<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 1, 1998
FILE NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AREMISSOFT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7372 68-0413929
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE) IDENTIFICATION NO.)
</TABLE>
60 BISHOPSGATE
LONDON EC2N 4AJ
ENGLAND
011-44-171-309-1555
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
DR. LYCOURGOS K. KYPRIANOU
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
AREMISSOFT CORPORATION
60 BISHOPSGATE
LONDON EC2N 4AJ
ENGLAND
011-44-171-309-1555
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE OF PROCESS)
COPIES TO:
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SCOTT E. BARTEL MICHAEL J. HALLORAN GARY T. JOHNSON
ERIC J. STIFF MICHELLE ROWE HALLSTEN EDWARD B. WINSLOW
BARTEL ENG LINN & SCHRODER PILLSBURY MADISON & SUTRO LLP JONES, DAY, REAVIS & POGUE
300 CAPITOL MALL, SUITE 1100 400 CAPITOL MALL, SUITE 1700 77 WEST WACKER DRIVE
SACRAMENTO, CA 95814 SACRAMENTO, CA 95814 CHICAGO, IL 60601
</TABLE>
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- ---------------
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ---------------
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ---------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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============================================================================================================
TITLE OF EACH PROPOSED
CLASS OF SECURITIES MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value per share..................... $65,000,000 $19,175
============================================================================================================
</TABLE>
(1) Calculated in accordance with Rule 457 of the Securities Act of 1933, as
amended.
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
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY 1, 1998
PROSPECTUS
SHARES
AREMISSOFT CORPORATION
COMMON STOCK
Of the shares of common stock ("Common Stock") offered hereby,
shares are being sold by AremisSoft Corporation ("AremisSoft" or the
"Company") and shares are being sold by certain stockholders of the
Company (the "Selling Stockholders"). The Company will not receive any of the
proceeds from the sale of shares by the Selling Stockholders. See "Principal and
Selling Stockholders."
Prior to this offering (the "Offering"), there has been no public trading
market for the Common Stock. It is currently estimated that the initial public
offering price per share will be between $ and $ . See "Underwriting"
for a discussion of the factors considered in determining the initial public
offering price. Application has been made to list the Common Stock on the Nasdaq
National Market under the symbol "AREM."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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==================================================================================================================
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS
- ------------------------------------------------------------------------------------------------------------------
Per Share $ $ $ $
- ------------------------------------------------------------------------------------------------------------------
Total(3) $ $ $ $
==================================================================================================================
</TABLE>
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities arising
under the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional shares of Common Stock at the Price to Public
less the Underwriting Discount solely to cover over-allotments, if any. If
such option is exercised in full, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."
------------------------
The shares of Common Stock are offered severally by the Underwriters
specified herein, subject to receipt and acceptance by them and subject to the
right to reject any order, in whole or in part. It is expected that delivery of
the shares of Common Stock will be made against payment therefor in Chicago,
Illinois on or about , 1998.
ABN AMRO INCORPORATED EVEREN SECURITIES, INC.
, 1998
<PAGE> 3
[AREMISSoft LOGO]
[ARTWORK]
The AremisSoft tradename and logo are trademarks of the Company and are the
subject of applications for federal registration in the United States Patent and
Trademark Office. This Prospectus also includes trade names, trademarks and
registered trademarks of other companies.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT COVERING
TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
<PAGE> 4
PROSPECTUS SUMMARY
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this Prospectus.
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus. Except as otherwise specifically noted
herein, all of the information in this Prospectus (i) gives effect to the
Reorganization (as defined herein) and (ii) assumes that the Underwriters'
over-allotment option is not exercised. Except as otherwise specifically noted
herein, all references to "AremisSoft" or the "Company" refer to AremisSoft
Corporation, a Delaware corporation, its consolidated subsidiaries and its
predecessors.
THE COMPANY
AremisSoft develops, markets, implements and supports enterprise-wide
applications software targeted to mid-sized organizations in the healthcare,
manufacturing, hospitality and construction industries (the "Vertical Markets").
Its software products provide an array of functions that address the
mission-critical information requirements of customers in the Vertical Markets.
The Company's software products incorporate object-oriented and client-server
technologies and are designed for rapid implementation, flexibility and
scalability across multiple platforms. The modular design and industry
specialization of its products limit the need for extensive customization which
the Company believes provides it with a competitive advantage. In addition, the
interoperability of the Company's products with other software applications and
their ability to grow with an organization permit rapid adaptation of the
Company's products in response to ongoing business changes. The Company believes
that it provides substantial benefits to its customers with legacy systems,
including reduced upgrade disruptions and costs, the ability to extend such
systems' useful lives and improved interoperability with existing software
applications. The Company markets its software products primarily through its
own sales force and provides product support worldwide through ten offices in
seven countries. The Company currently has more than 5,000 customers. Revenues
from customers located in the United Kingdom comprised 75% of total revenues in
both 1997 and in the first three months of 1998. Customers using the Company's
software products include Southampton Multifund (healthcare), Birmingham
Multifund (healthcare), Telefon AB LM Ericsson (manufacturing), Nabisco Biscuit
Co. (manufacturing), Forte Limited (hospitality) and London Electricity plc
(construction).
The Company's software products have been designed using a three-tiered,
object-oriented software architecture (the "Aremis Architecture"). The Aremis
Architecture achieves economies of scale and cost reductions in the software
development process by capitalizing on the common functional requirements of
customers across a variety of industries. The Aremis Architecture facilitates
customization and modification of the Company's software solutions to address
the mission-critical information requirements of its customers. The Company has
been developing its software in an object computing environment since 1986 and
believes that its substantial investment in the development of the Aremis
Architecture provides it with a competitive advantage in developing
enterprise-wide applications software.
In the past five years, the Company has experienced rapid growth both
internally and through acquisitions, with revenues increasing from $2.7 million
in 1993 to $42.4 million in 1997. During this period, the Company successfully
acquired and integrated the operations of eleven businesses. In each
acquisition, the Company sought to reduce expenses, rejuvenate existing products
of the acquired business and migrate the customers of the acquired business to
products that utilize the Aremis Architecture. Since 1986, the Company has
developed an extensive software development and support facility in New Delhi,
India, that provides the Company with access to highly-skilled technical
personnel who rejuvenate acquired products and support the Company's research
and development activities on a cost-effective basis.
The Company's business strategy is to continue its growth by (i) targeting
mid-sized organizations, including divisions and business units of larger
companies, with annual revenues of less than $1 billion, (ii) focusing on
strategic markets, (iii) leveraging the Company's cost-efficient India
operations, (iv) capitalizing on the Company's investment in the Aremis
Architecture, (v) expanding the Company's
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marketing, sales, support and service capabilities and (vi) acquiring related
software businesses, products or technologies.
The Company was incorporated in Delaware in June 1998 in connection with
the Reorganization. See "Organization of the Company." The Company's principal
executive offices are located at 60 Bishopsgate, London EC2N 4AJ, England, and
its telephone number is 011-44-171-309-1555.
THE OFFERING
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Common Stock offered by the Company........................ shares
Common Stock offered by the Selling Stockholders........... shares
Total...................................................... shares
Common Stock to be outstanding after this Offering......... shares
Use of proceeds............................................ To repay indebtedness, for general
corporate purposes and to fund potential
investments and acquisitions. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol..................... AREM
</TABLE>
RISK FACTORS
Prior to making an investment in the Common Stock offered hereby,
prospective purchasers should carefully consider the specific matters set forth
under the caption "Risk Factors" as well as the other information and data in
this Prospectus.
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The summary consolidated financial data presented below should be read in
conjunction with the more detailed Consolidated Financial Statements and Notes
thereto appearing elsewhere in this Prospectus and the information set forth
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------ -----------------
1993 1994 1995 1996 1997 1997 1998
------ ------- -------- -------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues........................... $2,670 $ 6,449 $ 21,422 $ 34,432 $42,374 $ 7,162 $10,096
Profit (loss) from operations(1)......... (809) (2,814) (13,248) (13,448) 310 (1,244) 705
Net income (loss)(1)..................... (821) (2,967) (14,569) (15,304) (1,620) (1,772) 248
Basic earnings (loss) per share(1)(2).... $(0.06) $ (0.23) $ (1.13) $ (1.19) $ (0.13) $ (0.14) $ 0.02
Weighted average number of shares used in
computing basic earnings (loss) per
share.................................. 12,845 12,845 12,845 12,845 12,870 12,845 14,175
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1998
-------------------------
ACTUAL AS ADJUSTED(3)
------- --------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 5,270 --
Working capital (deficit)................................... (3,274) --
Total assets................................................ 24,059 --
Long-term debt.............................................. 10,262 --
Total stockholders' equity (deficit)(3)..................... $(9,884) --
</TABLE>
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(1) Includes amortization and write-off of capitalized software, software
development costs and intangible assets of approximately $5.5 million in
1995 and $8.0 million in 1996.
(2) The basis for the determination of shares used in computing basic earnings
(loss) per share is described in Note 1 of Notes to Consolidated Financial
Statements.
(3) Adjusted to give effect to the estimated net proceeds of the Offering to be
received by the Company based upon an assumed initial public offering price
of $ per share.
2
<PAGE> 6
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Prospective investors should consider carefully the following
risk factors in addition to the other information set forth in this Prospectus
prior to making any investment in the Common Stock. This Prospectus contains, in
addition to historical information, forward-looking statements that involve
risks and uncertainties. The Company's actual results could differ materially
from the results discussed in the forward-looking statements. Factors that could
cause or contribute to such a difference include, but are not limited to, those
discussed below as well as those discussed elsewhere in this Prospectus.
LOSS HISTORY; VOLATILITY AND SEASONALITY OF QUARTERLY OPERATING RESULTS
The Company has incurred net losses in the past five fiscal years. For the
years ended December 31, 1997, and December 31, 1996, the Company incurred net
losses of $1.6 million and $15.3 million, respectively, and, as of December 31,
1997, had an accumulated deficit of $19.5 million. Although the Company achieved
limited profitability during the third and fourth quarters of 1997 and the first
quarter of 1998, no assurances can be given that the Company will sustain
profitability on a quarterly basis or achieve profitability on an annual basis.
See "Selected Consolidated Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
The Company's quarterly operating results have varied, sometimes
substantially, in the past, and are expected to vary in the future. These
fluctuations may be caused by a variety of factors, many of which are outside of
the Company's control, including the relatively long sales cycles for the
Company's products, the size and timing of individual licensing transactions,
the timing, proper operation and market acceptance of new products or product
enhancements by the Company or its competitors, the potential for delay or
deferral of customer implementations of the Company's products, changes in
customer budget cycles, seasonality of technology purchases, foreign currency
exchange rates and other general industry and economic conditions. In addition,
the timing of revenue recognition can be affected by many factors, including the
timing of contract execution and delivery, customer acceptance and post-delivery
obligations of the Company related to installation and implementation. As a
result, the time between contract execution and the satisfaction of criteria for
revenue recognition can be lengthy and unpredictable and, consequently, affect
revenues and the Company's operating results in any given quarter. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
A significant portion of the Company's accounts receivable are derived from
licensing arrangements to customers with which the Company does not have a
payment history. In addition, the Company's customers may decide not to honor
contractual obligations for license fees for various reasons including, but not
limited to, changes in their business levels or plans or implementation problems
associated with the Company's products. Although the Company provides reserves
and allowances for such circumstances, no assurances can be given that such
reserves and allowances will be adequate to cover any receivables which are
later determined to be uncollectible, particularly if such receivables are
large. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations." In the event one or more customers failed to honor its
contractual obligations and the Company's reserves and allowances were
inadequate, such failure could have a material adverse effect on the Company's
business, operating results and financial condition.
The Company's business has experienced and is expected to continue to
experience seasonality due in large part to the buying cycles of its customers.
In recent years, the Company has generally had stronger demand for its products
during the second half of the calendar year. This seasonality is not uncommon in
the computer software industry and typically results in revenues for the first
half of the calendar year being lower than revenues in the second half of the
immediately preceding calendar year. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
ASSIMILATION OF ACQUISITIONS
As part of its business strategy to increase its presence in certain
Vertical Markets and complement and expand its existing business and product
offerings, the Company expects to continue to pursue acquisitions of
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<PAGE> 7
other businesses, products of technologies that are complementary to those of
the Company. Although the Company currently has no agreement, understanding or
arrangement with respect to any future acquisitions, the Company evaluates
potential strategic business opportunities, some of which may be material in
size and scope on an ongoing basis. No assurances can be given that any
acquisition by the Company will occur or that any acquisition will not have a
material adverse effect on the Company's business, operating results and
financial condition.
Acquisitions, including those consummated by the Company to date, involve a
number of risks and difficulties, including technology acceptance, expansion
into new geographic markets and business areas, the diversion of management's
attention, the assimilation of the operations and personnel of acquired
businesses and the integration of acquired operations and financial reporting
systems with those of the Company. No assurances can be given that the Company
will successfully integrate the operations of acquired businesses, which could
have a material adverse effect on the Company's business, operating results and
financial condition. Further, possible future acquisitions by the Company could
result in dilutive issuances of debt or equity securities, the incurrence of
additional debt and contingent liabilities, potential reductions in income due
to losses incurred by the acquired business, additional amortization expenses
related to goodwill and other intangible assets, and post-acquisition
restructuring charges, any of which could have a material adverse effect on the
Company's business, operating results and financial condition. The Company has
in the past and may in the future incur significant indebtedness to finance
acquisitions, with associated interest costs, repayment terms and restrictive
covenants. See "Business -- Acquisition Strategy."
MANAGEMENT OF GROWTH
The Company's business has grown rapidly in the last five fiscal years,
with total net revenues increasing from $2.7 million, $6.4 million and $21.4
million in 1993, 1994 and 1995, respectively, to $34.4 million and $42.4 million
in fiscal 1996 and 1997, respectively. The growth in the Company's business and
expansion of the Company's customer base has placed a significant strain on the
Company's management, operations and financial resources. The Company's recent
expansion has resulted in substantial growth in the number of its employees, the
scope of its operating and financial reporting systems and the geographic area
of its operations, creating increased responsibility for both existing and new
management personnel. The Company's ability to support the growth of its
business will be substantially dependent upon the ability to attract and retain
highly skilled personnel. Accordingly, the Company's future operating results
will depend on the ability of its officers and other key employees to continue
to implement and improve its operational and customer support systems and to
expand, train and manage its employee base. No assurances can be given that the
Company will be able to manage its recent or any future expansion successfully,
and any inability to do so would have a material adverse effect on the Company's
business, operating results and financial condition. See " -- Dependence on Key
Personnel; Need for Additional Qualified Personnel."
To manage its operations, the Company must continuously evaluate the
adequacy of its management structure and its existing procedures including,
among others, its financial and internal controls. No assurances can be given
that the Company's management will adequately anticipate all of the changing
demands that growth may impose on the Company's procedures and structure. Any
failure to adequately anticipate and respond to such changing demands could have
a material adverse effect on the Company's business, operating results and
financial condition.
RAPID TECHNOLOGICAL CHANGE; NEW VERSIONS AND PRODUCTS; RISK OF DEFECTIVE
PRODUCTS
The market for the Company's software products is characterized by rapid
technological changes, evolving industry standards in computer hardware and
software technology, changes in customer requirements and frequent new product
introductions and enhancements. The Company's future success will depend upon
its ability to continue to enhance its current product line and to develop and
introduce new products that keep pace with technological developments, satisfy
increasingly sophisticated customer requirements and achieve market acceptance.
The Company's customers utilize a wide variety of hardware, software, database
and networking platforms and, as a result, the Company must continue to support
and maintain its products on a variety of such platforms. In particular, the
Company must continue to anticipate and respond adequately to
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<PAGE> 8
advances in other software and desktop computer operating systems such as
Microsoft Windows and its successors. The Company's future success will depend
upon its ability to address the increasingly sophisticated needs of its
customers by supporting existing and emerging hardware, software, database and
networking platforms and by developing and introducing enhancements to its
products and new products on a timely basis to keep pace with technological
developments, evolving industry standards and changing customer requirements. No
assurances can be given that the Company will be successful in developing and
marketing, on a timely and cost-effective basis, fully functional product
enhancements or new products that respond to technological advances by others,
or that its new or enhanced products will achieve market acceptance.
The Company has, on occasion, experienced delays in the scheduled
introduction of new versions and new products. In addition, enterprise-wide
applications software products as complex as those offered by the Company may
contain undetected errors or "bugs" when first introduced or as new versions are
released that, despite testing by the Company, are discovered only after a
product has been installed and used by customers. No assurances can be given
that the Company's most current releases or future releases of its products will
not contain significant software errors that could impair the market acceptance
of these products and have a material adverse effect on the Company's business,
operating results and financial condition. In addition, the announcement and
introduction of new products may depress sales of existing products. Further,
problems can be encountered by customers in installing and implementing new
releases or with the performance of the Company's products. Delays in the
introduction of new and enhanced products, or significant problems with the
implementation and installation of new releases could have a material adverse
effect on the Company's business, operating results and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Three Months Ended March 31, 1998, Compared to March 31, 1997."
EXPOSURE TO REGULATORY AND GENERAL ECONOMIC CONDITIONS IN INDIA
A significant element of the Company's business strategy is to continue to
develop its offshore software development and support facility in New Delhi,
India. As of March 31, 1998, the Company had approximately 32% of its workforce
in India. The Indian government, as a means of encouraging foreign investment,
provides significant tax incentives and exemptions to regulatory restrictions.
Certain of these benefits that directly affect the Company include, among
others, tax holidays (temporary exemptions from taxation on operating income)
and liberalized import and export duties. The current tax holiday to which the
Company is subject expires in 2004. To be eligible for certain of these tax
benefits, the Company must continue to meet certain conditions. A failure to
meet such conditions could result in the cancellation of the benefits. With
respect to duties, subject to certain conditions, goods, raw materials and
components for production imported by the Company's offices in India are exempt
from the levy of a customs duty. No assurances can be given that such tax
benefits will be continued in the future at their current levels.
Although wage costs in India are significantly lower than in the United
States, United Kingdom and similar markets for comparably skilled software
engineering and other technical personnel, wages in India are increasing at a
faster rate than in the United States and United Kingdom. In the past, India has
experienced significant inflation and shortages of foreign exchange, and has
been subject to civil unrest and acts of terrorism. Although the inflation rate
for the periods discussed in this Prospectus has been insignificant, increases
in inflation in the future could have a material adverse affect on the Company's
business, operating results and financial condition. In addition, changes in
interest rates, taxation or other social, political, economic or diplomatic
developments affecting India in the future could have a material adverse effect
on the Company's business, operating results and financial condition. See
"Business -- The AremisSoft Strategy."
On May 13, 1998, the United States imposed immediate economic sanctions
against India, as required under Section 102 of the Arms Export Control Act, in
response to the detonation by India of nuclear devices. Japan and certain other
nations have also announced sanctions against India. Although most of the
current sanctions imposed by the United States restrict the United States from
providing assistance to India and do not directly limit the activities of United
States businesses, the precise ramifications of the sanctions are not expected
to be known for some time. Further, although the current sanctions do not
directly affect United States businesses, additional sanctions could be imposed
which could have a material adverse effect on United
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<PAGE> 9
States businesses with operations, sales or suppliers in India. In addition, one
of these sanctions prohibits the export to India of specific goods and
technology, which may include certain technologies and equipment such as
computers, certain software and fiber optic devices. The United States
Department of Commerce and other agencies are currently preparing guidelines to
clarify the specific technologies that are affected. Although the Company does
not believe its activities are affected by the current sanctions, no assurances
can be given that the Company's technologies will not be included in the
specific technologies that are subject to the sanctions.
COMPETITION
The market for enterprise-wide applications software is intensely
competitive, fragmented, subject to rapid changes and significantly affected by
new product introductions and other market activities of industry participants.
The Company's products are primarily designed for and marketed to mid-sized
organizations in the Vertical Markets. A number of companies offer competitive
products to organizations in the Vertical Markets. In addition, the Company
faces indirect competition from suppliers of customized enterprise-wide
applications software primarily designed for proprietary mainframe and
minicomputer-based systems with highly customized software and the internal MIS
departments of large organizations who develop their own systems. Many of the
Company's present or potential competitors have longer operating histories,
significantly greater financial, technical, marketing and other resources,
greater name recognition and a larger installed base of customers than the
Company. As a result, they may be able to respond more quickly than the Company
to new or emerging technologies and to changes in customer requirements, or they
may be able to devote greater resources to the development, promotion and sale
of their products.
The Company's products are currently marketed and sold primarily in the
United Kingdom. The Company's principal competitors in the healthcare industry
in the United Kingdom include Egton Medical Information Services ("EMIS"),
Reuters Group plc ("Reuters"), AAH Meditel, GPASS, HCSL, Exeter Systems, Medical
Care Systems, Microtest Europe Limited, PCTI Solutions Ltd. and Seetec Medical
Systems. Principal competitors in the manufacturing industry include QAD Inc.,
FOURTH SHIFT Corporation ("Fourth Shift"), Symix Systems, Inc. ("Symix"),
DataWorks Corporation ("DataWorks") and MDIS Group plc ("MDIS"). The Company's
principal competitor in the United Kingdom in the hospitality industry is
Innsite Hotel Services Ltd. and in Europe is MICROS-Fidelio International. In
the construction industry, the Company's principal competitors include FCG
Computer Systems/Red Sky Software Ltd., Misys plc, The Database Ltd.,
Engineering Technology Ltd. and Estimation Inc. The Company also believes that
large enterprise software vendors, such as Oracle Corporation ("Oracle"), SAP AG
("SAP"), Baan Company N.V. ("Baan") and PeopleSoft, Inc. ("PeopleSoft") are
increasing their marketing efforts to mid-sized organizations in the
manufacturing sector, one of the Vertical Markets in which the Company competes.
See "Business -- Vertical Markets." No assurances can be given that the Company
will be able to compete successfully against any of these competitors.
In addition, because the barriers to entry in the enterprise-wide
applications software market are relatively low, additional competitors may
emerge as the market continues to develop and expand. Because the
enterprise-wide applications software market is fragmented, the Company also
anticipates that acquisitions of competitors by large software companies or
strategic alliances will occur and that significant consolidation in the
Company's industry will occur over the next few years. Increased competition
from new entrants to the industry or through strategic acquisitions or alliances
could lead to price erosion, reduced margins or loss of market share, any of
which could have a material adverse effect on the Company's business, operating
results and financial condition. Further, the Company's growth strategy has been
and is expected to remain dependent to a significant extent on the Company's
ability to acquire complementary businesses, products or technologies in the
future. Increasing consolidation in the Company's industries will require the
Company to compete with other software companies and alliances for strategic
acquisition opportunities. No assurances can be given that the Company will be
able to successfully identify acquisition opportunities, that any acquisitions
will be successfully consummated and integrated into the Company's operations or
that the Company will be successful in competing for acquisition opportunities.
See "Business -- Acquisition Strategy" and "-- Assimilation of Acquisitions."
6
<PAGE> 10
GOVERNMENT REGULATION OF HEALTHCARE PRODUCT SPECIFICATIONS
The Company's healthcare products sold in the United Kingdom are regulated
by the National Health Service (the "NHS"), a government agency, through a
product accreditation procedure. While the Company's healthcare products
currently meet NHS specifications for information systems, the requirements are
expected to be updated pursuant to the NHS' new Information Management and
Technology Strategy, which is expected to be published in July 1998. The new
mandatory specifications are expected to be introduced to conform all
information technology systems in the United Kingdom's healthcare marketplace.
See "Business -- Vertical Markets -- Healthcare." Although the Company is
currently modifying its healthcare industry products in anticipation of the
proposed product specifications, no assurances can be given that the Company
will be able to meet all such specifications or, if met, that the related costs
will not be substantial or make the cost of the Company's healthcare products
prohibitive for potential customers. In addition, the Company expects to
experience a decrease in the number of purchases of its existing healthcare
products as businesses in the healthcare industry in the United Kingdom postpone
purchases pending release of the final new regulations and related product
specifications. Such regulations and related product specifications, as well as
future changes to NHS specifications for information systems, could have a
material adverse effect on the Company's business, operating results and
financial condition. See "Business -- Vertical Markets -- Healthcare."
LENGTHY SALES AND IMPLEMENTATION CYCLES
The Company's products are generally used for division- or enterprise-wide
purposes and involve significant capital outlays by customers and relatively
complex installations. Potential customers generally commit significant
resources to an evaluation of available enterprise-wide applications software
and require the Company to provide a significant level of education about the
use and benefits of the Company's products. Sales of the Company's software
products require an extensive marketing effort because decisions to license such
software generally involve the evaluation of the software by a significant
number of a potential customer's personnel in various functional and geographic
areas, many of which may have specific and conflicting requirements. A variety
of factors over which the Company has little or no control may cause potential
customers to favor a particular supplier or to delay or forego a purchase. As a
result of these or other factors, the sales cycles for the Company's products
can be lengthy and vary among customers and across the Vertical Markets. See
"Business -- Vertical Markets." As a result of the length of the sales cycle for
its products, the Company's ability to forecast the timing and amount of
specific sales is limited, and the delay or failure to complete one or more
large license transactions could have a material adverse effect on the Company's
business, operating results and financial condition and cause the Company's
operating results to vary significantly from quarter to quarter. See "-- Loss
History; Volatility and Seasonality of Quarterly Operating Results" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The Company's products are designed to perform or directly affect
business-critical functions across many different functional and geographic
areas of a customer's organization. Consequently, implementation of the
Company's software is subject to delays over which the Company has little or no
control. Delays in the completion of implementation of any of the applications
of its products by the Company can result in delay in revenue recognition and
may result in customer dissatisfaction or damage to the Company's reputation and
could have a material adverse effect on the Company's business, operating
results and financial condition. See "-- Loss History; Volatility and
Seasonality of Quarterly Operating Results."
INTERNATIONAL OPERATIONS AND CURRENCY FLUCTUATIONS
The Company currently has operations in the United Kingdom, United States,
Argentina, Mexico, India, Ireland and Cyprus and distributors in 14 additional
countries. A significant portion of the Company's revenues are received in
currencies other than the United States dollar (the currency into which the
Company's historical financial statements have been translated), primarily
British pounds. In the past, the Company has not engaged in hedging transactions
designed to manage currency fluctuation risks but may implement programs to
mitigate foreign currency risk exposure in the future as the Company's
management deems appropriate. Foreign currency transaction gains and losses
arising from normal business operations are
7
<PAGE> 11
credited to, or charged against, earnings in the period realized. As a result,
fluctuations in the value of the currencies in which the Company conducts its
business relative to British pounds have caused and will continue to cause
foreign currency transaction gains and losses. Because of the number of
currencies involved, the constantly changing currency exposures and the
substantial volatility of currency exchange rates, no assurances can be given
that the Company will not experience currency losses in the future, nor can
there be any assurances that foreign exchange rate fluctuations will not have a
material adverse effect on the Company's business, operating results and
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
The Company's international operations are subject to other risks inherent
in international business activities, such as the imposition of governmental
controls, export license requirements, restrictions on the export of certain
technology, cultural and language difficulties associated with servicing
customers, the impact of a recessionary environment in economies outside the
United States, reduced protection for intellectual property rights in some
countries, the potential exchange and repatriation of foreign earnings,
political instability, sanctions imposed as a result of violations of
international law or other governmental action, trade restrictions, tariff
changes, localization and translation of products for foreign countries,
difficulties in staffing and managing international operations, difficulties in
collecting accounts receivable and longer collection periods and the impact of
local economic conditions and practices. See "-- Exposure to Regulatory and
General Economic Conditions in India." The Company's success in expanding its
international business will be dependent, in part, on its ability to anticipate
and effectively manage these and other risks. No assurances can be given that
these and other factors will not have a material adverse effect on the Company's
business, operating results and financial condition.
ENFORCEABILITY OF CIVIL LIABILITIES UNDER THE UNITED STATES SECURITIES LAWS
A majority of the Company's directors, substantially all of its executive
officers and certain of the experts named in this Prospectus are non-residents
of the United States. A substantial portion of the assets of the Company and all
or a substantial portion of the assets of such persons are located outside the
United States. As a result, it may not be possible to effect service of process
within the United States upon such persons with respect to matters arising under
the United States securities laws or to enforce against the Company or such
persons in United States courts judgments of United States courts predicated
upon civil liability under such securities laws. Further, there is doubt as to
the enforceability in the United Kingdom, in original actions or in actions for
enforcement of judgment of United States courts, of civil liabilities predicated
upon United States securities laws.
DEPENDENCE ON KEY PERSONNEL; NEED FOR ADDITIONAL QUALIFIED PERSONNEL
The Company's success depends, to a significant extent, upon a limited
number of members of senior management of the Company and other key employees.
Although the Company maintains and is the beneficiary under a key man life
insurance policy in the amount of $3.0 million on the life of its Chairman of
the Board and Chief Executive Officer, Dr. Lycourgos K. Kyprianou, and maintains
such insurance for certain other key personnel in amounts ranging from $150,000
to $500,000, the loss of the services of Dr. Kyprianou or other key personnel
could have a material adverse effect on the Company's business, operating
results and financial condition.
The Company believes that its future operating results will also depend in
significant part on its ability to attract and retain highly skilled technical,
managerial, sales, marketing, service and support personnel. Competition for
such personnel within the software industry is intense. Although the Company has
increased the number of its technical, sales, services and support personnel in
recent years, the Company could experience difficulty in recruiting such
personnel in the future. The Company anticipates that it will need to continue
to increase the size of its direct sales, services and support personnel in
future periods. No assurances can be given that the Company will be successful
in attracting and recruiting qualified personnel. An inability to hire qualified
personnel on a timely basis could have a material and adverse effect on the
Company's business, operating results and financial condition. See
"-- Management of Growth."
8
<PAGE> 12
YEAR 2000 AND EURO COMPLIANCE
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. In addition, the Euro is expected to be introduced as the
currency of participating nations of the European Union in 1999. A significant
number of the Company's customers are located in participating European Union
countries. As a result, the computer systems or software used by many companies
may need to be upgraded to comply with Year 2000 and Euro requirements. Although
all of the software products currently marketed by the Company are designed to
be Year 2000 and Euro compliant, no assurances can be given that the Company's
software products contain all necessary date code or other applicable
modifications.
