreement shall automatically renew for periods
of one (1) year unless either party shall give the other party sixty
(60) days written notice of non-renewal prior to the end of the Initial
Term or any Renewal Term.
12.2 Termination for Breach. Either party may terminate this Agreement
upon breach of this Agreement by the other party not remedied within
thirty (30) days after the receipt by such other party of notice thereof
from the terminating party.
12.3 Survival of Covenants. The surrender, cancellation or termination
of the Sublicenses granted pursuant to this Agreement shall not effect
the liability of any party for the obligations (i) set forth in Section
9 and Section 11; and (ii) accruing prior to termination.
6
<PAGE> 8
13. Remedies.
13.1 Injunctive Relief. Remedies at law may be inadequate and the
parties shall be entitled to equitable relief, including without
limitation, injunctive relief, specific performance or other equitable
remedies in addition to all other remedies provided hereunder or
available to the parties at law or equity.
13.2 Remedies Cumulative. No remedy made available by any of the
provisions of this Agreement is intended to be exclusive of any other
remedy, and each and every remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute or otherwise.
13.3 Limitation of Liabilities.
13.3.1 Liability of InterQual to Sublicensor for any breach or
act or omission of InterQual pursuant to this Agreement, shall
not exceed the consideration received by InterQual from
Sublicensor and Sublicensees pursuant to this Agreement.
13.3.2 Liability of Sublicensor to InterQual for any breach or
act or omission of Sublicensor pursuant to this Agreement, except
for those relating to Section 9, shall not exceed the
consideration received by InterQual from Sublicensor and
Sublicensees pursuant to this Agreement.
13.4 Costs. If any legal action or other proceeding is brought for the
enforcement of this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with any of the provisions of
this Agreement, each party, if it is the successful or prevailing party,
shall be entitled to recover reasonable attorneys' fees and other costs
incurred in that action or proceeding, in addition to any other relief
to which it may be entitled.
14. Miscellaneous Provisions.
14.1 Notices. All notices shall be in writing personally delivered or
sent by fax or mailed by certified mail, return receipt requested,
effective on delivery, addressed to the parties at their respective
address set forth on the signature page or such other address as the
party may specify from time to time in writing.
14.2 Independent Contractors. Each party, its officers, agents and
employees are at all times independent contractors to the other party.
Nothing in this Agreement shall be construed to make or render either
party or any of its officers, agents, or employees of agent, servant, or
employee of, or joint venturer of or with, the other.
14.3 Entire Agreement.
This Agreement represents the entire agreement and understanding of the
parties hereto
7
<PAGE> 9
with respect to the subject matter hereof, and all prior and concurrent
agreements, understandings, representations and warranties with respect
to such subject matter, whether written or oral, are and have been
merged herein and superseded hereby. This Agreement may be amended in
writing, and any such amendment shall not be effective against a party
to this Agreement that shall not have signed such amendment.
14.4 Compliance with Terms. Failure to insist upon strict compliance
with any of the terms herein (by way of waiver or breach) by any party
hereto shall not be deemed to be a continuous waiver in the event of any
future breach or waiver of any condition hereunder.
14.5 Rights of Parties. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason
of this Agreement on any persons other than the parties to this
Agreement and to their respective successors and assigns.
14.6 Benefits. This Agreement shall be binding upon, and shall inure to
the benefit of, the parties hereto and their respective successors and,
to the extent permitted herein, assigns.
14.7 Severability. If any portions of this Agreement shall, for any
reason, be invalid or unenforceable, such portions shall be ineffective
only to the extent of such invalidity or unenforceability, and the
remaining portion or portions shall nevertheless be valid, enforceable
and of full force and effect.
14.8 Conflict of Laws. This Agreement shall be governed by the laws of
the State of Massachusetts, without giving effect to its conflicts of
law provisions.
14.9 Exhibits. The Exhibits referenced herein are made a part of this
Agreement, and the parties to this Agreement represent and warrant that
they are true and correct in all material respects as of the date
appearing thereof.
14.10 Assignment. Except as otherwise specifically provided herein, this
Agreement may not be assigned without the express written consent of the
parties hereto.
8
<PAGE> 10
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date set forth Below as the effective date.
EFFECTIVE DATE 15 APR 94
---------------------
LICENSOR: InterQual, Inc. SUBLICENSOR: Landa Management Systems,
------------------------- Inc.
---------------------------
Address: 293 Boston Post Rd. West Address: 1370 RIDGEWOOD DRIVE, Suite #7
Marlborough, MA 01752 CHICO, CA 95926
------------------------- -------------------------------
By: By: BRYAN H. LANG
-------------------------------- ------------------------------------
Print Name Print Name
By: /s/ [Signature Illegible] By: /s/ BRYAN H. LANG
------------------------------- ------------------------------------
Signature Signature
Title: V.P. Finance Title: CEO
---------------------------- ---------------------------------
Date: 8-31-93 Date: 15 APR 94
----------------------------- ----------------------------------
Telephone: (508) 481-1181 Telephone: (916) 891-0853
------------------------ -----------------------------
Fax: (508) 481-2393 Fax: (916) 891-8428
------------------------------ -----------------------------------
This Sublicensor Agreement is an offer valid for thirty days (30) from
the date executed by InterQual. This offer may be extended by InterQual only by
written notification to Sublicensor.
9
<PAGE> 11
INTERQUAL(R)
Exhibit 2.1
TRADEMARKS AND REGISTERED MARKS OF INTERQUAL
1. InterQual(R)
2. SI/IS(TM)
3. ISD(R)
4. ISD-A(R)
5. SIM(TM)
6. SIM(TM)II
7. SIM(TM)III
8. SIM(TM)IV
9. SIM(TM)V
10. SIM-A(R)
11. IQ/ACS(TM)
12. IPM-A(R)
13. BBP-A(TM)
14. NIPM-A(TM)
15. MTM-A(R)
16. MPT-A(TM)
17. RAQ(R)
18. ISDAD(TM)
<PAGE> 12
INTERQUAL(R)
Exhibit 2.1
TRADEMARKS AND REGISTERED MARKS OF INTERQUAL Cont'd
19. ISPAD (TM)
20. IPM(TM)
21. BBP(TM)
22. NIPM(TM)
23. MTM(TM)
24. MPT(TM)
25. ISP-A(TM)
26. ISP(TM)
27. ISD/ISP-A(TM)
28. ISD/ISP(TM)
29. Any additional trademarks and registered marks as may be added from time
to time. InterQual shall provide delineation of any added marks in writing,
return receipt requested.
<PAGE> 13
INTERQUAL(R)
EXHIBIT 2.2
CRITERIA
The following list of Criteria are specifically covered under this agreement:
ISDAD(TM)
ISD(TM) Adult and Pediatric
SIM(TM) Adult and Pediatric
IPM(TM) Adult
NIPM(TM)
BBP(TM)
MPT(TM) (not currently available for distribution)
RAQ(TM)
11
<PAGE> 14
INTERQUAL(R)
EXHIBIT 4.5
INTERQUAL SUBLICENSE AGREEMENT
12
<PAGE> 15
INTERQUAL(R)
EXHIBIT 6.1
SUBLICENSOR FEES
1. Criteria License Fees to be charged to LandaCorp Sublicensee's: For each sale
of LandaCorps software systems containing InterQual Criteria, LandaCorp will
remit to InterQual eighty (80%) percent of that Criteria list Price based upon
fee's in Attachment A-1 through A-7.
2. All remittances are due thirty (30) days from the date of Sublicensee
Agreement.
3. InterQual maintains the right to modify its Criteria fee schedule from time
to time. Sublicensor shall, upon receipt of the new pricing fee, have sixty (60)
days to modify its own fee schedule to reflect InterQual's new price structure.
4. License Fee Price Lists, Attachment A-l through A-7, shall not be distributed
or issued without prior consent of InterQual.
13
<PAGE> 1
EXHIBIT 10.15
DISTRIBUTION AGREEMENT
FOR
INTERQUAL(R) MEDICAL APPROPRIATENESS REVIEW SYSTEMS
DISTRIBUTION AGREEMENT ("Agreement") by and between InterQual, Inc. a Delaware
corporation headquartered in Marlboro, MA ("InterQual" or "Licensor") and the
entity named as "Distributor" below (also "VAR" herein).
WHEREAS, InterQual owns certain proprietary Medical Appropriateness Review
Systems and related software media and other materials ("Criteria') and VAR owns
certain proprietary applications software ("VAR Software"), both of which are
marketed to and used in the healthcare industry, and;
WHEREAS, the parties desire to embody the Criteria into a module of the VAR
Software to create one or more systems ("Product(s)") for enhancing Criteria
functionality and Software marketability and for distributing Criteria Licenses
for use of the Criteria with the VAR Software;
NOW, THEREFORE, in consideration of the mutual covenants, terms and conditions
hereof and for other good and valuable consideration, whose receipt and adequacy
is hereby acknowledged, the parties agree as follows:
1. INCORPORATION. The foregoing recitals are hereby incorporated into and made a
part of this Agreement.
2. REPRESENTATIONS. VAR represents that the description of its business, VAR
Software into which the Criteria will be embodied and customer base shown in
Exhibit 1 is accurate and complete and that it has the technical capability to
embody the Criteria into the VAR Software as shown in Exhibit 1; and InterQual
represents that it is the owner of the proprietary Criteria shown in Exhibit 1;
and each party represents that to the best of its knowledge it does not violate
any confidentiality obligation to, or proprietary right in, or other protected
interest of a third party by entering into this Agreement.
3. LICENSE. Subject to the terms and conditions of this Agreement and of its
Exhibits 1 and 2 and the Attachments thereto, InterQual hereby grants to VAR the
non-exclusive right (a) to embody the Criteria into the Software; (b) to
distribute Criteria Licenses to VAR Software licensees (upon InterQual's
execution of such Criteria Licenses, "Product Licensees") for use of the
Criteria in the Product; and (c) to use InterQual's trademarks shown in Exhibit
2 hereto ("Marks") in connection therewith.
4. TERM. The Agreement term will be three years from the Effective Date shown in
Exhibit 1 ("Initial Term") and will automatically renew for additional,
sequential two year terms (each a "Renewal Term") unless either part), gives
notice to the other of non-renewal at least 12 months prior to the expiration of
the Initial or any Renewal Term, or this Agreement is otherwise terminated.
5. CONSIDERATION. The license fees for use of the Criteria and other
consideration under this Agreement will be as shown in Exhibit 2 and Attachment
A thereto.
BY SIGNING BELOW, VAR ACKNOWLEDGES THAT IT HAS READ AND UNDERSTANDS THIS
AGREEMENT AND ITS RELATED EXHIBITS 1 AND 2 AND ALL ATTACHMENTS THERETO AND THAT
THEY CONSTITUTE THE COMPLETE AND EXCLUSIVE AGREEMENT BETWEEN THE PARTIES AND VAR
AGREES TO BE BOUND BY THEIR TERMS.
LICENSOR: DISTRIBUTOR:
INTERQUAL, INC. LANDA MANAGEMENT SYSTEMS CORPORATION:
Signature: /s/ ALAN D. MELLO Signature: /s/ STEVE KAY
---------------------- -----------------------------
Name: Alan D. Mello Name: Steve Kay
--------------------------- ------------------------------------
Title: V.P. Marketing and Sales Title: Chief Operating Officer
-------------------------- -----------------------------------
Date: 12/8/95 Date: 1/8/96
--------------------------- ------------------------------------
Page 1 of 1
<PAGE> 2
DISTRIBUTION AGREEMENT FOR INTERQUAL(R) MEDICAL APPROPRIATENESS REVIEW SYSTEMS
EXHIBIT 1: PREFERENTIAL CROSS-MARKETING PROGRAM
Intending to be bound, the parties agree that this Exhibit 1, Preferential
Cross-Marketing Program, is an integral part of the Distribution Agreement by
and between InterQual, Inc. ("InterQual" or "Licensor") and Landa Management
Systems Corporation ("VAR" or "Distributor").
1. PARTIES. The parties to this Distribution Agreement are:
1.1 LICENSOR:
InterQual, Inc.
Corporate Office/Technical Services/Notice Address
293 Boston Post Road West
Marlborough, MA 01752
Telephone: (508) 481-1181
Facsimile: (508) 481-2393
Training and Consulting/Customer Services
44 Lafayette Road
P.O. Box 988
North Hampton, NH 03862
Telephone: (603) 964-7255
Facsimile: (603) 964-7105
CONTACTS:
CEO: Charles M. Jacobs (MA)
President: Joanne Lamprey (NH)
Marketing/Sales: Alan Mello/Eric Kapust (MA)
Technical: Jeff Katzif/David Baird (MA)
Training: Charlotte Corcoran (NH)
Consulting: Charlotte Corcoran (NH)
Customer Support: Carolyn Vinica (NH)
EXHIBIT 1: InterQual and Landa
Page 1 of 4
<PAGE> 3
DISTRIBUTION AGREEMENT FOR INTERQUAL(R) MEDICAL APPROPRIATENESS REVIEW SYSTEMS
1.2 DISTRIBUTOR:
CORPORATE OFFICE:
Landa Management Systems Corporation
1370 Ridgewood Plaza, Suite 7
Chico, CA 95926
Phone: (916) 891-0853
Fax: (916) 891-8428
CONTACTS:
CEO: Bryan Lang
COO: Steve Kay
Marketing/Sales: David Wellons
Technical: Randy Smith
Training: Laura Sutherland
Consulting: Laura Sutherland
Customer Support: Laura Sutherland
2. LICENSED CRITERIA:
ISD-AC(TM) (Adult)..............Intensity/ Severity Discharge Criteria for
Acute Care
ISD-AC(TM) (Pediatric)..........Intensity/Severity/Discharge Criteria for Acute
Care
ISP(TM).........................Indications for Surgery and Procedures
ISX(TM).........................Indications for Imaging Studies and X-rays
IPR(TM).........................Indications to Physicians' Referral for
Specialists' Care
ISD-HC(TM)......................Intensity/Severity/Discharge Criteria for Home
Care
ISD-SAC(TM).....................Intensity/Severity/Discharge Criteria for
Subacute Care
ISD-RHB(TM).....................Intensity/Severity/Discharge Criteria for
Rehabilitation
ISD-LTC(TM).....................Intensity/Severity/Discharge Criteria for Long
Term Care
SIM(TM) (Adult).................Surgical Indications Monitoring (Adult)
SIM(TM) (Pediatric).............Surgical Indications Monitoring (Pediatric)
IPM(TM).........................Invasive Procedure Monitoring
AutoBook(TM) Software Automated Criteria Software (Site License)
EXHIBIT 1: InterQual and Landa
Page 2 of 4
<PAGE> 4
DISTRIBUTION AGREEMENT FOR INTERQUAL(R) MEDICAL APPROPRIATENESS REVIEW SYSTEMS
3. Distributor's Software (VAR Software):
3.1 MAXSYS II:
Maxsys II is a suite of software produced and marketed exclusively by Landa
Management Systems Corporation, (Landcorp). It is intended for use within
healthcare organizations. In particular, it is appropriate for Acute,
Subacute, Community Long Term Care, PHO, HMO and physician practices.