The purchasing patterns of customers and potential customers may be
affected by Year 2000 and Euro issues in a variety of ways. Many companies are
expending significant resources to correct or patch their current software
systems for Year 2000 and Euro compliance. Even though the Company believes that
Year 2000 and Euro compliance could create a marketing opportunity for the
Company, the expenditures that potential customers are making may result in
reduced funds available to purchase software products such as those offered by
the Company. Many potential customers may also choose to defer purchasing Year
2000 and Euro compliant products until they believe it is absolutely necessary,
thus resulting in potentially stalled market sales within the industry.
Conversely, Year 2000 and Euro compliance may cause other companies to
accelerate purchases, thereby causing an increase in short-term demand and a
consequent decrease in long-term demand for software products. Additionally,
Year 2000 and Euro compliance could cause a significant number of companies,
including current Company customers, to reevaluate their current enterprise
software needs and, as a result, consider switching to products offered by other
software vendors. Moreover, the Company believes that some customers may be
purchasing the Company's products as an interim solution for Year 2000 or Euro
compliance until their current software vendors reach compliance. No assurances
can be given that such customers will purchase support services from the Company
or that they will upgrade beyond their current version of the Company's software
once their current software suppliers reach compliance. Any of the foregoing
could have a material adverse effect on the Company's business, operating
results and financial condition.
INTELLECTUAL PROPERTY RIGHTS
The Company relies on the protection provided by applicable copyright,
trademark and trade secret laws, confidentiality procedures and licensing
arrangements to establish and protect its proprietary rights. Despite the
Company's efforts, which afford only limited protection, it may be possible for
unauthorized third parties to copy certain portions of the Company's products or
to reverse engineer or obtain and use information that the Company regards as
proprietary. Policing unauthorized use of the Company's software is difficult
and, while the Company is unable to determine the extent to which piracy of its
products exists, software piracy can be expected to be a problem. In addition,
the laws of certain countries do not protect the Company's proprietary rights to
the same extent as do the laws of the United States. Accordingly, no assurances
can be given that the Company will be able to protect its proprietary rights
against unauthorized third-party copying or use, which could adversely affect
the Company's competitive position. Further, litigation may be necessary in the
future to enforce the Company's intellectual property rights, to protect the
Company's trade secrets or to determine the validity and scope of the
proprietary rights of others. Such litigation could result in substantial costs
and diversion of resources and could have a material adverse effect on the
Company's business, operating results and financial condition.
The Company expects that enterprise-wide applications software products
will increasingly be subject to claims of infringement relating to software
codes as the number of products and competitors in the Company's industry
segment grows and the functionality of products overlaps. No assurances can be
given that legal actions claiming copyright or other intellectual property
infringement will not be commenced against the Company, or that the Company
would necessarily prevail in such litigation given the complex technical issues
and inherent uncertainties in intellectual property litigation. Any such claim,
with or without merit, could be time-consuming, result in costly litigation and
require the Company to enter into royalty and licensing
9
<PAGE> 13
agreements. Such royalty or licensing agreements, if required, may not be
available on terms acceptable to the Company or at all. A successful claim
against the Company and the failure of the Company to develop or license a
substitute technology could have a material adverse effect on the Company's
business, operating results and financial condition. See
"Business -- Proprietary Rights and Licensing."
FIXED-PRICE SERVICE CONTRACTS
The Company offers a combination of enterprise-wide applications software,
implementation and support services to its customers. Certain customers have
asked for, and the Company has from time to time entered into, fixed-price
service contracts. These contracts specify certain milestones to be met by the
Company regardless of actual costs incurred by the Company in fulfilling those
obligations. The Company may enter into more fixed-price contracts in the
future. No assurances can be given that the Company will be able to successfully
complete these contracts within budget and the Company's inability to do so
could have a material adverse effect on its business, operating results and
financial condition.
CONTROL BY EXISTING STOCKHOLDERS
Upon the completion of the Offering, Dr. Kyprianou and other members of
management will beneficially own approximately % of the outstanding Common
Stock ( % if the Underwriters' over-allotment option is exercised in full)
and will have the power to control all matters submitted for a stockholder vote,
including the election of directors and the approval of significant corporate
transactions, such as mergers, consolidations, sales of all or substantially all
of the assets of the Company and other change in control transactions.
Management's significant equity interest in the Company also may have the effect
of making certain transactions more difficult without their support and may have
the effect of delaying, deferring or preventing a change in control of the
Company. See "Principal and Selling Stockholders" and "Description of Capital
Stock."
ANTI-TAKEOVER EFFECTS OF CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW
Certain provisions of the Company's Certificate of Incorporation, Bylaws
and Delaware law could delay, defer or prevent a change in control of the
Company. The Board of Directors has the authority to issue up to 15,000,000
shares of preferred stock and to fix the rights, preferences, privileges and
restrictions of those shares, including voting rights, without any further vote
or action by the stockholders. The rights of the holders of the Common Stock
will be subject to, and may be adversely affected by, the rights of the holders
of the preferred stock that may be issued in the future. The Company's
Certificate of Incorporation also includes provisions limiting the right of
stockholders to take action by written consent. The Company's Bylaws contain
advance notice requirements for stockholder nominations for election to the
Board of Directors or for stockholder proposals of business to be considered at
stockholder meetings. In addition, the Company is subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law ("DGCL"),
which will prohibit the Company 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
business combination is approved in a prescribed manner under the DGCL. The
ability of the Board of Directors to issue shares of preferred stock without
further stockholder approval, as well as the aforementioned provisions of the
Company's Certificate of Incorporation and Bylaws and of Delaware law, could
have the effect of delaying, deferring or preventing a change in control of the
Company. See "Description of Capital Stock."
ABSENCE OF PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common
Stock. No assurances can be given that an active public market for the Common
Stock will develop or be sustained after the Offering. The initial public
offering price will be determined by negotiations between the Company and the
representatives of the Underwriters based on several factors and may not be
indicative of the future market price of the Common Stock. The market price of
the Common Stock is likely to be highly volatile and may be subject to
significant fluctuations in response to actual or anticipated variations in
quarterly operating results and other
10
<PAGE> 14
factors, such as announcements of technological innovations, new products or new
contracts by the Company or its competitors, conditions and trends in the
software and other technology industries, adoption of new accounting standards
affecting the software industry, changes in earning estimates or recommendations
by securities analysts, general market conditions or other events. In addition,
equity markets have experienced extreme volatility that has particularly
affected the market prices of equity securities of many high technology
companies and that has been unrelated or disproportionate to the operating
performance of such companies. Broad market fluctuations, as well as economic
conditions generally and in the software industry specifically, may result in
material adverse effects on the market price of the Common Stock. No assurances
can be given that the market price of the Common Stock will not decline below
the initial public offering price. In the past, following periods of volatility
in the market price of a particular company's securities, securities class
action litigation has often been brought against that company. No assurances can
be given that such litigation will not occur in the future with respect to the
Company. Such litigation could result in substantial costs and diversion of
management's attention and resources, which could have a material adverse effect
upon the Company's business, operating results and financial condition. See
"Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of a substantial number of shares of Common Stock in the public
market following the Offering, or the perception that such sales could occur,
could adversely affect the market price of the Common Stock. The shares of
Common Stock outstanding prior to the Offering will be eligible for sale in the
public market at various times in the future. Upon the completion of the
Offering, the Company will have issued and outstanding shares of
Common Stock. The Company, all of the Company's executive officers and
directors, the Selling Stockholders and certain other stockholders of the
Company have agreed that, without the prior written consent of ABN AMRO
Incorporated and subject to certain limited exceptions, they will not sell any
shares of Common Stock for a period of 180 days after the date of this
Prospectus. See "Underwriting." Substantially all of the shares to be
outstanding upon the completion of the Offering, other than the
shares being offered hereby and approximately shares that are not
restricted under Rule 144 promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), will be subject to the lock-up agreements
described above or are "restricted securities" within the meaning of Rule 144
and are subject to certain restrictions on resale or transfer under the
Securities Act. Upon expiration of the lock-up period described above,
approximately additional shares will be eligible for sale in the
public market, subject to certain restrictions under Rule 144. See "Shares
Eligible for Future Sale." In addition, certain stockholders of the Company have
certain registration rights with respect to shares of Common Stock beneficially
owned by such stockholders. See "Shares Eligible for Future Sale -- Registration
Rights."
DISCRETION OVER USE OF PROCEEDS
The principal purposes of the Offering are to repay indebtedness and to
increase the Company's capital base and financial flexibility. After the
repayment of approximately $16.9 million of indebtedness, the Company expects to
use the net proceeds to the Company from the Offering principally for general
corporate purposes, including working capital and, potentially, to fund
strategic investments and acquisitions. However, after the repayment of
indebtedness, the Company has no current specific plans for use of the net
proceeds of the Offering. As a result, the Company's management will have broad
discretion over the use of the net proceeds to the Company from the Offering. An
inability to effectively apply the net proceeds could have a material adverse
effect on the Company's business, operating results and financial condition. See
"Use of Proceeds."
DILUTION; DIVIDENDS
The initial public offering price is expected to be greater than the net
tangible book value per outstanding share of Common Stock as of March 31, 1998.
Accordingly, purchasers in the Offering will suffer immediate and substantial
dilution of $ in the net tangible book value per share of the Common
Stock from the
11
<PAGE> 15
initial public offering price. Additional dilution will occur upon exercise of
outstanding warrants granted by the Company. See "Dilution."
The Company has never declared or paid any cash dividends on its Common
Stock and does not anticipate paying any cash dividends in the foreseeable
future. See "Dividend Policy."
ORGANIZATION OF THE COMPANY
The Company was incorporated in Delaware on June 1, 1998. Prior to that
time, the Company's predecessor, LK Global Information Systems, B.V., a
Netherlands corporation ("LK Global"), reorganized into a holding company in the
United States by acquiring Juno Acquisitions, Inc., a Nevada corporation,
through a share exchange. The name of the Nevada corporation was subsequently
changed to AremisSoft Corporation ("AremisSoft-Nevada"). AremisSoft-Nevada will
become a wholly owned subsidiary of the Company before the Registration
Statement (of which this Prospectus is a part) becomes effective in a share
exchange pursuant to which shareholders of AremisSoft-Nevada will receive shares
of Common Stock in exchange for their shares of AremisSoft-Nevada common stock
(the "Reorganization").
Prior to 1995, several of the Company's operating subsidiaries were wholly
owned by the Company's Chairman and Chief Executive Officer, Dr. Lycourgos K.
Kyprianou. In 1995, all of the Company's operating subsidiaries were reorganized
under a holding company, LK Global.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
shares of Common Stock offered by the Company hereby, based upon
an assumed initial public offering price of $ per share, are estimated to be
$ million (approximately $ million if the Underwriters'
over-allotment option is exercised in full), after deducting the underwriting
discount and estimated offering expenses payable by the Company.
The principal purposes of the Offering are to provide increased visibility
of the Company in a marketplace where many of its competitors are publicly held
companies, to create a public market for the Common Stock, to increase the
Company's equity capital, to facilitate future access by the Company to the
public equity markets, to repay indebtedness and to fund potential investments
and acquisitions.
The Company currently intends to use the net proceeds of the Offering to
repay all borrowings outstanding under the Company's bank credit facilities,
which totaled approximately $16.9 million as of June 30, 1998, and for working
capital and other corporate purposes. The weighted average maturity of
indebtedness to be repaid upon the completion of the Offering was years and
the weighted average interest rate of such indebtedness was % per annum as
of June 30, 1998. The Company may also apply a portion of the net proceeds of
the Offering to acquire or invest in businesses, products or technologies that
are complementary to those of the Company. Although the Company has not
identified any specific businesses, products or technologies that it may
acquire, nor are there any current agreements or negotiations with respect to
any such transactions, the Company from time to time evaluates such
opportunities. Pending such uses, the net proceeds will be invested in
government securities and other short-term, investment-grade, interest-bearing
instruments. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common
Stock. Following the Offering, the Company does not intend to pay cash dividends
because it intends to retain all earnings to support its planned growth. Any
future dividends will be at the discretion of the Board of Directors, subject to
a number of factors, including the Company's results of operations, general
business conditions, capital requirements, general financial condition and other
factors deemed relevant by the Board of Directors. The Company expects that any
future credit facilities will restrict the payment of dividends. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
12
<PAGE> 16
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of March 31, 1998, on an actual basis and on an as adjusted basis to
give effect to the Offering at an assumed initial public offering price of
$ per share and the application of the estimated net proceeds therefrom.
<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt(1).......................................... $ 6,726 $
======== ========
Long-term debt, less current maturities(1).................. $ 10,262 $
-------- --------
Stockholders' equity (deficit):
Preferred stock, par value $.001 per share; 15,000,000
shares authorized; no shares issued and outstanding.... -- --
Common stock, $.001 par value per share, 85,000,000 shares
authorized; 17,117,720 shares issued and outstanding,
actual; and shares issued and outstanding, as
adjusted(2)............................................ 17
Additional paid-in capital............................. 27,061
Cumulative translation adjustment(3)................. (1,834)
Accumulated deficit.................................. (35,128)
--------
Total stockholders' equity (deficit).............. (9,884)
-------- --------
Total capitalization.............................. $ 378 $
======== ========
</TABLE>
- ---------------
(1) See Notes 5 and 6 of Notes to Consolidated Financial Statements.
(2) Excludes 87,500 shares of Common Stock underlying certain warrants. No
options to purchase shares of Common Stock were outstanding as of March 31,
1998.
(3) See Note 1 of Notes to Consolidated Financial Statements.
13
<PAGE> 17
DILUTION
The net tangible book value (deficit) of the Company as of March 31, 1998,
was $ or $ per share. Net tangible book value (deficit) per share
represents the Company's total tangible assets less total liabilities, divided
by the number of shares of Common Stock outstanding after giving effect to the
conversion of the Company's preferred stock to Common Stock, which occurred
subsequent to March 31, 1998. Dilution per share represents the difference
between the amount paid by investors in the Offering and the net tangible book
value per share immediately after the completion of the Offering. After giving
effect to the sale by the Company of shares of Common Stock
offered hereby at an assumed an initial public offering price of $ per
share, assuming no exercise of the Underwriters' over-allotment option and after
deducting the estimated underwriting discount and Offering expenses payable by
the Company, the net tangible book value (deficit) as of March 31, 1998, as
adjusted, would have been $ , or $ per share. This represents an
immediate increase in net tangible book value of $ per share to existing
stockholders and an immediate dilution in net tangible book value of $ per
share to new investors at the assumed initial public offering price. The
following table illustrates this dilution per share:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share....................... $
Net tangible book value (deficit) per share as of March 31,
1998...................................................... $
Increase in net tangible book value per share attributable
to new investors..........................................
--------
Net tangible book value per share after the Offering..................
Dilution per share to new investors................................... $
========
</TABLE>
The following table summarizes, as of March 31, 1998, the total
consideration paid and the average price per share paid by the existing
stockholders and new investors, after giving effect to the sale by the Company
of shares of Common Stock offered hereby at an assumed initial
public offering price of $ per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------- ------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------- -------- ------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Existing stockholders........... % $ % $
New investors(1)................
----- ----- ------ -----
Total................. 100.0% $ 100.0%
===== ===== ====== =====
</TABLE>
- ---------------
(1) The sale of shares of Common Stock offered hereby by the
Selling Stockholders will reduce the number of shares of Common Stock held
by existing stockholders to shares or % of the
total number of shares of Common Stock to be outstanding upon the completion
of the Offering ( shares or % of the total number of shares
of Common Stock to be outstanding upon the completion of the Offering if the
Underwriters' over-allotment option is exercised in full), and will increase
the total number of shares of Common Stock held by new investors to
shares or % of the total number of shares of Common Stock to be
outstanding after the Offering ( shares or % of the total
number of shares of Common Stock to be outstanding upon the completion of
the Offering if the Underwriters' over-allotment option is exercised in
full). See "Principal and Selling Stockholders."
14
<PAGE> 18
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below as of December 31,
1997 and 1996 and for the three years ended December 31, 1997, have been derived
from the Company's Consolidated Financial Statements, which have been audited by
independent auditors whose reports are included elsewhere in this Prospectus.
The selected consolidated financial data set forth below as of December 31,
1995, 1994 and 1993 and for the two years ended December 31, 1994 have been
derived from the Company's historical financial statements not included in this
Prospectus. The selected consolidated financial data set forth below as of March
31, 1998 and 1997 and for the three month periods then ended are derived from
the unaudited Consolidated Financial Statements of the Company. The unaudited
Consolidated Financial Statements have been prepared on a consistent basis with
the audited Consolidated Financial Statements and, in the opinion of management,
include all adjustments necessary for a fair presentation of the financial
position and results of operations of the Company for the periods covered
thereby. The selected consolidated financial data set forth below should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's Consolidated Financial Statements
and Notes thereto appearing elsewhere in this Prospectus. The results of
operations for the three month period ended March 31, 1998, are not necessarily
indicative of the results to be expected for the full fiscal year or in the
future.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------------------------- -----------------
1993 1994 1995 1996 1997 1997 1998
------- ------- -------- -------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software licenses............................... $ 812 $ 2,039 $ 6,641 $ 12,052 $ 17,024 $ 2,787 $ 4,108
Maintenance and services........................ 1,193 2,822 9,426 15,839 18,990 3,286 4,563
Hardware and other.............................. 665 1,588 5,355 6,541 6,360 1,089 1,425
------- ------- -------- -------- -------- ------- -------
Total revenues........................... 2,670 6,449 21,422 34,432 42,374 7,162 10,096
Cost of revenues:
Software licenses............................... 129 281 875 1,555 2,079 350 480
Maintenance and services........................ 380 842 2,735 5,393 5,377 974 1,255
Hardware and other.............................. 585 1,323 4,829 5,760 5,147 855 1,140
Amortization of purchased software and
capitalized software development costs........ 325 331 2,374 2,327 70 17 17
------- ------- -------- -------- -------- ------- -------
Total cost of revenues................... 1,419 2,777 10,813 15,035 12,673 2,196 2,892
------- ------- -------- -------- -------- ------- -------
Gross profit...................................... 1,251 3,672 10,609 19,397 29,701 4,966 7,204
Operating expenses:
Sales and marketing............................. 766 2,133 10,811 15,182 17,834 3,276 3,900
Research and development........................ 251 521 6,428 6,409 6,233 1,560 1,495
General and administrative...................... 436 1,282 3,442 5,605 5,227 1,350 1,080
Amortization of intangible assets............... 607 2,550 3,176 5,649 97 24 24
------- ------- -------- -------- -------- ------- -------
Total operating expenses................. 2,060 6,486 23,857 32,845 29,391 6,210 6,499
------- ------- -------- -------- -------- ------- -------
Profit (loss) from operations..................... (809) (2,814) (13,248) (13,448) 310 (1,244) 705
Interest expense, net............................. (6) (207) (1,284) (1,906) (1,895) (538) (457)
------- ------- -------- -------- -------- ------- -------
Income (loss) before income taxes................. (815) (3,021) (14,532) (15,354) (1,585) (1,782) 248
Income tax expense (benefit)...................... 6 (54) 37 (50) 35 (10) --
------- ------- -------- -------- -------- ------- -------
Net income (loss)................................. $ (821) $(2,967) $(14,569) $(15,304) $ (1,620) $(1,772) $ 248
======= ======= ======== ======== ======== ======= =======
Basic earnings (loss) per share................... $ (0.06) $ (0.23) $ (1.13) $ (1.19) $ (0.13) $ (0.14) $ 0.02
======= ======= ======== ======== ======== ======= =======
Diluted earnings (loss) per share................. $ (0.06) $ (0.23) $ (1.13) $ (1.19) $ (0.13) $ (0.14) $ 0.02
======= ======= ======== ======== ======== ======= =======
Weighted average number of shares used in
computing:
Basic earnings (loss) per share................... 12,845 12,845 12,845 12,845 12,870 12,845 14,175
======= ======= ======== ======== ======== ======= =======
Diluted earnings (loss) per share................. 12,845 12,845 12,845 12,845 12,870 12,845 16,208
======= ======= ======== ======== ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
------------------------------------------------- ------------------
1993 1994 1995 1996 1997 1997 1998
------ ------- -------- -------- -------- -------- -------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......................... $ 1 $ 120 $ 255 $ 867 $ 239 $ 253 $ 5,270
Working capital (deficit)......................... 522 863 (8,244) (15,438) (12,971) (16,928) (3,274)
Total assets...................................... 2,668 10,012 22,729 18,449 17,242 17,826 24,059
Long-term debt.................................... 358 679 12,453 13,388 10,096 13,056 10,262
Total stockholders' equity (deficit).............. 196 2,219 (12,365) (25,103) (19,534) (26,517) (9,884)
</TABLE>
15
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with information
contained in "Selected Consolidated Financial Data" and the Consolidated
Financial Statements and Notes thereto appearing elsewhere in this Prospectus.
All statements other than statements of historical fact included in the
following discussion regarding the Company's financial position, business
strategy and plans of management for future operations are forward-looking
statements. The Company's actual results could differ materially from those
anticipated in these forward looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this Prospectus.
GENERAL
AremisSoft develops, markets, implements and supports enterprise-wide
applications software targeted to mid-sized organizations in the Vertical
Markets. Its software products provide an array of functions that address the
mission-critical information requirements of customers in the Vertical Markets.
The Company was founded in Cyprus in 1978 as LK Global Information Systems
(Cyprus) Limited and originally focused on developing customized enterprise-wide
applications software for international organizations located in the Middle/Near
East. In 1986, the Company established its New Delhi, India software development
and support facility to access the skilled Indian labor force and capture cost
efficiencies. The Company established operations in the United Kingdom in 1992.
From 1993 to 1996, the Company successfully completed eleven acquisitions and
established operations in the United States, Mexico, Argentina and Ireland. As
of March 31, 1998, the Company had 520 full time employees and operations in
seven countries.
The Company derives its revenues primarily from software licenses,
maintenance and service contracts and hardware sales. Software license revenues
are mainly derived from the licensing and service of industry-specific software
applications, primarily the sale of upgrades to existing customers. Maintenance
and service contract revenues are primarily derived from the ongoing support of
installed software and training, consulting and implementation services.
Occasionally, the Company may discount its fees on relatively large service
contracts to remain competitive. Hardware sales revenues are primarily derived
from the sale of third-party hardware to customers requiring turnkey solutions.
For the year ended December 31, 1997, 44%, 22%, 22% and 8% of the Company's
revenues were derived from customers in the healthcare, manufacturing,
hospitality and construction markets, respectively. The remaining 4% of the
Company's revenues for the year ended December 31, 1997, was derived from sales
to approximately 1,000 relatively small customers in various industries
primarily based in Cyprus and India. For the year ended December 31, 1997, 75%
of the Company's revenues were derived from customers located in the United
Kingdom and 15% from customers located in Europe. The remaining 10% of revenues
for the year ended December 31, 1997, were derived from customers located in
North and South America, Cyprus and other regions.
The sales cycles for the Company's products can vary widely among customers
and across the Vertical Markets. Historically, the Company's sales cycles have
ranged from three to 12 months. Similar to other enterprise-wide applications
software companies, the Company has experienced and expects to continue to
experience seasonal fluctuations in its operating results. See "Risk
Factors -- Loss History; Volatility and Seasonality of Quarterly Operating
Results." The Company has generally realized lower revenues in its first and
second fiscal quarters and higher revenues in its third and fourth fiscal
quarters. This is due, in part, to the March 31 fiscal year-end of many of the
Company's customers. During the Company's first fiscal quarter, many customers
have already expended their information technology budgets. As a result, the
Company's third and fourth fiscal quarters generally reflect greater revenue
recognition because of a higher concentration of software system installations.
The Company recognizes software license and hardware revenues at the time
of the installation, provided no significant obligations remain and collection
of the resulting receivable is deemed probable. Maintenance contract revenues
are recognized ratably over the life of the contract, service contract revenues
are recognized
16
<PAGE> 20
in accordance with the terms of the contract and add-on hardware sales revenues
are recognized when the hardware is shipped to the customer.
The cost of software license revenues consist primarily of personnel costs
as well as the costs of third-party software, media and freight. The cost of
maintenance and service contract revenues consist primarily of salary, travel
and other personnel costs. In addition, cost of service revenues may include the
cost of outsourcing services when relatively large service contracts require
resources in excess of the Company's resources. In general, the Company's costs
are higher when services are outsourced. The cost of hardware revenues consist
primarily of the cost of hardware purchased from third parties.
Sales and marketing expenses consist primarily of sales personnel costs,
advertising and other public relations expenses. Research and development
expenses consist primarily of personnel costs, facility overhead and other
expenses associated with the development of new and enhanced products and
technologies. General and administrative expenses include salaries and benefits
for administrative, executive, finance, legal, human resources, data center,
distribution and internal systems personnel and associated overhead costs, as
well as bad debt, accounting and legal expenses. General and administrative
expenses also include depreciation, which represents the write down of the cost
of tangible fixed assets over their expected useful lives. Amortization of
intangible assets consists of the amortization of customer lists and management
contracts of acquired businesses.
The Company continues to make substantial investments and operational cost
improvements in its sales and marketing, research and development and
administrative infrastructure. From the year ended December 31, 1995 through the
three month period ended March 31, 1998, the Company increased its sales and
marketing staff from 85 employees to 270 employees. During this same period, the
Company reduced its total research and development and administrative staff from
331 employees to 250 employees. The major impetus behind this transition is the
continuous shift of the research and development and, to a lesser degree,
administrative functions from the United Kingdom to India, where the relative
cost of operations is lower. During this period, the Company's research and
development and administrative personnel in India increased from 115 to 165,
while research and development and administrative personnel in the United
Kingdom and other countries decreased from 216 to 85.
A significant portion of the Company's business is conducted in currencies
other than United States dollars (the currency into which the Company's
historical financial statements have been translated). Historically, the Company
has recorded a majority of its operating expenses in British pounds, and a
substantial portion of its research and development costs in Indian rupees.
Because of the number of currencies involved, the constant currency exposures
and the substantial volatility of exchange rates, no assurances can be given
that the Company will not experience currency losses in the future. The Company
cannot predict the effect of exchange rate fluctuations on the Company's future
operating results. The Company has not previously undertaken hedging
transactions to cover its currency exposure, but may implement programs to
mitigate foreign currency risk exposure in the future as management deems
appropriate. See "Risk Factors -- International Operations and Currency
Fluctuations."
17
<PAGE> 21
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
of revenues represented by each item in the Company's Consolidated Statements of
Operations:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------ ------------
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Software licenses........................... 30% 32% 31% 35% 40% 39% 41%
Maintenance and services.................... 45 44 44 46 45 46 45
Hardware and other.......................... 25 24 25 19 15 15 14
--- --- --- --- --- --- ---
Total revenues......................... 100 100 100 100 100 100 100
--- --- --- --- --- --- ---
Cost of revenues:
Software licenses........................... 5 4 4 5 5 5 5
Maintenance and services.................... 14 13 13 16 13 14 13
Hardware and other.......................... 22 21 22 16 12 12 11
Amortization of purchased software and
capitalized software development costs.... 12 5 11 7 -- -- --
--- --- --- --- --- --- ---
Total cost of revenues................. 53 43 50 44 30 31 29
--- --- --- --- --- --- ---
Gross profit................................ 47 57 50 56 70 69 71
--- --- --- --- --- --- ---
Operating expenses:
Sales and marketing......................... 29 33 51 44 42 45 39
Research and development.................... 9 8 30 19 15 22 15
General and administrative.................. 16 20 16 16 12 19 10
Amortization of intangible assets........... 23 40 15 16 -- -- --
--- --- --- --- --- --- ---
Total operating expenses............... 77 101 112 95 69 86 64
--- --- --- --- --- --- ---
Profit (loss) from operations................... (30) (44) (62) (39) 1 (17) 7
Interest expense, net........................... 1 3 6 6 5 8 5
--- --- --- --- --- --- ---
Income (loss) before income taxes............... (31) (47) (68) (45) (4) (25) 2
Income tax expense (benefit).................... -- (1) -- -- -- -- --
--- --- --- --- --- --- ---
Net income (loss)............................... (31)% (46)% (68)% (45)% (4)% (25)% 2%
=== === === === === === ===
</TABLE>
THREE MONTHS ENDED MARCH 31, 1998, COMPARED TO MARCH 31, 1997
Revenues
Total revenues increased 40% to $10.1 million for the three months ended
March 31, 1998, from $7.2 million for the three months ended March 31, 1997.
This increase was due primarily to higher software license revenues and
associated maintenance and service contract revenues, principally generated by
the healthcare division, as a result of an increase in the user base of the
Company's Global Clinical Systems ("GCS") software product. During the three
months ended March 31, 1997, revenues from the healthcare market were negatively
impacted by a longer than expected Beta testing period for its GCS product. The
Company believes that the overall increase in total revenues reflects increased
customer preferences for client/server computing.
Software license revenues increased 46% to $4.1 million for the three
months ended March 31, 1998, from $2.8 million for the three months ended March
31, 1997. This increase is primarily due to the growth in the number of
installed customers, greater number of software upgrades and price increases. As
a percentage of total revenues, license revenues increased to 41% for the three
months ended March 31, 1998, from 39% for the three months ended March 31, 1997,
reflecting the Company's strategy to increase its higher margin software license
revenues as a percentage of total revenues.
18
<PAGE> 22
Maintenance and service contract revenues increased 39% to $4.6 million for
the three months ended March 31, 1998, from $3.3 million for the three months
ended March 31, 1997, as a result of the increase in the number of installed
customers and the growth in software license revenues. As a percentage of total
revenues, maintenance and service contract revenues declined to 45% for the
three months ended March 31, 1998, from 46% for the three months ended March 31,
1997.
Hardware and other revenues increased 27% to $1.4 million for the three
months ended March 31, 1998, from $1.1 million for the three months ended March
31, 1997. As a percentage of total revenues, hardware and other revenues
declined to 14% for the three months ended March 31, 1998, from 15% for the
three months ended March 31, 1997, reflecting the Company's strategy to reduce
the sale and installation of lower margin third-party hardware.
Cost of Revenues
Cost of revenues increased 32% to $2.9 million for the three months ended
March 31, 1998, from $2.2 million for the three months ended March 31, 1997,
primarily due to the increase in total revenues. As a percentage of total
revenues, cost of revenues declined to 29% for the three months ended March 31,
1998, from 31% for the three months ended March 31, 1997, primarily due to an
increase in software license revenues.
Sales and Marketing
The Company's sales and marketing expenses increased 18% to $3.9 million
for the three months ended March 31, 1998, from $3.3 million for the three
months ended March 31, 1997, primarily due to the expansion of sales and
marketing activities in the United States, Mexico and Argentina. As a percentage
of total revenues, sales and marketing expenses declined to 39% for the three
months ended March 31, 1998, from 45% for the three months ended March 31, 1997,
primarily due to a planned reduction in the Company's sales and marketing
personnel in the United Kingdom.
Research and Development
Research and development expenses declined 6% to $1.5 million for the three
months ended March 31, 1998, from $1.6 million for the three months ended March
31, 1997. As a percentage of total revenues, research and development expenses
declined to 15% for the three months ended March 31, 1998, from 22% of revenues
for the three months ended March 31, 1997. This decline was primarily due to (i)
cost savings resulting from the shifting of research and development functions
from the United Kingdom to India and (ii) a significant portion of the planned
expenditures relating to the Company's new generation of software products
having been incurred in prior accounting periods.
General and Administrative
General and administrative expenses declined 21% to $1.1 million for the
three months ended March 31, 1998, from $1.4 million for the three months ended
March 31, 1997. As a percentage of total revenues, general and administrative
expenses declined to 10% for the three months ended March 31, 1998, from 19% for
the three months ended March 31, 1997. This decline reflects the effect of the
Company's cost-cutting and cost control measures in 1997, including the closure
of the Company's office at Dukes Court, Central Woking, England, during the
fourth quarter of 1997.
Net Interest Expense
Net interest expense reflects interest on the Company's bank credit
facilities, as reduced by interest income on cash balances. Net interest expense
declined 15% to $457,000 for the three months ended March 31, 1998, from
$538,000 for the three months ended March 31, 1997, primarily due to a reduction
in amounts outstanding under the Company's bank credit facilities.
19
<PAGE> 23
Income Taxes
There was no provision for income taxes recorded for the three months ended
March 31, 1998, because of the availability of net operating loss carryforwards.
The Company recorded a benefit for income taxes of $10,000 for the three months
ended March 31, 1997.
FISCAL YEAR ENDED DECEMBER 31, 1997, COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1996
Revenues
Total revenues increased 23% to $42.4 million for 1997 from $34.4 million
for 1996, primarily due to increased software license revenues and associated
maintenance contract revenues for 1997. This increase was partially offset by a
decrease in hardware and other and service contract revenues.
Software license revenues increased 40% to $17.0 million for 1997 from
$12.1 million for 1996, primarily due to an increase in the number of software
licenses sold. This increase in software licenses sold consisted principally of
upgrades to existing customers and an increase in the average price of
individual software licenses. As a percentage of total revenues, software
license revenues increased to 40% for 1997 from 35% for 1996, reflecting the
increase in the number of software licenses sold and a decline in service
contract and hardware and other revenues.
Maintenance and service contract revenues increased 20% to $19.0 million
for 1997 from $15.8 million for 1996. As a percentage of total revenues,
maintenance and service contract revenues declined to 45% for 1997 from 46% for
1996, primarily as a result of the completion of certain large contracts in
1996.
Hardware and other revenues declined 2% to $6.4 million for 1997 from $6.5
million for 1996. As a percentage of total revenues, hardware and other revenues
declined to 15% for 1997 from 19% for 1996, primarily as a result of the
Company's efforts to reduce the sale of lower margin third-party hardware.
Cost of Revenues
Cost of revenues declined 15% to $12.7 million for 1997 from $15.0 million
for 1996. As a percentage of total revenues, cost of revenues declined to 30%
for 1997 from 44% for 1996. This decline was primarily due to (i) the reduction
of amortization charges relating to purchased and capitalized software, which
totaled $70,000 for 1997 compared with $2.3 million for 1996, (ii) reduced costs
for services as a result of the decreased use of outside consultants, which
totaled $1.3 million for 1997 and $2.4 million for 1996, and (iii) lower
hardware costs as a result of the Company's efforts to reduce its sales of lower
margin third-party hardware. The cost of hardware and other revenues totaled
$5.1 million, or 12% of total revenues, for 1997 and $5.8 million, or 16% of
total revenues, for 1996.
Sales and Marketing
Sales and marketing expenses increased 17% to $17.8 million for 1997 from
$15.2 million for 1996, primarily due to an increase in marketing activity as
well as costs associated with the Company's expansion in the United States,
Mexico and Argentina. As a percentage of total revenues, sales and marketing
expenses declined to 42% for 1997 from 44% for 1996, primarily as a result of
the realization of operating efficiencies in the United Kingdom in connection
with the integration of acquired businesses.
Research and Development
Research and development expenses declined 3% to $6.2 million for 1997 from
$6.4 million for 1996. As a percentage of total revenues, research and
development expenses declined to 15% for 1997 from 19% for 1996, primarily due
to the cost savings resulting from the shifting of research and development
functions from the United Kingdom to India. In addition, a significant portion
of the planned expenditures relating to the Company's new generation of software
products were incurred in prior accounting periods.
20
<PAGE> 24
\ General and Administrative
General and administrative expenses declined 7% to $5.2 million for 1997
from $5.6 million for 1996. As a percentage of total revenues, general and
administrative expenses declined to 12% for 1997 from 16% for 1996. This decline
reflects the effect of the Company's cost-cutting and cost control measures in
1997, including the closure of the Company's office at Dukes Court, Central
Woking, England, during the fourth quarter of 1997.
Amortization of Intangible Assets
Amortization of intangible assets declined 98% to $97,000 for 1997 from
$5.6 million for 1996, primarily due to the accelerated expiration of
amortization periods as a result of the termination of certain management
employment agreements in 1996.
Net Interest Expense
The net interest expense was $1.9 million for each of 1997 and 1996.
Although the Company's outstanding indebtedness was higher in 1997, net interest
expense remained constant as a result of an overall decrease in the Company's
cost of borrowings.
Income Taxes
The Company recorded a provision for income taxes of $35,000 for 1997
compared to a benefit of $50,000 for 1996.
FISCAL YEAR ENDED DECEMBER 31, 1996, COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1995
Revenues
Total revenues increased 61% to $34.4 million for 1996 from $21.4 million
for 1995, primarily due to increased software license revenues and associated
maintenance and service contract revenues as well as the inclusion of revenues
from businesses acquired in 1995.
Software license revenues increased 83% to $12.1 million for 1996 from $6.6
million for 1995, primarily due to an increase in the number of software
licenses sold, upgrades to existing customers and an increase in the average
price of individual software licenses. As a percentage of total revenues,
software license revenues increased to 35% for 1996 from 31% for 1995,
reflecting that the increases in the Company's software license revenues
exceeded the increases in maintenance and service contract and hardware and
other revenues.
Maintenance and service contract revenues increased 68% to $15.8 million
for 1996 from $9.4 million for 1995. As a percentage of total revenues,
maintenance and service contract revenues increased to 46% for 1996 from 44% for
1995. This increase was primarily attributable to an increase in the number of
installed customers as a result of an increase in software licenses sold and the
integration of businesses acquired in 1995.
Hardware and other revenues increased 20% to $6.5 million for 1996 from
$5.4 million for 1995, primarily as a result of the Company's growth in system
sales in which the Company's software products are sold with hardware pursuant
to turnkey contracts. As a percentage of total revenues, hardware and other
revenues decreased to 19% for 1996 from 25% for 1995, reflecting the Company's
efforts to reduce sales of lower margin third-party hardware.
Cost of Revenues
Cost of revenues increased 39% to $15.0 million for 1996 from $10.8 million
for 1995, primarily due to an increase in the number of installed customers. As
a percentage of total revenues, cost of revenues declined to 44% for 1996 from
50% for 1995, primarily as a result of (i) a reduction of hardware and other
costs, as a percentage of total revenues, to 16% for 1996 from 22% for 1995, and
(ii) a reduction of amortization charges relating to purchased and capitalized
software, as a percentage of total revenues, to 7% for 1996 from 11% for
21
<PAGE> 25
1995. This decline was partially offset by higher cost of revenues for service
contracts as a result of the increased use of outside consultants in 1996.
Sales and Marketing
Sales and marketing expenses increased 41% to $15.2 million for 1996 from
$10.8 million for 1995, primarily due to an increase in marketing activity as
well as costs associated with the Company's expansion in the United States,
Mexico and Argentina. As a percentage of total revenues, sales and marketing
expenses declined to 44% for 1996 from 51% for 1995, primarily due to the
realization of operating efficiencies in the United Kingdom in connection with
the integration of acquired businesses.
Research and Development
Research and development expenses totaled $6.4 million for each of 1996 and
1995. As a percentage of total revenues, research and development expenses
declined to 19% for 1996 from 30% for 1995, primarily due to the increase in
total revenues and relatively constant research and development expenses.
General and Administrative
General and administrative expenses increased 65% to $5.6 million for 1996
from $3.4 million for 1995, primarily due to an increase in the number of
installed customers. As a percentage of total revenues, general and
administrative expenses were 16% for each of 1996 and 1995.
Amortization of Intangible Assets
Amortization of intangible assets increased 75% to $5.6 million for 1996
from $3.2 million for 1995, primarily due to the accelerated expiration of
amortization periods as a result of the termination of certain management
employment agreements in 1996.
Net Interest Expense
Net interest expense increased 46% to $1.9 million for 1996 from $1.3
million for 1995, primarily due to greater amount of indebtedness outstanding in
1996.
Income Taxes
The Company recorded a benefit for income taxes of $50,000 in 1996 compared
to a provision for income taxes of $37,000 in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations since inception primarily through
cash generated from operations, borrowings under bank credit facilities, private
placements of equity securities and equity contributions by its principal
stockholder. As of March 31, 1998, the Company had $5.3 million of cash and cash
equivalents and a $4.4 million short-term demand facility. The Company had a
working capital deficit of $3.3 million as of March 31, 1998.
The Company had an operating cash flow deficit of $3.6 million for the
three months ended March 31, 1998. This deficit was primarily due to reductions
in prepaid expenses, accounts payable and accrued income taxes. The Company had
operating cash flow deficits of $4.0 million, $1.3 million and $6.1 million for
1997, 1996 and 1995, respectively. Operating cash flow is affected by
seasonality, among other factors, and is often disproportionately higher in the
Company's third and fourth fiscal quarters than in the first two quarters of its
fiscal year.
Accounts receivable declined to $9.6 million as of March 31, 1998, from
$11.2 million as of March 31, 1997. Accounts receivable declined to $9.5 million
as of December 31, 1997, from $11.0 million as of December 31, 1996. These
declines were primarily due to management's efforts to collect outstanding
22
<PAGE> 26
accounts receivable. Accounts receivable days sales outstanding was 86 days as
of March 31, 1998, compared to 142 days as of March 31, 1997, and 80 days as of
December 31, 1997, compared to 115 days as of December 31, 1996. During 1997,
the Company funded $2.6 million of prepaid expenses and $5.7 million of deferred
maintenance revenues from cash flows from operating activities.
The Company utilized cash for investing activities of $287,000 for the
three months ended March 31, 1998, and $1.0 million, $4.1 million and $8.4
million for 1997, 1996 and 1995, respectively. During these periods, the Company
experienced significant growth and invested in property and equipment. In 1996
and 1995, the Company expended $3.3 million and $7.5 million, respectively (net
of cash acquired), to purchase complementary businesses.
Cash provided by financing activities was $8.8 million for the three months
ended March 31, 1998, and $4.5 million, $6.5 million and $14.8 million for 1997,
1996 and 1995, respectively. Financing activities for the three months ended
March 31, 1998, primarily consisted of a private placement of $9.3 million of
equity securities. Financing activities for 1997 primarily consisted of a
private placement of $6.4 million of equity securities and repayment of bank
indebtedness of $2.0 million. In 1996, financing activities primarily consisted
of a stockholder contribution of $5.3 million, long-term borrowings under the
Company's bank credit facilities of $1.9 million, an increase in the short-term
demand facility of $1.3 million and repayment of bank indebtedness of $1.7
million. Financing activities in 1995, primarily consisted of long-term
borrowings of $13.5 million under the Company's bank credit facilities and an
increase in the short-term demand facility of $1.8 million.
As of March 31, 1998, the Company had outstanding indebtedness under its
bank credit facilities of $16.9 million, which included approximately $2.3
million with maturities of one year or less at interest rates ranging from
Sterling LIBOR plus 3% to Sterling LIBOR plus 4% and a $4.4 million short-term
demand facility that bears interest at the lending bank's base rate plus the
applicable margin.
The Company believes that the net proceeds from the Offering, together with
existing cash and cash equivalents, will be sufficient to meet the Company's
working capital and currently planned expenditure requirements for the next 12
months. The Company may, from time to time, consider acquisitions of
complementary businesses, products or technologies, which may require additional
financing. In addition, continued growth in the Company's business may, from
time to time, require additional capital. No assurances can be given that
additional capital will be available to the Company at such time or times as
such capital may be required or, if available, that it will be on commercially
acceptable terms or would not result in additional dilution to the Company's
stockholders.
IMPACT OF THE YEAR 2000 AND EURO COMPLIANCE
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
or its suppliers' and customers' computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in system failures or miscalculations causing
disruptions of operations including, among other things, a temporary inability
to process transactions, send invoices or engage in similar normal business
activities. In addition, in 1999 the Euro is expected to be introduced as the
currency of participating nations of the European Union.
The Company's internal information system is a client/server environment
and the Company believes that its internal software is currently both Year 2000
and Euro compliant. The Company has not yet identified any Year 2000 or Euro
compliance problems, but will continue to monitor its information systems for
compliance problems. However, no assurances can be given that Year 2000 or Euro
compliance problems will not eventually occur with respect to the Company's
information systems.
Neither the Company nor its subsidiaries has initiated formal
communications with suppliers to determine the extent to which those third
parties' failure to remedy their own Year 2000 or Euro compliance problems would
materially effect the Company and its subsidiaries. The Company has not received
any indication from its suppliers that Year 2000 or Euro compliance may
materially effect their ability to conduct business and the Company has no
current plans to formally undertake such an assessment.
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<PAGE> 27
BUSINESS
THE COMPANY
AremisSoft develops, markets, implements and supports enterprise-wide
applications software targeted to mid-sized organizations in the healthcare,
manufacturing, hospitality and construction industries (the "Vertical Markets").
Its software products provide an array of functions that address the
mission-critical information requirements of customers in the Vertical Markets.
The Company's software products incorporate object-oriented and client-server
technologies and are designed for rapid implementation, flexibility and
scalability across multiple platforms. The modular design and industry
specialization of its products limit the need for extensive customization which
the Company believes provides it with a competitive advantage. In addition, the
interoperability of the Company's products with other software applications and
their ability to grow with an organization permit rapid adaptation of the
Company's products in response to ongoing business changes. The Company believes
that it provides substantial benefits to its customers with legacy systems,
including reduced upgrade disruptions and costs, the ability to extend such
systems' useful lives and improved interoperability with existing software
applications. The Company markets its software products primarily through its
own sales force and provides product support worldwide through ten offices in
seven countries. The Company currently has more than 5,000 customers. Revenues
from customers located in the United Kingdom comprised 75% of total revenues in
both 1997 and in the first three months of 1998. Customers using the Company's
software products include Southampton Multifund (healthcare), Birmingham
Multifund (healthcare), Telefon AB LM Ericsson (manufacturing), Nabisco Biscuit
Co. (manufacturing), Forte Limited (hospitality) and London Electricity plc
(construction).
The Company's software products have been designed using a three-tiered,
object-oriented software architecture (the "Aremis Architecture"). The Aremis
Architecture achieves economies of scale and cost reductions in the software
development process by capitalizing on the common functional requirements of
customers across a variety of industries. The Aremis Architecture facilitates
customization and modification of the Company's software solutions to address
the mission-critical information requirements of its customers. The Company has
been developing its software in an object computing environment since 1986 and
believes that its substantial investment in the development of the Aremis
Architecture provides it with a competitive advantage in developing
enterprise-wide applications software.
In the past five years, the Company has experienced rapid growth both
internally and through acquisitions, with revenues increasing from $2.7 million
in 1993 to $42.4 million in 1997. During this period, the Company successfully
acquired and integrated the operations of eleven businesses. In each
acquisition, the Company sought to reduce expenses, rejuvenate existing products
of the acquired business and migrate the customers of the acquired business to
products that utilize the Aremis Architecture. Since 1986, the Company has
developed an extensive software development and support facility in New Delhi,
India, that provides the Company with access to highly-skilled technical
personnel who rejuvenate acquired products and support the Company's research
and development activities on a cost-effective basis.
The Company's business strategy is to continue its growth by (i) targeting
mid-sized organizations, including divisions and business units of larger
companies, with annual revenues of less than $1 billion, (ii) focusing on
strategic markets, (iii) leveraging the Company's cost-efficient India
operations, (iv) capitalizing on the Company's investment in the Aremis
Architecture, (v) expanding the Company's marketing, sales, support and service
capabilities and (vi) acquiring related software businesses, products or
technologies.
The Company was incorporated in Delaware in June 1998 in connection with
the Reorganization. See "Organization of the Company." The Company's principal
executive offices are located at 60 Bishopsgate, London EC2N 4AJ, England, and
its telephone number is 011-44-171-309-1555.
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<PAGE> 28
INDUSTRY BACKGROUND
Enterprise-wide applications software is designed to help streamline and
enhance an organization's ability to manage and execute mission-critical
operations, such as accounting, payroll, purchasing, manufacturing, human
resources, customer service and sales and marketing. Enterprise-wide
applications software that is capable of generating and disseminating critical
information across a business organization and its extended enterprise provide a
strategic resource that enables an organization to respond rapidly to changing
market environments and customer needs.
With the growth of computer networks across local and remote parts of an
enterprise and the sharing of information between departments, the demand for
flexible solutions that address continually changing business requirements is
rapidly increasing. In the past, host-centric systems operating on mainframes or
mid-range computers and offering high levels of performance, scalability and
data security achieved broad market acceptance. Although these systems served
the near-term needs of customers, they lacked the flexibility necessary to
operate in today's marketplace. As a result, open architecture, client/server
based computing systems were developed and offer the following advantages: (i)
easier access to corporate data, (ii) improved reporting and analysis, (iii)
flexibility in decision-making, (iv) quicker time to market and (v) a more
strategic computing model. Along with the growth in demand for these systems, an
increasing demand for a new generation of enterprise-wide applications software
has emerged to address various business requirements.
In addition, object-oriented technology is rapidly emerging as a desired
feature of enterprise-wide client/server-based applications software.
Object-oriented technology consists of component objects that are essentially
building blocks of small, discrete pieces of functionality. These component
objects can be configured to create complete applications and enable software
developers to rapidly create and modify systems to provide the desired
functionality for specific markets or individual customers. Object-oriented
technology also allows for the creation of systems that are scalable, flexible
and capable of accommodating variations in business requirements and technology
infrastructure.
According to International Data Corporation, growth in the enterprise-wide
applications software market has been strong in recent years and is expected to
continue. This growth may be attributed to a variety of factors, including a
shift among organizations from developing enterprise-wide applications software
in-house to purchasing enterprise-wide applications software from outside
sources. The Company believes this trend is principally fueled by the growing
complexity of new technology and the increasing failure rate of in-house
enterprise-wide applications software development projects. By outsourcing their
enterprise-wide applications software needs, organizations reduce the risk of
in-house development failures and ensure quicker time to market with new and
increased functionality, creating a competitive advantage.
The Company believes that a significant portion of the future growth in the
enterprise-wide applications software industry will be generated from purchases
by mid-sized organizations, including divisions and business units of larger
companies, with annual revenues less than $1 billion. Within this market,
organizations with annual revenues between $150 million and $1 billion are
generally referred to as "Tier II" organizations and organizations with annual
revenues less than $150 million are generally referred to as "Tier III"
organizations. "Tier I" organizations typically have annual revenues in excess
of $1 billion. The number of organizations in Tier II and Tier III is
substantially greater than in Tier I. Tier III and certain Tier II organizations
have attractive characteristics for enterprise-wide applications software
providers. Enterprise software marketed to Tier II and Tier III organizations is
generally less expensive and has significantly shorter sales and implementation
cycles than software for Tier I organizations.
The Company believes there is a substantial market opportunity for
enterprise-wide applications software that offers ease of integration, faster
implementation, reduced risks associated with business and technological
changes, lower overall cost of ownership and industry-specific and customized
functionality. At the same time, these applications should attempt to mask the
complexities of the underlying hardware, software or network technologies.
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<PAGE> 29
THE AREMIS ARCHITECTURE
The Aremis Architecture provides Advanced, Real-time, Enterprise-wide,
Mission-critical, Integrated Systems to customers in each of the Vertical
Markets. The Company believes that the Aremis Architecture enables it to produce
high quality, scalable enterprise-wide applications software with substantially
reduced software development, implementation and maintenance costs. The Aremis
Architecture incorporates a three-tiered, object-oriented approach in its
enterprise-wide applications software, which is depicted below:
[Schematic Description of Aremis Architecture]
The three tiers of the Aremis Architecture consist of presentation, logic
and database. The presentation tier relates to what the end user sees on the
screen when using the software. The logic tier consists of the actual
applications in the system and interacts with the database tier which stores
mission-critical enterprise-wide data. A primary advantage of this three-tier
structure is that it allows software programmers to make changes and
enhancements to one of the tiers without disrupting the logic of the other
tiers.
The Aremis Architecture utilizes graphical user interface ("GUI"), which
uses icons and other graphical methods to guide a user through the software. GUI
is more user-friendly than character user interface ("CUI"), commonly known as
"green screen" technology, which requires users to know numerous commands when
using the software.
A central feature of the Aremis Architecture's logic tier is its object
orientation. The Company has devoted significant resources to developing an
extensive proprietary software library of well-defined, re-usable business
objects. These objects link business rules and policies to applications written
in C++ and Java languages. This object orientation enables customers or the
Company's developers to easily create additional modules or to rapidly adapt
existing software to changing business conditions or requirements. It also
facilitates the re-use of functional applications which are similar across
products and industries. The Aremis Architecture has 70% commonality of objects
across the Vertical Markets, which the Company believes provides it with a
significant competitive advantage.
The object orientation of the Aremis Architecture also helps to minimize
training costs as the Company's software developers who are already trained in
its development methods and language can be assigned to new markets with little
training. In a similar manner, customers with multiple AremisSoft products can
minimize their training and implementation costs as each of the products
operates in a similar manner.
The Aremis Architecture encompasses industry standard database technologies
and is designed to be compatible with Oracle, Sybase, SQL Server, Informix and
other open database connectivity ("ODBC") compliant databases. This industry
standard database tier provides AremisSoft customers with the flexibility to
utilize high quality data warehouse and data-mining applications.
The Aremis Architecture is based on open, client/server computing
technology. This open environment provides interoperability with other software
applications, even among multiple revision levels of the same or different
products. The Aremis Architecture is also platform independent and operates
seamlessly with
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<PAGE> 30
Windows NT, Windows 95, UNIX, Novell and multitasking DOS environments on
numerous hardware platforms and interfaces with Internet and intranet
technologies.
THE AREMISSOFT SOLUTION
The Company's enterprise-wide applications software products address the
mission-critical, business information requirements of organizations in the
Vertical Markets. AremisSoft's products are designed to provide the following
benefits:
Enhanced Functionality. The Company's visual development environment allows
customers to focus on incorporating business logic into a solution instead of on
complex technical details. With the Company's visual, object-oriented
development environment, developers and end users can rapidly build applications
that automate and integrate business processes such as credit checking, order
handling and inventory management. From its history of working closely with its
customers, the Company believes that it has gained a high level of expertise in
industry-specific, complex business processes. The close mapping between a
business process and the Aremis Architecture enables developers to more easily
design, maintain and re-use applications. This also enables endusers to be an
integral part of the development of business solutions and results in more
successful implementation.
Ease of Integration. AremisSoft's software products operate in Windows NT,
Windows 95, UNIX, AS/400, Novell and multitasking DOS environments on numerous
hardware platforms and are compatible with Oracle, Sybase, SQL Server, Informix
and other ODBC compliant databases. Because of the flexible 32-bit open
architecture and open approach to development, the Company's products can also
be integrated with technologies such as Java, Visual Basic, Visual Basic for
Applications and C++. Ease of integration with existing technologies allows
customers to accommodate and modify their business practices without regard to
underlying hardware, software and network technologies.
Industry-Specific Applications. The Company offers enterprise-wide
applications software for mid-sized organizations in the healthcare,
manufacturing, hospitality and construction industries. Through its concentrated
product focus, the Company believes it has developed substantial industry
expertise in the Vertical Markets that has enabled the Company to develop
software applications that address customers' specific industry needs.
Rapid Implementation. The modular product design of AremisSoft's software
combined with the Company's focus and expertise in the Vertical Markets permits
rapid product implementation. Product applications are designed to address the
specific needs of customers in the Vertical Markets, limiting the need for
extensive customization upon implementation. In addition, customers are able to
purchase only those applications with functionality appropriate for their needs,
eliminating implementation and training time for unnecessary features. The
Company also provides all of the system implementation and training services for
its clients using AremisSoft field engineers. By providing implementation
services in-house, the Company believes that its customers benefit from a more
efficient implementation process and by having only one vendor accountable for
system performance.
Protection of Investment in Legacy Systems. AremisSoft's open architecture,
client/server-computing technology allows customers to migrate their existing
mission-critical business software to an open platform, thereby protecting their
legacy systems and reducing the costs and business interruptions associated with
system upgrades.
Global Service and Support. The Company provides a high level of global
service and support as a critical component of its enterprise-wide applications
software. The Company offers product service and support by highly trained and
dedicated personnel through its software development and support facility in
India in addition to local support. The Company believes its investment in
worldwide customer support services and user groups facilitates customer
communication and feedback, enhancing customer satisfaction and engendering
long-term customer relationships.
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<PAGE> 31
THE AREMISSOFT STRATEGY
The Company's primary business objective is to strengthen its position in
each of the Vertical Markets as a leading provider of enterprise-wide
applications software. The key elements of the Company's business strategy
include the following:
Target Tier II and Tier III Organizations. The number of organizations in
the Tier II and Tier III markets is significantly larger than Tier I, which
affords the Company opportunities to expand its customer base. In addition, the
Company's software products are suited to the needs of Tier II and Tier III
organizations because they are generally less expensive and have significantly
shorter sales cycles and implementation periods than products marketed to Tier I
organizations, which typically require implementation periods in excess of one
year. Moreover, unlike the Tier I market, the Tier II and Tier III markets are
not easily penetrated by large software vendors who face difficulty in scaling
monolithic applications to fit the needs of Tier II and Tier III organizations.
In addition, large software vendors cannot offer cost savings, rapid
implementation and ease of integration and maintenance, benefits that are
particularly important to Tier II and Tier III customers. The Tier II and Tier
III markets are also not dominated by one or more vendors of enterprise-wide
applications software, providing the Company with significantly greater internal
growth and acquisition opportunities.
Focus on Strategic Vertical Markets. The Company believes there are
significant opportunities to increase its presence and expand its customer base
within the healthcare, manufacturing, hospitality and construction industries.
The Company has targeted these markets because they (i) enhance the Company's
substantial expertise in each market, (ii) provide international marketing
opportunities which increase the potential for global growth and (iii) have
common software application functional requirements which enable the Company to
leverage the use of the Aremis Architecture.
Shift Operations To Low Cost Environments Utilizing Communication
Technology. AremisSoft believes it has a significant competitive advantage in
its ability to use its software development and support facility in India for
product development, product rejuvenation and administrative functions. The
Company intends to increase utilization of its India software development and
support facility to achieve further cost efficiencies without sacrificing
quality. In 1997, the Company also established a satellite wide area network
("WAN") link between the Company's India operations and each of its other
offices to increase operating efficiency and enhance communications throughout
the Company's operations.
Leverage the Company's Investment in the Aremis Architecture. As an
integral part of its business strategy, the Company intends to continue to
invest in the development of new technologies and products to address the
evolving needs of its customers. The Company believes that the Aremis
Architecture enables it to respond to and incorporate new technologies. In
addition, the Company's technology strategy is focused on migrating its legacy
products to an object-oriented architecture to enable customers to improve
interoperability with existing software applications and to deploy and integrate
new software applications across their businesses.
Expand Marketing, Sales, Support and Service. The Company believes there
are significant opportunities to expand its market position in existing markets
by further developing its sales, marketing and support infrastructure. The
Company primarily sells its software products through an overall sales and
marketing force of 270 employees in the United Kingdom, United States, Ireland,
India, Cyprus, Mexico and Argentina, and indirectly in 12 additional countries.
The Company plans to continue to invest significantly in expanding its
marketing, sales, support and service in such geographic regions. The Company
also believes that prompt and effective service and technical support are
essential elements of enterprise-wide applications software. The Company
continues to invest in its support infrastructure as evidenced by the
establishment of a customer support hotline in each operating division.
Acquire Related Software Products and Companies. A significant aspect of
the Company's growth strategy has been the acquisition of complementary
businesses in order to achieve market presence and increase its customer base
within the Vertical Markets. The Company's strategy is to rejuvenate the
products of acquired businesses utilizing the Aremis Architecture and gradually
migrate the customers of acquired
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<PAGE> 32
businesses to such products. The Company expects that it will continue to rely
on acquisitions as a significant part of its growth strategy. The Company
believes that significant value can be generated from acquired businesses
through rejuvenation of the acquired businesses' products and the eventual
migration of the acquired businesses' customers to products based on the Aremis
Architecture.
ACQUISITION STRATEGY
From January 1993 to March 1996, the Company acquired eleven businesses
with operations in the Vertical Markets. The aggregate net sales of the acquired
businesses (based on net sales for each business during the last completed
fiscal year immediately preceding the acquisition translated to United States
dollars based on the applicable exchange rate in effect on the date the
acquisition was consummated) totaled approximately $24.2 million.