Maxsys II maintains a Clinical and Financial Resource Management Repository
for operational and decision support use; is fully client-server open
architecture; is database independent and can run on the client side with
Windows 3.x, Windows NT, Windows 95 operating systems and on the server side
with Novel NetWare and a wide variety of UNIX operating systems.
Maxsys II has been written in PowerBuilder(R), a fourth generation language
("4GL") with Graphical User Interface ("GUI"). The main modules of the core
Maxsys II product are as follows:
Quality Management
Utilization Management
Clinical Pathways
Risk Management
Medical Staff and Health Professional Management and Credentialing
Corporate Data Aggregation and Comparative Reporting
Automated InterQual(R) Criteria
This above description is not intended to be exhaustive but covers the main
areas of the Maxsys II core product. Other modules will be released over time
and will also be considered to be part of the Maxsys II system. For the
purposes of this description, all new modules to be described in future
marketing material of Landa Management Systems Corporation will be deemed to
be core Maxsys II software.
3.2 IQ/MAX.
3.2.1 IQ/Max is the Utilization Management Module of Maxsys II excluding
it's critical pathways feature. As used in this Distribution Agreement,
the term VAR Software includesIQ/Max.
3.2.2 Landacorp hereby grants to InterQual a non-exclusive right to
market IQ/Max as a Criteria delivery vehicle (a Product hereunder).
InterQual will distribute IQ/Max licenses to potential product licensees
and submit same to Landacorp for signature. Any customer executing an
IQ/Max License and a Criteria License will be a Product Licensee
hereunder.
3.3 IQ/RSM. IQ/RSM is a VAR Software derivative with the embodied criteria
that enables automated use of the Criteria. Landacorp will, at InterQual's
request given by notice, license IQ/RSM (a) to Product Licensees in lieu of
AutoBook as shown in Exhibit 2, section 9 of this Distribution Agreement;
(b) to other InterQual criteria distributors (vendors of software
applications systems wishing to create linkages to IQ/RSM), under terms,
conditions and fees equivalent to those then offered to Product Licensees
hereunder.
EXHIBIT 1: InterQual and Landa
Page 3 of 4
<PAGE> 5
DISTRIBUTION AGREEMENT FOR INTERQUAL(R) MEDICAL APPROPRIATENESS REVIEW SYSTEMS
4. PRODUCTS AND PROGRAM: The Products of this Distribution Agreement and the
preferential cross-marketing program hereby established between the parties is
shown in the Draft Letter of Intent between InterQual ("IQ") and Landa
Management Systems Corporation ("LC") dated 12 July 1995, a copy of which is
shown in Attachment A hereto, and the same is hereby incorporated into and made
a part of this Distribution Agreement with the same force and effect as if set
forth herein. If there is any inconsistency between the terms and conditions of
the Draft Letter of Intent and this Distribution Agreement, including Exhibit 2
and any Attachments thereto, the Draft Letter of Intent (excepting Sections 4.3,
5.4, 6.3, and 6.4 thereof) will have precedence and will govern the relationship
between the par-ties and between them and Third Parties and with respect to the
excepted sections, the Distribution Agreement will have such precedence.
5. CUSTOMER TYPES AND MARKETS: There will be no restrictions concerning customer
types (e.g. hospitals; managed care organizations, including HMOs, PPOs, PHOs,
Physician Group Practices, CHINS, etc.). Subject to InterQual's ability to
obtain adequate protection for its intellectual property rights, there will be
no restrictions concerning geographic markets. VAR will give notice to InterQual
of any potential distribution outside the United States, its Territories and
Canada. No such distribution will be concluded until InterQual gives notice that
it has concluded satisfactory arrangements for protection of its intellectual
property in such other locations.
6. APPROVAL: VAR has previously submitted its current version of Maxsys 11 to
InterQual pursuant to Exhibit 2, Sections 3.1, 3.2 and 3.3. InterQual
acknowledges that same meets InterQual's Functional Requirements and that this
provision hereof constitutes its notice of approval thereof.
EXHIBIT 1: Interqual and Landa
Page 4 of 4
<PAGE> 6
ATTACHMENT A TO EXHIBIT 1
DRAFT LETTER OF INTENT BETWEEN INTERQUAL ("IQ") AND
LANDA MANAGEMENT SYSTEMS CORPORATION ("LC")
<PAGE> 7
DRAFT LETTER OF INTENT BETWEEN INTERQUAL ("IQ") AND
LANDA MANAGEMENT SYSTEMS CORPORATION ("LC")
12 JULY 1995
1. Preamble.
1.1 LC develops and owns the MAXSYS II software system ("MAXSYS II").
1.2 IQ develops and owns certain medical review systems and criteria sets used
for utilization review, case management, practice guidance and clinical
pathways ("Criteria").
1.3 LC as an independent value-added reseller of IQ Criteria has developed a
software module that automates the Criteria ("MAX/CMS") and can be used
with Maxsys II.
1.4 IQ and LC intend to:
- establish a partnership to enhance licensing and revenue potential;
- package two separate versions of LC Software to better promote IQ
Criteria, as stipulated in section two herein;
- establish a preferential cross-marketing program between the two
firms.
2. Products.
2.1 "IQMAX"
2.1.1 Bundles certain MAXSYS II modules and MAX/CMS including the Criteria into
a standalone product for utilization management.
2.1.2 Enables the user to perform patient care review based upon the Criteria.
2.1.3 Contains the following features:
a. patient level data collection
b. data aggregation. analysis and reporting, including graphics.
2.2 "MAX/RSM" - Review Session Manager
2.2.1 Bundles very limited MAXSYS II functionality with MAX/CMS.
2.2.2 Contains the following features:
a. limited patient demographics data entry
b. Criteria reviews C. review results printing.
2.2.3 MAX/RSM" will not be capable of storing patient demographics nor review
data.
3. Ongoing Product Development.
3.1 IQ will continue to supply the Criteria and any applicable updates to LC,
together with functional specifications of Criteria detailing how the
Criteria are to be used by end users. LC agrees that it will take all
reasonable steps to protect and prevent the Criteria from being used
without authority by any third party.
Page 1 of 4
<PAGE> 8
DRAFT LETTER OF INTENT BETWEEN INTERQUAL ("IQ") AND
LANDA MANAGEMENT SYSTEMS CORPORATION ("LC")
12 JULY 1995
3.2 LC will continue to perform the necessary software design, programming,
and quality assurance for the MAX/CMS products.
3.3 IQ will review MAX/CMS products to certify conformance to the functional
specifications stated in section 3.1
4. Term of Agreement; Termination.
4.1 The initial term of this agreement is three years.
4.2 This agreement will automatically renew for two-year periods unless either
party elects not to renew and provides the other party with 12 months
prior notice.
4.3 This agreement may be terminated only for cause where applicable notice
has been given, and, following a cure period, the cause remains
uncorrected. This agreement may be terminated in the event of bankruptcy,
receivership, or substantial reorganization of either party.
5. Marketing & Licensing.
5.1 It is acknowledged to be in the mutual interest of both parties to sell
licenses for the complete MAXSYS II and MAX/CMS product line in preference
to IQMAX. It is understood that IQMAX will be offered for potential
clients who do not currently want or need MAXSYS If capabilities, but who
may want to upgrade in the future.
5.2 MAX/RMS is to be provided exclusively and on an interim basis to customers
who have already licensed IQMAX or both MAXSYS II and MAX/CMS pending the
completion of implementation of IQMAX or MAXSYS II, so as to pen-nit use
of the Criteria at the earliest moment.
5.3 The parties agree to use their best efforts to engage in good faith joint
Marketing and promotion of each party's products, without limiting either
party's ability to market and promote the Criteria, MAXSYS II, IQMAX, and
MAX/CMS on its own.
5.4 MAX/CMS, IQMAX, and MAX/RSM shall be licensed under uniform agreement
containing a Criteria sublicense that is executed by LC as sublicensor and
IQ as licensor. In any event, LC is the principal licensor of all software
products.
5.5 MAX/IRSM shall be licensed for the then-applicable fees for Criteria
license plus a certain premium (e.g.. 10% to 15%), with automatic
substitution of the principal product upon initiation of principal product
use.
5.6 IQ agrees to provide LC with reasonable sales assistance relative to IQMAX
and MAX/CMS. LC agrees to provide IQ with reasonable sales assistance
relative to IQMAX and MAX/CMS. IQ agrees to inform all IQMAX prospects of
the greater benefits of MAXSYS II, and agrees to license IQMAX only if the
prospective client has no current interest or use for these additional
benefits. IQ and LC agree to regular exchange of sales lead and prospect
information.
Page 2 of 4
<PAGE> 9
DRAFT LETTER OF INTENT BETWEEN INTERQUAL ("IQ") AND
LANDA MANAGEMENT SYSTEMS CORPORATION ("LC")
12 JULY 1995
6.0 PRICING.
6.1 LC reserves the right to determine and set any and all applicable license
fees for its software products.
6.2 IQ reserves the right to determine and set any and all applicable license
fees for its Criteria products.
6.3 LC and IQ intend to determine and set mutually-acceptable license fees for
MAX/CMS, IQMAX, and MAX/RSM.
6.4 IQ and LC agree to provide three months' advance notice prior to
effectuating any changes in license fees.
7. LEAD GENERATION AND SALES COMMISSIONS
7.1 The purpose of intercompany lead generation and sales commissions is to
provide incentives for each party's marketing and sales forces to actively
promote the interest of the other party.
7.2 A lead generation commission will be payable to the party who initiates a
sales contact that results in the licensing of the products shown in
section two herein. The definition of "sales initiation" and the
deten-nination of any applicable commission amounts and structures shall
be agreed by the LC and IQ sales & marketing departments.
7.3 A sales commission will be payable to the party where the other party
provided "substantial" sales assistance. The definition of "substantial"
and the determination of any applicable commission amounts and structures
is to be agreed by the LC and IQ sales & marketing departments.
8. LICENSE REVENUE. Except for commissions, each party receives its own
license fees directly from the licensing of its products. LC will receive
fees from software licenses, and IQ will receive fees from its Criteria
licenses.
9. CUSTOMER TRAINING AND SUPPORT. All substantive training and support with
respect to the usage of the Criteria shall be the obligation of IQ. All
substantive training and support with respect to the usage of software
products shall be the obligation of LC. Unless mutually agreed at a later
date between the parties, LC shall have the sole responsibility for the
implementation of all software systems.
10. LICENSE OF SOFTWARE FOR IQ USAGE.
LC agrees to license at no cost to IQ one or more copies of IQMAX to be
used solely for the purposes of sales presentations and assessment of
conformance to Criteria standards. IQ agrees that it will take all
reasonable steps to protect and prevent the software from being used
without authority BY any third party.
Page 3 of 4
<PAGE> 10
DRAFT LETTER OF INTENT BETWEEN INTERQUAL ("IQ") AND
LANDA MANAGEMENT SYSTEMS CORPORATION ("LC")
12 JULY 1995
11. FUTURE PROJECTS. The patties agree to investigate the feasibility of the
development of services, processes and products to augment revenues by
enabling clients to make use of emerging technologies such as electronic
data interchange (EDI).
12. RELATIONSHIP. The relationship between the parties is one of good faith
cooperation. No formal joint venture is contemplated nor may such be
inferred. Neither party is an agent of the other. Neither party can commit
the other except as specifically agreed.
13. NON-EXCLUSIVE AGREEMENT. This agreement is not exclusive. LC may
incorporate the criteria of other parties into its software, and IQ may
arrange for others to incorporate its Criteria into the software of other
parties. Nonetheless, this agreement shall be of a preferential nature.
Each party acknowledges an intent to accord preferential treatment to the
other in the belief that this arrangement is in each others best interest.
14. EXECUTION. The parties acknowledge each to the other that this Letter of
Intent is entered upon good faith with the express intent to induce each
to expend valuable human and financial resources. It is the expectation of
both parties that after prompt review and negotiation, the Intent will be
embodied into a formal agreement binding IQ and LC into a cooperative
venture.
FOR INTERQUAL: FOR LANDA MANAGEMENT SYSTEMS
CORPORATION:
Charles M. Jacobs, CEO Stephen P. Kay, COO
Signature: /s/ CHARLES M. JACOBS Signature: /s/ STEPHEN P. KAY
------------------------- ------------------------------
Date: 7/19/95 Date: 13-JUL-95
------------------------------ -----------------------------------
Page 4 of 4
<PAGE> 11
DISTRIBUTION AGREEMENT FOR INTERQUAL(R) MEDICAL APPROPRIATENESS REVIEW SYSTEMS
EXHIBIT 2
STANDARD TERMS AND CONDITIONS
1. BINDING EFFECT. Intending to be bound, the parties agree that these Standard
Terms and Conditions are an integral part of the Distribution Agreement for
InterQual Medical Appropriateness Review Systems ("Distribution Agreement") by
and between InterQual, Inc. ("InterQual" or "Licensor") and the entity
identified on the Agreement as "Distributor" (also as "VAR").