The following table sets forth certain information concerning the
businesses that have been acquired by the Company since January 1993:
<TABLE>
<CAPTION>
CONSIDERATION(1)
VERTICAL MARKET NAME OF ACQUIRED BUSINESS PRINCIPAL LOCATION DATE ACQUIRED (IN MILLIONS)
--------------- ------------------------------- ------------------ -------------- ----------------
<C> <S> <C> <C> <C>
HEALTHCARE Genisyst Limited United Kingdom October 1994 $5.00
Timemaster Systems Limited United Kingdom September 1995 0.90
Advanced Medical Systems United Kingdom October 1995 1.90
MANUFACTURING BEC Group Limited United Kingdom March 1995 4.00
Online Systems Inc. United States March 1996 0.60
HOSPITALITY HotelMaster Limited United Kingdom January 1993 0.30
IGS Leisure Technology Limited United Kingdom March 1993 1.00
Hotelier Limited United Kingdom June 1993 0.03
Sennen Computers Limited United Kingdom September 1993 0.40
Infoplan Computers Limited Cyprus June 1993 0.50
CONSTRUCTION Briter Computer Systems Limited United Kingdom October 1995 3.10
</TABLE>
- ---------------
(1) For acquisitions of businesses outside of the United States, consideration
figures have been translated to United States dollars based on the
applicable exchange rate in effect on the date the acquisition was
consummated.
Although the Company currently has no agreements, understandings or
arrangements with respect to any future acquisitions, the Company intends to
expand its activities in each Vertical Market on a global basis, including the
United States, and may do so through the acquisition of existing businesses,
products or technologies.
The Company's acquisition strategy focuses on the corporate, financial and
operational characteristics of both the Company and the acquired business. The
Company's acquisition strategy generally involves three phases: Phase I (the
pre-acquisition process), during which the Company identifies and analyzes
acquisition opportunities, Phase II (the post-acquisition assimilation process),
during which the acquired business is integrated into the Company's operations,
and Phase III (the post-acquisition product rejuvenation process), during which
the acquired business' products are rejuvenated and eventually migrated to the
Aremis Architecture.
Phase I -- Pre-Acquisition
During Phase I, the Company identifies potential acquisition candidates and
analyzes and evaluates various factors to determine the appropriateness of the
acquisition. The Company extensively considers the candidate's products and
their applications, application environment and operating platform to assess the
potential for rejuvenation of the products utilizing the Aremis Architecture. At
the same time, the Company reviews the financial condition of the candidate's
business, its market share and competitors as well as its current customers and
customer support to evaluate various issues, including (i) whether the candidate
can be acquired at an attractive price, (ii) the desirability of the candidate's
customers and markets and (iii) the potential for utilizing the Company's
existing product development and support functions following the acquisition.
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<PAGE> 33
These and other factors are then considered by the Company in making its
decision whether to complete the acquisition process.
Phase II -- Post-Acquisition Assimilation
During Phase II, the acquired business is integrated into the Company's
operations. The first step in Phase II of the acquisition process is to
establish a satellite WAN link between the Company's software development and
support facility in India and the acquired business. A team within the India
facility immediately assumes responsibility within the acquired business for
product development, finance and administration through the WAN link. As part of
this process, the Company reduces staff in development and administrative
functions previously performed by the acquired business. This team in India is
primarily responsible for research and development while sharing
responsibilities for design and specification with technical personnel in the
United Kingdom.
Phase III -- Post-Acquisition Product Rejuvenation
During Phase III, the Company begins the process of rejuvenating the
acquired businesses' products and transitioning them to the Aremis Architecture.
A customer of the acquired business may elect to (i) transition to an AremisSoft
product, (ii) upgrade to a rejuvenated legacy product or (iii) continue to
utilize its existing legacy product. The Company is sensitive to the acquired
business' investment in legacy systems and does not force customers of the
acquired business to transition to the rejuvenated products. The Company also
continues to support the acquired businesses' legacy products until all
customers are transitioned to a rejuvenated or new AremisSoft product. Because
the migration process is gradual and, to a large extent, is controlled by the
customer, disruption to the customer's operations is minimized.
The following table illustrates the product rejuvenation process:
[Schematic Description of Rejuvenation Process]
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<PAGE> 34
VERTICAL MARKETS
The Company currently provides customized enterprise-wide applications
software for mid-sized organizations in the Vertical Markets. In the United
Kingdom, the Company is one of the leading suppliers of enterprise-wide
applications software to the healthcare and hospitality industries. As of March
31, 1998, the Company had over 5,000 customers across the Vertical Markets. The
Company's customer base is comprised of approximately 2,000 healthcare, 450
manufacturing, 1,200 hospitality and 350 construction customers. The Company
also continues to service approximately 1,000 customers across a variety of
industries in other countries, primarily in Cyprus and India. For the year ended
December 31, 1997, no customer accounted for more than 10% of the Company's
total revenues.
As a result of the acquisitions completed by the Company from January 1993
to March 1996, the Company's customer base in each Vertical Market is in various
stages of the migration process to products utilizing the Aremis Architecture.
Each of the Company's legacy products was originally acquired as part of an
acquisition and subsequently rejuvenated. In the rejuvenation process, a legacy
product is enhanced through the utilization and incorporation of the then
current features of the Aremis Architecture. New customers in each of the
Vertical Markets have been sold rejuvenated products and updated versions of
such products, while existing customers of the acquired business have been
permitted to migrate to the rejuvenated product line at their own pace. As a
result, the Company's product line in each of the Vertical Markets consists of
(i) legacy products of acquired businesses that have not been rejuvenated, (ii)
legacy products of acquired businesses that have been rejuvenated and
incorporate certain features of the Aremis Architecture and (iii) new products,
including those under development, that incorporate all or a substantial portion
of the features of the Aremis Architecture. In each of the Vertical Markets, the
Company markets rejuvenated and new products, and provides service and support
for legacy products that have not been rejuvenated.
The Company's new product offerings in each of the Vertical Markets consist
of products that incorporate all or substantially all of the benefits of the
Aremis Architecture, which include object-oriented technology, seamless
interface with Internet and intranet technologies, full Windows compatibility,
ODBC compliance, transparent access to information from both CUI and GUI
terminals and Year 2000 and Euro compliance.
Within each of the Vertical Markets, the Company has adopted a sales and
marketing strategy that targets end user needs. This strategy includes
advertisements in leading trade publications, participation in trade shows and
sponsorship of user groups. In addition, the Company has developed corporate
sales and marketing materials as well as general financial and technical
materials that are distributed to each of the Company's subsidiaries for
inclusion in their sales materials, thereby promoting a consistent portrayal of
the Company's image and products.
The Company markets its products primarily through a direct sales force in
each of the Vertical Markets. In the manufacturing and hospitality industries,
the Company also relies to a limited extent on distributors to sell the
Company's products. The Company's senior management is typically involved in the
marketing process on contracts with a potential value of $500,000 or more. The
sales cycles for the Company's products vary across each Vertical Market
depending on many factors, including the size of the customer's organization,
the number of individuals within the organization who are involved in the
purchasing decision, whether the potential customer has retained a consultant to
assist in the purchasing decision, the status of the customer's implementation
of a hardware system and the degree of implementation, consulting and training
required. Contracts of $500,000 or more tend to have a longer sales cycle than
those under $500,000.
The enterprise-wide applications software market, including the market for
client/server-based systems, is intensely competitive and rapidly changing. The
competition that the Company encounters varies across and within each market
depending upon, among other things, the customer's size and specific system
requirements. The principal competitive factors affecting the market for the
Company's software products are responsiveness to customer needs, product
architecture, functionality, speed of implementation, ease of integration,
performance, features, quality and reliability, breadth of distribution, vendor
and product reputation, quality of customer support and price. The Company
believes that it has competed effectively to date on the basis of these factors,
particularly on its reputation for high quality service and support and its
ability to provide lower cost implementations.
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For each of the last three years, revenues in each of the Vertical Markets
as a percentage of the Company's total revenues were as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Healthcare.................................................. 51.9% 47.2% 43.6%
Manufacturing............................................... 15.4 16.1 22.4
Hospitality................................................. 29.4 22.0 22.4
Construction................................................ 3.3 9.7 7.8
Other....................................................... 0.0 5.0 3.8
---- ---- ----
Total.............................................. 100% 100% 100%
==== ==== ====
</TABLE>
HEALTHCARE
The healthcare industry in the United Kingdom, Europe and North America is
characterized by government regulation and rising healthcare costs. Rising costs
have resulted in pressures to reduce costs without sacrificing the quality of
care and have caused significant legislative and regulatory changes in the
healthcare industry. The pressure to reduce costs has encouraged physicians to
join group practices to share administrative costs and achieve economies of
scale. The Company believes that this movement toward group practices has
accelerated the trend toward automation, as group practices require more
efficient and productive management systems. Physician practice management
systems are now available that automate insurance processing and third party
claims, store clinical information and integrate the operations of physician
practices with larger healthcare organizations.
The healthcare industry in the United Kingdom is regulated by the National
Health Service ("NHS"), a government agency. Healthcare services are currently
provided primarily through health authorities and general practitioner ("GP")
fundholders. Health authorities ensure that the healthcare services provided
meet the needs of residents in their designated areas. GP fundholders are groups
of physicians who combine practices to manage a budget for staff, provide
hospital referrals, drug costs, community nursing services and management costs.
Groups of GP fundholders who work together and pool their budgets are known as
"Multifunds".
After April 1, 1999, the GP fundholding structure is expected to terminate
and be replaced by newly created primary care groups ("Primary Care Groups").
Each Primary Care Group is expected to be responsible for approximately 100,000
individuals within a certain territory, based on natural geographical
communities and will have a budget based upon its territory's population and
available resources.
The Company's healthcare products sold in the United Kingdom are regulated
by the NHS through an accreditation process. Requirements for Accreditation
("RFA") was first introduced in April 1993 and the current version, RFA4, was
reprinted in April 1998. RFAs ensure that computer systems provide consistent
core functionality and conform to NHS standards. It was recommended that
existing systems be upgraded and that health authorities and GP fundholders
would only be reimbursed for the cost of such systems if they were accredited to
RFA4. The Aremis Architecture is accredited to RFA4.
In July 1998, a new Information Management and Technology Strategy ("IMTS")
is expected to be published by the NHS. The IMTS is expected to set the
information technology standards for the next seven years, including
specifications for Primary Care Groups. The purpose of the IMTS is to ensure
that all Primary Care Groups will have in place an auditable clinical system
with the ability to provide management information. In addition, the NHS
recently recommended that major investments in information technology systems to
support Primary Care Groups not be made before the IMTS is published. As a
result, the Company anticipates that it may experience a delay in customer
purchases of its healthcare products pending such publication. See "Risk
Factors -- Government Regulation of Healthcare Product Specifications."
The IMTS is expected to be the basis for drafting an updated RFA, which
will be referred to as "RFA5." The Company is actively involved with the NHS in
the development of the new specifications. The Company believes it is
well-positioned to respond to the new specifications and provide its existing
and potential
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customers in the healthcare industry with enterprise-wide applications software
that will meet their specific needs and comply with applicable requirements. In
the future, the NHS is expected to only reimburse physicians groups for
purchases of information technology systems that meet RFA5 accreditation
criteria.
The information technology group of the NHS is also working on a project
called PRODIGY, the purpose of which is to test the concept of computer-aided
support for physician prescribing decisions. PRODIGY's proposed computer system
would contain advice on therapeutic options and is intended to work in tandem
with existing physician clinical systems. The system provides decision support
to the physician immediately after an initial diagnosis has been made by
presenting a prescribing recommendation on the condition diagnosed. It is
anticipated that the NHS will specify system requirements for computer aided
decision support as part of RFA5. The Company is one of five organizations
involved in preparing the specifications.
HEALTHCARE PRODUCTS
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NEW PRODUCTS REJUVENATED PRODUCTS LEGACY PRODUCTS
- ------------------------------------------------------------------------------------------------------------
GCS for Windows GCS AMSyS-v4
AMSyS-v5 Genisyst Clinical System
Genisyst 2.8 GENI Links
Genisyst 4 (NT) GENI
CHARM
Fundman Windows 95
Fundman Windows 3.1
Fundholding
Infolog
- ------------------------------------------------------------------------------------------------------------
To be released in late 1998 1,939 installed customers(1) 560 installed customers(1)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Certain customers of the Company have been licensed more than one product or
one version of a product and, as a result, are represented more than once in
the number of installed customers.
Global Clinical System for Windows ("GCS for Windows") is currently under
development and is expected to be released in the fourth quarter of 1998. GCS
for Windows operates on a PC/NT platform and provides healthcare providers with
a navigation system for managing medical and administrative tasks routinely
encountered by physicians, physician groups and community hospitals. GCS for
Windows is a Windows-based integrated clinical system compatible with both
Windows 95 and Windows 3.1, facilitating integration with other systems. It
utilizes many features of the Aremis Architecture, incorporating touch screen,
voice recognition and video conferencing technologies. GCS for Windows consists
of nine fully-integrated application modules.
Global Clinical System ("GCS") operates in Windows 95 and contains the same
application modules as GCS for Windows. Because GCS does not incorporate
object-oriented technology, it is expected to be gradually phased out when GCS
for Windows is released.
33
<PAGE> 37
The following table describes the main application modules of GCS for
Windows and GCS and their primary customer benefits:
<TABLE>
<CAPTION>
APPLICATION MODULES PRIMARY CUSTOMER BENEFITS
------------------- -------------------------
<S> <C> <C>
- Administration Manager - Contains all basic patient record information such as name, age, sex
and address
- Consultation Manager - Delivers an electronic patient record to the clinician's desktop,
providing the user with the significant medical history of the patient,
consultation history, test results and tests due
- Prescription Manager - Provides access to the user's 40 most commonly prescribed drugs, as
well as information on generic types, preferred drugs, packaging and
costs
- Appointment Manager - Creates an appointment calendar for multiple physicians across various
specialties, tracks patient visits, prints details and produces
statistical reports for physicians
- Reporting - Generates reports specific to a practice or health authority, based on
a number of factors such as age, sex and patient profile
- Training - Provides state-of-the-art training techniques from the user's screen
- Communications - Enables a facility to link its system to the NHS intranet, the local
hospital and the health authority
- Word Processing - Allows users to incorporate data from other modules into letters and
referrals
- Dispensing - Facilitates the cost-effective issuance of drugs and prescriptions
</TABLE>
AMSyS-v5 is a DOS-based clinical system released by the Company as a
product rejuvenation for AMSyS-v4 customers. AMSyS-v4 was acquired by the
Company in connection with the acquisition of Advanced Medical Systems Limited
in 1995 and subsequently rejuvenated. AMSyS-v5 incorporates primarily the same
application modules as GCS but in a non-Windows format and operates alone or in
a PC/LAN environment.
Genisyst 2.8 and Genisyst 4(NT) are both rejuvenations of a product
acquired by the Company in connection with its 1994 acquisition of Genisyst
Limited. Both products incorporate functionality similar to GCS and provide a
nondisruptive transition for customers to new products until these products are
phased out.
CHARM is a UNIX-based system primarily developed for community hospitals
and is principally used by physicians to manage home healthcare visits conducted
by health and social workers. CHARM consists of a central database that allows
the user to collect and maintain patient data and treatment information. The
software is installed on palm tops, which allows users to collect data in the
field and later upload the information into the central database. The Aremis
Architecture version of CHARM is under development and is expected to be
released within the next two years.
Fundholding and Fundman are accounting applications software. Fundholding
is a multi-user accounting system designed to operate in accordance with the NHS
Fundholding business model. All accounting modules are integrated with various
software applications, reducing the administrative costs associated with
operating a group practice in the Fundholding system. Fundman is a Windows-based
consolidation system for multifund physician practices and contains a total
purchasing module, which is expected to be the prototype model for the new IMTS
specifications.
Infolog is a hand held terminal which is used for remote data capture by
physicians and home healthcare providers. Infolog is a support product used by
licensees of the Company's GCS, Fundman and Fundholding products and enables
electronic data capture, resource management and contract/logistics management
for physicians and home healthcare providers. As of March 31, 1998, the Company
has sold approximately 5,000 units, used by approximately 3,500 healthcare
providers.
34
<PAGE> 38
HEALTHCARE SALES AND MARKETING
The Company's healthcare products are marketed and distributed to
organizations in the healthcare industry through a dedicated sales force of 19
employees in three offices. The healthcare marketing team is managed by a sales
director who allocates geographic territories among sales executives. The
Company is also exploring marketing opportunities in the healthcare industry in
European countries with healthcare industry models similar to that in the United
Kingdom, such as Denmark and Belgium.
In the United Kingdom, demand for the Company's products is generated by
the Company through contacts with physicians, physician groups and regulatory
authorities. In addition, the NHS sponsors a number of strategic initiatives
which can result in significant sales once product specifications are
determined. The NHS also underwrites a percentage of major information
technology initiatives which effectively reduce operating costs for physicians
and Primary Care Groups.
Sales cycles for the Company's healthcare products vary depending upon,
among other things, the degree of integration, consulting and training required
and the status of the customer's implementation of a hardware system. The
typical sales cycle is one to three months from the time an initial sales
presentation is made to a prospective customer to the time a purchase order is
received by the Company. License fees for GCS products range from approximately
$20,000 for single users to $150,000 for multiple user systems, depending upon
the number of applications licensed. License fees for other rejuvenated products
vary depending on the product but are generally lower than GCS license fees.
HEALTHCARE CUSTOMERS
The Company is recognized as one of the top four suppliers of
enterprise-wide applications software to physicians and physician groups in the
United Kingdom. The Company currently has approximately 2,000 healthcare
customers in the United Kingdom. The following is a list of representative
customers as of March 31, 1998:
<TABLE>
<S> <C>
Birmingham Multifund Kingston & Richmond Multifund
Southampton Multifund Potteries Healthcare
Blackburn National Health Trust Lambeth and Lewisham Multifund
Dudley Multifund BHB Hospital Trust
Durham Multifund South Wales GP Group (120 practices)
</TABLE>
HEALTHCARE COMPETITION
The Company's main competitors in the healthcare industry in the United
Kingdom include EMIS, Reuters, AAH Meditel, GPASS, HCSL, Exeter Systems, Medical
Care Systems, Microtest Europe Limited, PCTI Solutions Ltd. and Seetec Medical
Systems. The principal competitive factors affecting the market for the
Company's products in the healthcare industry in the United Kingdom are the
ability to produce products to market in relatively short periods of time and in
compliance with the requirements of physicians, physician groups, community
hospitals and applicable government regulations, including the specifications of
the NHS, access to reliable software support and system implementation and
maintenance costs. As with other markets, the United Kingdom healthcare market
has moved toward open systems and standardized platforms, which the Company
believes could draw new competitors into the market. This could favor
competitors with overseas operations who can achieve economies of scale. In view
of the increased complexity of NHS specification requirements, the number of
enterprise-wide applications software suppliers in the market may also be
significantly reduced.
MANUFACTURING
With the globalization of markets and increased competitive pressures for
lower production costs, improved product quality and performance, shortened
product development and delivery cycles, manufacturers around the world have
become increasingly dependent on enterprise resource planning ("ERP") systems.
ERP systems permit enterprise-wide management of material and human resources
and the integration of
35
<PAGE> 39
sales, forecasting, component procurement, inventory management, manufacturing
control, project management, distribution, transportation, finance and other
functions across a manufacturing organization. These systems manage and store
large amounts of diverse business information, providing continuous and
simultaneous availability of information to geographically dispersed employees,
customers and suppliers. The shortening of product life and demand cycles
creates significant risks to manufacturers who need to make quick, accurate
decisions with respect to demand, purchases and production volumes in order to
maximize production and minimize any materials or product obsolescence. These
challenges require highly efficient processes and smooth integration of the
enterprise from supply chain to sales and marketing channels. As a result, many
manufacturers have begun to restructure their critical business processes and
their organizational structures to be able to accommodate rapid changes in the
marketplace.
In recent years, ERP systems have been developed with client/server
architectures. These systems generally offer users easier access to information,
as well as multi-site processing capabilities. In addition, as compared to
host-centric systems, client/server environments are better able to accommodate
diverse hardware, software and network technology changes that can result from
rapid organizational growth, acquisitions and consolidations. However, such
systems are inherently complex and generally require lengthy and costly
implementation efforts, extensive user training and substantial ongoing support.
Accordingly, the Company believes there is a substantial market opportunity for
ERP applications that offer quick and measurable results, reduce risks
associated with implementation and modification and lower overall cost of
ownership. These solutions should consist of an integrated suite of ERP
applications and services that offer the reliable performance, ease of
implementation and ease of management available in host-centric systems as well
as the flexibility to support multi-site, multi-supplier, multi-platform
environments found in client/server systems. The Company's ERP applications
products are designed to meet the challenges faced by manufacturers in today's
marketplace by providing users with full ERP capability and broad functionality
across a variety of sectors in the manufacturing industry.
MANUFACTURING PRODUCTS
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
NEW PRODUCTS REJUVENATED PRODUCTS LEGACY PRODUCTS
- ----------------------------------------------------------------------------------------------------------------
MTMS Windows MTMS Enquiry MTMS
MTMS CoPilot MTMS Insight
- ----------------------------------------------------------------------------------------------------------------
35 installed customers(1) 350 installed customers 65 installed customers
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents MTMS CoPilot customers only.
MTMS Windows, the most recent version of the Company's manufacturing
products, is a Windows-based fully-integrated enterprise-wide management and
control system which provides full ERP capabilities and broad functionality.
MTMS Windows contains 13 main application modules and over 1,200 programs and
incorporates all features of the Aremis Architecture. It is expected to be
released in the fourth quarter of 1998.
MTMS consists of an integrated enterprise-wide management and control
system which provides full ERP capabilities and broad functionality and operates
in a DOS format. MTMS was acquired in connection with the Company's 1995
acquisition of BEC Group Limited and subsequently rejuvenated. MTMS contains the
same application modules and programs as MTMS Windows.
36
<PAGE> 40
The following table describes the main application modules of MTMS Windows
and MTMS and their primary customer benefits:
<TABLE>
<CAPTION>
APPLICATION MODULES PRIMARY CUSTOMER BENEFITS
------------------- -------------------------
<S> <C>
- - Manufacturing Data Management - Enables the creation and access of parts details, bills of material,
process routes and any other resources that are fundamental to the
control of the manufacturing process
- - Production Planning - Assists in the control of production via daily targets with actual
inventory and labor entries
- - Resource Planning - Allows the preparation of corporate business plans and undertaking of
thorough planning using the key resource planning module
- - Production - Facilitates ordering and controlling work in progress throughout
production
- - Inventory and Stores - Allows the user to define and control inventory requirements, record
unplanned inventory movements, track inventory in all stages of the
manufacturing process and generate product forecasts, which in turn can
be used in creating the master schedule
- - Purchasing - Allows users to fully integrate purchase orders, material requirements
planning, quality control and purchase invoice validation
- - Sales - Provides the user with optional methods of entering purchase orders to
accommodate the different requirements across the manufacturing
industry
- - Marketing - Assists the user in processing sales leads prior to quotation and
producing selective mailings to prospective customers with active
follow-up
- - Financial Management - Provides year-end and interim financial reporting for a variety of
accounts, including inventory, fixed assets and contracts
- - System Software - Provides the framework upon which the MTMS customer implementation is
built and maintained; includes modules to parameterize system
functions, set defaults and provide options for creating and
maintaining basic system data
- - Quality Control - Provides users with a set of comprehensive modules for managing quality
control of raw materials and finished products
- - Environment - Contains the control mechanism to support a range of database
facilities
</TABLE>
MTMS CoPilot is a project management package currently offered by the
Company that integrates the MTMS and MTMS Windows products within the
enterprise. MTMS CoPilot reconfigures MTMS functions to fit a customer's
business model and customizes the appearance and behavior of the system in line
with the customer's business procedures. The Company believes that MTMS CoPilot,
which allows manufacturing customers to review and improve working practices in
a strategic area on a timely basis, is the primary driver of the Company's
success with its MTMS products.
MTMS Enquiry is a Windows-based report writer suite. MTMS Enquiry is
designed to interact with the Company's MTMS products, enabling users to create
sophisticated reports and make inquiries in a single, unified Windows-based
graphical environment.
MTMS Insight is a Windows-based information management system that provides
users with high speed, graphical navigation of multidimensional information.
MTMS Insight is designed to interact with the Company's MTMS products to provide
users with multidimensional reporting and analysis capability. With MTMS
Insight, a user can create numerous graphs, charts and reports based on MTMS
data.
MANUFACTURING SALES AND MARKETING
The Company distributes its products directly in the United Kingdom, United
States, Argentina and Mexico through a direct sales force of 12 employees in
five offices and utilizes distributors in 14 additional countries. The Company
does not grant exclusive distribution rights to any of its distributors and
carefully manages its sales territories to avoid conflicts between distributors.
Products sold through distributors are generally supported by the Company
through a maintenance agreement between the Company and the distributor.
37
<PAGE> 41
Sales cycles for the Company's manufacturing products vary substantially
depending on, among other things, the size of the organization, the degree of
integration, consulting and training required, the status of the customer's
implementation of a hardware system and whether the customer has employed a
consultant to assist it in its purchasing decisions. The MTMS sales cycle is
generally three to nine months from the time an initial sales presentation is
made to a prospective customer to the time a purchase order is received by the
Company. License fees for MTMS products range from approximately $50,000 to
$500,000 depending upon the size of the customer and number of applications
licensed. The license fees for MTMS Enquiry and MTMS Insight are approximately
$1,100 per user. MTMS CoPilot is an MTMS implementation tool and is not licensed
separately. It is licensed with MTMS for an additional $15,000.
MANUFACTURING CUSTOMERS
The Company is becoming a significant supplier of ERP software to mid-sized
organizations in the United Kingdom and Europe and markets its manufacturing
products in 18 countries worldwide. Within the manufacturing industry, the
Company has a significant presence in a number of subvertical sectors including
machinery, transportation, chemicals, food and beverage, fabricated metal
products and textiles. The Company has approximately 450 manufacturing customers
in 18 countries. The following is a list of representative customers as of March
31, 1998:
<TABLE>
<S> <C>
Nabisco Biscuit Co. Watts Industries Europe BV
Telefon AB LM Ericsson Fernz Corporation Ltd.
Alcan Aluminum Limited Spartan Electronics Florida Inc.
ABB Kent plc Tomkins Group plc
Joy Mining Machinery Kvaerner Energy Ltd.
Rotork Controls, Ltd. Rheem Manufacturing Company
</TABLE>
MANUFACTURING COMPETITION
The Company's principal competitors in the manufacturing industry include
QAD Inc., Fourth Shift, Symix, DataWorks, MDIS and a number of smaller
independent companies that have developed or are attempting to develop advanced
planning and scheduling software which complement or compete with
enterprise-wide applications software or manufacturing resource planning
applications. The Company also believes that large enterprise-wide applications
software vendors such as Oracle, SAP, Baan, and PeopleSoft are increasing their
marketing efforts to mid-sized manufacturing companies. The principal
competitive factors affecting the market for the Company's products in the
manufacturing industry are product functionality, ease of implementation,
customer service, training and price.
HOSPITALITY
The Company's hospitality customers are primarily comprised of hotels,
motels and inns which seek property management systems that allow staff access
to reservation data, guest histories and demographics, simplify check-in and
check-out procedures, automate maintenance and housekeeping schedules and
provide information regarding guest preferences. Property management systems can
also consolidate data from restaurants, bars and other points of sale, which
helps to achieve greater accuracy and fewer delays for guests. One of the most
significant aspects of property management systems is their ability to trace the
source of existing business, identify potential sources of new business and
forecast how often a given guest, or type of guest, will use the establishment
in the future. The Company believes that its customers in the hospitality
industry require systems that are capable of managing guest requirements while,
at the same time, providing access to information which assists the customer in
its sales and marketing efforts.
38
<PAGE> 42
HOSPITALITY PRODUCTS
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------
NEW PRODUCTS REJUVENATED PRODUCTS LEGACY PRODUCTS
- -------------------------------------------------------------------------------------------------------
Aremis 4.0 PMS IGS Hotel (Version 3) IGS Hotel
IGS Hotel (Version 2.5) AccountMaster
IGS Hotel (Version 1.xx) HotelMaster
AccountMaster
- -------------------------------------------------------------------------------------------------------
To be released in late 1998 850 installed customers 350 installed customers
- -------------------------------------------------------------------------------------------------------
</TABLE>
Aremis 4.0 Property Management System ("Aremis 4.0 PMS") is an enhanced
version of IGS Hotel and is expected to be released in the fourth quarter of
1998. Aremis 4.0 PMS is a comprehensive hotel property management system that
can be dynamically configured to match the customer's business model. It offers
a wide range of functionality for both the front and back office operations in a
hotel and incorporates all features of the Aremis Architecture. Aremis 4.0 PMS
can be fully integrated with Microsoft Office. An attractive feature of Aremis
4.0 PMS is that its scalability will allow the Company to target customers that
have in excess of 500 rooms at a given site. Aremis 4.0 PMS consists of six main
application modules.
Aremis 4.0 PMS can also be used as a marketing tool for hotels, providing
its users with a comprehensive database of guest profiles and histories. From
the database, the system can be used to generate personalized letters and other
mailings to corporations and individuals in the database. The database also
enables the user to develop marketing strategies aimed at corporate guests and
other types of marketing campaigns. The information available through Aremis 4.0
PMS allows the hotel to offer a higher level of service through guest
recognition and to target preferred guests during particular periods through
directed marketing efforts.
IGS Hotel Property Management System (Version 3) ("IGS Hotel") is a
client/server based comprehensive hotel property management system that offers a
wide range of functionality for both the front and back office operations in a
hotel and operates in a DOS format. It is a rejuvenation of a product acquired
in connection with the Company's 1993 acquisition of IGS Leisure Technology
Limited. Similar to Aremis 4.0 PMS, IGS Hotel consists of six main application
modules and can be used as a marketing tool.
The following table describes the main application modules of Aremis 4.0
PMS and IGS Hotel and their primary customer benefits:
<TABLE>
<CAPTION>
APPLICATION MODULES PRIMARY CUSTOMER BENEFITS
------------------- -------------------------
<S> <C>
- - Front Office - Assists hotels in managing its front office operations from the point
of reservations until check out
- - History & Marketing - Provides hotels with key profile information on guests and prospects
- - Conferencing & Banqueting - Assists hotels in organizing events and facilitates the complex
reservation process, consolidating billing statements and maintaining
detailed information on guests and events
- - Point of Sale (Restaurant & Bar) - Provides automatic and direct settlement of restaurant and bar charges
onto the appropriate account; advanced inventory module also controls all
aspects of the catering process
- - Interfaces - Allows hotels to interface with a wide range of high quality
third-party hardware and software systems such as room access control
systems, telephone systems, television systems, mini-bar systems and
in-room fax facilities
- - AccountMaster - Provides hotels with a comprehensive range of management accounting and
reporting software designed specifically for the hospitality industry
</TABLE>
AccountMaster is a rejuvenation of a product which was acquired by the
Company in connection with the 1993 acquisition of HotelMaster Limited. It
provides hotels with a basic accounting system tailored for the hospitality
industry and includes functions such as tracking profit and loss and inventory,
generating numerous reports, including a general ledger, sales ledger and audit
reports, and creating receipts.