2. RELATIONSHIP. VAR's relationship with InterQual is solely that of a
distributor of InterQual Criteria Licenses (in form as shown in Attachment A
hereto or as amended by InterQual upon 45 days advance notice to VAR) to VAR's
existing customers and prospects who are potential licensees of the Product as
shown in Section 3.1 hereof. Neither party is an agent of or co-venturer with
the other; neither will represent to third parties that they have any other
relationship; and neither has any authority to commit or bind the other. Except
as expressly otherwise provided, each party will be solely responsible for its
own costs and expenses.
3. PRODUCT(S) AND APPROVAL.
3.1 EMBODYING. VAR will embody the Criteria into the VAR Software by full
integration into VAR's Software or by dynamic linkage (as this term is
commonly understood in the software development industry) to InterQual's
Software, or both, as shown in Exhibit 1, to create one or more "Products"
3.2 REQUIREMENTS. The Product(s) will function in accordance with
InterQual's Minimum Standards for Integrating InterQual Criteria into
Third Party Software ("Functional Requirements") shown in Attachment B
hereto, as the same may be amended by notice in connection with any
"Update" (as this term is defined in the License Agreement).
3.3 APPROVAL. VAR will deliver an archive copy of the latest version of
the resulting Product(s) to InterQual for its review for conformance with
the Functional Requirements and will not market the Product or distribute
Licenses until InterQual has given to VAR notice of its approval, which
will not be unreasonably withheld. If InterQual determines to withhold
approval, its notice will provide reasons therefore and VAR will have the
option of resubmitting to the same affect as shown above.
3.4 PROPRIETARY NOTICES. VAR will prominently affix to and/or display with
the Criteria InterQual's Copyright, Trademark and Proprietary Notices as
follows and as the same may be amended by notice from InterQual in
connection with any Update and/or new Product release.
Distribution Agreement Exhibit 2
Page 1 of 7
<PAGE> 12
DISTRIBUTION AGREEMENT FOR INTERQUAL(R) MEDICAL APPROPRIATENESS REVIEW SYSTEMS
3.4.1 Once on each copy of the Work as embodied, on the Product's
title page or on introductory screen:
a) Copyright Notice: Copyright, InterQual, Inc. 199_, 199_, etc. All
rights reserved [293 Boston Post Road West, Marlborough, MA 01752].
B) Trademarks and Registered Trademarks Notice: InterQual ISD and
RAQ are registered trademarks, and ISP", ISX", IPR", IWC(TM),
SIM(TM), IPM(TM), NIPM(TM), ILC(TM) ISD-AC(TM), ISD-HC(TM),
ISD-SAC(TM), ISD-LTC(TM), and ISD_RHB(TM) are trademarks of
InterQual, Inc.
c) Proprietary Notice (to be used on each release permitted by
InterQual): InterQual(R) Proprietary Notice:
InterQual, Inc., the Owner/Licensor of this Medical Appropriateness
Review System (Criteria/Work) has prepared this Work for the
exclusive use of its Customers (Licensees under Distribution
Agreements with vendors of Software Systems into which the Criteria
are embedded). This Work contains confidential and trade secret
information of InterQual and is provided to Licensees only under a
time-limited license. All right, title and interest in this Work,
including, without limitation, copyrights, trademarks, trade names,
etc., belong solely to InterQual. Licensee has been authorized by
InterQual to release portions of this work but only for the limited
purposes set forth in InterQual's License Agreement with Licensee.
(Recipient should consult with the Licensee regarding these
limitations). InterQual shall not be responsible for any damages
whatsoever, whether direct, indirect or consequential, regardless of
the form of action, resulting from Recipient's use of, or reliance
upon, the information contained in the Work. Further reproduction,
adaptation, incorporation in to other media, and release of this
Work by Recipient is strictly prohibited except on prior written
permission of an officer of InterQual. InterQual periodically makes
changes to the Work and Recipient should, in all cases, consult with
InterQual at: 1-800-582-1738.
4. MARKETING AND DISTRIBUTION.
4.1 MARKETING. VAR will use its best effort to promote and market the
Product to customer types in locations shown in Section 5 of Exhibit 1.
InterQual will provide to VAR reasonable marketing and promotional
materials and marketing assistance relative to the Criteria and will refer
to VAR prospects whose needs (in InterQual's judgment) are best met by the
Product.
4.2 SALES TRAINING & ASSISTANCE. Each party will make available its
marketing and sales personnel for training by the other, at times and
places to be mutually agreed upon at least once during each year of the
Term. At VAR's request, InterQual will provide VAR with reasonable sales
assistance by telephone and modem demonstration to prospective Product
Licensees.
Distribution Agreement Exhibit 2
Page 2 of 7
<PAGE> 13
DISTRIBUTION AGREEMENT FOR INTERQUAL(R) MEDICAL APPROPRIATENESS REVIEW SYSTEMS
5. VAR's OBLIGATIONS.
5.1 PRODUCT SUPPORT AND MAINTENANCE. VAR will undertake to provide timely
and accurate technical support and VAR Software maintenance services to
Product Licensees to assure that all Product components required for
functionally efficient and effective medical appropriateness review
perform in accordance with VAR's promotional materials and technical
specifications and InterQual's Functional Requirements.
5.2 UPDATES AND VAR SOFTWARE MODIFICATIONS
5.2.1 UPDATE NOTICES. Promptly upon release of each Update,
InterQual will provide same to VAR by notice ("Update Notice"). The
Update Notice will designate each Update as "Regular" or "Urgent" as
with or without "Material Changes." Material Changes means changes
to the Criteria or associated review rules or other review system
attributes that (in InterQual's judgment) require complementary VAR
Software modifications for the Product to meet the Requirements.
5.2.2 UPDATE DISTRIBUTION WITHOUT VAR SOFTWARE MODIFICATIONS. VAR
will embody into the VAR Software each Regular Update without
Material Changes and distribute same to Product Licensees at the
time of VAR's next Product release, but not later than 120 days of
the date of a regular Update Notice; and VAR will embody each Urgent
Update into the VAR Software and distribute same to Product
Licensees within 30 days of the date of an Urgent Update Notice.
5.2.3 VAR SOFTWARE MODIFICATIONS. Whenever a VAR Software
modification is required under this Agreement or is made at VAR's
own initiative and the same is likely to substantially affect
Product Licensees' use of the Criteria or any other benefit
associated with use of the Product in connection with medical
appropriateness review. VAR will deliver the Product with such
modifications to InterQual for review and approval as shown in
Section 3.3. If prompted by an Update Notice, it is the intention of
the parties that such modifications will be completed and approved
such that the Update can be distributed to Product Licensees not
later than 120 days from the date of such Update Notice.
6. INTERQUAL OBLIGATIONS.
6.1 TO CRITERIA LICENSEES. InterQual will faithfully discharge its
Criteria License obligations, including without limitation, to maintain
the clinical integrity and currency of the Criteria, to publish Updates,
to make available to Licensees timely and informed training opportunities
on proper application of its medical appropriateness review system(s), and
to provide telephone customer service support.
6.2 TO VAR. InterQual will provide reasonable written and telephone
support to VAR for purposes of facilitating VAR's obligation to embody.
Distribution Agreement Exhibit 2
Page 3 of 7
<PAGE> 14
DISTRIBUTION AGREEMENT FOR INTERQUAL(R) MEDICAL APPROPRIATENESS REVIEW SYSTEMS
7. LICENSING FEES. Each party will from time-to-time by notice to the other
establish its own Product licensing fees hereunder, VAR with respect to the VAR
Software and InterQual with respect to the
Criteria.
8. LICENSING AND RELATED REVENUES
8.1 LICENSING REVENUES. VAR has the sole right to VAR Software licensing
fee revenues (except with respect to Section 8.4 revenues), and InterQual
has the sole right to Criteria licensing fee revenues.
8.2 SERVICE REVENUES. VAR has the sole right to all revenues from fees it
charges a Product Licensee for VAR Software customization, installation
services, technical support and related training services, and InterQual
has the sole right to all revenues from fees it charges for Criteria use
training, medical appropriateness review system implementation and like
Criteria-related services.
8.3 Sales COMMISSIONS. InterQual will, based upon its Initial Term
Criteria License Fee revenues derived from License, (a) pay its then
standard sales commissions to InterQual's marketing/sales personnel as an
incentive to assist VAR's Product licensing and Criteria License
distribution efforts, and (b) pay to VAR the following percentages of such
revenues solely for VAR's use to pay sales commissions to VAR's
marketing/sales personnel as an incentive to distribute Criteria Licenses:
five (5%) percent of such Initial Term first year revenues and two (2%)
percent of such Initial Term subsequent years revenues.
8.4 OTHER REVENUES.
8.4.1 ELECTRONIC DATA INTERCHANGE FEES. At any time when the Product
includes capability by which data involving or derived from use of
the Criteria are interchanged with any third party and in connection
with which VAR receives any fees or payments of any kind whatsoever,
or by standard industry practice could demand such fees or payments,
VAR will not permit any such use of such data without InterQual's
prior written approval, which may not be unreasonably withheld.
8.4.2 OTHER REVENUE SOURCES. The parties acknowledge that it may be
possible to develop valuable databases and information and analytic
products and services based upon Product Licensees' medical
appropriateness review experiences and agree that such revenue
opportunities will be exploited jointly.
8.5 ACCESS. Each party will have access, upon reasonable notice and during
normal business hours, to inspect the premises and copy all records of the
other party in connection with the others compliance with this
Distribution Agreement and to verify the uses of its proprietary materials
and the accuracy of all fees and payments due to the other and from
Product Licensees. Each party WILL continue to have such access for a
period of one year following the expiration or termination of this
Distribution Agreement arid/or any Criteria License executed prior to such
expiration or termination.
Distribution Agreement Exhibit 2
Page 4 of 7
<PAGE> 15
DISTRIBUTION AGREEMENT FOR INTERQUAL(R) MEDICAL APPROPRIATENESS REVIEW SYSTEMS
9. AUTOBOOK(TM) SOFTWARE. In connection with each Product license, VAR will, by
notice to InterQual, provide its best estimate of the time required by VAR to
complete Product installation and the date when VAR estimates the Licensee will
be able to use the Product for medical review. In the event such date is in
excess of 60 days from the Product License Agreement execution date, InterQual
and/or VAR will offer to such Licensee the use of InterQual's Autobook software
for conducting interim medical review InterQual may charge its customary fee for
Autobook licensing.
10. TITLE.
10.1 OWNERSHIP OF VAR SOFTWARE. InterQual acknowledges VAR's claim to
exclusive right, title and interest in and to the VAR Software, including
without limitation, designs, algorithms, flow charts, source code, object
code, user interface and other documentation. VAR will have the right to
obtain and hold in its own name trademarks, copyrights, registrations or
such other protection as may be appropriate to the subject matter, and any
extensions or renewals thereof. InterQual will not represent that it has
any ownership in the VAR Software and will provide VAR, and any person
designated by VAR, any reasonable assistance, at VAR's expense, required
to perfect VAR's rights defined in this Agreement. As used, the term VAR
Software does not include InterQual's Proprietary Property as shown in
section 10.2. InterQual will have no right under this Agreement to use the
Product or the VAR Software for its own account without the express prior
written permission of VAR.
10.2 OWNERSHIP OF INTERQUAL'S PROPRIETARY PROPERTY. VAR acknowledges
InterQual's claim to exclusive right, title and interest in and to the
Criteria, the InterQual developed software, database and other media in
which the Criteria may be expressed or operationalized, and all materials
of any kind related thereto, including without limitation, Updates,
Criteria modifications made by or for VAR or any Licensee, all derivative
works, and the AUTOBOOK(TM) Software ("InterQual's Proprietary
Property"). InterQual will have the right to obtain and hold in its own
name trademarks, copyrights, registrations or such other protection as may
be appropriate to the subject matter, and any extensions or renewals
thereof VAR will provide InterQual, and any person designated by
InterQual, any reasonable assistance, at InterQual's expense, required to
perfect InterQual's rights defined in this Agreement. In connection with
the distribution of License Agreements and all uses of the Product, VAR
will not represent that it has any ownership in InterQual's Proprietary
Property, and VAR acknowledges that all such uses and any modifications of
InterQual's Proprietary Property by VAR or any Licensee will inure to the
benefit of InterQual. VAR will have no right under this Agreement to use
InterQual's Proprietary Property or the Product for its own account
without the express prior written permission of InterQual.
Distribution Agreement Exhibit 2
Page 5 of 7
<PAGE> 16
DISTRIBUTION AGREEMENT FOR INTERQUAL(R) MEDICAL APPROPRIATENESS REVIEW SYSTEMS
11. CONFIDENTIALITY AND NONDISCLOSURE. VAR will observe the
confidentiality/nondisclosure provisions with respect to InterQual proprietary,
confidential and trade secret information shown in License Agreement Exhibit B
sections 2.5, 3 (introductory paragraph), 3.1 (b), (d) and (e), and 3.3. In
addition, each party (and the officers, director, employees, agent, successors
and assigns of each party) will, during the term of this Distribution Agreement
and following its termination with or without cause, whether voluntary or
involuntary, hold any and all proprietary and trade secret information of the
other party (information which is known only to persons having a fiduciary or
confidential relationship with such party) in strictest confidence, as a
fiduciary, and shall not sell, transfer, publish, disclose or otherwise make
same available to others except as expressly permitted by this Distribution
Agreement or, to the extent the same has come into the public domain without
breach, any License Agreement.
12. NON-EXCLUSIVITY. This Distribution Agreement is non-exclusive. InterQual may
conclude distribution agreements with other software system vendors and may
develop its own software systems provided only that it does not violate VAR's
ownership rights as defined herein. VAR may conclude distribution agreements
with vendors of other medical review Criteria except that VAR will make prudent
inquiry and investigation to assure that such others' criteria are not
modifications or derivative works of InterQual's Criteria and do not otherwise
violate InterQual's Proprietary Product and ownership rights as defined herein.
13. INDEMNIFICATION. Each party shall indemnify, defend and hold harmless the
other party, its officers, directors, employees and agents, from and against
liability arising from such party's breach of its express obligations
thereunder.
14. NON-RENEWAL AND TERMINATION.
14.1 TERMINATION EVENTS. This Agreement may be terminated in whole or in
part, upon the happening of one or more of the events and by the process
shown in License Agreement Exhibit B Clause 8.