39
<PAGE> 43
HOSPITALITY SALES AND MARKETING
The Company's hospitality products are marketed and distributed to
mid-sized organizations in the hospitality industry in the United Kingdom,
Ireland, Cyprus and India through a direct sales force of 12 employees in two
offices. Each sales team is managed by a sales director who allocates geographic
territories among sales executives. In the Channel Islands and Scotland, the
Company also utilizes distributors on a nonexclusive basis.
Sales cycles for the Company's hospitality products vary substantially
depending on, among other things, the size of the organization, the degree of
integration, consulting and training required, the status of the customer's
implementation of a hardware system, the number of individuals involved in the
purchasing decision and whether the customer has retained a consultant to assist
in the purchasing decision. The sales cycle for IGS Hotel is three to six months
from the time an initial sales presentation is made to a prospective customer to
the time a purchase order is received by the Company. License fees for the
Company's property management system products range from approximately $11,000
to $1 million, depending on the size of the customer and number of applications
licensed. The license fee for AccountMaster is approximately $1,000.
HOSPITALITY CUSTOMERS
The Company is a leading supplier of property management systems to hotels
in the United Kingdom. AremisSoft currently has approximately 1,200 hospitality
customers in the United Kingdom, Cyprus and India, including major hotel chains
with multiple sites. The Company's current customer base consists of inns and
hotels with 500 rooms or less. The following is a list of representative
customers as of March 31, 1998:
<TABLE>
<S> <C>
Forte Limited Jarvis Hotels plc
Whitbread plc (Travel Inn) Jurys Hotel Group plc
Bass plc (Toby Inns) Millennium & Copthorne Hotels plc
Regal Hotel Group plc Thistle Hotels plc
Friendly Hotels plc Cliveden plc
</TABLE>
HOSPITALITY COMPETITION
In the hospitality industry, the Company's principal competitor in the
United Kingdom is Innsite Hotel Services Ltd. With respect to the other markets
in Europe in which the Company sells its products, the principal competitor is
MICROS-Fidelio International. The principal competitive factors affecting the
market for the Company's products in the hospitality industry are product
functionality, ease of implementation and use, return on the customers'
investment, customer service, training and price.
CONSTRUCTION
Historically, the construction industry in the United Kingdom has been
characterized by fragmentation, lack of investment in technology, focus on cost
rather than quality and a lack of standardization with respect to contracts,
insurance and related matters. As a result, significant changes in the United
Kingdom construction industry have begun to occur and more are expected to occur
in the future. Many of these expected changes focus on improving efficiency and
incorporating information and communication technology into the decision-making
and control processes.
Businesses in the construction industry typically seek enterprise-wide
applications software that provides purchasing control, inventory, estimating,
job costing, project management, purchase orders, invoicing, accounting, service
and maintenance, payroll, inventory control and sales and marketing functions.
As a result, the Company believes that many organizations in the construction
industry are shifting away from in-house applications toward more sophisticated,
third-party enterprise-wide applications software. In addition, the Company
believes that a substantial number of organizations in the construction industry
are seeking solutions related to Year 2000 and Euro compliance and plan to
upgrade or replace their existing information technology systems.
40
<PAGE> 44
CONSTRUCTION PRODUCTS
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
NEW PRODUCTS REJUVENATED PRODUCTS LEGACY PRODUCTS
- ----------------------------------------------------------------------------------------------------------------
ViXEN Windows ViXEN Plus & ODBC ViXEN
- ----------------------------------------------------------------------------------------------------------------
To be released in late 1998 60 installed customers 300 installed customers
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
ViXEN Windows, the most recent version of the Company's ViXEN Contracting
System is a fully-integrated Windows-based management and control system
designed specifically for contracting companies across a variety of industries.
It incorporates many features of the Aremis Architecture, including ODBC
compliance and GUI. ViXEN Windows consists of 13 fully-integrated main
application modules and over 600 programs. It is expected to be released in the
fourth quarter of 1998.
ViXEN Plus & ODBC ("ViXEN Plus") is a UNIX-based management and control
system for contracting companies consisting of an integrated, modular system
which offers broad functionality. ViXEN Plus is a rejuvenation of the ViXEN
product acquired by the Company in connection with the Company's 1995
acquisition of Briter Computer Systems Limited. The product was rejuvenated to
operate in a multi-user environment and consists of the same main application
modules as ViXEN Windows.
The following table describes the main application modules of ViXEN Windows
and ViXEN Plus and their primary customer benefits:
<TABLE>
<CAPTION>
APPLICATION MODULES PRIMARY CUSTOMER BENEFITS
------------------- -------------------------
<S> <C>
- - Services and Maintenance - Controls various tasks related to servicing and maintaining equipment
and facilities, allowing users to record and manage numerous customer
address and plant equipment parameters
- - Job Costing - Enables users to record and analyze costs of each job; serves as the
hub of the ViXEN contracting system and is fully-integrated with each
other application module
- - Purchase Orders - Allows users to produce printed orders, to calculate prices and
discounts automatically and to record the value of outstanding orders as
part of work in progress
- - Estimating - Enables users to create a quote based on the resources required for the
job and to perform sensitivity analyses based on changes in labor rates,
overhead, task factors, wastage, allowances, increased cost percentages
and desired profit margin
- - Inventory Control - Allows users to maintain control of inventory changes by providing
detailed information on inventory levels, goods ordered from suppliers
and incoming and outgoing transactions
- - Price File Database - Provides users with instant access to current prices on frequently used
products for a variety of purposes, including estimating, material
requisitions, purchase orders, inventory control and small works
invoicing
- - Client Reconciliation - Assists users in the complex tasks of recording, reconciling and
accounting for interim applications, client certificates, deferred
value-added taxes and discounts and retentions on contracts
- - Subcontractor Reconciliation - Provides the same functionality for subcontractors as Client
Reconciliation provides for contractors
- - Sales Ledger - Allows users to automatically post invoices through the Job Costing
module and to perform sales analyses
- - Purchase Ledger - Allows users to log invoices, validate input data, specify payment
options, make automatic payments and produce invoices and checks
- - Nominal Ledger - Provides users with extensive reporting modules in a variety of formats
based on a user-defined structure
- - Payroll - Processes the wage and salary payments of various types of employees
- - System Management - Embraces a range of necessary features, integrating other ViXEN modules
in a UNIX environment
</TABLE>
41
<PAGE> 45
CONSTRUCTION SALES AND MARKETING
The Company distributes its construction products through a direct sales
force of six employees in two offices. Similar to the Company's marketing
strategy in the healthcare and hospitality markets, the sales force is divided
into teams, each of which is managed by a sales director who allocates
geographic territories among sales executives.
Sales cycles for the Company's construction products vary substantially
depending on, among other things, the size of the organization, the degree of
integration, consulting and training required, the status of the customer's
implementation of a hardware system and whether the customer has retained a
consultant to assist in the purchasing decisions. The sales cycle for ViXEN
Windows is six to 12 months from the time an initial sales presentation is made
to a prospective customer to the time a purchase order is received by the
Company. License fees for a ViXEN contracting system range from approximately
$80,000 to $500,000 depending on the size of the customer and the number of
applications licensed.
CONSTRUCTION CUSTOMERS
The Company is a major supplier of enterprise-wide applications software to
the electrical/mechanical contracting sector of the construction industry in the
United Kingdom. Ten of the recently privatized electricity supply companies
(seven of which are now owned by United States companies) in the United Kingdom
are customers of the Company, together with most of the major electrical and
mechanical contracting companies representing a customer base of over 350
contractors. The following is a list of representative customers as of March 31,
1998:
<TABLE>
<S> <C>
London Electricity plc Midlands Electricity plc
Southern Electric plc Norweb Contracting
East Midlands Electricity South Western Electricity
Yorkshire Electricity N G Bailey & Co., Ltd
CWS Engineering Services Ltd. ROMEC
</TABLE>
CONSTRUCTION COMPETITION
In the construction market, larger competitors tend to operate across the
entire construction spectrum and offer enterprise-wide applications software to
suit every division, such as construction, contracting, security and service and
maintenance. The Company's principal competitors in the construction industry
are Misys plc, FCG Computer Systems/Red Sky Software Ltd., MicaBuild Products,
Estimation Inc., Database, and Engineering Technology. The principal competitive
factors affecting the market for the Company's products in the construction
industry are the ability to collect marketing data, effective organization of
pricing and buying information, accurate invoicing and profit control.
PRODUCT DEVELOPMENT AND QUALITY ASSURANCES
Since its formation, the Company has made substantial investments in
research and development. New generations of software products are continually
being designed and developed to provide improved performance and greater
functionality while utilizing the most recent proven technology.
The Company maintains research and development centers in both the United
Kingdom and India. The Company's operation in the United Kingdom concentrates
primarily on new product design and prototyping using the Aremis Architecture.
Coding, integration and testing are performed at the Company's software
development and support facility in India where employees are divided into teams
for each Vertical Market. The Company's teams in India also focus on
enhancements and error corrections to existing products.
Use of the software development and support facility in India provides
AremisSoft with access to highly skilled software engineers. In contrast, the
available pool of appropriately skilled software professionals in Europe and the
United States is decreasing as a result of Year 2000 and other projects
including, the conversion to the Euro. Further, the cost of recruiting and
training software developers in C++ and Java is
42
<PAGE> 46
substantially more expensive in Europe and North America. The Company believes
its facility in India provides it with a significant advantage over its
competitors in Western Europe and the United States, even with the additional
communications and management overhead associated with remote development.
All of AremisSoft's employees in India are full-time employees. The Company
does not employ contractors or fixed term temporary personnel in India. In order
to retain key personnel the Company operates a number of incentive programs,
including subsidized housing, car allowances, and generous overseas allowances
and bonuses for employees working on special projects. Currently, the Company
utilizes a three-shift system at its facility in India, thereby allowing the
Company to ensure key projects are delivered on time and to specification and
facilitating customer access to software staff. The Company's software
engineering research division also evaluates and develops new technologies and
methodologies for the future benefit of the Company's broad range of products.
Currently, these include hand held, EDI, imaging, Internet/intranet, voice
activation, touchscreen and multimedia technology.
CUSTOMER SERVICE AND SUPPORT
The Company provides the following services to its customers in an effort
to promote rapid and efficient implementation, product consultation and
technical support:
Installations and Training. Installations are planned and overseen by
specialist project managers in accordance with customer requirements and
pre-installation consultation is provided when necessary. The Company offers a
fully-integrated training program to support customer implementation of the
Company's products to help ensure successful installations.
Customer Support. The Company provides a high level of customer support
through its software development and support facility in India in addition to
the local support provided on a daily basis. Support and product information are
also provided through the Company's Web page. In addition, the Company supports
user groups in the United Kingdom and North America to enhance the support and
development of the Company's products as well as its image.
Business Review Services. AremisSoft recently introduced a business review
service to ensure that its customer organizations recognize and respond to
market trends. These reviews assess the factors influencing the performance of a
business with respect to the management of required information services. As
part of the service, the Company produces a comprehensive report containing
recommendations for change and the related costs and benefits.
PROPRIETARY RIGHTS AND LICENSING
The Company's success is dependent upon its proprietary technology and
other intellectual property. The Company has no patents or pending patent
applications. The Company relies primarily on a combination of the protections
provided by applicable copyright, trademark and trade secret laws, as well as on
confidentiality procedures and licensing arrangements, to establish and protect
its rights in its software. The Company believes that the foregoing measures
afford only limited protection. Despite the Company's efforts, it may be
possible for third parties to copy certain portions of the Company's products or
reverse engineer or obtain and use information that the Company regards as
proprietary. In addition, the laws of certain countries do not protect the
Company's proprietary rights to the same extent as do the laws of the United
States. Accordingly, no assurances can be given that the Company will be able to
protect its proprietary software against unauthorized third-party copying or
use, which could adversely affect the Company's competitive position. Policing
unauthorized use of the Company's products is difficult, and while the Company
is unable to determine the extent to which piracy of its software products
exists, software piracy can be expected to be a problem. No assurances can be
given that the Company's competitors will not independently develop technology
similar to that of the Company. Moreover, litigation may be necessary in the
future to enforce the Company's intellectual property rights, to protect the
Company's trade secrets or to determine the validity and scope of the
proprietary rights of others. Such litigation could result in substantial costs
and diversion of resources and could have a material adverse effect on the
Company's business, operating results and financial condition. See "Risk
Factors -- Intellectual Property Rights."
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<PAGE> 47
The Company enters into license arrangements that provide for the
nonexclusive license of the Company's software. The Company's license agreements
generally allow the use of its software solely by the customer for internal
purposes without the right to sublicense or transfer the software to third
parties. Such licenses generally are perpetual, but subject to termination for
breach or on notice, and contain confidentiality and nondisclosure provisions, a
limited warranty covering the software, and indemnification for the customer
from any infringement action related to the software.
Although the Company is not aware that any of its products infringes upon
the proprietary rights of third parties, no assurances can be given that third
parties will not claim infringement by the Company with respect to current or
future products. Any such claims, with or without merit, could be
time-consuming, result in costly litigation, cause product shipment delays or
require the Company to enter into royalty or licensing agreements. Such royalty
or licensing agreements, if required, may not be available on terms acceptable
to the Company. The Company may also initiate claims or litigation against third
parties for infringement of the Company's proprietary rights or to establish the
validity of the Company's proprietary rights. Litigation to determine the
validity of any claims could result in significant expense to the Company and
divert the efforts of the Company's technical and management personnel from
productive tasks, whether or not such litigation were determined in favor of the
Company. See "Risk Factors -- Intellectual Property Rights."
The Company has in the past and may in the future resell certain software
that it licenses from third parties. In addition, the Company may in the future
jointly develop software in which the Company will have co-ownership or
cross-licensing rights. No assurances can be given that these third-party
software licenses will continue to be available to the Company on terms that
provide the Company with the third-party software it requires to provide
adequate functionality in its products, on terms that adequately protect the
Company's proprietary rights or on terms that are commercially favorable to the
Company. The loss of or inability to maintain to obtain any of these software
licenses, including a loss as a result of a third-party infringement claim,
could result in delays or reductions in product shipments until equivalent
software, if any, could be identified, licensed and integrated, which could have
a material adverse effect on the Company's business, operating results and
financial condition. See "Risk Factors -- Intellectual Property Rights."
EMPLOYEES
As of March 31, 1998, the Company had 520 full-time employees. Of these
employees, 295 are based in the Company's offices in the United Kingdom and 165
are based in the Company's software development and support facility in New
Delhi, India. The remaining 60 employees are in various facilities in other
locations. Of the Company's 295 employees in the United Kingdom, 118 are in the
healthcare division, 59 are in the manufacturing division, 84 are in the
hospitality division and 34 are in the construction division. None of the
Company's employees is represented by any collective bargaining agreements and
the Company has never experienced a work stoppage. The Company considers its
relationship with its employees to be good and has not experienced any
interruptions of operations due to labor disagreements.
PROPERTIES
The Company leases various facilities in the United Kingdom, United States,
Ireland, India, Mexico, Argentina and Cyprus which house the Company's
administration, sales, marketing, support and research and development
functions. The Company does not currently own any of its facilities.
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<PAGE> 48
The following table sets forth certain information concerning the Company's
principal facilities as of March 31, 1998:
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION FUNCTION LEASE EXPIRATION SQUARE FOOTAGE
-------- -------- ------------------ --------------
<S> <C> <C> <C>
London, United Kingdom Principal Executive Offices 2002 1,725
New Delhi, India Research and Development, 1999 7,620
Customer Support
Hitchin, United Kingdom Healthcare Division 2000 7,125
Blackburn, United Kingdom Manufacturing Division 2010 12,000
Westmont, New Jersey Manufacturing Division 1999 4,200
Woking, United Kingdom Hospitality Division 2012 7,430
Alton, United Kingdom Construction Division 2005 4,500
Nicosia, Cyprus Sales and Marketing 2004 4,000
</TABLE>
As a result of the Company's acquisitions from 1993 through 1996, the
Company has also been assigned relatively small leaseholdings elsewhere in the
United Kingdom and in the United States, Ireland, India, Mexico, Argentina and
Cyprus which expire on various dates from 1998 through 2013. The Company does
not currently own any of these facilities and does not intend to renew these
leases beyond the current expiration dates. The Company believes that its
current facilities will be sufficient to meet its needs for the next 12 months.
See Note 7 of Notes to Consolidated Financial Statements for information
regarding the Company's obligations under its leases.
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<PAGE> 49
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The Board of Directors of the Company consists of five directors, all of
whom are elected for one-year terms at each annual meeting of stockholders.
There currently are two vacancies on the Board of Directors, which the Company
intends to fill with persons who are not officers or employees of the Company
prior to the completion of the Offering. Holders of shares of Common Stock have
no right to cumulative voting in the election of directors. Consequently at each
annual meeting, a majority of the stockholders will be able to elect all of the
directors. The Company's executive officers are elected annually by the Board of
Directors, however, they may be removed at any time by the Board of Directors.
The following table sets forth certain information with respect to the
current directors, executive officers and key employees of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Dr. Lycourgos K. Kyprianou 43 Chairman of the Board, Chief Executive
Officer and Secretary
Roys Poyiadjis 32 President and Vice Chairman of the Board
Nigel A. Spence 42 Chief Financial Officer and Director
Noel R. Voice 56 Chief Operating Officer, General Manager of
Healthcare Systems and Assistant Secretary
M.C. Mathews 33 General Manager of Group Software Development
Barry J. Crowe 54 General Manager of Manufacturing Systems
Michael Gadbury 49 General Manager of Hospitality Systems
Brian Rogers 58 General Manager of Construction Systems
</TABLE>
Dr. Lycourgos K. Kyprianou has served as the Company's Chairman of the
Board, Chief Executive Officer and Secretary since the Reorganization. From 1997
to 1998, Dr. Kyprianou served as Chairman of the Board, President, Secretary and
Chief Financial Officer of AremisSoft-Nevada and served as Chairman of the Board
and Managing Director of LK Global from 1979 to 1998. Dr. Kyprianou is the sole
founder of the Company's worldwide business, including the software development
and support facility in India. Dr. Kyprianou obtained a Doctorate in Philosophy
(Computer Science) from Cambridge University in 1979 and a Bachelor of Science
with first class honors in Computer Science from the University of London in
1977.
Roys Poyiadjis has served as the Company's President and Vice Chairman of
the Board since the Reorganization. From 1997 to 1998, Mr. Poyiadjis served as a
partner of Alpha Capital Limited, an investment firm. From 1995 to 1996, he
served as a director of Lehman Brothers International (United Kingdom) Ltd. and
from 1993 to 1995 he served as an associate with Morgan Stanley & Co.
International Limited. Mr. Poyiadjis received a Masters in Business
Administration from the London Business School in 1993 and a Bachelor of Science
(Honors) in Communications Engineering from the University of Kent in 1989.
Nigel A. Spence has served as the Company's Chief Financial Officer and a
director since the Reorganization. From 1997 to 1998, he served as a financial
consultant to AremisSoft-Nevada. From 1995 to 1997, Mr. Spence was self-employed
as a corporate finance analyst. From 1994 to 1995, he served as Chief Investment
Officer of The Ondaatje Corporation, an investment banking firm, and from 1992
to 1994 he served as a director of Lehman Brothers International (United
Kingdom) Ltd.
Noel R. Voice has served as the Company's Chief Operating Officer, General
Manager of Healthcare Systems and Assistant Secretary since the Reorganization.
From 1997 to 1998, he served as a director and Senior Vice President of
Administration of AremisSoft-Nevada. From 1992 to 1997, he served as the Senior
Vice President of Administration of LK Global. From 1987 to 1989, he was
Managing Director of Cara Consulting Ltd., a United Kingdom hotel systems
company. From 1987 to 1992 he was founder and Managing Director of Noble
Marketing Ltd., a sales and marketing consulting firm. Prior to that, he served
in various
46
<PAGE> 50
senior sales and marketing positions with Motorola Information Systems (United
Kingdom) (1983-1985), Philips N.V. (1980-1983) and IBM (United Kingdom) Ltd.
(1970-1980).
M.C. Mathews has served as the Company's General Manager of Group Software
Development since the Reorganization. From 1997 to 1998, he served as Vice
President of Group Software Development for AremisSoft-Nevada. From 1995 to
1997, he served as the Managing Director of Software Engineering of LK Global
Software Engineering (India) Private Limited ("LK Global (India)") and from 1992
to 1995, he served as its Group Project Manager. Prior to joining LK Global
(India) in 1990, Mr. Mathews was employed as a programmer with Alphabetics Ltd.,
an IBM distributor in India. Mr. Mathews has a Bachelor of Science (Honors) and
Master of Science in Physics from Kerala and Delhi Universities, respectively.
Barry J. Crowe has served as the Company's General Manager of Manufacturing
Systems since the Reorganization. From 1997 to 1998, he served as Managing
Director of Manufacturing for AremisSoft-Nevada. From 1995 to 1997, Mr. Crowe
served as Project Manager, Account Manager and Managing Director of LK Global
Manufacturing Systems (UK) Limited. From 1992 to 1995, he was a Managing
Director of BEC Group Limited, a manufacturing computer systems company, that
was acquired by LK Global in 1995. From 1988 to 1991, he served as a consultant
for the BM Group, plc, a construction company. Prior to that, he was General
Manager and Construction Director of the Beazer Group, plc, a construction
company. Mr. Crowe is a Chartered Structural Engineer.
Michael Gadbury has served as the Company's General Manager of Hospitality
Systems since the Reorganization. From 1993 to 1996, he served as Managing
Director of LK Global Hospitality Systems (UK) Limited and later served as its
Director of International Business Development from 1996 to 1998. From 1984 to
1993, he was a Managing Director of IGS Leisure Technology Limited, a hotel
computer systems company. IGS Leisure Technology Limited was acquired by LK
Global in 1993.
Brian Rogers has served as the Company's General Manager of Construction
Systems since the Reorganization. From 1995 to 1998, he served as Managing
Director of LK Global Construction Systems (UK) Limited. From 1978 to 1995, Mr.
Rogers served as Managing Director for Briter Computer Systems Limited, a
manufacturing computer systems company that was acquired by LK Global
Construction Systems (UK) Limited in 1995.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors will establish an Audit Committee and a Compensation
Committee prior to the completion of the Offering. The functions of the Audit
Committee will include recommending to the Board of Directors the retention of
independent auditors, reviewing the scope of the annual audit undertaken by the
Company's independent auditors and the progress and results of their work, and
reviewing the Company's financial statements, internal accounting and auditing
procedures and corporate program to ensure compliance with applicable laws. The
functions of the Compensation Committee will include reviewing and approving
executive compensation policies and practices, reviewing salaries and bonuses
for certain officers of the Company, administering the Company's 1998 Stock
Option Plan (the "Stock Option Plan") and other benefit plans, and considering
such other matters as may from time to time be referred to the committee by the
Board of Directors.
COMPENSATION OF THE BOARD OF DIRECTORS
Directors of the Company who are not also employees of the Company or one
of its subsidiaries will receive $ for each Board meeting attended and
$ for each committee meeting attended. No other director will receive
cash compensation for services as a director. All directors will, however, be
reimbursed for their expenses incurred in attending meetings.
47
<PAGE> 51
EXECUTIVE COMPENSATION
The following table summarizes all compensation earned by or paid to the
Company's Chairman of the Board and Chief Executive Officer for services
rendered in all capacities to the Company and its subsidiaries during the fiscal
year ended December 31, 1997. No other executive officer's total annual
compensation for services rendered in all capacities to the Company and its
subsidiaries during the fiscal year ended December 31, 1997, exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS COMPENSATION
--------------------------- ---------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Dr. Lycourgos K. Kyprianou
Chairman of the Board and Chief Executive
Officer.................................... $198,000(1) -- -- --
</TABLE>
- ---------------
(1) As translated into United States dollars based upon the average conversion
rate in effect during fiscal 1997.
1998 STOCK OPTION PLAN
In June 1998, the Company adopted the Stock Option Plan, which provides for
awards in the form of options, including incentive stock options ("ISOs") and
nonstatutory stock options ("NSOs"). Employees, directors, consultants and
advisors of the Company will be eligible for the grant of NSOs, while only
employees will be eligible for the grant of ISOs. Options will have a term of up
to ten years from the date of grant.
Upon the completion of the Offering, 1,500,000 shares of Common Stock will
be reserved for issuance pursuant to the exercise of stock options granted under
the Stock Option Plan.
The Stock Option Plan will be administered by the Compensation Committee.
The Board of Directors may amend the Stock Option Plan as desired without
further action by the Company's stockholders except as required by applicable
law. The Stock Option Plan will continue in effect until terminated by the Board
of Directors or, with respect to ISOs, for a term of ten years from its original
adoption date, whichever is earlier.
The consideration for each award under the Stock Option Plan will be
established by the Compensation Committee, but in no event will the option
exercise price for ISOs and NSOs be less than 100% of the fair market value of
the Common Stock on the date of grant. Awards for key employees will have such
terms and be exercisable in such manner and at such time as the Compensation
Committee may determine, and the Committee may permit the deferred payment of
awards. However, each ISO must expire no later than ten years from the date of
grant. The Stock Option Plan provides that, in the event of a merger or
reorganization of the Company, outstanding options shall be subject to the
agreement of merger or reorganization.
As of June 30, 1998, there were no options to purchase Common Stock
outstanding.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Dr. Kyprianou and
Messrs. Poyiadjis, Spence and Voice, The employment agreements for Dr. Kyprianou
and Mr. Poyiadjis provide for an initial three-year term expiring on June 1,
2001. The employment agreements for Messrs. Voice and Spence provide for an
initial one-year term expiring on June 1, 1999. Each of the employment
agreements may be terminated by the Company or the employee without cause (as
defined in the employment agreements) upon 30 days notice, or for cause without
notice. Under the employment agreements, Dr. Kyprianou and Messrs. Poyiadjis,
Spence and Voice are entitled to minimum annual compensation of $250,000,
$200,000, $100,000 and $100,000, respectively. Under their employment
agreements, each of Dr. Kyprianou and Mr. Poyiadjis will
48
<PAGE> 52
receive a severance benefit equal to 2.99 times his annual compensation upon a
"change in control" of the Company. For purposes of Dr. Kyprianou's and Mr.
Poyiadjis' employment agreements, "change in control" is defined as an event
involving one transaction or a series of related transactions in which (i) the
Company issues securities equal to more than 50% of the issued and outstanding
capital stock of the Company to any individual, firm, partnership, or other
entity, including a "group" within the meaning of Section 13(d)(3) of the
Exchange Act, (ii) the Company issues securities equal to more than 50% of the
issued and outstanding capital stock of the Company in connection with a merger,
consolidation or other business combination (other than for purposes of a
reincorporation), (iii) the Company is acquired in a merger or other business
combination transaction in which the Company is not the surviving corporation
(other than a reincorporation) or (iv) more than 50% of the Company's
consolidated assets or earning power are sold or transferred.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Upon the completion of the Offering, the Compensation Committee of the
Board of Directors will consist of two directors. All matters concerning
executive compensation in 1997 were addressed by the full Board of Directors of
AremisSoft-Nevada, including Messrs. Kyprianou and Voice, who were executive
officers of AremisSoft-Nevada in 1997.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company has adopted provisions in its Certificate of Incorporation that
limit the liability of its directors for monetary damages for breach of their
fiduciary duty as directors, except for liability that cannot be eliminated
under the DGCL. The DGCL provides that directors of a company will not be
personally liable for monetary damages for breach of their fiduciary duty as
directors, except for liability (i) for any breach of their duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) that
arises under Section 174 of the DGCL for unlawful payment of dividends or
unlawful stock repurchases or redemptions, or (iv) for any transaction from
which the director derived an improper personal benefit.
The Company's Certificate of Incorporation and bylaws also provide for
indemnification of the Company's directors and officers to the fullest extent
permitted by the DGCL. The Company intends to enter into separate
indemnification agreements with its directors and certain of its officers that
could require the Company, among other things, to indemnify such persons against
certain liabilities that may arise by reason of their status or service as
directors or officers and to advance their expenses as a result of any
proceeding against them as to which they could be indemnified. The Company
believes that the limitation of liability provision in its Certificate of
Incorporation and the indemnification agreements will facilitate the Company's
ability to continue to attract and retain qualified individuals to serve as
directors and officers.
The employment agreements with each of Dr. Kyprianou and Messrs. Poyiadjis,
Spence and Voice also provide that the Company will indemnify such individuals
for any losses, costs, damages or expenses incurred as a direct consequence of
the discharge of their duties or by reason of their status as agents of the
Company.
CERTAIN TRANSACTIONS
On May 15, 1998, the Company loaned $2.6 million to Dr. Kyprianou. The loan
matures on May 15, 2000, and is an unsecured personal obligation of Dr.
Kyprianou. The loan bears interest at LIBOR plus 2% per annum.
The Company is a party to employment agreements with Dr. Kyprianou and
Messrs. Poyiadjis, Spence and Voice. See "Management -- Employment Agreements."
The Company has entered into registration rights agreements with Dr.
Kyprianou and Mr. Poyiadjis. See "Shares Eligible for Future
Sale -- Registration Rights."
The Company intends to enter into indemnification agreements with each of
its directors and executive officers. See "Management -- Limitation of Liability
and Indemnification Matters."
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<PAGE> 53
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of June 30, 1998, and as
adjusted to reflect the sale of the shares of Common Stock offered hereby, (i)
for each person or entity known by the Company to own beneficially more than
five percent of the then outstanding shares of Common Stock, (ii) each of the
Company's directors, (iii) the Company's Chief Executive Officer, (iv) all
directors and executive officers as a group and (v) each Selling Stockholder.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO THE AFTER THE
OFFERING(1) OFFERING(2)
--------------------- SHARES BEING --------------------
NAME NUMBER PERCENT OFFERED NUMBER PERCENT
---- ---------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
All directors and executive
officers as a group (four
persons)......................... 9,967,850 % -- 9,967,850 %
Directors, Chief Executive Officer
and 5% Stockholders:
Dr. Lycourgos K. Kyprianou(3).... 8,949,850 % -- 8,949,850 %
Roys Poyiadjis................... 1,000,000 -- 1,000,000
Nigel A. Spence.................. 18,000 * -- 18,000 *
Selling Stockholders:
Hare & Co........................ 150,000 20,000 130,000
Krug, Burgess, Webster Inc....... 176,500 20,000 156,500
Profunda Truehand S.A............ 226,000 100,000 126,000
Bank Austria Aktiengese/Schaft..... 260,000 77,500 182,500
RBB Bank AG........................ 200,000 70,000 130,000
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
(1) Unless otherwise indicated in these footnotes and any applicable community
property laws, each stockholder has sole voting and investment power with
respect to the shares of Common Stock beneficially owned.
(2) Beneficial ownership has been determined in accordance with Rule 13d-3 under
the Securities and Exchange Act of 1934, as amended (the "Exchange Act").
(3) Represents shares held by LK Global (Holdings) N.V., a Netherlands
corporation, for which Dr. Kyprianou serves as trustee and has sole voting
and investment power. Dr. Kyprianou's address is 60 Bishopsgate, London EC2N
4AJ, England.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company's Certificate of Incorporation provides for authorized capital
stock of 100,000,000 shares, consisting of 85,000,000 shares of Common Stock,
$.001 par value per share ("Common Stock"), and 15,000,000 shares of Preferred
Stock, $.001 par value per share ("Preferred Stock"). As of June 30, 1998, there
were 17,117,720 shares of Common Stock issued and outstanding held by 212
stockholders of record and there were no shares of Preferred Stock outstanding.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders and do not have
preemptive rights. The Company's Certificate of Incorporation does not provide
for cumulative voting for the election of directors. Subject to preferences that
may be applicable to any then outstanding Preferred Stock, holders of Common
Stock are entitled to receive
50
<PAGE> 54
ratably such dividends, if any, as may be declared by the Board of Directors out
of funds legally available therefor. See "Dividend Policy." All outstanding
shares of Common Stock are, and the Common Stock to be outstanding upon
completion of the Offering will be, fully paid and nonassessable. In the event
of any liquidation, dissolution or winding up of the affairs of the Company, the
holders of Common Stock will be entitled to share ratably in the assets of the
Company remaining after the payment or provision for payment of all of the
Company's debts and obligations and liquidation payments to holders of
outstanding shares of Preferred Stock. See "-- Preferred Stock." Holders of
Common Stock have no preemptive or conversion rights or other subscription
rights and there are no redemption or sinking fund provisions applicable to the
Common Stock.
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes 15,000,000 shares of
undesignated Preferred Stock, none of which is currently outstanding. The Board
of Directors has the authority, without further action by the stockholders, to
issue from time to time the Preferred Stock in one or more series and to fix the
number of shares, designations, preferences, powers and relative participating,
optional or other special rights and the qualifications or restrictions thereof.
The preferences, powers, rights and restrictions of different series of
Preferred Stock may differ with respect to dividend rates, amounts payable on
liquidation, voting rights, conversion rights, redemption provisions, sinking
fund provisions and other matters. The issuance of Preferred Stock could reduce
the amount of earnings and assets available for distribution to holders of
Common Stock or affect adversely the rights and powers, including voting rights,
of the holders of Common Stock, and may have the effect of delaying, deferring
or preventing a change in control of the Company. The Company has no present
plan to issue any shares of Preferred Stock.
WARRANTS
The Company has issued warrants to purchase an aggregate of 87,500 shares
of the Company's Common Stock at an exercise price of $5.00 per share. The
Warrants are immediately exercisable, have a term of two years expiring on April
10, 2000 and were issued in payment of finder's fees in connection with a
private placement by AremisSoft-Nevada of preferred stock. The number of shares
issuable upon exercise of the Warrants is subject to adjustment in the event of
certain dividends and other distributions, issuances of convertible securities
and stock splits, stock dividends and similar events. The Warrants also contain
registration rights. See "Shares Eligible for Future Sale -- Registration
Rights."
ANTI-TAKEOVER EFFECTS OF DELAWARE LAW AND CERTAIN CERTIFICATE OF INCORPORATION
AND BYLAW PROVISIONS
Certain provisions of the Company's Certificate of Incorporation and Bylaws
summarized in the following paragraphs may be deemed to have anti-takeover
effects. These provisions may have the effect of discouraging a future takeover
attempt that is not approved by the Board of Directors but that individual
Company stockholders may deem to be in their best interests or by which
stockholders may receive a substantial premium for their shares over then
current market prices. As a result, stockholders who might desire to participate
in such a transaction may not have an opportunity to do so. Such provisions will
also make the removal of the current Board of Directors or management of the
Company more difficult. The following description of certain of the provisions
of the Certificate of Incorporation and Bylaws of the Company is necessarily
general and reference should be made in each case to the Certificate of
Incorporation and Bylaws, which are incorporated herein by reference. See
"Additional Information" as to how to obtain a copy of these documents.
Authorized Shares
The Certificate of Incorporation authorizes the issuance of 85,000,000
shares of Common Stock and 15,000,000 shares of Preferred Stock. Following the
consummation of the Offering, the Board of Directors will have the authority to
authorize issuance of any authorized and unissued shares of Common Stock and
Preferred Stock. The Board of Directors has sole authority to determine the
terms of any one or more series of Preferred Stock, including voting rights,
conversion rates and liquidation preferences. As a result of the ability
51
<PAGE> 55
to fix voting rights for a series of Preferred Stock, the Board has the power,
consistent with its fiduciary duty, to issue a series of Preferred Stock to
persons friendly to management in order to attempt to block a post-tender offer
merger or other transaction by which a third party seeks control, and thereby
assist management in retaining its position. The Company's Board of Directors
currently has no plans for the issuance of additional shares of Preferred Stock
or Common Stock.
Advance Notice Provisions for Stockholder Proposals and Stockholder
Nominations of Directors
The Bylaws establish an advance notice procedure with regard to the
nomination, other than by or at the direction of the Board or a committee
thereof, of candidates for election as directors (the "Nomination Procedure")
and with regard to other matters to be brought by stockholders before an annual
meeting of stockholders of the Company (the "Business Procedure"). The
Nomination Procedure requires that a stockholder give 90 days advance written
notice, in proper form, of a planned nomination for the Board of Directors to
the Secretary of the Company. The requirements as to the form and timing of the
notice are specified in the Bylaws. If the Chairman of the Board of Directors
determines that a person was not nominated in accordance with the Nomination
Procedure, such person will not be eligible for election as a director. Under
the Business Procedure, a stockholder seeking to have any business conducted at
an annual meeting must give 90 days advance written notice, in proper form, to
the Secretary of the Company. The requirements as to the form and timing of the
notice is specified in the Bylaws. If the Chairman of the Board of Directors
determines that the other business was not properly brought before the meeting
in accordance with the Business Procedure, the business will not be conducted at
the meeting.
Although the Bylaws do not give the Board of Directors any power to approve
or disapprove stockholder nominations for the election of directors or of any
other business desired by stockholders to be conducted at an annual or any other
meeting, the Bylaws (i) may have the effect of precluding a nomination for the
election of directors or precluding the conduct of business at a particular
annual meeting if the proper procedures are not followed or (ii) may discourage
or deter a third party from conducting a solicitation of proxies to elect its
own slate of directors or otherwise attempting to obtain control of the Company,
even if the conduct of such solicitation or such attempt might be beneficial to
the Company and its stockholders.
Delaware Law
The Company is subject to Section 203 of the DGCL which, subject to certain
exceptions, prohibits a Delaware corporation from engaging in any of a broad
range of business combinations with any interested stockholder, as defined
below, for a period of three years following the time that such stockholder
became an interested stockholder, unless (i) prior to such time, the Board of
Directors of the corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder, (ii) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned (a) by persons who are directors and
officers and (b) by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer, or (iii) at or after such
time, the business combination is approved by the Board of Directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock which is not owned by the interested stockholder. For purposes of Section
203 of the DGCL, an "interested stockholder" is defined as any person that is
(a) the owner of 15% or more of the outstanding voting stock of the corporation
or (b) an affiliate or associate of the corporation who was the owner of 15% or
more of the outstanding voting stock of the corporation at any time within the
three-year period immediately prior to the date on which it is sought to be
determined whether such person is an interested stockholder. Section 203 of the
DGCL may have the effect of delaying, deterring or preventing a change in
control of the Company without further action by the Company's stockholders.
52
<PAGE> 56
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Olde Monmouth
Stock Transfer Co., Inc., Atlantic Highlands, New Jersey.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there was no public market for the Common Stock and
no prediction can be made as to the effect, if any, that future sales of shares
of Common Stock or the availability of shares for future sale will have on the
market price prevailing from time to time. Sales of substantial amounts of
Common Stock could adversely affect the prevailing market price of the Common
Stock and could impair the Company's ability to raise capital through an
offering of its equity securities. See "Risk Factors -- Shares Eligible for
Future Sale; Registration Rights."
GENERAL
Upon the completion of the Offering, the Company will have issued and
outstanding shares of Common Stock. The shares of Common Stock
sold in the Offering will be freely tradeable by persons other than affiliates
of the Company without restriction under the Securities Act. Substantially all
of the shares to be outstanding upon the completion of the Offering, other than
the shares being offered hereby and approximately
shares which are freely tradable pursuant to Rule 144 promulgated under the
Securities Act ("Rule 144"), are subject to the lock-up agreements described
below or are "restricted securities" within the meaning of Rule 144. The shares
of Common Stock outstanding immediately prior to the Offering which are
restricted securities may not be sold in the absence of registration under the
Securities Act unless an exemption from registration is available. As described
below under " -- Registration Rights," the Company has granted registration
rights covering approximately of such shares.
In general, under Rule 144 as currently in effect, if one year has elapsed
since the later of the date of acquisition of restricted securities from the
Company or any affiliate of the Company, a person (or persons whose shares are
aggregated) would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of (i) 1% of the number of then
outstanding shares of Common Stock ( shares immediately after the
completion of the Offering) or (ii) the average weekly trading volume of the
Common Stock during the four calendar weeks preceding the date on which notice
of the sale is filed with the Commission. Sales under Rule 144 are also subject
to certain manner of sales provisions, notice requirements and the availability
of current public information about the Company. If two years have elapsed since
the date of acquisition of restricted securities from the Company or any
affiliate of the Company, and the acquiror or subsequent holder thereof is
deemed not to have been an affiliate of the Company at any time during the 90
days preceding a sale, such person (or persons whose shares are aggregated)
would be entitled to sell such shares in the public market under Rule 144(k)
without regard to the volume limitations, manner of sale provisions, notice
requirements and the availability of current public information requirements. An
"affiliate" of an entity is a person that directly, or indirectly through one or
more intermediaries, controls or is controlled by, or is under common control
with such entity and may include officers and directors, principal stockholders
and certain stockholders with special relationships. Upon the expiration of the
lock-up period described below, approximately additional shares
will be eligible for sale in the public market, approximately of
which will be subject to certain restrictions under Rule 144. The foregoing is a
summary of Rule 144 and is not intended to be a complete description of it.
Subject to certain exceptions, the Company, all of the Company's executive
officers and directors, the Selling Stockholders and certain other stockholders
of the Company have agreed that, without the prior written consent of ABN AMRO
Incorporated, they will not, during the period ending 180 days from the date of
this Prospectus, register for sale, sell, offer, contract to sell, grant an
option for sale or otherwise dispose of or transfer any capital stock of the
Company or any securities convertible into or exchangeable for capital stock of
the Company. See "Underwriting."
The Company intends to file one or more registration statements under the
Securities Act to register shares of Common Stock that will be reserved for
issuance upon exercise of options that may be granted under
53
<PAGE> 57
the Stock Option Plan. Other than the shares and options to purchase shares
subject to the lock-up agreements, shares registered under the Securities Act
will be freely transferable upon issuance unless acquired by affiliates of the
Company.
REGISTRATION RIGHTS
The following summary of certain material provisions of certain
registration rights agreements is qualified in its entirety by reference to each
such registration rights agreement, copies of which are filed as exhibits to the
Registration Statement of which this Prospectus is a part. See "Available
Information."
Upon the completion of the Offering, the holders of approximately
shares of Common Stock, or their permitted transferees, are
entitled to certain rights with respect to the registration of such shares under
the Securities Act. Registration of such shares under the Securities Act would
result in such shares becoming freely tradable without restriction under the
Securities Act (except for shares purchased by affiliates of the Company)
immediately upon the effectiveness of a registration statement covering such
registrable shares. If the Company proposes to register any of its securities
under the Securities Act either for its own account or the account of any
holders of securities exercising registration rights, holders of shares
registrable pursuant to registration rights are entitled to notice of such
registration and are entitled to include such registrable shares therein,
subject to certain terms and conditions.
Pursuant to their employment agreements, the Company has entered into
registration rights agreements with Dr. Kyprianou and Mr. Poyiadjis (the
"Existing Stockholders"), who beneficially owned and
shares, of Common Stock, respectively, as of May 31, 1998.
Pursuant to their registration rights agreements, the Existing Stockholders have
the right to require the Company to use its best efforts to register under the
Securities Act all or a portion of their shares, subject to certain terms and
conditions. The Existing Stockholders also have the right to participate in
equity offerings initiated by the Company, subject to certain terms and
conditions. The Company will pay all expenses relating to the performance of, or
compliance with the Company's obligations under such registration rights
agreements. In either case, however, the Existing Stockholders will be
responsible for underwriters' discounts and selling commissions with respect to
the shares being sold pursuant to such registration rights agreements and the
fees and expenses of their counsel in connection with such registration. The
Existing Stockholders' rights under their registration rights agreements will be
assignable to parties who agree to be bound thereby.
In addition, the Company has granted certain registration rights in
connection with the issuance of warrants to purchase 87,500 shares of Common
Stock. See "Description of Capital Stock -- Warrants."
54
<PAGE> 58
UNDERWRITING
The Underwriters named below (the "Underwriters"), for whom ABN AMRO
Incorporated and EVEREN Securities, Inc. are acting as representatives (the
"Representatives"), have severally agreed, subject to the terms and conditions
specified in the underwriting agreement among the Company, the Representatives
and the Selling Stockholders (the "Underwriting Agreement"), to purchase from
the Company and the Selling Stockholders the respective number of shares of
Common Stock set forth opposite their names below:
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITER OF COMMON STOCK
----------- ----------------
<S> <C>
ABN AMRO Incorporated.....................................
EVEREN Securities, Inc....................................
---------
Total...........................................
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions and that the Underwriters will be
obligated to purchase all of the shares of Common Stock offered hereby (other
than those shares covered by the over-allotment option described below) if any
are purchased. The Underwriting Agreement provides that, in the event of a
default by an Underwriter, in certain circumstances the purchase commitments of
non-defaulting Underwriters may be increased or the Underwriting Agreement may
be terminated.
The Company and the Selling Stockholders have been advised by the
Representatives that the Underwriters propose to offer the shares of Common
Stock to the public initially at the public offering price set forth on the
cover page of this Prospectus and to certain selected dealers at such public
offering price less a concession not in excess of $ per share, and that the
Underwriters and such dealers may reallow to certain other dealers, including
any Underwriters, a discount not in excess of $ per share. After the initial
offering to the public, the public offering price and other selling terms may be
changed by the Representatives.
The Company has granted to the Underwriters an option, exercisable by ABN
AMRO Incorporated, expiring at the close of business on the 30th day after the
date of this Prospectus, to purchase up to an aggregate of
additional shares of Common Stock from it at the public offering price less the
underwriting discount, all as set forth on the cover page of this Prospectus.
Such option may be exercised only to cover over-allotments in the sale of the
shares of Common Stock offered hereby. To the extent such option is exercised,
each Underwriter will become obligated, subject to certain conditions, to
purchase approximately the same percentage of such additional shares of Common
Stock as it was obligated to purchase pursuant to the Underwriting Agreement.
The Company, all of the Company's executive officers and directors, the
Selling Stockholders and certain other stockholders of the Company have agreed
for a period of 180 days after the date of this Prospectus not to register for
sale, sell, offer, contract to sell, grant an option for sale or otherwise
dispose of or transfer any capital stock of the Company or any securities
convertible into or exchangeable or exercisable for capital stock of the
Company, without the prior written consent of ABN AMRO Incorporated except, in
the case of the Company, issuances pursuant to the exercise of employee stock
options granted under the Company's existing incentive plans and, in the case of
the Company's executive officers and directors, the Selling Stockholders
55
<PAGE> 59
and certain other stockholders of the Company, pledges of shares and gifts of
shares where the donee agrees in writing to be bound by the terms of such
agreement.
Prior to the Offering, there has been no public market for the Common
Stock. The initial public offering price will be determined by negotiations
between the Company and the Representatives. Among the factors to be considered
in determining the initial public offering price will be the future prospects of
the Company and its industry in general, sales, earnings and certain other
financial operating information of the Company in recent periods, the experience
of the Company's management, the general condition of the equity securities
markets, and the price-earnings ratios, price-revenues ratios, market prices of
securities and certain financial and operating information of companies engaged
in activities similar to those of the Company. The estimated initial public
offering price range set forth on the cover page of this Prospectus is subject
to change as a result of market conditions and other factors.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters and their controlling persons against certain liabilities,
including civil liabilities under the Securities Act, or contribute to payments
that the Underwriters may be required to make in respect thereof.
The Company has submitted an application to list the shares of Common Stock
offered hereby on the Nasdaq National Market under the symbol "AREM."
The Representatives, on behalf of the Underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M of the Exchange Act. Over-allotment
involves syndicate sales in excess of the Offering size, which creates a
syndicate short position. Stabilizing transactions permit bids to purchase the
underlying security so long as the stabilizing bids do not exceed a specified
maximum. Syndicate covering transactions involve purchases of the Common Stock
in the open market after the distribution has been completed in order to cover
syndicate short positions. Penalty bids permit the Representatives to reclaim a
selling concession from a syndicate member when the Common Stock originally sold
by such syndicate member is purchased in a syndicate covering transaction to
cover syndicate short positions. Such stabilizing transactions, syndicate
covering transactions and penalty bids may cause the price of the Common Stock
to be higher than it would otherwise be in the absence of such transactions.
These transactions may be effected on the Nasdaq National Market or otherwise
and, if commenced, may be discontinued at any time.
Purchasers of the Common Stock offered hereby may be required to pay stamp
taxes and other charges in accordance with the laws and practices of the country
of purchase in addition to the Offering price set forth on the cover page
hereof.
The Representatives have informed the Company that they do not intend sales
to discretionary accounts to exceed five percent of the total number of shares
of Common Stock offered by them.
LEGAL MATTERS
Certain legal matters with respect to the Common Stock offered hereby will
be passed upon by Bartel Eng Linn & Schroder, Sacramento, California. Certain
legal matters in connection with the Offering will be passed upon for the
Company by Pillsbury Madison & Sutro LLP, Sacramento, California. Certain legal
matters in connection with the Offering will be passed upon for the Underwriters
by Jones, Day, Reavis & Pogue, Chicago, Illinois.
EXPERTS
The Consolidated Financial Statements of the Company as of December 31,
1997, and for the year then ended appearing in this Prospectus and Registration
Statement have been audited by Ernst & Young, chartered accountants, independent
auditors, to the extent indicated in their reports thereon appearing elsewhere
herein and in the Registration Statement. Such Consolidated Financial Statements
have been included in reliance upon such reports given upon the authority of
such firm as experts in accounting and auditing. The Consolidated Financial
Statements of the Company as of December 31, 1996, and for each of
56
<PAGE> 60
the two years in the period then ended appearing in this Prospectus and in the
Registration Statement, have been audited by Pannell Kerr Forster, chartered
accountants, independent auditors, as set forth in their reports thereon
appearing elsewhere herein, and in the Registration Statement, and are included
in reliance upon such reports given upon the authority of such firm as experts
in accounting and auditing.
CHANGE IN ACCOUNTANTS
Effective May 15, 1998, Ernst & Young, chartered accountants, was engaged
as the Company's independent auditors to audit the consolidated financial
statements for the year ended December 31, 1997. Accordingly, the engagement of
Pannell Kerr Forster, chartered accountants, was discontinued. The decision to
change independent accountants was approved by the Company's Board of Directors.
In the period from January 1, 1995, through December 31, 1997, Pannell Kerr
Forster issued no audit report which was qualified or modified as to
uncertainty, audit scope or accounting principles, or which contained adverse
opinions or disclaimers of opinion on any of the Company's financial statements
and there were no disagreements with Pannell Kerr Forster on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure. Prior to May 15, 1998, the Company had not consulted with
Ernst & Young on items which involved the Company's accounting principles, the
application of accounting principles to a specified transaction, or the form of
audit opinion to be rendered on the Company's financial statements.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (the "Registration Statement," which term encompasses all amendments,
exhibits and schedules thereto) under the Securities Act with respect to the
Common Stock offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the Commission. Statements made in this
Prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is hereby made to the exhibit for a more complete description of the
matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. The Registration Statement, including exhibits
thereto, may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the regional offices of the Commission
located at Seven World Trade Center, 13th Floor, New York, New York 10048 and
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material, when filed, may also be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission maintains a Web site (address http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
Upon the completion of the Offering, the Company will become subject to the
informational requirements of the Exchange Act and, in accordance therewith,
will file reports and other information with the Commission in accordance with
the Commission's rules. Such reports and other information concerning the
Company may be inspected and copied at the public reference facilities and
regional offices of the Commission referred to above.
The Company intends to furnish to its stockholders annual reports
containing audited financial information and furnish quarterly reports
containing condensed unaudited financial information for each of the first three
quarters of each fiscal year.
57
<PAGE> 61
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young, Independent Auditors............... F-2
Report of Pannell Kerr Forster, Independent Auditors........ F-3
Consolidated Balance Sheets................................. F-4
Consolidated Statements of Operations....................... F-5
Consolidated Statements of Changes in Stockholders' Equity
(Deficit)................................................. F-6
Consolidated Statements of Cash Flows....................... F-7
Notes to Consolidated Financial Statements.................. F-8
</TABLE>
F-1
<PAGE> 62
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
AremisSoft Corporation
We have audited the accompanying consolidated balance sheet of AremisSoft
Corporation as of December 31, 1997, and the related consolidated statements of
operations, changes in stockholders' equity (deficit) and cash flows for the
year then ended. Our audit also included the financial statement schedule listed
in the index. These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audit.
We conducted our audit in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of AremisSoft
Corporation at December 31, 1997, and the consolidated results of its operations
and its consolidated cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
ERNST & YOUNG
Chartered Accountants
Reading, England
June 30, 1998
F-2
<PAGE> 63
REPORT OF PANNELL KERR FORSTER, INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
AremisSoft Corporation
We have audited the accompanying consolidated balance sheet of AremisSoft
Corporation as of December 31, 1996, and the related consolidated statements of
operations, changes in stockholders' equity (deficit) and cash flows for each of
the two years in the period ended December 31, 1996. Our audit also included the
financial statement schedule listed in the index. These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with United Kingdom auditing
standards which do not differ materially from United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinions.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of AremisSoft
Corporation at December 31, 1996, and the consolidated results of its operations
and its consolidated cash flows for each of the two years in the period ended
December 31, 1996, in conformity with accounting principles generally accepted
in the United States. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements take as
a whole, presents fairly, in all material respects, the information set forth
therein.
PANNELL KERR FORSTER
Chartered Accountants
London, England
June 30, 1998
F-3
<PAGE> 64
AREMISSOFT CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1996 1997 1998
-------- -------- -----------
ASSETS (unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 867 $ 239 $ 5,270
Accounts receivable, less allowances for doubtful accounts
of $484, $971 and $971 at December 31, 1996 and 1997 and
March 31, 1998, respectively............................ 11,017 9,458 9,628
Other receivables......................................... 254 670 764
Inventory................................................. 1,283 1,070 1,153
Prepaid expenses and other assets......................... 1,284 2,169 3,592
-------- -------- --------
Total current assets........................................ 14,705 13,606 20,407
Property and equipment, net................................. 2,386 2,040 2,059
Purchased and developed software, net of accumulated
amortization of $5,912, $5,755 and $5,772 at December 31,
1996 and 1997 and March 31, 1998, respectively............ 334 764 785
Intangible assets, net of accumulated amortization of
$13,241, $12,766 and $12,790 at December 31, 1996 and 1997
and March 31, 1998, respectively.......................... 1,024 832 808
-------- -------- --------
Total assets................................................ $ 18,449 $ 17,242 $ 24,059
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 3,596 $ 4,244 $ 3,244
Accrued taxes payable..................................... 3,828 4,887 3,545
Current portion of capital lease obligations.............. 68 40 39
Other accrued expenses.................................... 4,565 4,507 3,590
Bank loans and short-term demand facility................. 6,490 7,207 6,687
Deferred revenue.......................................... 11,596 5,692 6,576
-------- -------- --------
Total current liabilities................................... 30,143 26,577 23,681
Long-term debt.............................................. 13,388 10,096 10,262
Capital lease obligations, less current portion............. 21 103 --
Stockholders' equity (deficit):
Series A convertible preferred stock, par value $0.001;
authorized 2,100 shares; no shares, 1,945 and 1,945
shares issued and outstanding at December 31, 1996, 1997
and March 31, 1998, respectively; liquidating preference
at par value............................................ -- 2 2
Series B convertible preferred stock, par value $0.001;
authorized 3,500 shares; no shares issued and
outstanding at December 31, 1996, 1997 and March 31,
1998, respectively; liquidating preference at par
value................................................... -- -- --
Common stock, par value $0.001; authorized 75,000 shares;
814, 12,957 and 15,173 shares issued and outstanding at
December 31, 1996 and 1997 and March 31, 1998,
respectively............................................ 13 13 15
Additional paid-in capital................................ 11,359 17,761 27,061
Accumulated deficit....................................... (33,756) (35,376) (35,128)
Cumulative translation adjustment......................... (2,719) (1,934) (1,834)
-------- -------- --------
Total stockholders' equity (deficit)........................ (25,103) (19,534) (9,884)
-------- -------- --------
Total liabilities and stockholders' equity (deficit)........ $ 18,449 $ 17,242 $ 24,059
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 65
AREMISSOFT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------- ------------------
1995 1996 1997 1997 1998
-------- -------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses............................. $ 6,641 $ 12,052 $ 17,024 $ 2,787 $ 4,108
Maintenance and services...................... 9,426 15,839 18,990 3,286 4,563
Hardware and other............................ 5,355 6,541 6,360 1,089 1,425
-------- -------- -------- ------- -------
Total revenues......................... 21,422 34,432 42,374 7,162 10,096
Cost of revenues:
Software licenses............................. 875 1,555 2,079 350 480
Maintenance and services...................... 2,735 5,393 5,377 974 1,255
Hardware and other............................ 4,829 5,760 5,147 855 1,140
Amortization of purchased software and
capitalized software development costs...... 2,374 2,327 70 17 17
-------- -------- -------- ------- -------
Total cost of revenues................. 10,813 15,035 12,673 2,196 2,892
-------- -------- -------- ------- -------
Gross profit.................................... 10,609 19,397 29,701 4,966 7,204
Operating expenses:
Sales and marketing........................... 10,811 15,182 17,834 3,276 3,900
Research and development...................... 6,428 6,409 6,233 1,560 1,495
General and administrative.................... 3,442 5,605 5,227 1,350 1,080
Amortization of intangible assets............. 3,176 5,649 97 24 24
-------- -------- -------- ------- -------
Total operating expenses............... 23,857 32,845 29,391 6,210 6,499
-------- -------- -------- ------- -------
Profit (loss) from operations................... (13,248) (13,448) 310 (1,244) 705
Other income (expense):
Interest income............................... 5 11 6 2 28
Interest expense.............................. (1,289) (1,917) (1,901) (540) (485)
-------- -------- -------- ------- -------
Income (loss) before income taxes............... (14,532) (15,354) (1,585) (1,782) 248
Income tax expense (benefit).................... 37 (50) 35 (10) --
-------- -------- -------- ------- -------
Net income (loss)............................... $(14,569) $(15,304) $ (1,620) $(1,772) $ 248
======== ======== ======== ======= =======
Basic earnings (loss) per share................. $ (1.13) $ (1.19) $ (0.13) $ (0.14) $ 0.02
======== ======== ======== ======= =======
Diluted earnings (loss) per share............... $ (1.13) $ (1.19) $ (0.13) $ (0.14) $ 0.02
======== ======== ======== ======= =======
Weighted average number of shares used in
computing:
Basic earnings (loss) per share................. 12,845 12,845 12,870 12,845 14,175
======== ======== ======== ======= =======
Diluted earnings (loss) per share............... 12,845 12,845 12,870 12,845 16,208
======== ======== ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 66
AREMISSOFT CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
PREFERRED STOCK COMMON STOCK ADDITIONAL CUMULATIVE STOCKHOLDERS'
--------------- --------------- PAID-IN ACCUMULATED TRANSLATION EQUITY
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT (DEFICIT)
------ ------ ------ ------ ---------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1994.... -- $-- 12,845 $13 $ 6,054 $ (3,883) $ -- $ 2,184
Net loss......................... -- -- -- -- -- (14,569) -- (14,569)
Currency translation
adjustment..................... -- -- -- -- -- -- 19 19
------ --- ------ --- ------- -------- ------- --------
BALANCES AT DECEMBER 31, 1995.... -- -- 12,845 13 6,054 (18,452) 19 (12,366)
Stockholder contribution......... -- -- -- -- 5,305 -- -- 5,305
Net loss......................... -- -- -- -- -- (15,304) -- (15,304)
Currency translation
adjustment..................... -- -- -- -- -- -- (2,738) (2,738)
------ --- ------ --- ------- -------- ------- --------
BALANCES AT DECEMBER 31, 1996.... -- -- 12,845 13 11,359 (33,756) (2,719) (25,103)
Issuance of common stock in
connection with the acquisition
of the net assets of Juno (Note
1)............................. -- -- 112 -- -- -- -- --
Issuance of Series A preferred
stock, net of costs of $609.... 1,945 2 -- -- 6,402 -- -- 6,404
Net loss......................... -- -- -- -- -- (1,620) -- (1,620)
Currency translation
adjustment..................... -- -- -- -- -- -- 785 785
------ --- ------ --- ------- -------- ------- --------
BALANCES AT DECEMBER 31, 1997.... 1,945 2 12,957 13 17,761 (35,376) (1,934) (19,534)
Issuance of common stock, net of
costs of $1,036 (unaudited).... -- -- 2,216 2 9,300 -- -- 9,302
Net income (unaudited)........... -- -- -- -- -- 248 -- 248
Currency translation adjustment
(unaudited).................... -- -- -- -- -- -- 100 100
------ --- ------ --- ------- -------- ------- --------
BALANCES AT MARCH 31, 1998
(UNAUDITED).................... 1,945 $ 2 15,173 $15 $27,061 $(35,128) $(1,834) $ (9,884)
====== === ====== === ======= ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 67
AREMISSOFT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- ------------------
1995 1996 1997 1997 1998
-------- -------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).............................. $(14,569) $(15,304) $(1,620) $(1,772) $ 248
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation................................... 345 958 977 240 230
Amortization and write-off of capitalized
software and intangible assets............... 5,550 7,976 167 41 41
Changes in assets and liabilities, net of
acquisitions Accounts receivable............. (5,091) 1,106 2,933 (219) (170)
Other receivables............................ (30) 832 (461) (4) (94)
Inventory.................................... 74 (477) 163 (25) (83)
Prepaid expenses............................. (365) 653 (2,595) (23) (1,423)
Accounts payable............................. 1,034 422 788 136 (999)
Deferred maintenance revenue................. 4,098 (1,290) (5,726) 443 884
Accrued taxes payable........................ 754 1,679 1,242 147 (1,342)
Other accrued expenses....................... 2,062 2,191 103 181 (917)
-------- -------- ------- ------- -------
Net cash used in operating activities............ (6,138) (1,254) (4,029) (855) (3,625)
-------- -------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment............ (495) (1,130) (684) (150) (249)
Capitalized software development costs......... (514) (223) (515) -- (38)
Payment for acquisitions, net of cash
acquired..................................... (7,527) (3,256) -- -- --
Proceeds from disposal of property and
equipment.................................... 167 549 228 150 --
-------- -------- ------- ------- -------
Net cash used in investing activities............ (8,369) (4,060) (971) -- (287)
-------- -------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of stock............ -- -- 6,402 -- 9,302
Stockholder contribution....................... -- 5,305 -- -- --
Long-term borrowings........................... 13,475 1,936 33 -- --
Principal payments of long-term borrowings..... (268) (1,732) (2,040) (356) 166
Principal payments of capital lease
obligations.................................. (246) (353) (53) (4) (104)
Short-term demand facility..................... 1,818 1,301 186 248 (520)
-------- -------- ------- ------- -------
Net cash provided by (used in) financing
activities..................................... 14,779 6,457 4,528 (112) 8,844
-------- -------- ------- ------- -------
Net increase (decrease) in cash and cash
equivalents.................................... 272 1,143 (472) (967) 4,932
Effect of foreign currency exchange rates on cash
and cash equivalents........................... (17) (531) (156) 353 99
Cash and cash equivalents, at beginning of
period......................................... -- 255 867 867 239
-------- -------- ------- ------- -------
Cash and cash equivalents, at end of period...... $ 255 $ 867 $ 239 $ 253 $ 5,270
======== ======== ======= ======= =======
Supplemental disclosure:
Interest paid.................................. $ 975 $ 1,887 $ 1,900 $ 518 $ 457
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE> 68
AREMISSOFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
AremisSoft Corporation develops, markets, implements and supports
enterprise-wide applications software targeted to mid-sized organizations,
principally in the healthcare, manufacturing, hospitality and construction
industries.