14.2 EFFECT OF EXPIRATION OR TERMINATION.
14.2.1 ON PARTIES. Upon expiration of this Distribution Agreement
due to expiration or termination with or without cause, whether
voluntary or involuntary, the License granted herein will be revoked
with the same effect (except as shown in section 14.3 below) as
shown in License Agreement Exhibit B Section 8. In addition, VAR
will not adopt or use any materials derivative of the Criteria or
similar to the Marks or any other criteria or mark which is likely
to be similar to or confusing with the Criteria or Marks without
InterQual's prior written consent, to the extent that the same would
be in derogation of InterQual's legally protectable, proprietary
intellectual property.
14.2.2 ON LICENSEES. Any License Agreement executed prior to the
expiration of this Agreement will, with respect to any Licensee so
electing, remain in full force and effect in accordance with its
terms, and VAR and InterQual will continue to FULFILL their
obligations to each other and to such Licensees until the expiration
by non-renewal or permitted termination thereof
Distribution Agreement Exhibit 2
Page 6 of 7
<PAGE> 17
DISTRIBUTION AGREEMENT FOR INTERQUAL(R) MEDICAL APPROPRIATENESS REVIEW SYSTEMS
14.2.3 ON INTERQUAL InterQual will not adopt or use any software in
violation of VAR's ownership rights in and to the VAR Software
insofar as the same constitutes VAR's proprietary,
legally-protectable intellectual property, but InterQual will not be
contained from adopting or using industry standard software
development tools and user interfaces, even if VAR has also used
same in the VAR Software.
Distribution Agreement Exhibit 2
Page 7 of 7
<PAGE> 18
Draft LETTER OF Intent BETWEEN INTERQUAL ("IQ") AND
LANDA MANAGEMENT SYSTEMS CORPORATION("LC")
12 JULY 1995
1. PREAMBLE.
1.1 LC develops and owns the MAXSYS II software system ("MAXSYS II").
1.2 IQ develops and owns certain medical review systems and criteria sets
used for utilization review, case management, practice guidance and
clinical pathways ("Criteria").
1.3 LC as an independent value-added reseller of IQ Criteria has developed a
software module that automates the Criteria (MAX/CMS) and can be used
with MAXSYS II.
1.4 IQ and LC intend to:
- establish a partnership to enhance licensing and revenue
potential;
- package two separate versions of LC Software to better promote
IQ Criteria, as stipulated in section two herein;
- establish a preferential cross-marketing program between the two
firms.
2. PRODUCTS.
2.1 "IQMAX'
2.1.1 Bundles certain MAXSYS II modules and MAX/CMS including the Criteria
into a standalone product for utilization management.
2.1.2 Enables the user to perform patient care review based upon the Criteria.
2.1.3 Contains the following features:
a. patient level data collection
b. data aggregation, analysis and reporting, including graphics.
2.2 "MAX/RSM" - Review Session Manager
2.2.1 Bundles very limited MAXSYS II functionality with MAX(CMS.
2.2.2 Contains the following features:
a. limited patient demographics data entry
b. Criteria reviews
C. review results printing.
2.2.3 MAX/RSM will not be capable of storing patient demographics nor review
data.
3. ONGOING PRODUCT DEVELOPMENT.
3.1 IQ will continue to supply the Criteria and any applicable updates to
LC, together with functional specifications of Criteria detailing how
the Criteria are to be used by end users. LC agrees that it will take
all reasonable steps to protect and prevent the Criteria from being used
without authority BY any third party.
Page 1 of 4
<PAGE> 19
DRAFT LETTER OF INTENT BETWEEN INTERQUAL ("IQ") AND
LANDA MANAGEMENT SYSTEMS CORPORATION ("LC")
12 JULY 1995
3.2 LC will continue to perform the necessary software design, programming,
and quality assurance for the MAX/CMS products.
3.3 IQ will review MAX/CMS products to certify conformance to the functional
specifications stated in section 3.1
4. Term OF AGREEMENT; TERMINATION.
4.1 The initial term of this agreement is three years.
4.2 This agreement will automatically renew for two-year periods unless
either party elects not to renew and provides the other party with 12
months prior notice.
4.3 This agreement may be terminated only for cause where applicable notice
has been given, and, following a cure period, the cause remains
uncorrected. This agreement may be terminated in the event of
bankruptcy, receivership, or substantial reorganization of either party.
5. MARKETING & LICENSING.
5.1 It is acknowledged to be in the mutual interest of both parties to sell
licenses for the complete MAXSYS II and MAX/CMS product line in
preference to IQMAX. It is understood that IQMAX WILL be offered for
potential clients who do not currently want or need MAXSYS II
capabilities, but who may want to upgrade in the future.
5.2 MW/RSM is to be provided exclusively and on an interim basis to
customers who have already licensed IQMAX or both MAXSYS II and MAX/CMS
pending the completion of implementation of IQMAX or MAXSYS II, so as to
permit use of the Criteria at the earliest moment.
5.3 The parties agree to use their best efforts to engage in good faith
joint marketing and promotion of each party's products, without limiting
either party's ability to market and promote the Criteria, MAXSYS II,
IQMAX, and MAX/CMS on its own.
5.4 MAX/CMS, IQMAX, and MAX/RSM shall be licensed under uniform agreement
containing a Criteria sublicense that is executed by LC as sublicensor
and 10 as licensor. In any event, LC is the principal licensor of all
software products.
5.5 MAX/RSM shall be licensed for the then-applicable fees for Criteria
license plus a certain premium (e.g., 10% to 15%), with automatic
substitution of the principal product upon initiation of principal
product use.
5.6 IQ agrees to provide LC with reasonable sales assistance relative to
IQMAX and MAX/CMS. LC agrees to provide IQ with reasonable sales
assistance relative to IQMAX and MAX/CMS. IQ agrees to inform all IQMAX
prospects of the greater benefits of MAXSYS II, and agrees to license
IQMAX only if the prospective client has no current interest or use for
these additional benefits. IQ and LC agree to regular exchange of sales
lead and prospect information.
Page 2 of 4
<PAGE> 20
DRAFT LETTER OF INTENT BETWEEN INTERQUAL ("IQ") AND
LANDA MANAGEMENT SYSTEMS CORPORATION("LC")
12 JULY 1995
6.0 PRICING.
6.1 LC reserves the right to determine and set any and all applicable
license fees for its software products.
6.2 IQ reserves the right to determine and set any and all applicable
license fees for its Criteria products.
6.3 LC and IQ intend to determine and set mutually-acceptable license fees
for Max/CMS, IQMax, and Max/RSM.
6.4 IQ and LC agree to provide three months' advance notice prior to
effectuating any changes in license fees.
7. LEAD GENERATION AND SALES COMMISSIONS
7.1 The purpose of intercompany lead generation and sales commissions is to
provide incentives for each party's marketing and sales forces to
actively promote the interest of the other party.
7.2 A lead generation commission will be payable to the party who initiates
a sales contact that results in the licensing of the products shown in
section two herein. The definition of "sales initiation" and the
determination of any applicable commission amounts and structures shall
be agreed by the LC and IQ sales & marketing departments.
7.3 A sales commission will be payable to the party where the other party
provided "substantial" sales assistance. The definition of "substantial"
and the determination of any applicable commission amounts and
structures is to be agreed by the LC and IQ sales & marketing
departments.
8. LICENSE REVENUE. Except for commissions, each party receives its own
license fees directly from the licensing of its products. LC will
receive fees from software licenses, and IQ will receive fees from its
Criteria licenses.
9. CUSTOMER TRAINING AND SUPPORT. All substantive training and support with
respect to the usage of the Criteria shall be the obligation of IQ. All
substantive training and support with respect to the usage of software
products shall be the obligation of LC. Unless mutually agreed at a
later date between the parties, LC shall have the sole responsibility
for the implementation of all software systems.
10. LICENSE OF SOFTWARE FOR IQ USAGE.
LC agrees to license at no cost to IQ one or more copies of IQMaxto be
used solely for the purposes of sales presentations and assessment of
conformance to Criteria standards. IQ agrees that it will take all
reasonable steps to protect and prevent the software from being used
without authority by any third party.
Page 3 of 4
<PAGE> 21
DRAFT LETTER OF Intent BETWEEN InterQual ("IQ") AND
LANDA MANAGEMENT SYSTEMS CORPORATION ("LC")
12 JULY 1995
11. FUTURE PROJECTS. The parties agree to investigate the feasibility of the
development of services, processes and products to augment revenues BY
enabling clients to make use of emerging technologies such as electronic
data interchange (EDI).
12. RELATIONSHIP. The relationship between the parties is one of good faith
cooperation. No formal joint venture is contemplated nor may such be
inferred. Neither party is an agent of the other. Neither party can
commit the other except as specifically agreed.
13. NON-EXCLUSIVE AGREEMENT. This agreement is not exclusive. LC may
incorporate the criteria of other parties into its software, and IQ may
arrange for others to incorporate its Criteria into the software of
other parties. Nonetheless, this agreement shall be of a preferential
nature. Each party acknowledges an intent to accord preferential
treatment to the other in the belief that this arrangement is in each
other's best interest.
14. EXECUTION. The parties acknowledge each to the other that this Letter of
Intent is entered upon good faith with the express intent to induce each
to expend valuable human and financial resources. It is the expectation
of both parties that after prompt review and negotiation, the Intent
will be embodied into a formal agreement binding IQ and LC into a
cooperative venture.
FOR INTERQUAL: FOR LANDA MANAGEMENT SYSTEMS
CORPORATION:
Charles M. Jacobs, CEO Stephen P. Kay, COO
Signature: /s/ CHARLES M. JACOBS Signature: /s/ STEPHEN P. KAY
------------------------- ----------------------------
Date: 7-19-95 Date: 13-JUL-95
------------------------------ ---------------------------------
Page 4 of 4
<PAGE> 1
EXHIBIT 10.16
LICENSE AGREEMENT - SOFTWARE DEVELOPERS
THIS AGREEMENT, dated August 17, 1998, is between MILLIMAN &
ROBERTSON, INC. ("M&R") and LANDACORP. ("Licensee").
RECITALS
M&R and Licensee acknowledge the following:
A. M&R has developed the Healthcare Management Guidelines, Volumes 1, 2, 3, 4,
5, 6, and 7 (the "Guidelines") for use by qualified medical personnel in
managing healthcare delivery and workers compensation systems. M&R holds the
copyright of these Guidelines.
B. Licensee is developing software systems (the "Software") designed to utilize
or display the data contained in the Guidelines.
C. M&R is willing to grant Licensee the right to utilize the Guidelines and make
copies of the computer-readable copy of the Guidelines as part of the Software
subject to the terms and conditions set forth below.
AGREEMENTS
In consideration of the Recitals and the promises and agreements
set forth below, M&R and Licensee agree as follows:
1. Grant of License. M&R grants Licensee a non-exclusive, nontransferable
license to use the Guidelines during the term of the Agreement, including use
with Licensee's Software.
a. Licensee may make such copies of the Guidelines as are necessary for
Licensee to develop the Software.
b. M&R further grants Licensee the non-exclusive, nontransferable right
to make copies in computer-readable form of the Guidelines and to transfer such
copies of the Guidelines to customers who are healthcare or workers compensation
management organizations in the United States ("the Customers"), provided that
Licensee has verified with M&R that such customers have entered into a current
Customer License agreement and have paid the required license fee. The delivery
of any copy of the Guidelines shall not exceed the scope of the license granted
to the Customer in a Customer License Agreement. M&R shall have the sole and
absolute discretion to determine to whom it will grant a Customer License
Agreement.
c. Licensee may only use the Guidelines in connection with the
development, sale and licensing of the Software. Use by Licensee of the
Guidelines for the purposes of managed care services or health care delivery is
prohibited without a separate licensee agreement for the Guidelines permitting
such use.
d. This license agreement shall extend to such updates of the Guidelines
as M&R may create from time to time. M&R shall deliver such updates to Licensee
within a reasonable time after the release of the Update. Licensee agrees that
it will install the version of the Guidelines for which the client has a valid
license.
<PAGE> 2
License Agreement - Software Developers
Page 2
2. Unauthorized copying forbidden. Except as authorized in this agreement,
unauthorized copying or disclosure is strictly forbidden. Licensee may only use
the Guidelines at the installation site of Licensee and the Guidelines cannot be
used in any public computer system or computer based bulletin board system or be
otherwise made available or distributed to third parties. Any back-up or
archival copies shall include all notices required herein and no such notice
shall be deleted upon copying.
3. License Fee. No license fee shall be required under this agreement so long as
Licensee complies with its obligations hereunder.
4. Right to Review. M&R shall have the right to review and approve the manner in
which the Guidelines are utilized in the Software. M&R's approval will not be
unreasonably withheld. M&R shall also have the right to review and approve any
subsequent versions of the Software in which there is any material change in the
manner in which the Guidelines are utilized.
5. Title to Guidelines and Related Matters. Title to the Guidelines shall remain
with M&R. Licensee shall not remove, alter, cover or obfuscate any copyright
notices or other proprietary rights notices placed or embedded by M&R on or in
the Guidelines. Licensee shall have no right to use any trademark, service mark,
logo or tradename of M&R without M&R's prior express written consent. Licensee
shall make no representation that M&R has approved, sanctioned, recommended or
otherwise endorsed the Software.
6. Ownership of Software. Licensee shall retain exclusive ownership rights and
interests in the Software and M&R shall acquire no rights in the Software by
virtue of this agreement.
7. Confidentiality. Licensee acknowledges that the Guidelines have been
developed at great expense to M&R. Licensee agrees to take all commercially
reasonable precautions to prevent any unauthorized copying or use of the
Guidelines. To protect M&R's interest in maintaining the copyright of the
Guidelines, Licensee agrees that it will not permit any copies of the Guidelines
to be made unless the prior written consent of M&R is obtained or except as
authorized in this License Agreement. Licensee agrees not to market this
material in such a way as to impede M&R's proprietary interests in the material.
8. Limited Warranty. In the event of any defect in the magnetic medium
containing the Guidelines, M&R will replace the defective diskette(s) upon
request, which shall be the sole obligation of M&R and the exclusive remedy of
Licensee. M&R DISCLAIMS ALL OTHER EXPRESS AND ALL IMPLIED WARRANTIES INCLUDING
WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE OF LICENSEE.