Organization and Basis of Presentation
In October 1997, AremisSoft Corporation, under its previous name of Juno
Acquisitions, Inc. ("Juno"), entered into a Plan and Agreement of Reorganization
(the "Plan") with LK Global Information Systems BV ("LK Global"), a company
incorporated in The Netherlands. Under the terms of the Plan, Juno acquired all
of the issued and outstanding common stock of LK Global in exchange for
12,845,000 shares of its common stock (the "1997 Acquisition"). Prior to the
1997 Acquisition, Juno had no significant operations.
LK Global is accounted for as the acquirer and as the surviving accounting
entity because the former stockholders of LK Global received approximately 99%
of the voting rights in the combined corporation. The shares issued by Juno have
been accounted for as if those shares comprised the historical share capital of
LK Global. The outstanding capital stock of Juno, at the date of the 1997
Acquisition, has been accounted for as shares issued by LK Global to acquire the
net assets of Juno.
Because LK Global is the accounting survivor, the financial statements
presented for all periods are those of LK Global and its subsidiaries
(collectively the "Company") with a change in the name to AremisSoft
Corporation. All intercompany accounts and transactions are eliminated in
consolidation.
At March 31, 1998, the Company was not in compliance with certain financial
covenants in the agreements relating to its long-term debt. However, by
subsequent agreements the principal lender has waived all covenants for the
period to September 30, 1998, or until the completion of an initial public
offering of its common stock ("IPO"), whichever occurs first. In the event that
the Company does not complete an IPO by September 30, 1998, in order for the
Company to remain in compliance with any reinstated covenants it must achieve
its operating plan and/or raise additional capital or obtain an extention of the
waiver from the principal lender.
Interim Financial Information
The interim financial information as of March 31, 1998, and for the three
months ended March 31, 1997 and 1998, is unaudited but includes all adjustments,
consisting only of normal recurring adjustments, that the Company considers
necessary for a fair presentation of its financial position at such date and its
results of operations and cash flows for those periods. Operating results for
the three months ended March 31, 1998, are not necessarily indicative of results
that may be expected for any future periods.
Revenue Recognition
The Company derives its revenue primarily from software licenses,
maintenance and service contracts and hardware sales. Software license revenues
are mainly derived from the licensing of industry-specific software
applications, primarily the sale of upgrades to existing customers. Maintenance
and service contract revenues are derived from ongoing support of installed
software, and training, consulting and implementation services. Hardware sales
revenues are primarily derived from the sale of third-party hardware to
customers requiring turnkey solutions.
The Company recognizes software license and hardware revenues at the time
of installation, provided no significant obligations remain and collection of
the resulting receivable is deemed probable. Maintenance contract revenues are
recognized ratably over the life of the contract, service contract revenues are
recognized
F-8
<PAGE> 69
AREMISSOFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
in accordance with the terms of the contract and add-on hardware sales revenues
are recognized when the hardware is shipped to the customer.
Foreign Currency
The functional currency of the Company and its United Kingdom subsidiaries
is the British pound. The functional currencies of the other subsidiaries are
their local currencies.
For reporting purposes, the financial statements are presented in United
States dollars Statement of Financial Accounting Standard No. 52, "Foreign
Currency Translation". The consolidated balance sheets are translated into
United States dollars at the exchange rates prevailing at the balance sheet
dates and the statements of operations and cash flows at the average rates for
the relevant periods. Gains and losses resulting from translation are
accumulated as a separate component of stockholders' equity.
Net gains and losses resulting from foreign exchange transactions are
included in the consolidated statements of operations.
Cash Equivalents
Cash equivalents consist of highly liquid investments with insignificant
interest rate risk and a maturity date of three months or less when purchased.
They are carried at cost which approximates fair value.
Inventory
Inventory is comprised of finished goods held for resale and maintenance
parts. Finished goods held for resale are stated at the lower of cost or net
realizable value. Cost is determined on a first-in first-out basis, and includes
all direct costs incurred and attributable production overheads. Net realizable
value is based on estimated selling price net of completion and disposal costs.
Maintenance parts are valued at cost and are depreciated over a three-year
period.
Purchased and Developed Software
The Company capitalizes the qualifying costs of developing its software
products. Capitalization of such costs requires that technological feasibility
has been established. Development costs incurred prior to the establishment of
technological feasibility are expensed as incurred. When the software is fully
documented and available for unrestricted sale, capitalization of development
costs ceases, and amortization commences and is computed on a product-by-product
basis, based on either a straight-line basis over the economic life of the
product or the ratio of current gross revenues to the total of current and
anticipated future gross revenues, whichever is greater.
The Company capitalizes as purchased software the costs associated with
software products either purchased from other companies for resale or developed
by other companies under contract with the Company. The cost of the software is
amortized on the same basis as capitalized software development costs. The
amortization period is re-evaluated quarterly with respect to certain external
factors including, but not limited to, technological feasibility, anticipated
future gross revenues, estimated economic life and changes in software and
hardware technologies.
The establishment of technological feasibility and the ongoing assessment
of recoverability of capitalized software development costs require considerable
judgment by management with respect to certain external factors, including, but
not limited to, technological feasibility, anticipated future gross revenues,
estimated economic life and changes in software and hardware technologies.
Realization of capitalized software costs is subject to the Company's ability to
market its software products in the future and generate cash flows sufficient to
support future operations.
F-9
<PAGE> 70
AREMISSOFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Intangible Assets
Intangible assets consist of customer lists and management employment
agreements related to acquired businesses. Customer lists are amortized over
periods of one to three years, depending on the circumstances of the company
acquired, and management employment agreements are amortized over periods of
four to five years.
Property and Equipment
Property and equipment is recorded at cost. Depreciation is calculated
using the straight-line method over the estimated useful lives of the assets as
follows:
<TABLE>
<S> <C>
Leasehold improvements shorter of the lease term or economic life
Fixtures and equipment three to five years
Motor vehicles four years
</TABLE>
Impairment of Long-lived Assets
In the event that facts and circumstances indicate that the carrying value
of an asset may be impaired, an evaluation of recoverability would be performed.
If an evaluation is required, the estimated fair market value of the asset would
be compared to the asset's carrying value to determine if a write-down to the
lower of carrying value or market value is required.
The Company made certain acquisitions in 1995 on the assumption that
further funding would be made available by its bankers. This financing was not
obtained and, as a result, the Company wrote off $388,000 of purchased and
developed software during 1995.
In 1996, the Company elected to replace certain members of management in
connection with the integration of an acquired business. Accordingly, the
Company accelerated the amortization of an additional $505,000 of intangible
assets over and above the normal amortization that would have been expensed had
this event not occurred.
Income Taxes
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). Under
the asset and liability method of SFAS 109, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to net operating
loss carryforwards and differences between the financial statement carrying
amounts of existing assets and liabilities, and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Deferred tax assets are
recorded at their estimated realizable value.
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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Certain estimates used by management are particularly susceptible to
significant changes, such as the recoverability and amortization periods of
purchased and developed software and intangible assets. Management believes
that, as of December 31, 1997, the estimates used are adequate based on the
information currently available.
F-10
<PAGE> 71
AREMISSOFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net Loss Per Common Share
In 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"),
pursuant to which the calculation of primary and fully diluted earnings per
share was replaced with basic and diluted earnings per share. Unlike primary
earnings per share, basic earnings per share excludes any dilutive effects of
options, warrants and convertible securities, except as required by Staff
Accounting Bulletin No. 98 ("SAB 98"). Diluted earnings per share is very
similar to the previously reported fully diluted earnings per share.
On February 23, 1998, the staff of the Securities and Exchange Commission
("SEC") issued SAB 98 which changes the SEC staff's guidance on cheap stock in
initial public offering filings and the subsequent reporting of cheap stock.
Under the SEC's old guidance, Staff Accounting Bulletin No. 83, common stock
issued during a one-year period prior to an initial public offering at prices
below the initial public offering price, including any option or warrant, was
considered cheap and was treated as outstanding for all periods in a manner
similar to a stock split.
Under SAB 98, common stock, options or warrants to purchase common stock or
other potentially dilutive instruments issued for nominal consideration
(collectively "nominal issuances") during any of the periods covered by
statements of operations that are included in initial public offering filings,
must be reflected in basic (for common stock) and diluted earnings per share
(for common stock or other potentially dilutive instruments) for all periods
subsequent to their respective issuances in a manner similar to a stock split,
even if anti-dilutive.
All earnings (loss) per share amounts for all periods presented have been
stated to conform to the SFAS 128 and SAB 98 requirements.
The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- ------------------
1995 1996 1997 1997 1998
-------- -------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Numerator used for both basic and diluted
earnings (loss) per share...................... $(14,569) $(15,304) $(1,620) $(1,772) $ 248
Denominator for basic earnings per share:
Weighted average shares outstanding............ 12,845 12,845 12,870 12,845 14,175
Denominator for diluted earnings per share:
Denominator for basic earnings per share....... 12,845 12,845 12,870 12,845 14,175
Effect of dilutive securities:
Warrants....................................... -- -- -- -- 88
Convertible preferred shares................... -- -- -- -- 1,945
-------- -------- ------- ------- -------
12,845 12,845 12,870 12,845 16,208
======== ======== ======= ======= =======
Basic earnings (loss) per share.................. $ (1.13) $ (1.19) $ (0.13) $ (0.14) $ 0.02
======== ======== ======= ======= =======
Diluted earnings (loss) per share................ $ (1.13) $ (1.19) $ (0.13) $ (0.14) $ 0.02
======== ======== ======= ======= =======
</TABLE>
F-11
<PAGE> 72
AREMISSOFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Fair Value of Financial Instruments
The carrying amounts for the Company's financial instruments, including
cash and cash equivalents, accounts receivable, accounts payable, accrued
expenses and long-term debt approximate fair values.
Estimates are not necessarily indicative of the amounts which could be
realized or would be paid in a current market exchange. The effect of using
different market assumptions and/or estimation methodologies may be material to
the estimated fair value amount.
New Accounting Standards
In June 1997, FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes new
rules for the reporting and display of comprehensive income and its components.
SFAS 130 requires unrealized gains or losses on the Company's available-for-sale
securities, which currently are reported in stockholders' equity, to be included
in other comprehensive income and the disclosure of total comprehensive income.
The adoption of SFAS 130 is required in 1998 and will not have an impact on the
Company's net income or stockholders' equity.
In June 1997, FASB issued Statement of Financial Accounting Standards No.
131, "Disclosure About Segments of an Enterprise and Related Information" ("SFAS
131"). SFAS 131 establishes standards for the way public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to stockholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The adoption of SFAS 131 is required for
periods beginning after December 15, 1997, though it is not required for interim
financial statements in its initial year of adoption in 1998 and will not have
any impact on the Company's consolidated results of operations, financial
position or cash flows.
Effective January 1, 1998, the Company adopted the American Institute of
Certified Public Accountants' ("AICPA") Statement of Position No. 97-2 "Software
Revenue Recognition" ("SOP 97-2"), which supersedes Statement of Position No.
91-1. SOP 97-2 addresses software revenue recognition matters primarily from a
conceptual level and detailed implementation guidelines have not been issued.
Restatement of prior financial statements is prohibited.
In March 1998, the AICPA issued Statement of Position No. 98-4, "Deferral
of the Effective Date of a Provision of SOP 97-2, Software Revenue Recognition,"
which defers for one year the application of certain provisions of SOP 97-2.
These provisions limit what is considered vendor-specific objective evidence of
the fair value of the various elements in a multiple-element arrangement. All
other provisions of SOP 97-2 remain in effect.
2. INVENTORY
Inventory consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------ ------
<S> <C> <C>
Finished goods held for resale............................. $ 498 $ 262
Maintenance parts.......................................... 785 808
------ ------
$1,283 $1,070
====== ======
</TABLE>
F-12
<PAGE> 73
AREMISSOFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1997
------- -------
<S> <C> <C>
Fixtures and equipment..................................... $ 4,779 $ 5,160
Motor vehicles............................................. 605 459
Leasehold improvements..................................... 294 283
------- -------
5,678 5,902
Less accumulated depreciation.............................. (3,292) (3,862)
------- -------
$ 2,386 $ 2,040
======= =======
</TABLE>
At December 31, 1996 and 1997, the Company held property and equipment with
a net book value of $51,000 and $90,000, respectively, under capital leases.
Depreciation expense was $345,000, $958,000 and $977,000 for the years
ended December 31, 1995, 1996 and 1997, respectively.
4. BUSINESS COMBINATIONS
The Company made various acquisitions during 1995 and 1996, which have been
accounted for using the purchase method of accounting.
In each case the Company acquired all of the outstanding stock of the
acquired company. All of the companies were involved with the development of
computer software and the supply of software and services.
The aggregate estimated fair value of the assets and liabilities of the
acquired businesses and the aggregate consideration paid are as follows (in
thousands):
<TABLE>
<CAPTION>
1995 1996
------- ------
<S> <C> <C>
Current assets (including cash of $504 in 1995 and $88 in
1996)..................................................... $ 3,078 $ 424
Property and equipment...................................... 1,417 346
Software development costs and intellectual property........ 3,972 331
Accounts payable and accrued expenses....................... (3,777) (581)
Intangible assets........................................... 4,323 2,862
------- ------
$ 9,013 $3,382
======= ======
Consideration paid:
Cash consideration.......................................... $ 7,998 $3,302
Deferred consideration...................................... 982 38
Related acquisition costs................................... 33 42
------- ------
$ 9,013 $3,382
======= ======
</TABLE>
The operating results for each of these acquisitions are included in the
Company's Consolidated Statements of Operations from the date of acquisition.
Revenues and net income (loss) pro forma financial data for the year ended
December 31, 1996, is not materially different from the data presented in the
Consolidated Statements of Operations. No pro forma data reflecting the
Company's results of operations for the year ended December 31, 1995, is
provided as the Company does not consider such data to be meaningful because of
the write down of purchased software and intangible assets.
F-13
<PAGE> 74
AREMISSOFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. SHORT-TERM DEBT
Short-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
--------------- -----------
1996 1997 1998
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Current portion of long-term debt (Note 6)....... $2,103 $2,803 $2,314
Short-term demand facility....................... 4,387 4,404 4,373
------ ------ ------
$6,490 $7,207 $6,687
====== ====== ======
</TABLE>
The short-term demand facility bears interest at the lending bank's base
rate plus the applicable margin.
6. LONG-TERM DEBT
Long-term debt, all of which is collateralized and fully guaranteed,
consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------ -----------
DESCRIPTION 1996 1997 1998
----------- ------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Loan payable to bank, interest payable quarterly at 3%
over bank base rate, principal due in monthly
installments of $10, maturing June 2000. ............... $ 449 $ 309 $ 282
Loan payable to bank, interest payable quarterly at 3%
over Sterling LIBOR plus 1/16% associated costs,
principal due in quarterly installments of $144,
maturing October 2000. ................................. 2,246 1,584 1,463
Loan payable to bank, interest payable quarterly at 3%
over Sterling LIBOR plus 1/16% associated costs,
principal due in quarterly installments of $48, maturing
September 1998. ........................................ 349 144 97
Loan payable to bank, interest payable quarterly at 3%
over Sterling LIBOR plus 1/16% associated costs,
principal due in quarterly installments of $82, maturing
October 1998. .......................................... 685 329 247
Loan payable to bank, interest payable quarterly at 3%
over Sterling LIBOR plus 1/16% associated costs,
principal due in quarterly installments of $84, maturing
May 2001. .............................................. 1,493 1,098 1,030
Loan payable to bank, interest payable quarterly at 3%
over Sterling LIBOR inclusive of associated costs,
principal due in quarterly installments of $118,
maturing April 2000. ................................... 1,712 1,176 1,060
Loan payable to bank, interest payable monthly at 4% over
Sterling LIBOR plus variable associated funding costs,
averaging 1/32% in 1997, principal due $823 in February
1998, balance in equal annual installments, maturing
February 2002. ......................................... 8,557 8,226 8,363
Loan payable to bank, interest payable at 12% per annum,
maturing 2002. ......................................... -- 33 34
------- ------- -------
15,491 12,899 12,576
Less current installments................................... (2,103) (2,803) (2,314)
------- ------- -------
$13,388 $10,096 $10,262
======= ======= =======
</TABLE>
The lending bank's base rate ranged between 6.0% and 7.3% and Sterling
LIBOR ranged between 6.6% and 7.9% during the year ended December 31, 1997.
F-14
<PAGE> 75
AREMISSOFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At March 31, 1998, the Company was not in compliance with certain financial
covenants in the agreements relating to its long-term debt but has obtained a
waiver in respect of all covenants for the period to September 30, 1998, or
until the completion of an IPO, whichever occurs first.
As of December 31, 1997, future minimum annual principal payments of the
Company's long-term debt are as follows (in thousands):
<TABLE>
<S> <C>
1998..................................................... $ 2,803
1999..................................................... 3,359
2000..................................................... 2,918
2001..................................................... 1,936
2002..................................................... 1,883
-------
$12,899
=======
</TABLE>
7. CAPITAL LEASE OBLIGATIONS
The Company has entered into various noncancelable capital lease agreements
for items of property and equipment. Annual payments for the years ending
December 31, are as follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $ 56
1999........................................................ 48
2000........................................................ 47
2001........................................................ 36
2002........................................................ 8
----
195
Less amount representing interest........................... (52)
----
143
Less current portion........................................ (40)
----
$103
====
</TABLE>
8. COMMITMENTS
Operating Leases
The Company leases office space, equipment and motor vehicles under
noncancelable operating leases which expire on various dates through 2012.
Required future minimum rentals to be paid as of December 31, 1997, are as
follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $1,548
1999........................................................ 1,050
2000........................................................ 639
2001........................................................ 349
2002........................................................ 327
Thereafter.................................................. 3,057
------
$6,970
======
</TABLE>
F-15
<PAGE> 76
AREMISSOFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Employee Benefit Plans
The Company has various defined contribution retirement plans for qualified
employees. Contributions made under the plans were $192,000, $298,000 and
$328,000 in 1995, 1996 and 1997, respectively.
9. INCOME TAX
The Company's principal subsidiaries are not resident in the United States
for tax purposes. The Company made acquisitions during both 1995 and 1996 and
the income tax expense (benefit) has principally related to prior period
adjustments (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
-------- ------- -----
<S> <C> <C> <C>
Statutory tax at 31%........................................ $ (4,505) $(4,759) $(491)
Non deductible expenses..................................... 2,831 2,600 733
Valuation allowance on operating loss....................... 1,674 2,159 (207)
Other prior period adjustments.............................. 37 (50) --
-------- ------- -----
Income tax expense (benefit)................................ $ 37 $ (50) $ 35
======== ======= =====
</TABLE>
The Company's deferred tax assets as of December 31, primarily consist of
the following (in thousands):
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C> <C>
Loss carryforwards.......................................... $ 3,482 $ 2,978
Equipment................................................... 1,009 856
Other....................................................... 8 24
------- -------
4,499 3,858
Valuation allowance......................................... (4,499) (3,858)
------- -------
Total deferred tax assets.......................... $ -- $ --
======= =======
</TABLE>
As of December 31, 1997, the Company had approximately $9,600,000 of net
operating loss carryforwards. These net operating loss carryforwards will not
expire at any particular time provided the Company does not change its principal
activity or cease operations. The Company has recorded a valuation allowance to
offset the entire deferred tax asset.
10. STOCKHOLDERS' EQUITY
The Company is authorized to issue 75,000,000 shares of common stock, par
value $0.001 per share, and 15,000,000 shares of preferred stock, par value
$0.001 per share, two series of which have been issued: 2,100,000 shares of
Series A convertible preferred stock and 3,500,000 shares of Series B
convertible preferred stock.
The Company's Series A and Series B convertible preferred stock rank pari
passu except with respect to the right to receive dividends. In respect of
dividends, Series A holders are entitled to a non-cumulative cash dividend of
$0.40 per share per annum and Series B holders are entitled to a non-cumulative
cash dividend of $0.50 per share per annum, each commencing on September 1,
1998. If, within 120 days of issuance of the Series A and Series B shares, the
Company fails to register the common stock into which such shares are
convertible, the holders of shares of Series A will be entitled to a cumulative
cash dividend of $0.40 per share per annum and the holders of shares of Series B
will be entitled to a cumulative cash dividend of $0.50 per share per annum,
increasing each month, until registration of the underlying common stock, by
$0.08 and $0.10 per share per annum, respectively, to a maximum of $1.80 and
$2.25 per share per annum, respectively. In a liquidation, the preferred stock
ranks in preference to the common stock as to repayment of par value, and
ratably with the common stock thereafter.
F-16
<PAGE> 77
AREMISSOFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The preferred stock is convertible at the rate of one share of preferred
stock for one share of common stock at the option of the holder and
automatically on the effective date of a registration statement covering the
underlying common stock. The preferred stock is not redeemable. There are
provisions to protect the preferred holders from dilution in events such as
subdivision or combination of the common stock, the payment of stock dividends
or distributions of other securities or other reclassifications, exchanges or
substitutions. The preferred stock votes with the common stock on an
as-converted basis.
11. WARRANTS
In connection with the issuance of its Series A convertible preferred
stock, the Company issued warrants to purchase an aggregate of 87,500 shares of
common stock. Such warrants have an exercise price of $5.00 per share, are
assignable and expire on April 10, 2000.
12. SUBSEQUENT EVENTS
Conversion of Preferred Stock
On June 16, 1998, each share of the Company's Series A convertible
preferred stock was converted into one share of common stock.
Proposed Public Offering of Common Stock
Subsequent to March 31, 1998, the Board of Directors authorized the Company
to file a Form S-1 Registration Statement with the SEC in connection with a
planned public offering of its common stock.
F-17
<PAGE> 78
======================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING
STOCKHOLDERS OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL. UNDER NO CIRCUMSTANCES SHALL THE DELIVERY OF THIS
PROSPECTUS OR ANY SALE MADE PURSUANT TO THIS PROSPECTUS CREATE ANY IMPLICATION
THAT INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 3
Organization of the Company........... 12
Use of Proceeds....................... 12
Dividend Policy....................... 12
Capitalization........................ 13
Dilution.............................. 14
Selected Consolidated Financial
Data................................ 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 16
Business.............................. 24
Management............................ 46
Certain Transactions.................. 49
Principal and Selling Stockholders.... 50
Description of Capital Stock.......... 50
Shares Eligible for Future Sale....... 53
Underwriting.......................... 55
Legal Matters......................... 56
Experts............................... 56
Change in Accountants................. 57
Additional Information................ 57
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
------------------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================
SHARES
[AremisSoft Logo]
COMMON STOCK
------------------------
PROSPECTUS
------------------------
ABN AMRO INCORPORATED
EVEREN SECURITIES, INC.
, 1998
======================================================
<PAGE> 79
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses payable by the
Company in connection with the issuance and distribution of the securities being
registered hereunder. No expenses will be borne by the Selling Stockholders. All
of the amounts shown are estimates, except for the SEC and NASD registration
fees.
<TABLE>
<S> <C>
SEC registration fee........................................ $19,175
NASD registration fee....................................... 7,000
Printing and engraving expenses............................. *
Accounting fees and expenses................................ *
Legal fees and expenses..................................... *
Transfer agent and registrar fees........................... *
Miscellaneous............................................... *
-------
Total.............................................. $ *
=======
</TABLE>
- ---------------
* To be provided by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Certificate of Incorporation contains provisions eliminating
or limiting director liability to the Company and its stockholders for monetary
damages arising from acts or omissions in the director's capacity as a director.
The provisions do not, however, eliminate the personal liability of a director
(i) for any breach of such director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under the Delaware
statutory provision making directors personally liable, under a negligence
standard, for unlawful dividends or stock repurchases or redemptions, or (iv)
for any transaction from which the director derived an improper personal
benefit. This provision offers persons who serve on the Board of Directors of
the Company protection against awards of monetary damages resulting from
breaches of their duty of care, except as indicated above. As a result of this
provision, the ability of the Company or a stockholder thereof to successfully
prosecute an action against a director for breach of his or her duty of care is
limited. However, the provision does not affect the availability of equitable
remedies such as an injunction or rescission based upon a director's breach of
his duty of care. Any amendment or repeal of these provisions requires the
approval of the holders of shares representing at least 66% of the shares of the
Company entitled to vote in the election of directors, voting as one class for
that purpose.
The Company's Certificate of Incorporation and Bylaws also provide that the
Company shall indemnify its directors and officers to the fullest extent
permitted by applicable law, subject to limited exceptions against liabilities
arising by reason of their status or services as an officer or director.
The Company intends to enter into separate indemnification agreements with
its directors and certain of its officers that require the Company, among other
things, to advance their expenses as a result of any proceeding against them as
to which they could be indemnified. The Company believes that the limitation of
liability provision in its Certificate of Incorporation and the indemnification
agreements will facilitate the Company's ability to continue to attract and
retain qualified individuals to serve as directors and officers of the Company.
The Company may, from time to time, agree to provide similar indemnification to
certain employees and agents of the Company.
The employment agreements with Dr. Kyprianou and Messrs. Poyiadjis, Spence
and Voice also provide that the Company will indemnify such individuals for any
losses, costs, damages or expenses incurred as a direct consequence of the
discharge of their duties or by reason of their status as agents of the Company.
II-1
<PAGE> 80
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In June 1998, the Company approved the form of Merger Agreement ("Merger
Agreement") whereby the Company will complete the acquisition of 100% of the
issued and outstanding shares of AremisSoft-Nevada in a share exchange. Pursuant
to the Merger Agreement, the Company is authorized to issue up to 17,117,720
shares of its Common Stock for an equal number of shares of Common Stock of
AremisSoft-Nevada, representing all of its issued and outstanding stock. Subject
to stockholder approval by AremisSoft-Nevada, the Company intends to complete
the exchange and succeed to the assets and assume the liabilities of
AremisSoft-Nevada and the Company's Board of Directors will have the discretion
of enacting a three-for-two reverse stock split. When completed, each
outstanding share, option or warrant to purchase Common Stock of
AremisSoft-Nevada will automatically be converted into one share, option or
warrant to purchase Common Stock of the Company and AremisSoft-Nevada will
become a wholly-owned subsidiary of the Company. The securities are being
exchanged pursuant to an exemption from registration under Rule 145(a)(2) of the
Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Unless otherwise noted, the following exhibits are filed with this
registration statement.
(A) EXHIBITS.
<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement*
2.1 Form of proposed Agreement of Merger between AremisSoft
Corporation, a Nevada corporation ("AremisSoft-Nevada") and
the Company
2.2 Plan and Agreement of Reorganization between
AremisSoft-Nevada and LK Global Information Systems, B.V.