9. Limited Warranty and Remedies re American Medical Association CPT Codes. The
Guidelines contain files of CPT codes that are copyrighted by the American
Medical Association (the "CPT file"). Licensee acknowledges that the CPT files
are provided "as is" and that the AMA makes no warranty of any kind, either
express or implied, including, but not limited to, the implied warranties of
merchantability and fitness for a particular purpose. The AMA bears no
responsibility for problems as to the quality or performance of the CPT files.
The AMA has no responsibility for any servicing, repair or correction if the CPT
files prove to be defective.
<PAGE> 3
License Agreement - Software Developers
Page 3
The American Medical Association disclaims responsibility for any
consequences attributable to or related to any uses, non-use or interpretation
of information contained in or not contained in the CPT file. The AMA shall not
be deemed to be engaged in the practice of medicine or dispensing medical
services.
Licensee acknowledges that in no event will AMA be liable to Licensee
for any damages, including any lost profits, lost savings or other incidental or
consequential damages arising out of possibility of such damages, or for any
claim by any other party.
AMA does not warrant that the data contained in the CPT file will meet
Licensee's requirements or that the operation of the CPT file will be
uninterrupted or without error. Licensee acknowledges that the CPT files have
not been developed according to Licensee's specification or otherwise
custom-made.
10. Government Data Rights Notice if Government Personnel Have Access. The
Software and documentation is provided with restricted rights. The Use,
Duplication, or Disclosure by the Government is subject to restrictions as set
forth in subdivision (c)(1)(ii) of the Rights in Technical Data and Computer
Software clause at 252.277-7013 or restricted rights clauses at 48 CFR 52.227-19
or 52.227-14, as applicable. Any applicable notices to preserve restricted
rights are incorporated herein by reference. Contractor/Manufacturer is Milliman
& Robertson, Inc. 1301 Fifth Avenue, Suite 3800, Seattle, Washington 98101-2605.
12. Indemnification and Hold Harmless. Licensee agrees to indemnify and hold
harmless M&R, its officers, employees and agents, from and against all loss,
damages, liability and expense incurred by reason of any claims, actions, suits
or governmental investigations or proceedings, brought against or involving them
or any of them (excluding claims or suits brought by Licensee), which relate to
or arise out of (1) changes or modifications to the Guidelines made by Licensee,
(2) representations or warranties made by Licensee which exceed that made in
paragraph 8 above, (3) failure by Licensee to accurately copy or reproduce the
Guidelines for any Customer, or (4) any breach of this agreement by Licensee.
13. Term of License Termination. The license to use the Guidelines granted
herein shall be perpetual, unless terminated pursuant to the provisions in this
paragraph.
a. M&R may terminate this license to use the Guidelines for any reason
upon 60 days written notice to Licensee.
b. Licensee may terminate this license agreement at any time upon
written notice to M&R and certification that Licensee has deleted or erased all
copies of the Guidelines in its possession, custody or control.
c. If Licensee breaches this agreement, and such breach remains uncured
for ten days after notice, the Agreement will terminate.
14. Post Termination. Upon termination of the license, Licensee shall
immediately return all copies of the Guidelines in its possession to M&R.
15. Liability Upon Termination. Neither party shall be liable to the other party
for damages, losses, costs or expenses of any kind or character whatsoever on
account of the termination of this Agreement, whether such damages, losses,
costs or expenses arise out of the distribution of the Guidelines or from the
loss of prospective sales or expenses incurred or investments made in connection
with the establishment, development or maintenance of Licensee's business.
<PAGE> 4
License Agreement - Software Developers
Page 4
16. No Transfer. Licensee agrees that it will not transfer the Guidelines or
assign its rights under this Agreement without the prior written consent of M&R,
which consent shall not be unreasonably withheld.
17. Injunctive Relief. The parties acknowledge and agree that damages would be
an inadequate remedy for M&R resulting from a breach by Licensee of its
obligations thereunder and that M&R shall be entitled to injunctive relief in
the event of such a breach, in addition to any other remedy at law or in equity
which may otherwise be available to M&R.
18. No Waiver. No waiver by one party of any breach by the other party shall be
valid unless in writing and no such waiver shall extend to any other breach.
19. Entire Agreement. This Agreement constitutes the entire agreement between
the parties relating to the subject matter hereof and shall supersede all prior
or contemporaneous written or oral understandings or agreements. This Agreement
may be amended only by a written document signed by duly authorized
representatives of M&R and Licensee.
20. Governing Law. The interpretation, construction and enforcement of this
Agreement shall be governed by the laws of the State of Washington.
21. No Assignment. Licensee may not assign this Agreement without the written
consent of M&R which consent will not be unreasonably withheld.
LANDACORP
By: /s/ [SIGNATURE ILLEGIBLE]
-------------------------------------
Title: COO
----------------------------------
Date: August 24th, 1998
-----------------------------------
MILLIMAN & ROBERTSON, INC.
By: /s/ [SIGNATURE ILLEGIBLE]
-------------------------------------
Title: DIRECTOR
----------------------------------
Date: 9/1/98
-----------------------------------
<PAGE> 5
LICENSE AGREEMENT - SOFTWARE DEVELOPERS
THIS AGREEMENT, dated August 17, 1998, is between MILLIMAN &
ROBERTSON, INC. ("M&R") and LANDACORP. ("Licensee").
RECITALS
M&R and Licensee acknowledge the following:
A. M&R has developed the Healthcare Management Guidelines, Volumes 1, 2, 3, 4,
5, 6, and 7 (the "Guidelines") for use by qualified medical personnel in
managing healthcare delivery and workers compensation systems. M&R holds the
copyright of these Guidelines.
B. Licensee is developing software systems (the "Software") designed to utilize
or display the data contained in the Guidelines.
C. M&R is willing to grant Licensee the right to utilize the Guidelines and make
copies of the computer-readable copy of the Guidelines as part of the Software
subject to the terms and conditions set forth below.
AGREEMENTS
In consideration of the Recitals and the promises and agreements
set forth below, M&R and Licensee agree as follows:
1. Grant of License. M&R grants Licensee a non-exclusive, nontransferable
license to use the Guidelines during the term of the Agreement, including use
with Licensee's Software.
a. Licensee may make such copies of the Guidelines as are necessary for
Licensee to develop the Software.
b. M&R further grants Licensee the non-exclusive, nontransferable right
to make copies in computer-readable form of the Guidelines and to transfer such
copies of the Guidelines to customers who are healthcare or workers compensation
management organizations in the United States ("the Customers"), provided that
Licensee has verified with M&R that such customers have entered into a current
Customer License agreement and have paid the required license fee. The delivery
of any copy of the Guidelines shall not exceed the scope of the license granted
to the Customer in a Customer License Agreement. M&R shall have the sole and
absolute discretion to determine to whom it will grant a Customer License
Agreement.
c. Licensee may only use the Guidelines in connection with the
development, sale and licensing of the Software. Use by Licensee of the
Guidelines for the purposes of managed care services or health care delivery is
prohibited without a separate licensee agreement for the Guidelines permitting
such use.
d. This license agreement shall extend to such updates of the Guidelines
as M&R may create from time to time. M&R shall deliver such updates to Licensee
within a reasonable time after the release of the Update. Licensee agrees that
it will install the version of the Guidelines for which the client has a valid
license.
<PAGE> 6
License Agreement - Software Developers
Page 2
2. Unauthorized copying forbidden. Except as authorized in this agreement,
unauthorized copying or disclosure is strictly forbidden. Licensee may only use
the Guidelines at the installation site of Licensee and the Guidelines cannot be
used in any public computer system or computer based bulletin board system or be
otherwise made available or distributed to third parties. Any back-up or
archival copies shall include all notices required herein and no such notice
shall be deleted upon copying.
3 License Fee. No license fee shall be required under this agreement so long as
Licensee complies with its obligations hereunder.
4. Right to Review. M&R shall have the right to review and approve the manner in
which the Guidelines are utilized in the Software. M&R's approval will not be
unreasonably withheld. M&R shall also have the night to review and approve any
subsequent versions of the Software in which there is any material change in the
manner in which the Guidelines are utilized.
5. Title to Guidelines and Related Matters. Title to the Guidelines shall
remain with M&R. Licensee shall not remove, alter, cover or obfuscate any
copyright notices or other proprietary rights notices placed or embedded by M&R
on or in the Guidelines. Licensee shall have no right to use any trademark,
service mark, logo or tradename of M&R without M&R's prior express written
consent. Licensee shall make no representation that M&R has approved,
sanctioned, recommended or otherwise endorsed the Software.
6. Ownership of Software. Licensee shall retain exclusive ownership rights and
interests in the Software and M&R shall acquire no rights in the Software by
virtue of this agreement.
7. Confidentiality. Licensee acknowledges that the Guidelines have been
developed at great expense to M&R. Licensee agrees to take all commercially
reasonable precautions to prevent any unauthorized copying or use of the
Guidelines. To protect M&R's interest in maintaining the copyright of the
Guidelines, Licensee agrees that it will not permit any copies of the Guidelines
to be made unless the prior written consent of M&R is obtained or except as
authorized in this License Agreement. Licensee agrees not to market this
material in such a way as to impede M&R's proprietary interests in the material.
8. Limited Warranty. In the event of any defect in the magnetic medium
containing the Guidelines, M&R will replace the defective diskette(s) upon
request, which shall be the sole obligation of M&R and the exclusive remedy of
Licensee. M&R DISCLAIMS ALL OTHER EXPRESS AND ALL IMPLIED WARRANTIES INCLUDING
WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE OF LICENSEE.
9. Limited Warranty and Remedies re American Medical Association CPT Codes. The
Guidelines contain files of CPT codes that are copyrighted by the American
Medical Association (the "CPT FILE"). Licensee acknowledges that the CPT files
are provided "as is" and that the AMA makes no warranty of any kind, either
express or implied, including, but not limited to, the implied warranties of
merchantability and fitness for a particular purpose. The AMA bears no
responsibility for problems as to the quality or performance of the CPT files.
The AMA has no responsibility for any servicing, repair or correction if the CPT
files prove to be defective.
<PAGE> 7
License Agreement - Software Developers
Page 3
The American Medical Association disclaims responsibility for any
consequences attributable to or related to any uses, non-use or interpretation
of information contained in or not contained in the CPT file. The AMA shall not
be deemed to be engaged in the practice of medicine or dispensing medical
services.
Licensee acknowledges that in no event will AMA be liable to Licensee
for any damages, including any lost profits, lost savings or other incidental or
consequential damages arising out of possibility of such damages, or for any
claim by any other party.
AMA does not warrant that the data contained in the CPT file will meet
Licensee's requirements or that the operation of the CPT file will be
uninterrupted or without error. Licensee acknowledges that the CPT files have
not been developed according to Licensee's specification or otherwise
custom-made.
10. Government Data Rights Notice if Government Personnel Have Access. The
Software and documentation is provided with restricted rights. The Use,
Duplication, or Disclosure by the Government is subject to restrictions as set
forth in subdivision (c)(1)(ii) of the Rights in Technical Data and Computer
Software clause at 252.277-7013 or restricted rights clauses at 48 CFR 52.227-19
or 52.227-14, as applicable. Any applicable notices to preserve restricted
rights are incorporated herein by reference. Contractor/Manufacturer is Milliman
& Robertson, Inc. 1301 Fifth Avenue, Suite 3800, Seattle, Washington 98101-2605.
12. Indemnification and Hold Harmless. Licensee agrees to indemnify and hold
harmless M&R, its officers, employees and agents, from and against all loss,
damages, liability and expense incurred by reason of any claims, actions, suits
or governmental investigations or proceedings, brought against or involving them
or any of them (excluding claims or suits brought by Licensee), which relate to
or arise out of (1) changes or modifications to the Guidelines made by Licensee,
(2) representations or warranties made by Licensee which exceed that made in
paragraph 8 above, (3) failure by Licensee to accurately copy or reproduce the
Guidelines for any Customer, or (4) any breach of this agreement by Licensee.
13. Term of License Termination. The license to use the Guidelines granted
herein shall be perpetual, unless terminated pursuant to the provisions in this
paragraph.
a. M&R may terminate this license to use the Guidelines for any reason
upon 60 days written notice to Licensee.
b. Licensee may terminate this license agreement at any time upon
written notice to M&R and certification that Licensee has deleted or erased all
copies of the Guidelines in its possession, custody or control.
c. If Licensee breaches this agreement, and such breach remains uncured
for ten days after notice, the Agreement will terminate.
14. Post Termination. Upon termination of the license, Licensee shall
immediately return all copies of the Guidelines in its possession to M&R.
15. Liability Upon Termination. Neither party shall be liable to the other party
for damages, losses, costs or expenses of any kind or character whatsoever on
account of the termination of this Agreement, whether such damages, losses,
costs or expenses arise out of the distribution of the Guidelines or from the
loss of prospective sales or expenses incurred or investments made in connection
with the establishment, development or maintenance of Licensee's business.
<PAGE> 8
License Agreement - Software Developers
Page 4
16. No Transfer. Licensee agrees that it will not transfer the Guidelines or
assign its rights under this Agreement without the prior written consent of M&R,
which consent shall not be unreasonably withheld.
17. Injunctive Relief. The parties acknowledge and agree that damages would be
an inadequate remedy for M&R resulting from a breach by Licensee of its
obligations thereunder and that M&R shall be entitled to injunctive relief in
the event of such a breach, in addition to any other remedy at law or in equity
which may otherwise be available to M&R.
18. No Waiver. No waiver by one party of any breach by the other party shall be
valid unless in writing and no such waiver shall extend to any other breach.
19. Entire Agreement. This Agreement constitutes the entire agreement between
the parties relating to the subject matter hereof and shall supersede all prior
or contemporaneous written or oral understandings or agreements. This Agreement
may be amended only by a written document signed by duly authorized
representatives of M&R and Licensee.
20. Governing Law. The interpretation, construction and enforcement of this
Agreement shall be governed by the laws of the State of Washington.
21. No Assignment. Licensee may not assign this Agreement without the written
consent of M&R which consent will not be unreasonably withheld.
LANDACORP
By: /s/ [SIGNATURE ILLEGIBLE]
-------------------------------------
Title: COO
----------------------------------
Date: August 24th, 1998
-----------------------------------
MILLIMAN & ROBERTSON, INC.
By:
-------------------------------------
Title:
----------------------------------
Date:
-----------------------------------
<PAGE> 9
[MILLIMAN & ROBERTSON, INC. LETTERHEAD]
[HMG LOGO]
HMG PRICE LIST
Licensing
Each volume licensed includes a hardcover book, knowledgebase data file, and if
licensed, HMG or HSIM OnLine diskette(s). The following fee schedule is per
volume and applies to the initial license. The annual renewal fee is equal to
40% of M&R's then-current license fee and is due on the anniversary date of the
license.
The knowledgebase file is designed to embed into your healthcare management
system. The data within these knowledgebase files are structured to allow
convenience access to the Guidelines. We also have a list of software vendors
who have developed applications that incorporate the Guidelines. This list is
available upon request. THE KNOWLEDGEBASE FILES DO NOT ALLOW VIEWING OR
PRINTING OF THE GUIDELINES FROM THE DISKETTE.
For those customers who do not want to create a custom application for viewing
selected guidelines, we recommend purchasing the network version of HMG or HSIM
OnLine. The HMG or HSIM OnLine network installation program supports
installation of components on a server, on a local or network Windows client,
and on stand-alone systems.
-----------------------------------------------------
ALL PRICES ARE SUBJECT TO CHANGE WITHOUT PRIOR NOTICE
-----------------------------------------------------
Multiple Book
Order Discounts
<TABLE>
<CAPTION>
NUMBER OF
COPIES/VOLUME DISCOUNT/VOLUME
------------- ---------------
<S> <C>
Less than 5 0%
5 - 24 5%
25 - 49 10%
50 - 99 15%
100 - 199 20%
</TABLE>
HMG/HSIM Base Price List
<TABLE>
<CAPTION>
NETWORK
STANDARD HMG
PRODUCT FORMAT** ONLINE*** INTERNET
-------------------------------------------------------------- -------- --------- --------
<S> <C> <C> <C>
Vol. 1: Inpatient and Surgical Care $ 500 $ 750 $ 450
Vol. 2: Return-to-Work Planning 400 600 360
Vol. 3: Ambulatory Surgery Guidelines 400 600 360
Vol. 4: Case Management; Home Care 500 750 450
Vol. 5: Ambulatory, Primary, and Pharmaceutical Care 500 750 450
Vol. 6: Case Management; Recovery Facility Care 500 750 450
Vol. 7: Workers Compensation 400 600 360
Continuum of Care Package: V. 1, 4 & 6 1,250 1,875 1,125
Primary and Continuum of Care Package: V. 1, 4, 5 & 6 1,660 2,480 1,494
HSIM - Pediatrics+ 1,850 2,775 1,665
HSIM - Dental+ 250 375 225
Healthcare Companion+ 70 105 63
</TABLE>
---------------
** Standard Format applies to books or the knowledgebase file.
*** HMC OnLine applies to licensing arrangements only.
+ Available 3rd Quarter 1998.
----------------------------------------------------------------------
CALCULATING HGM/HSIM LICENSES:
Multiply the price of the desired product in the Base Price List by
the appropriate licensing factor from the Licensing Factors table.
Repeat for each product ordered.
----------------------------------------------------------------------
Licensing Factors
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF NEW CLAIMS/ NUMBER OF
MEMBERS STAFFED NUMBER OF MONTH CASE PRICING
(IN 1000s)* BEDS CLINICIANS (IN 1000s) MANAGERS FACTOR
--------------- ---------------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Less than 50 Less than 75 Less than 75 Less than 5 Less than 5 20
50 - 99 75 - 149 75 - 124 5 - 9 5 - 9 25
100 - 149 150 - 199 125 - 159 10 - 14 10 - 14 35
150 - 199 200 - 299 160 - 199 15 - 19 15 - 19 40
200 - 299 300 - 399 200 - 239 20 - 29 20 - 29 50
300 - 399 400 - 549 240 - 269 30 - 39 30 - 39 62
400 - 499 550 - 699 270 - 299 40 - 49 40 - 49 75
500 - 749 700 - 999 300 - 374 50 - 74 50 - 74 90
750 - 999 1,000 - 1,249 375 - 449 75 - 99 75 - 99 110
1,000 - 1,249 1,250 - 1,749 450 - 524 100 - 124 100 - 124 130
1,250 - 1,499 1,750 - 1,999 525 - 599 125 - 149 125 - 149 150
1,500 - 1,749 2,000 - 2,249 600 - 674 150 - 174 150 - 174 185
1,750 - 1,999 2,250 - 2,749 675 - 749 175 - 199 175 - 199 180
2,000 + 2,750 + 750 + 200 + 200 + 180 + excess
factor
--------------- ---------------- -------------- -------------- -------------- ------------
40/million .04/bed in .333/clinician 40/1000 40/individual
members in excess of in excess monthly claims case managers
excess of 2,750 beds of 750 in excess in excess
2 million of 200 of 200
</TABLE>
<PAGE> 10
[MILLIMAN & ROBERTSON, INC. LETTERHEAD]
[HMG LOGO] HMG PRICE LIST
Licensing
Each volume licensed includes a hardcover book, knowledgebase data file, and if
licensed, HMG or HSIM OnLine diskette(s). The following fee schedule is per
volume and applies to the initial license. The annual renewal fee is equal to
40% of M&R's then-current license fee and is due on the anniversary date of the
license.
The knowledgebase file is designed to embed into your healthcare management
system. The data within these knowledgebase files are structured to allow
convenient access to the Guidelines. We also have a list of software vendors who
have developed applications that incorporate the Guidelines. This list is
available upon request. THE KNOWLEDGEBASE FILES DO NOT ALLOW VIEWING OR PRINTING
OF THE GUIDELINES FROM THE DISKETTE.
For those customers who do not want to create a custom application for viewing
selected guidelines, we recommend purchasing the network version of HMG or HSIM
OnLine. The HMG or HSIM OnLine network installation program supports
installation of components on a server, on a local or network Windows client,
and on stand-alone systems.
ALL PRICES ARE SUBJECT TO CHANGE WITHOUT PRIOR NOTICE
Multiple Book Order Discounts
<TABLE>
<CAPTION>
NUMBER OF
COPIES/VOLUME DISCOUNT/VOLUME
------------- ---------------
<S> <C>
<5 0%
5 - 24 5%
25 - 49 10%
50 - 99 15%
100 - 199 20%
</TABLE>
HMG/HSIM Base Price List
<TABLE>
<CAPTION>
NETWORK
STANDARD HMG
PRODUCT FORMAT** ONLINE*** INTERNET
------- -------- --------- --------
<S> <C> <C> <C>
Vol. 1: Inpatient and Surgical Care $ 500 $ 750 $ 450
Vol. 2: Return-to-Work Planning 400 600 360
Vol. 3: Ambulatory Surgery Guidelines 400 600 360
Vol. 4: Case Management Home Care 500 750 450
Vol. 5: Ambulatory, Primary, and Pharmaceutical Care 500 750 450
Vol. 6: Case Management Recovery Facility Care 500 750 450
Vol. 7: Workers Compensation 400 600 360
Continuum of Care Package: V. 1, 4 & 6 1,250 1,675 1,125
Primary and Continuum of Care Package: V. 1, 4, 5 & 6 1,660 2,490 1,494
HSIM - Pediatrics(dagger sign) 1,850 2,775 1,665
HSIM - Dental(dagger sign) 250 375 225
Healthcare Companion(dagger sign) 70 105 63
</TABLE>
** Standard Format applies to books or the knowledgebase file.
***HMG OnLine applies to licensing arrangements only.
(dagger sign) Available 3rd Quarter 1998.
CALCULATING HMG/HSIM LICENSES:
Multiply the price of the desired product in the Base Price List by
the appropriate licensing factor from the Licensing Factors table.
Repeat for each product ordered.
Licensing Factors
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF NEW CLAIMS/ NUMBER OF
MEMBERS STAFFED NUMBER OF MONTH CASE PRICING
(IN 1,000S)* BEDS CLINICIANS (IN 1,000S) MANAGERS FACTOR
------------ ----------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
<50 <75 <75 <5 <5 20
50-99 75-149 75-124 5-9 5-9 25
100-149 150-199 125-159 10-14 10-14 35
150-199 200-299 160-199 15-19 15-19 40
200-299 300-399 200-239 20-29 20-29 50
300-399 400-549 240-269 30-39 30-39 62
400-499 550-699 270-299 40-49 40-49 75
500-749 700-999 300-374 50-74 50-74 90
750-999 1,000-1,249 375-449 75-99 75-99 110
1,000-1,249 1,250-1,749 450-524 100-124 100-124 130
1,250-1,499 1,750-1,999 525-599 125-149 125-149 150
1,500-1,749 2,000-2,249 600-674 150-174 150-174 165
1,750-1,999 2,250-2,749 675-749 175-199 175-199 180
2,000+ 2,750+ 750+ 200+ 200+ 180+ excess
factor
40/million .04/bed in .333/clin- 40/1000 40/indivi-
members in excess of ician in monthly case managers
excess of 2,750 beds excess of claims in in excess
2 million 750 excess of of 200
200
</TABLE>
<PAGE> 11
[MILLIMAN & ROBERTSON, INC. LETTERHEAD]
April 2, 1998
Dear Clients and Friends:
HMG PRICING AND LICENSING CHANGES
Enclosed is our new price list, effective May 1, 1998, for the Healthcare
Management Guidelines(TM) (HMGs). Our number one objective, like yours, is to
provide a quality product to clients at a reasonable price.
The extensive investment M&R makes to maintain a high quality product combined
with our effort to annually update the Guidelines creates a need to increase
prices. Therefore, the licensing price schedule and the price for individual
volumes for many of our publications will increase. Some clients, however, will
actually see a net decrease in cost depending on which volumes are purchased or
licensed.
The HMGs are a good value as measured by our clients' ability to reduce the
cost of healthcare. Many clients have seen a return on their HMG and related
infrastructure investment of more than 5 to 10 times the amount invested. Here
is an example that helps illustrate the potential savings when appropriately
implementing the Guidelines:
The first year license price for a 100,000 member HMO using Volumes 1, 4,
and 6 is $43,750. The net financial impact of reducing the length of stay
for a patient for one day is about $1,000. A reduction of 25-bed days/1000
for the plan over one year would save $2.5 million or about 60 times the
cost of the initial license. Most of our clients save far more than 25-bed
days/1000 in their first year and enjoy these savings over many years. Even
considering the additional infrastructure sometimes required to implement
the Guidelines, such as additional case managers, the value is far greater
than its cost.
Highlights of the new HMG pricing:
BOOKS
- We've introduced variable pricing per publication. For example, the content
and extent of Volume 1 is different from that in Volume 3, so the volumes
are priced to reflect this.
- We now have the capability to provide Internet-based access to the HMGs.
Internet subscriptions are discounted 10% from hardcover book prices.
- The best healthcare management strategy is to maximize one's health status
throughout the healthcare continuum. We are committed to this concept and
want to encourage use of those volumes that represent the core of this
concept. We now have a package price for purchasing a set containing
<PAGE> 12
HMG Pricing
April 2, 1998
Page 2
Volumes 1, 4, 5, and 6. Previously, we offered savings for purchasing the
Continuum of Care Package (Volumes 1, 4, and 6). Now you can save even more
by purchasing the Primary and Continuum of Care Package which includes
Volumes 1, 4, 6, and Volume 5, Ambulatory, Primary, and Pharmaceutical
Care. The Volume 5 diskette will, for the time being, not be integrated
with Volumes 1, 4, and 6 until technical issues are resolved. Nevertheless,
the package offers a 17% discount to purchase all four volumes.
LICENSES
- We have moved to a 12-month, annual subscription for licenses, thereby
eliminating the need to relicense when a new edition is released. When new
editions are released during the 12-month license you will automatically
receive the new edition at no additional license fee. In some cases this
could mean you would receive more than one edition during the 12-month
period. Licenses that are not renewed within 30-days of the renewal date
will expire and you must cease use of the HMG/HSIM products.
- The renewal fee remains at 40% of the current standard license fee. Since
NCQA requires current Guideline use, the annual renewal helps you meet
those requirements.
- We have eliminated the cumbersome, staggered renewal dates on each product
licensed. You will now have one simple-to-implement renewal date for all
licensed HMG/HSIM products. For example:
You have licensed Volume 1 with an expiration date of 8/31/98 and also
licensed Volume 5 containing an expiration date of 11/30/98. Sixty
days prior to 8/31/98 we will send you an invoice for 40% of the
standard licensing fee for Volume 1 plus a prorated amount (in this
case 9/12ths) of the 40% renewal fee for Volume 5. The new renewal
date for both Volumes 1 and 5 becomes 9/1/99.
- We are introducing a new service: complimentary technical consulting. In
addition to the 10% training credit currently included with your license,
you will receive the equivalent of 5% of your license fee each contract
year for telephone- or email-based technical consulting regarding our
software documentation. This consulting is designed to help you integrate
the Guidelines into your healthcare management system and is provided
exclusively by the HMG/HSIM Information Technology group.
If you have any questions about our new pricing or licensing process, please
call our Client Services Department toll-free at 888/HMG-HSIM (888-464-4746).
We appreciate your support of the Healthcare Management Guidelines and welcome
your suggestions on making the publications even more valuable to you.
Sincerely,
THE HMG/HSIM DEPARTMENT
Enclosure
<PAGE> 13
[MILLIMAN & ROBERTSON, INC. LETTERHEAD]
November 11, 1997
Ms. Joni Hill
Contract Administration
LANDACORP
1072 Marauder, Suite A
Chico, California 95973
Dear Joni:
Enclosed is your copy of the signed license agreement for the Healthcare
Management Guidelines(TM), Volumes 1, 3, 4, and 6.
I look forward to doing more business with you in the future.
Sincerely,
/s/ KATHY M. FARR
Kathy M. Farr
HMG Assistant
Enclosure
<PAGE> 14
LICENSE TO USE ELECTRONIC VERSION OF MILLIMAN & ROBERTSON, INC.
HEALTHCARE MANAGEMENT GUIDELINES(TM)
1. Milliman & Robertson, Inc. (M&R) grants the Licensee named in the
accompanying invoice a license to use the electronic version of the
Healthcare Management Guidelines(TM), (Volume 3, 8/97) for the number of
computers, users, or members set forth in such invoice.
2. Licensee is advised that the electronic version of the Guidelines, just
like the paper version, is protected by U.S. and international copyright
law and contains copyrighted material of third parties provided under
license. Unauthorized copying or disclosure is strictly forbidden. Licensee
may only use the Guidelines at the installation site of Licensee and the
Guidelines cannot be used in any public computer system or computer based
bulletin board system or be otherwise made available or distributed to
third parties. Installation site shall be all the Licensees' locations
where the Guidelines will be used. Any back-up or archival copies shall
include all notices required herein and no such notice shall be deleted
upon copying.
3. In the event of any defect in the magnetic medium of the diskette
containing the Guidelines, M&R will replace the defective diskette upon
request. The foregoing shall be the sole obligation of M&R and the
exclusive remedy of Licensee for any breach. M&R DISCLAIMS ALL OTHER
EXPRESS AND ALL IMPLIED WARRANTIES INCLUDING WITHOUT LIMITATION THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE OF
LICENSEE.
4. Limited Warranty and Remedies re American Medical Association CPT Codes.
The Guidelines contain files of CPT codes which are copyrighted by the
American Medical Association (the "CPT file"). Licensee acknowledges that
the CPT file is provided "as is" and that the AMA makes no warranty of any
kind, either express or implied, including, but not limited to, the implied
warranties of merchantability and fitness for a particular purpose. The AMA
bears no responsibility for problems as to the quality or performance of
the CPT file. The AMA has no responsibility for any servicing, repair or
correction if the CPT file proves to be defective. The American Medical
Association disclaims responsibility for any consequences attributable to
or related to any uses, non-use or interpretation of information contained
in or not contained in the CPT file. The AMA shall not be deemed to be
engaged in the practice of medicine or dispensing medical services.
Licensee acknowledges that in no event will AMA be liable to Licensee for
any damages, including any lost profits, lost savings or the incidental or
consequential damages arising out of possibility of such damages, or for
any claim by any other party.
AMA does not warrant that the data contained in the CPT file will meet
Licensee's requirements or that the operation of the CPT file will be
uninterrupted or without error. Licensee acknowledges that the CPT file has
not been developed according to Licensee's specification or otherwise
custom-made.
5. U.S. Government Rights. This product includes CPT which is commercial
technical data and/or computer data bases and/or commercial computer
software and/or commercial computer software documentation, as applicable
which were developed exclusively at private expense by the American Medical
Association, 515 N. State Street, Chicago Illinois, 60610. U.S. Government
rights to use, modify, reproduce, release, perform, display, or disclose
these technical data and/or computer data bases and/or computer software
and/or computer software documentation are subject to the limited rights
restrictions of DFARS 252.227-7015(b)(2) (June
<PAGE> 15
License to Use Electronic Version of
Milliman & Robertson, Inc. Healthcare Management Guidelines(TM)
Page 2
1995) and/or subject to the restrictions of DFARS 227.7202-1(a) (June 1995)
and DFARS 227.7202-3(a) (June 1995), as applicable for U.S. Department of
Defense procurements and the limited rights restrictions of FAR 52.227-14
(June 1987) and/or subject to the restricted rights provisions of FAR
52.227-14 (June 1987) and FAR 52.227-19 (June 1987), as applicable, and any
applicable agency FAR Supplements, for non-Department of Defense Federal
procurements.
6. If License breaches this agreement, and such breach remains uncured for
thirty days after notice, the Agreement will terminate and Licensee must
return or destroy all copies of the Guidelines.
MILLIMAN & ROBERTSON, INC. LANDACORP
By: /s/ DAVID AXENE By: /s/ STEVE KAY
--------------------------- ---------------------------
Date: 11/6//97 Date: October 31, 1997
------------------------- -------------------------
<PAGE> 16
ADDENDUM TO LICENSE TO USE ELECTRONIC VERSION OF
MILLIMAN & ROBERTSON, INC. HEALTHCARE MANAGEMENT GUIDELINES(TM)
1. Expanded License. Notwithstanding the provisions of the License to the
contrary, LANDACORP shall have the right to reproduce and distribute the
electronic version of the Healthcare Management Guidelines ("Product") to its
customers ("End Users"), provided that LANDACORP previously has been informed
by Milliman & Robertson, Inc. ("M&R") that such End User has entered into a
standard Product license with M&R. M&R shall have sole discretion to determine
to whom it will license its Healthcare Management Guidelines and LANDACORP
shall have no right to require that any particular customer receive a license
from M&R. Additionally, LANDACORP may develop and distribute tools to End Users
to provide for more efficient use of the Product.
2. Ownership of Work Product. M&R has exclusive ownership rights and
copyright interest in the Product or has sufficient licensee right to license
it to LANDACORP and End Users. LANDACORP has exclusive ownership rights and
copyright interests in any software tools developed by or for LANDACORP for the
purpose stated in Paragraph 1 above. Each party will indemnify the other
against any liability or expense arising from claims by End Users or other
third parties pertaining to these representations.
3. Representations by LANDACORP. LANDACORP shall make no warranties or
representations with respect to the Healthcare Management Guidelines and shall
not represent that M&R has approved or endorsed the Product in any way.
LANDACORP shall not use the trademarks or service marks of M&R except in a
manner which has been authorized by M&R.
4. Term and Termination. The License shall continue until terminated by
mutual agreement or by a party after the other party does not correct a
material breach of the License within thirty (30) days after receiving written
notice from the party of the breach.
5. Assignment. The License may not be assigned without M&R's consent,
which consent shall not be unreasonably withheld.
6. Extent of Addendum. Except as modified herein, the terms and
conditions of the License are unaffected by this Amendment. Any further
modifications must be in writing and signed by authorized representatives of
M&R and LANDACORP.
MILLIMAN & ROBERTSON, INC. LANDACORP
By: /s/ DAVID AXENE By: /s/ STEVE KAY
--------------------------- ---------------------------
David Axene Steve Kay
--------------------------- ---------------------------
(Printed Name) (Printed Name)
Title: Principal Title: COO
------------------------ --------------------
Date: 11/6/97 Date: October 31, 1997
------------------------- ---------------------
<PAGE> 17
LICENSE TO USE ELECTRONIC VERSION OF MILLIMAN & ROBERTSON, INC.
HEALTHCARE MANAGEMENT GUIDELINES(TM)
1. Milliman & Robertson, Inc. (M&R) grants the Licensee named in the
accompanying invoice a license to use the electronic version of the
Healthcare Management Guidelines(TM), (VOLUME 1, 11/96; AND VOLUME 6,
11/96; VOLUME 4, 12/96 AND VOLUME 6, 11/96) for the number of computers,
users, or members set forth in such invoice.
2. Licensee is advised that the electronic version of the Guidelines, just
like the paper version, is protected by U.S. and international copyright
law and contains copyrighted material of third parties provided under
license. Unauthorized copying or disclosure is strictly forbidden.
Licensee may only use the Guidelines at the installation site of Licensee
and the Guidelines cannot be used in any public computer system or
computer based bulletin board system or be otherwise made available or
distributed to third parties. Installation site shall be all the
Licensees' locations where the Guidelines will be used. Any back-up or
archival copies shall include all notices required herein and no such
notice shall be deleted, upon copying.
3. In the event of any defect in the magnetic medium of the diskette
containing the Guidelines, M&R will replace the defective diskette upon
request. The foregoing shall be the sole obligation of M&R and the
exclusive remedy of Licensee for any breach. M&R DISCLAIMS ALL OTHER
EXPRESS AND ALL IMPLIED WARRANTIES INCLUDING WITHOUT LIMITATION THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE
OF LICENSEE.
4. Limited Warranty and Remedies re American Medical Association CPT codes.
The Guidelines contain files of CPT codes which are copyrighted by the
American Medical Association (the "CPT file"). Licensee acknowledges that
the CPT file is provided "as is" and that the AMA makes no warranty of any
kind, either express or implied, including, but not limited to, the
implied warranties of merchantability and fitness for a particular
purpose. The AMA bears no responsibility for problems as to the quality or
performance of the CPT file. The AMA has no responsibility for any
servicing, repair or correction if the CPT file proves to be defective.
The American Medical Association disclaims responsibility for any
consequences attributable to or related to any uses, non-use or
interpretation of information contained in or not contained in the CPT
file. The AMA shall not be deemed to be engaged in the practice of
medicine or dispensing medical services.
Licensee acknowledges that in no event will AMA be liable to Licensee for
any damages, including any lost profits, lost savings or the incidental or
consequential damages arising out of possibility of such damages, or for
any claim by any other party.
AMA does not warrant that the data contained in the CPT file will meet
Licensee's requirements or that the operation of the CPT file will be
uninterrupted or without error. Licensee acknowledges that the CPT file
has not been developed according to Licensee's specification or otherwise
custom-made.
5. U.S. Government Rights. This product includes CPT which is commercial
technical data and/or computer data bases and/or commercial computer
software and/or commercial computer software documentation, as applicable
which were developed exclusively at private expense by the American
Medical Association, 515 N. State Street, Chicago, Illinois, 60610. U.S.
Government rights to use, modify, reproduce, release, perform, display, or
disclose these technical data and/or computer data bases and/or computer
software and/or computer software
<PAGE> 18
License to Use Electronic version of
Milliman & Robertson, Inc. Healthcare Management Guidelines[TM]
Page 2
documentation are subject to the limited rights restrictions of DFARS
252.227-7015(b)(2)(June 1995) and/or subject to the restrictions of DFARS
227.7202-1(a)(June 1995) and DFARS 227.7202-3(a)(June 1995), as applicable
for U.S. Department of Defense procurements and the limited rights
restrictions of FAR 52.227-14 (June 1987) and/or subject to the restricted
rights provisions of FAR 52.227-14 (June 1987) and FAR 52.227-19 (June
1987), as applicable, and any applicable agency FAR Supplements, for
non-Department of Defense Federal procurements.
6. If Licensee breaches this agreement, and such breach remains uncured for
thirty days after notice, the Agreement will terminate and Licensee must
return or destroy all copies of the Guidelines.
7. This agreement shall have a term of one year from the date of execution.
The initial term may be extended for additional one-year terms by payment
of an additional license fee at M&R's then current fee schedule. This
agreement shall also terminate if Licensee fails to comply with the terms
of this agreement and fails to cure such default within 15 days of notice
from M&R. Upon termination, Licensee shall destroy or return to M&R all
copies of the Guidelines and shall have no further right to copy or use the
Guidelines in any form.
MILLIMAN & ROBERTSON, INC. LANDACORP
By: /s/ [Signature Illegible] By: [Signature Illegible]
----------------------------- ---------------------------
Date: 10/30/97 Date: 10/7/97
---------------------------- -------------------------
<PAGE> 19
ADDENDUM TO LICENSE TO USE ELECTRONIC VERSION OF
MILLIMAN & ROBERTSON, INC. HEALTHCARE MANAGEMENT GUIDELINES(TM)
1. Expanded License. Notwithstanding the provisions of the License to
the contrary, LANDACORP shall have the right to reproduce and distribute the
electronic version of the Healthcare Management Guidelines ("Product") to its
customers ("End Users"), provided that LANDACORP previously has been informed
by Milliman & Robertson, Inc. ("M&R") that such End User has entered into a
standard Product license with M&R. M&R shall have sole discretion to determine
to whom it will license its Healthcare Management Guidelines and LANDACORP
shall have no right to require that any particular customer receive a license
from M&R. Additionally, LANDACORP may develop and distribute tools to End Users
to provide for more efficient use of the Product.
2. Ownership of Work Product. M&R has exclusive ownership rights and
copyright interest in the Product or has sufficient licensee right to license
it to LANDACORP and End Users. LANDACORP has exclusive ownership rights and
copyright interests in any software tools developed by or for LANDACORP for the
purpose stated in Paragraph 1 above. Each party will indemnify the other
against any liability or expense arising from claims by End Users or other
third parties pertaining to these representations.
3. Representations by LANDACORP. LANDACORP shall make no warranties or
representations with respect to the Healthcare Management Guidelines and shall
not represent that M&R has approved or endorsed the Product in any way.
LANDACORP shall not use the trademarks or service marks of M&R except in a
manner which has been authorized by M&R.
4. Term and Termination. The License shall continue until terminated
by mutual agreement or by a party after the other party does not correct a
material breach of the License within thirty (30) days after receiving written
notice from the party of the breach.
5. Assignment. The License may not be assigned without M&R's consent,
which consent shall not be unreasonably withheld.
6. Extent of Addendum. Except as modified herein, the terms and
conditions of the License are unaffected by this Amendment. Any further
modifications must be in writing and signed by authorized representatives of
M&R and LANDACORP.
MILLIMAN & ROBERTSON, INC. LANDACORP
By: /s/ DAVID AXENE By: /s/ S. P. KAY
-------------------------------- --------------------------------
DAVID AXENE S.P. KAY
-------------------------------- --------------------------------
(Printed Name) (Printed Name)
Title: Principal Title: C.O.O.
----------------------------- -----------------------------
Date: 10/30/97 Date: 10/7/97
------------------------------ ------------------------------
<PAGE> 20
LICENSE TO USE ELECTRONIC VERSION OF MILLIMAN & ROBERTSON, INC.
HEALTHCARE MANAGEMENT GUIDELINES(TM)
1. Milliman & Robertson, Inc. (M&R) grants the Licensee named in the
accompanying invoice a license to use the electronic version of the
Healthcare Management Guidelines(TM), (VOLUME 3, 8/97) for the number of
computers, users, or members set forth in such invoice.
2. Licensee is advised that the electronic version of the Guidelines, just
like the paper version, is protected by U.S. and international copyright
law and contains copyrighted material of third parties provided under
license. Unauthorized copying or disclosure is strictly forbidden.
Licensee may only use the Guidelines at the installation site of Licensee
and the Guidelines cannot be used in any public computer system or
computer based bulletin board system or be otherwise made available or
distributed to third parties. Installation site shall be all the
Licensees' locations where the Guidelines will be used. Any back-up or
archival copies shall include all invoices required herein and no such
notice shall be deleted upon copying.
3. In the event of any defect in the magnetic medium of the diskette
containing the Guidelines, M&R will replace the defective diskette upon
request. The foregoing shall be the sole obligation of M&R ad the
exclusive remedy of Licensee for any breach. M&R DISCLAIMS ALL OTHER
EXPRESS, AND ALL IMPLIED WARRANTIES INCLUDING WITHOUT LIMITATION THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE
OF LICENSEE.
4. Limited Warranty and Remedies re American Medical Association CPT Codes.
The Guidelines contain files of CPT codes which are copyrighted by the
American Medical Association (the "CPT file"). Licensee acknowledges that
the CPT file is provided "as is" and that the AMA makes no warranty of any
kind, either express or implied, including, but not limited to, the
implied, warranties of merchantability and fitness for a particular
purpose. The AMA bears no responsibility for problems as to the quality or
performance of the CPT file. The AMA has no responsibility for any
servicing, repair or correction if the CPT file proves to be defective.
The American Medical Association disclaims responsibility for any
consequences attributable to or related to any uses, non-use or
interpretation of information contained in or not contained in the CPT
file. The AMA shall not be deemed to be engaged in the practice of medicine
or dispensing medical services.
Licensee acknowledges that in no event will AMA be liable to Licensee for
any damages, including any lost profits, lost savings or the incidental or
consequential damages arising out of possibility of such damages, or for
any claim by any other party.
AMA does not warrant that the data contained in the CPT file will meet
Licensee's requirements or that the operation of the CPT file will be
uninterrupted or without error. Licensee acknowledges that the CPT file
has not been developed according to Licensee's specifications or otherwise
custom-made.
5. U.S. Government Rights. This product includes CPT which is commercial
technical data and/or computer data bases and/or commercial computer
software and/or commercial computer software documentation, as applicable
which were developed exclusively at private expense by the American
Medical Association, 515 N. State Street, Chicago, Illinois, 60610. U.S.
Government rights to use, modify, reproduce, release, perform, display, or
disclose these technical data and/or computer data bases and/or computer
software and/or computer software documentation are subject to the limited
rights restrictions of DFARS 252.227-7015(b)(2) (June
<PAGE> 21
License to Use Electronic version of
Milliman & Robertson, Inc. Healthcare Management Guidelines(TM)
Page 2
1995) and/or subject to the restrictions of DFARS 227-7202-1(a) (June 1995)
and DFARS 227.7202-3(a) (June 1995), as applicable for U.S. Department of
Defense procurements and the limited rights restrictions of FAR 52.227-14
(June 1987) and/or subject to the restricted rights provisions of FAR
52.227-14 (June 1987) and FAR 52.227-19 (June 1987), as applicable, and any
applicable agency FAR Supplements, for non-Department of Defense Federal
procurements.
6. If Licensee breaches this agreement, and such breach remains uncured for
thirty days after notice, the Agreement will terminate and Licensee must
return or destroy all copies of the Guidelines.
MILLIMAN & ROBERTSON, INC. LANDACORP
By: /s/ STEVE KAY By: /s/ STEVE KAY
------------------------- -------------------------
Date: Date: October 31, 1997
----------------------- -----------------------
<PAGE> 22
ADDENDUM TO LICENSE TO USE ELECTRONIC VERSION OF
MILLIMAN & ROBERTSON, INC. HEALTHCARE MANAGEMENT GUIDELINES(TM)
1. Expanded License. Notwithstanding the provisions of the License to
the contrary, LANDACORP shall have the right to reproduce and distribute the
electronic version of the Healthcare Management Guidelines ("Product") to its
customers ("End Users"), provided that LANDACORP previously has been informed
by Milliman & Robertson, Inc. ("M&R") that such End User has entered into a
standard Product license with M&R. M&R shall have sole discretion to determine
to whom it will license its Healthcare Management Guidelines and LANDACORP
shall have no right to require that any particular customer receive a license
from M&R. Additionally, LANDACORP may develop and distribute tools to End Users
to provide for more efficient use of the Product.
2. Ownership of Work Product. M&R has exclusive ownership rights and
copyright interest in the Product or has sufficient licensee right to license
it to LANDACORP and End Users. LANDACORP has exclusive ownership rights and
copyright interests in any software tools developed by or for LANDACORP for the
purpose stated in Paragraph 1 above. Each party will indemnify the other
against any liability or expense arising from claims by End Users or other
third parties pertaining to these representations.
3. Representations by LANDACORP. LANDACORP shall make no warranties or
representations with respect to the Healthcare Management Guidelines and shall
not represent that M&R has approved or endorsed the Product in any way.
LANDACORP shall not use the trademarks or service marks of M&R except in a
manner which has been authorized by M&R.
4. Term and Termination. The License shall continue until terminated by
mutual agreement or by a party after the other party does not correct a
material breach of the License within thirty (30) days after receiving written
notice from the party of the breach.
5. Assignment. The License may not be assigned without M&R's consent,
which consent shall not be unreasonably withheld.
6. Extent of Addendum. Except as modified herein, the terms and
conditions of the License are unaffected by this Amendment. Any further
modifications must be in writing and signed by authorized representatives of
M&R and LANDACORP.
MILLIMAN & ROBERTSON, INC. LANDACORP
By: By: /s/ STEVE KAY
------------------------- -------------------------
Steve Kay
------------------------- -------------------------
(Printed Name) (Printed Name)
Title: Title: COO
----------------------- ----------------------
Date: Date: October 31, 1997
----------------------- -----------------------
<PAGE> 23
LICENSE TO USE ELECTRONIC VERSION OF MILLIMAN & ROBERTSON, INC.
HEALTHCARE MANAGEMENT GUIDELINES[TM]
1. Milliman & Robertson, Inc. (M&R) grants the Licensee named in the
accompanying invoice a license to use the electronic version of the
Healthcare Management Guidelines[TM], (VOLUME 1, 11/96; VOLUME 4, 12,96 and
VOLUME 6, 11/96) for the number of computers, users or members set forth in
such invoice.
2. Licensee is advised that the electronic version of the Guidelines, just
like the paper version, is protected by U.S. and international copyright
law and contains copyrighted material of third parties provided under
license. Unauthorized copying or disclosure is strictly forbidden. Licensee
may only use the Guidelines at the installation site of Licensee and the
Guidelines cannot be used in any public computer system or computer based
bulletin board system or be otherwise made available or distributed to
third parties. Installation site shall be all the Licensees' locations
where the Guidelines will be used. Any back-up or archival copies shall
include all notices required herein and no such notice shall be deleted
upon copying.
3. In the event of any defect in the magnetic medium of the diskette
containing the Guidelines M&R will replace the defective diskette upon
request. The foregoing shall be the sole obligation of M&R and the
exclusive remedy of Licensee for any breach. M&R DISCLAIMS ALL OTHER
EXPRESS AND ALL IMPLIED WARRANTIES INCLUDING WITHOUT LIMITATION THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE OF
LICENSEE.
4. Limited Warranty and Remedies re American Medical Association CPT Codes.
The Guidelines contain files of CPT codes which are copyrighted by the
American Medical Association (the "CPT file"). Licensee acknowledges that
the CPT file is provided "as is" and that the AMA makes no warranty of any
kind, either express or implied, including, but not limited to the implied
warranties of merchantability and fitness for a particular purpose. The AMA
bears no responsibility for problems as to the quality or performance of
the CPT file. The AMA has no responsibility for any servicing, repair or
correction if the CPT file proves to be defective. The American Medical
Association disclaims responsibility for any consequences attributable to
or related to any uses, non-use or interpretation of information contained
in or not contained in the CPT file. The AMA shall not be deemed to be
engaged in the practice of medicine or dispensing medical services.
Licensee acknowledges that in no event will AMA be liable to Licensee for
any damages, including any lost profits, lost savings or the incidental or
consequental damages arising out of possibility of such damages, or for any
claim by any other party.
AMA does not warrant that the data contained in the CPT file will meet
Licensee's requirements or that the operation of the CPT file will be
uninterrupted or without error. Licensee acknowledges that the CPT file has
not been developed according to Licensee's specifications or otherwise
custom-made.
5. U.S. Government Rights. This product includes CPT which is commercial
technical data and/or computer data bases and/or commercial computer
software and/or commercial computer software documentation, as applicable
which were developed exclusively at private expense by the American Medical
Association, 515 N. State Street, Chicago Illinois, 60610. U.S. Government
rights to use, modify, reproduce, release, perform, display, or disclose
these technical data and/or computer data bases and/or computer software
and/or computer software
<PAGE> 24
ADDENDUM TO LICENSE TO USE ELECTRONIC VERSION OF
MILLIMAN & ROBERTSON, INC. HEALTHCARE MANAGEMENT GUIDELINES(TM)
1. Expanded License. Notwithstanding the provisions of the License to the
contrary, LANDACORP shall have the right to reproduce and distribute the
electronic version of the Healthcare Management Guidelines ("Product") to its
customers ("End Users"), provided that LANDACORP previously has been informed
by Milliman & Robertson, Inc. ("M&R") that such End User has entered into a
standard Product license with M&R. M&R shall have sole discretion to determine
to whom it will license its Healthcare Management Guidelines and LANDACORP
shall have no right to require that any particular customer receive a license
from M&R. Additionally, LANDACORP may develop and distribute tools to End Users
to provide for more efficient use of the Product.
2. Ownership of Work Product. M&R has exclusive ownership rights and
copyright interest in the Product or has sufficient licensee right to license
it to LANDACORP and End Users. LANDACORP has exclusive ownership rights and
copyright interests in any software tools developed by or for LANDACORP for the
purpose stated in Paragraph 1 above. Each party will indemnify the other
against any liability or expense arising from claims by End Users or other
third parties pertaining to these representations.
3. Representations by LANDACORP. LANDACORP shall make no warranties or
representations with respect to the Healthcare Management Guidelines and shall
not represent that M&R has approved or endorsed the Product in any way.
LANDACORP shall not use the trademarks or service marks of M&R except in a
manner which has been authorized by M&R.
4. Term and Termination. The License shall continue until terminated by
mutual agreement or by a party after the other party does not correct a
material breach of the License within thirty (30) days after receiving written
notice from the party of the breach.
5. Assignment. The License may not be assigned without M&R's consent,
which consent shall not be unreasonably withheld.
6. Extent of Addendum. Except as modified herein, the terms and
conditions of the License are unaffected by this Amendment. Any further
modifications must be in writing and signed by authorized representatives of
M&R and LANDACORP.
MILLIMAN & ROBERTSON, INC. LANDACORP
By: By: /s/ S. P. KAY
--------------------------- ---------------------------
S. P. Kay
--------------------------- ---------------------------
(Printed Name) (Printed Name)
Title: Title: C.O.O.
------------------------ --------------------
Date: Date: 10/7/97
------------------------- ---------------------
<PAGE> 25
License to Use Electronic Version of
Milliman & Robertson, Inc. Healthcare Management Guidelines(TM)
Page 2
documentation are subject to the limited rights restrictions of DFARS
252.227-7015(b)(2) (June 1995) and/or subject to the restrictions of DFARS
227.7202-1(a)(June 1995) and DFARS 227.7202-3(a)(June 1995), as applicable
for U.S. Department of Defense procurements and the limited rights
restrictions of FAR 52.227-14 (June 1987) and/or subject to the restricted
rights provisions of FAR 52.227-14 (June 1987) and FAR 52.227-19 (June 1987),
as applicable, and any applicable agency FAR Supplements, for non-Department
of Defense Federal procurements.
6. If Licensee breaches this agreement, and such breach remains uncured for
thirty days after notice, the Agreement will terminate and Licensee must
return or destroy all copies of the Guidelines.
7. This agreement shall have a term of one-year from the date of execution. The
initial term may be extended for additional one-year terms by payment of an
additional license fee at M&R's then current fee schedule. This agreement
shall also terminate if Licensee fails to comply with the terms of this
agreement and fails to cure such default within 15 days of notice from M&R.
Upon termination, Licensee shall destroy or return to M&R all copies of the
Guidelines and shall have no further right to copy or use the Guidelines and
shall have no further right to copy or use the Guidelines in any form.
MILLIMAN & ROBERTSON, INC. LANDACORP
By: ______________________________ By: [Signature illegible]
-----------------------------
Date: ____________________________ Date: 10/7/97
-----------------------------
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1
of our report dated February 12, 1999, except Note 9 which is as of November 29,
1999, relating to the financial statements of Landa Management Systems
Corporation, which appear in such Registration Statement. We also consent to the
reference to us under the headings "Experts" in such Registration Statement.
/s/ PRICEWATERHOUSECOOPERS LLP
---------------------------------------------
PricewaterhouseCoopers LLP
San Jose, California
November 29, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> SEP-30-1999 DEC-31-1998
<CASH> 2,094 2,032
<SECURITIES> 0 0
<RECEIVABLES> 2,433 1,838
<ALLOWANCES> (215) (187)
<INVENTORY> 0 0
<CURRENT-ASSETS> 4,507 3,869
<PP&E> 1,972 1,342
<DEPRECIATION> (1,162) (898)
<TOTAL-ASSETS> 5,317 4,313
<CURRENT-LIABILITIES> 4,180 3,414
<BONDS> 0 0
0 0
7 7
<COMMON> 3 1
<OTHER-SE> 957 891
<TOTAL-LIABILITY-AND-EQUITY> 5,317 4,313
<SALES> 7,067 6,217
<TOTAL-REVENUES> 7,067 6,217
<CGS> 2,511 2,663
<TOTAL-COSTS> 2,511 2,663
<OTHER-EXPENSES> 6,080 5,539
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 72 75
<INCOME-PRETAX> (1,452) (1,910)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,452) (1,910)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,452) (1,910)
<EPS-BASIC> (0.18) (0.27)
<EPS-DILUTED> (0.18) (0.27)
</TABLE>