("LK Global") (the "Plan of Reorganization")(1)
2.3 Addendum to the Plan of Reorganization(1)
3.1 Certificate of Incorporation of the Company
3.2 Bylaws of the Company
4.1 Specimen Common Stock Certificate*
4.2 Form of Warrant to purchase Common Stock
5.1 Opinion of Bartel Eng Linn & Schroder re legality*
10.1 Form of Lock-up Agreement(2)
10.2 L1,750,000 Medium Term Loan between LK Global Healthcare
Systems (UK) Limited and Barclays Bank plc dated October 6,
1994, and all amendments thereto(2)
10.3 L5,000,000 Term Loan Facility between LK Global and Barclays
Bank plc dated March 31, 1995(2)
10.4 Overdraft Facility of up to L2,500,000 to LK Global and its
subsidiaries with Barclays Bank plc dated November 25,
1997(2)
10.5 1998 Stock Option Plan
10.6 Form of Incentive Stock Option Agreement
10.7 Form of Nonqualified Stock Option Agreement
10.8 Employment Agreement with Dr. Lycourgos K. Kyprianou,
Chairman of the Board and Chief Executive Officer
10.9 Employment Agreement with Roys Poyiadjis, President and Vice
Chairman of the Board
10.10 Employment Agreement with Noel R. Voice, Chief Operating
Officer and General Manager of Healthcare Systems
10.11 Employment Agreement with Nigel A. Spence, Chief Financial
Officer
10.12 Form of Indemnification Agreement*
</TABLE>
II-2
<PAGE> 81
<TABLE>
<S> <C>
16.1 Letter of Pannell Kerr Forster, chartered accountants,
regarding change in independent auditors(3)
21.1 Subsidiaries of the Company
23.1 Consent of Bartel Eng Linn & Schroder is contained in
Exhibit 5.1
23.2 Consent of Pannell Kerr Forster, chartered accountants
23.3 Consent of Ernst & Young, chartered accountants
24.1 Power of Attorney (contained in signature page hereof)
27.1 Financial Data Schedules
</TABLE>
- ---------------
* To be filed by amendment.
(1) Incorporated by reference to AremisSoft-Nevada's Form 8-K, filed on October
10, 1997
(2) Incorporated by reference to AremisSoft-Nevada's Form 10-K, filed on July 1,
1998
(3) Incorporated by reference to AremisSoft-Nevada's Form 8-K, filed on July 1,
1998
(B) FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young, Independent Auditors, on
Schedule.................................................. S-1
Report of Pannell Kerr Forster, Independent Auditors, on
Schedule.................................................. S-2
Schedule II -- Valuation and Qualifying Accounts............ S-3
</TABLE>
All other schedules have been omitted as not applicable.
ITEM 17. UNDERTAKINGS.
The Company hereby undertakes:
(1) To file, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement to:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) Include any additional or changed material information on the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement.
(2) That, for determining liability under the Securities Act, each
such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) To provide the underwriter at the closing specified in the
underwriting agreements certificates in such denominations and registered
in such names as required by the underwriter to permit prompt delivery to
each purchaser.
II-3
<PAGE> 82
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriter 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
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Company of expenses incurred or paid by a director,
officer, or controlling person of the Company 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
Company 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 Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, that 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 small business issuer pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act as part of this
registration statement as of the time the Commission declared it effective;
and
(2) For determining any liability under the Securities Act, each
post-effective amendment that contains a form of Prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-4
<PAGE> 83
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunder duly authorized, in the City of Sacramento, State of
California on July 1, 1998.
AREMISSOFT CORPORATION,
a Delaware Corporation
/s/ DR. LYCOURGOS K. KYPRIANOU
--------------------------------------
Dr. Lycourgos K. Kyprianou,
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Dr. Lycourgos Kyprianou and Roys
Poyiadjis or either of them as his true and lawful attorneys-in-fact and agent,
with full power of substitution and re-substitution, for him and in his name,
place, and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agent or any of
them, or of their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES DATE
---------- ----
<S> <C>
/s/ DR. LYCOURGOS K. KYPRIANOU
- --------------------------------------------------------
Dr. Lycourgos K. Kyprianou, Chairman of the Board, Chief July 1, 1998
Executive Officer and Secretary (Principal Executive
Officer)
/s/ ROYS POYIADJIS
- --------------------------------------------------------
Roys Poyiadjis, President and Director July 1, 1998
/s/ NIGEL A. SPENCE
- --------------------------------------------------------
Nigel A. Spence, Chief Financial Officer and Director July 1, 1998
(Principal Accounting and Financial Officer)
</TABLE>
II-5
<PAGE> 84
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS, ON SCHEDULE
We have audited the consolidated financial statements of AremisSoft
Corporation as of December 31, 1997, and for the year then ended and have issued
our report thereon dated June 30, 1998 (included elsewhere in this Registration
Statement). Our audit also included the financial statement schedule listed in
Item 16(b) of this Registration Statement. This schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audit.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
ERNST & YOUNG
Chartered Accountants
Reading, England
June 30, 1998
S-1
<PAGE> 85
REPORT OF PANNELL KERR FORSTER, INDEPENDENT AUDITORS, ON SCHEDULE
We have audited the consolidated financial statements of AremisSoft
Corporation as of December 31, 1996, and for the two years then ended and have
issued our report thereon dated June 30, 1998 (included elsewhere in this
Registration Statement). Our audits also included the financial statement
schedules listed in Item 16(b) of this Registration Statement. These schedules
are the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
PANNELL KERR FORSTER
Chartered Accountants
London, England
June 30, 1998
S-2
<PAGE> 86
SCHEDULE II
AREMISSOFT CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND EXCHANGE END OF
DESCRIPTION OF PERIOD EXPENSES DIFFERENCES DEDUCTIONS PERIOD
----------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Allowance for doubtful accounts...... 484 560 (16) (57) 971
YEAR ENDED DECEMBER 31, 1996
Allowance for doubtful accounts...... 55 441 47 (59) 484
YEAR ENDED DECEMBER 31, 1995
Allowance for doubtful accounts...... 76 10 (1) (30) 55
</TABLE>
S-3
<PAGE> 87
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
1.1 Form of Underwriting Agreement*
2.1 Form of proposed Agreement of Merger between AremisSoft
Corporation, a Nevada corporation ("AremisSoft-Nevada") and
the Company
2.2 Plan and Agreement of Reorganization between
AremisSoft-Nevada and LK Global Information Systems, B.V.
("LK Global") (the "Plan of Reorganization")(1)
2.3 Addendum to the Plan of Reorganization(1)
3.1 Certificate of Incorporation of the Company
3.2 Bylaws of the Company
4.1 Specimen Common Stock Certificate*
4.2 Form of Warrant to purchase Common Stock
5.1 Opinion of Bartel Eng Linn & Schroder re legality*
10.1 Form of Lock-up Agreement(2)
10.2 L1,750,000 Medium Term Loan between LK Global Healthcare
Systems (UK) Limited and Barclays Bank plc dated October 6,
1994, and all amendments thereto(2)
10.3 L5,000,000 Term Loan Facility between LK Global and Barclays
Bank plc dated March 31, 1995(2)
10.4 Overdraft Facility of up to L2,500,000 to LK Global and its
subsidiaries with Barclays Bank plc dated November 25,
1997(2)
10.5 1998 Stock Option Plan
10.6 Form of Incentive Stock Option Agreement
10.7 Form of Nonqualified Stock Option Agreement
10.8 Employment Agreement with Dr. Lycourgos K. Kyprianou,
Chairman of the Board and Chief Executive Officer
10.9 Employment Agreement with Roys Poyiadjis, President and Vice
Chairman of the Board
10.10 Employment Agreement with Noel R. Voice, Chief Operating
Officer and General Manager of Healthcare Systems
10.11 Employment Agreement with Nigel A. Spence, Chief Financial
Officer.
10.12 Form of Indemnification Agreement*
16.1 Letter of Pannell Kerr Forster, chartered accountants,
regarding change in independent auditors(3)
21.1 Subsidiaries of the Company
23.1 Consent of Bartel Eng Linn & Schroder is contained in
Exhibit 5.1
23.2 Consent of Pannell Kerr Forster, chartered accountants
23.3 Consent of Ernst & Young, chartered accountants
24.1 Power of Attorney (contained in signature page hereof)
27.1 Financial Data Schedules
</TABLE>
- ---------------
* To be filed by amendment.
(1) Incorporated by reference to AremisSoft-Nevada's Form 8-K, filed on October
10, 1997
(2) Incorporated by reference to AremisSoft-Nevada's Form 10-K, filed on July 1,
1998
(3) Incorporated by reference to AremisSoft-Nevada's Form 8-K, filed on July 1,
1998
<PAGE> 1
EXHIBIT 2.1
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (this "Agreement") is entered into as of this ____
day of _________, 1998, between LK Global Holdings Corporation, a Delaware
corporation ("LK Global"), AremisSoft Corporation, a Nevada corporation
("AremisSoft-Nevada") and AremisSoft Corporation, a Delaware corporation
("AremisSoft-Delaware"). (LK Global, AremisSoft-Nevada and AremisSoft-Delaware
are hereinafter collectively referred to as the "Constituent Corporations").
WHEREAS, LK Global is a wholly-owned subsidiary of AremisSoft-Delaware; and
WHEREAS, the respective Boards of Directors of the Constituent Corporations
have determined that, for the purpose of effecting the reincorporation of
AremisSoft-Nevada in the State of Delaware, it is advisable and to the advantage
of the corporations to utilize a holding company corporate structure; and
WHEREAS, in connection therewith and to facilitate the reincorporation,
AremisSoft-Nevada will merge with and into LK Global and the stockholders of
AremisSoft-Nevada will become stockholders of AremisSoft-Delaware (the "Merger")
and upon the effectiveness of the Merger, provided herein, the legal existence
of AremisSoft-Nevada as a separate corporation will cease and LK Global will
become a wholly-owned subsidiary of AremisSoft-Delaware.
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
MERGER
1.1. THE MERGER. In accordance with the provisions of this Agreement and
the Delaware General Corporation Law (the "Corporation Law"), on the date on
which this Agreement and the properly executed officers' certificates of each
Constituent Corporation or when the properly executed certificate of merger is
filed and accepted by the Delaware Secretary of State as required by Section 252
of the Corporation Law (the "Effective Date" or "Effective Time"),
AremisSoft-Nevada shall be merged with and into LK Global, in the manner of and
as more fully set forth in Sections 251 through 264 of the Corporation Law (the
"Merger"), the separate existence of AremisSoft-Nevada shall cease and LK Global
shall continue as the surviving corporation (the "Surviving Corporation") under
its present corporate name and as a wholly owned subsidiary of
AremisSoft-Delaware.
1.2. THE SURVIVING CORPORATION. On the Effective Date, the Surviving
Corporation shall succeed AremisSoft-Nevada, without other transfer, to all the
rights and property of AremisSoft-Nevada and shall be subject to all the debts,
obligations and liabilities of AremisSoft-Nevada in the
1
<PAGE> 2
same manner as if the Surviving Corporation had itself incurred them; all rights
of creditors and all liens upon the property of each of the Constituent
Corporations shall be preserved unimpaired.
ARTICLE II
CONVERSION AND EXCHANGE OF SHARES
2.1. STOCK OF AREMISSOFT-NEVADA. Upon the Effective Date, by virtue of the
Merger and without any action on the part of the holder thereof, each share of
AremisSoft-Nevada Common Stock outstanding immediately prior thereto shall be
changed and converted automatically into one fully paid and nonassessable share
of AremisSoft-Delaware Common Stock.
2.2. STOCK CERTIFICATES. On and after the Effective Date, all of the
outstanding certificates which prior to that time represented shares of
AremisSoft-Nevada shall be deemed for all purposes to evidence ownership of and
to represent shares of AremisSoft-Delaware into which the shares of
AremisSoft-Nevada represented by such certificates have been converted as herein
provided. The registered owner on the books and records of AremisSoft-Nevada or
its transfer agent of any such outstanding stock certificate shall have and
shall be entitled, until such certificate shall have been surrendered for
transfer or otherwise accounted for to AremisSoft-Delaware or its transfer
agent, to exercise any voting or other rights with respect to and receive any
dividend or other distributions upon the shares of AremisSoft-Delaware evidenced
by such outstanding certificate as provided above.
2.3. OPTIONS AND WARRANTS. Each option or warrant to purchase three shares
of AremisSoft-Nevada Common Stock granted under AremisSoft-Nevada Stock Option
Plan, or otherwise, which is outstanding on the Effective Date, shall, by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into and become an option or warrant, as the case may be, to purchase
two shares of AremisSoft-Delaware Common Stock at an exercise price per share
adjusted three for two to reflect the exchange ratio provided for herein, and
except for the exercise price, upon the same terms and subject to the same
conditions as set forth in the AremisSoft-Nevada Stock Option Plan or warrant
agreement, as the case may be, under which such options or warrants were
granted, as in effect on the Effective Date. As of the Effective Date, the
AremisSoft-Nevada Stock Option Plan shall become the AremisSoft-Delaware Stock
Option Plan and all obligations of AremisSoft-Nevada under the AremisSoft-Nevada
Stock Option Plan shall be assumed by AremisSoft-Delaware including all
outstanding options granted pursuant to the Stock Option Plan. Upon approval of
this Merger Agreement by stockholders of AremisSoft-Nevada and
AremisSoft-Delaware, the stockholders of AremisSoft-Nevada and
AremisSoft-Delaware shall be deemed to have adopted and approved the assumption
of the AremisSoft-Nevada Stock Option Plan by AremisSoft-Delaware under the same
terms and conditions that the AremisSoft-Nevada Stock Option Plan was previously
adopted and approved by stockholders of AremisSoft-Nevada, as amended.
2.4. OTHER EMPLOYEE BENEFIT PLANS. Upon the Effective Date, the
obligations of AremisSoft-Nevada under or with respect to every plan, trust,
program and benefit then in effect or
2
<PAGE> 3
administered by AremisSoft-Nevada on behalf or for the benefit of the officers
and employees of AremisSoft-Nevada, including plans, trusts, programs and
benefits administered by AremisSoft-Nevada in which subsidiaries of
AremisSoft-Nevada, their officers and employees currently are permitted to
participate (the "Employee Benefit Plans"), shall become the lawful obligations
of AremisSoft-Delaware and shall be implemented and administered in the same
manner and without interruption until the same are amended or otherwise lawfully
altered or terminated.
2.5. NO FRACTIONAL SHARES TO BE ISSUED. No fractional shares shall be
issued as a result of the exchange of AremisSoft-Nevada shares for
AremisSoft-Delaware shares. Instead, AremisSoft-Delaware shall issue scrip or
warrants pursuant to Section 155 of the Corporation Law entitling the holder to
receive a full share upon the surrender of such scrip or warrant aggregating a
full share. In calculating the amount of scrip or warrants to be issued to a
stockholder, all shares owned by the same stockholder shall be aggregated and
the fractional amount of a share to be covered by such scrip or warrant shall be
calculated by applying the exchange ratio provided for herein to each
stockholder's entire share ownership.
ARTICLE III
THE SURVIVING CORPORATION
3.1. CORPORATE DOCUMENTS. The Certificate of Incorporation of LK Global, as
in effect on the Effective Date, shall continue to be the Certificate of
Incorporation of LK Global as the surviving corporation without change or
amendment until further amended in accordance with the provisions thereof and
applicable law. The Bylaws of LK Global, as in effect on the Effective Date,
shall continue to be the Bylaws of LK Global as the surviving corporation
without change or amendment until further amended in accordance with the
provisions thereof and applicable law. The Certificate of Incorporation and
Bylaws of AremisSoft-Delaware, as in effect on the Effective Date, shall
continue in force and effect without change or amendment until further amended
in accordance with the provisions thereof and applicable law.
3.2. DIRECTORS AND OFFICERS. The directors and officers of
AremisSoft-Nevada on the Effective Date shall be and become directors and
officers, holding the same titles and positions, of LK Global on the Effective
Date, and after the Effective Date shall serve in accordance with the Bylaws of
LK Global.
3.3. FURTHER ASSURANCES. From time to time, as and when required by LK
Global or by its successors and assigns, there shall be executed and delivered
on behalf of AremisSoft-Nevada such deeds and other instruments, and there shall
be taken or caused to be taken by it such further and other action, as shall be
appropriate or necessary in order to vest or perfect in or to confer of record
or otherwise in LK Global the title to and possession of all the property
interests, assets, rights, privileges, immunities, powers, franchises and
authority of AremisSoft-Nevada, and otherwise to carry out the purposes and
intent of this Merger Agreement, and the officers and directors of LK Global are
fully authorized in the name and on behalf of AremisSoft-Nevada or otherwise to
take any
3
<PAGE> 4
and all such actions and to execute and deliver any and all such deeds and other
instruments.
3.4. PLAN OF REORGANIZATION. This Merger Agreement constitutes a plan of
reorganization to be carried out in the manner, on the terms, and subject to the
conditions herein set forth.
3.5. RIGHTS AND DUTIES OF AREMISSOFT-NEVADA. On the Effective Date, for all
purposes, the separate existence of AremisSoft-Nevada shall cease and shall be
merged with and into LK Global. LK Global, as the surviving corporation, shall
continue and all property (real, personal and mixed), all debts due on whatever
account, all choses in action, and all and every other interest of or belonging
to or due to AremisSoft-Nevada; and the title to any real estate, or any
interest therein, vested in AremisSoft-Nevada shall not revert or be in any way
impaired by reason of such Merger; and LK Global shall continue to be
responsible and liable for all of its liabilities and obligations and any claim
existing, or action or proceeding pending, by or against AremisSoft-Nevada. If
at any time LK Global shall consider or be advised that any assignment or
assurances in law or any other actions are necessary or desirable to vest the
title of any property or rights of AremisSoft-Nevada in LK Global according to
the terms hereof, the officers and directors of LK Global are empowered to
execute and make all such property assignments and assurances and do any and all
other things necessary or proper to vest title to such property or other rights
in LK Global, and otherwise to carry out the purposes of this Merger Agreement.
ARTICLE IV
MISCELLANEOUS
4.1. AMENDMENT. Prior to stockholder approval, this Merger Agreement may
be amended in any manner as may be determined in the judgment of the respective
Boards of Directors of AremisSoft-Delaware, AremisSoft-Nevada and LK Global.
After shareholder approval, this Merger Agreement may be amended in any manner
(except that Section 2.1 and any of the other principal terms may not be amended
without the approval of the stockholders of AremisSoft-Nevada) as may be
determined in the judgment of the respective Boards of Directors of
AremisSoft-Delaware, AremisSoft-Nevada and LK Global to be necessary, desirable
or expedient in order to clarify the intention of the parties hereto or to
effect or facilitate the purposes and intent of this Merger Agreement.
4.2. ABANDONMENT. At any time before the Effective Date, this Merger
Agreement may be terminated and the Merger contemplated hereby may be abandoned
by the Board of Directors of either AremisSoft-Delaware, AremisSoft-Nevada or LK
Global, notwithstanding approval of this Merger Agreement by the stockholders of
AremisSoft-Nevada and AremisSoft-Delaware and by the sole stockholder of LK
Global.
4.3. COUNTERPARTS. In order to facilitate the filing and recording of this
Merger Agreement, the same may be executed in any number of counterparts, each
of which shall be deemed to be an original.
4
<PAGE> 5
IN WITNESS WHEREOF, this Merger Agreement, having first been duly approved
by the Boards of Directors of AremisSoft-Nevada, AremisSoft-Delaware and LK
Global, has been executed on the date set forth above on behalf of each of said
three corporations by their respective duly authorized officers.
AREMISSOFT CORPORATION,
a Nevada corporation
By:
-------------------------------------
Dr. Lycourgos K. Kyprianous,
Chief Executive Officer
(Corporate Seal)
Attest:
- --------------------------------------
Dr. Lycourgos K. Kyprianous, Secretary
AREMISSOFT CORPORATION,
a Delaware corporation
By:
-------------------------------------
Dr. Lycourgos K. Kyprianous,
Chief Executive Officer
(Corporate Seal)
Attest:
- --------------------------------------
Dr. Lycourgos K. Kyprianous, Secretary
LK GLOBAL CORPORATION,
a Delaware corporation
By:
-------------------------------------
Dr. Lycourgos K. Kyprianous,
Chief Executive Officer
(Corporate Seal)
Attest:
- --------------------------------------
Dr. Lycourgos K. Kyprianous, Secretary
5
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
AREMISSOFT CORPORATION
ARTICLE I
The name of the corporation is AremisSoft Corporation.
ARTICLE II
The address of the registered office of the Corporation in the State of
Delaware is 1013 Centre Road, Wilmington, Delaware 19805, County of New Castle.
The name of its registered agent at such address is Corporation Service Company.
ARTICLE III
The nature of the business of the Corporation, or the purposes to be
conducted or promoted by the Corporation, is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
ARTICLE IV
The aggregate number of shares which the Corporation shall have the
authority to issue is One Hundred Million (100,000,000) of which Eighty-Five
Million (85,000,000) shares shall be Common Stock, par value $.001 per share,
and Fifteen Million (15,000,000) shares shall be Preferred Stock, par value
$.001 per share.
The Board of Directors of the Corporation (the "Board") is authorized,
subject to limitations prescribed by law and the provisions of this Article IV,
to provide for the issuance of the shares of Preferred Stock in series, and by
filing a certificate pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each such
series, and to fix the designation, powers, preferences and rights of the shares
of each such series and the qualifications, limitations or restrictions thereof.
The authority of the Board with respect to each series shall include,
but is not limited to, determination of the following:
(a) The number of shares constituting that series and the distinctive
designation of that series;
(b) The dividend rate on the shares of that series, whether dividends
shall be cumulative and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that series;
(c) Whether that series shall have voting rights, in addition to the
voting rights provided
<PAGE> 2
by law and, if so, the terms of such voting rights;
(d) Whether that series shall have conversion privileges and, if so, the
terms and conditions of such conversion, including provision for adjustment of
the conversion rate in such events as the Board shall determine;
(e) Whether or not the shares of that series shall be redeemable and, if
so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable, and the amount per share payable
in case of redemption, which amount may vary under different conditions and at
different redemption dates;
(f) Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series and, if so, the terms and amount of such
sinking fund;
(g) The rights of the shares in the event of voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, and the relative
rights of priority, if any, of payment of shares of that series;
(h) any other relative rights, preferences and limitations of that
series.
ARTICLE V
In furtherance and not in limitation of the powers conferred by the laws
of the State of Delaware, the Board is expressly authorized to make, alter or
repeal the Bylaws of the Corporation, subject to the power of the stockholders
of the Corporation to alter or repeal any Bylaws made by the Board.
ARTICLE VI
Unless, and except to the extent that, the Bylaws of the Corporation
shall so require, the election of Directors of the Corporation need not be by
written ballot.
ARTICLE VII
The name and mailing address of the sole incorporator is:
Scott E. Bartel
Bartel Eng Linn & Schroder
300 Capitol Mall, Suite 1100
Sacramento, California 95814
ARTICLE VIII
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
<PAGE> 3
such exemption from liability or limitation thereof is not permitted under the
General Corporation Law of the State of Delaware as the same exists or may
hereafter be amended.
Any repeal or modification of the foregoing paragraph 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.
ARTICLE IX
The Corporation shall indemnify its officers, directors, employees and
agents to the extent permitted by the General Corporation Law of Delaware.
ARTICLE X
The Corporation reserves the right at any time, and from time to time,
to amend, alter, change or repeal any provision contained in this Certificate of
Incorporation, and other provisions authorized by the laws of the State of
Delaware at the time in force may be added or inserted, in the manner now or
hereafter prescribed by law; and all rights, preferences and privileges of
whatsoever nature conferred upon stockholders, directors or any other persons
whomever by and pursuant to this Certificate of Incorporation in its present
form or as hereafter amended are granted subject to the rights reserved in this
article.
ARTICLE XI
No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a meeting,
to the taking of any action is specifically denied, unless such action has been
approved by the Board prior to such action being taken.
I, Scott E. Bartel, being the sole incorporator of the Corporation, for
the purpose of forming a Corporation pursuant to the General Corporation Law of
the State of Delaware, do make this certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 29th day of May, 1998.
----------------------------------
Scott E. Bartel, Sole Incorporator
<PAGE> 1
EXHIBIT 3.2
BYLAWS OF
AREMISSOFT CORPORATION
<PAGE> 2
TABLE OF CONTENTS
TO THE BYLAWS
OF AREMISSOFT CORPORATION
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I - OFFICES..........................................................................1
Section 1. Registered Office......................................................1
Section 2. Principal Office.......................................................1
Section 3. Other Offices..........................................................1
ARTICLE II - MEETINGS OF STOCKHOLDERS........................................................1
Section 1. Place of Meetings......................................................1
Section 2. Annual Meetings........................................................1
Section 3. Special Meetings.......................................................2
Section 4. Notice of Stockholders' Meetings.......................................3
Section 5. Manner of Giving Notice; Affidavit of Notice...........................3
Section 6. Adjourned Meetings and Notice Thereof..................................4
Section 7. Voting at Meetings of Stockholders.....................................4
Section 8. Record Date for Stockholder Notice.....................................5
Section 9. Quorum.................................................................6
Section 10. Waiver of Notice.......................................................6
Section 11. Stockholder Action by Written Consent Without Meeting..................6
Section 12. Proxies................................................................7
Section 13. Voting Procedures and Inspectors of Election for Certain Corporations..8
Section 14. List of Stockholders...................................................9
ARTICLE III - DIRECTORS......................................................................9
Section 1. Powers.................................................................9
Section 2. Number of Directors...................................................10
Section 3. Election and Term of Office...........................................10
Section 4. Vacancies.............................................................11
Section 5. Removal of Directors..................................................11
Section 6. Resignation of Director...............................................12
Section 7. Place of Meeting......................................................12
Section 8. Annual Meeting........................................................12
Section 9. Special Meetings......................................................12
Section 10. Adjournment...........................................................13
Section 11. Notice of Adjournment.................................................13
Section 12. Waiver of Notice......................................................13
Section 13. Quorum and Voting.....................................................13
Section 14. Fees and Compensation.................................................13
Section 15. Action Without Meeting................................................14
Section 16. Committees of Directors...............................................14
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE IV - OFFICERS.......................................................................14
Section 1. Officers..............................................................14
Section 2. Election..............................................................14
Section 3. Subordinate Officers..................................................15
Section 4. Removal and Resignation...............................................15
Section 5. Vacancies.............................................................15
Section 6. Chairman of the Board.................................................15
Section 7. Chief Executive Officer...............................................15
Section 8. President.............................................................16
Section 9. Vice Presidents.......................................................16
Section 10. Secretary.............................................................16
Section 11. Assistant Secretaries.................................................16
Section 12. Chief Financial Officer (Treasurer)...................................17
Section 13. Assistant Financial Officers..........................................17
Section 14. Salaries..............................................................17
ARTICLE V - SHARES OF STOCK.................................................................18
Section 1. Share Certificates....................................................18
Section 2. Transfer of Shares....................................................18
Section 3. Lost or Destroyed Certificate.........................................18
ARTICLE VI - INDEMNIFICATION................................................................18
Section 1. Indemnity of Officers, Directors, Employees and Other Agents..........18
Section 2. Insurance.............................................................19
Section 3. Non-Exclusivity.......................................................19
ARTICLE VII - RECORDS AND REPORTS...........................................................19
Section 1. Maintenance and Stockholder Inspection of Corporate and
Stockholder Records...................................................19
Section 2. Inspection by Directors...............................................20
ARTICLE VIII - GENERAL PROVISIONS...........................................................20
Section 1. Dividends.............................................................20
Section 2. Reserves..............................................................20
Section 3. Annual Statement......................................................20
ARTICLE IX - MISCELLANEOUS..................................................................21
Section 1. Checks, Drafts, Etc...................................................21
Section 2. Contracts, Etc., How Executed.........................................21
Section 3. Representation of Shares of Other Corporations........................21
Section 4. Loans to Officers.....................................................21
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE X - AMENDMENTS OF BYLAWS............................................................21
Section 1. Amendment by Stockholders.............................................21
Section 2. Amendment by Directors................................................22
</TABLE>
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<PAGE> 5
BYLAWS
OF
AREMISSOFT CORPORATION
ARTICLE I - OFFICES
Section 1. Registered Office
The registered office of AremisSoft Corporation (hereinafter called the
"Corporation") in the State of Delaware shall be in the City of Wilmington,
County of New Castle, and the name of the registered agent in charge thereof
shall be Corporation Service Company, at 1013 Centre Road, Wilmington, Delaware
19805.
Section 2. Principal Office
The principal office for the transaction of the business of the
Corporation is hereby fixed and located at 3323 Watt Avenue, Suite 150,
Sacramento, California 95821.
The board of directors is hereby granted full power and authority to
change said principal office from one location to another.
Section 3. Other Offices
The Corporation may also have an office or offices at such other place
or places, either within or outside of the State of Delaware, as the board may
from time to time determine or as the business of the Corporation may require.
Branch or subordinate offices may at any time be established by the board of
directors at any place or places where the Corporation is qualified to do
business.
ARTICLE II - MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings
All annual and all other meetings of stockholders shall be held at the
location designated by the board of directors pursuant to a resolution or as set
forth in a notice of the meeting, within or outside the state of Delaware. If no
such location is set forth in a resolution or in the notice of the meeting, the
meeting shall be held at the principal office of the Corporation.
Section 2. Annual Meetings
The annual meetings of stockholders shall be held on such date or time
as may be determined from time to time by the board of directors. At such
meetings, directors shall be elected, reports of
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<PAGE> 6
the affairs of the Corporation shall be considered, and any other business may
be transacted which is within the powers of the stockholders.
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting business must be (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors, (b) or otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (c) otherwise properly brought before
the meeting by a stockholder. For business to be properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation, not less than 60 days nor more
than 90 days prior to the meeting; provided, however, that in the event that
less than 70 days' notice or prior public disclosure of the date of the meeting
is given or made to stockholders, notice by the stockholder to be timely must be
so received not later than the close of business of the 10th day following the
day on which such notice of the date of the annual meeting was mailed or such
public disclosure was made. A stockholder's notice to the Secretary shall set
forth as to each matter the stockholder proposes to bring before the annual
meeting (a) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (b) the name and address, as they appear on the Corporation's books, of
the stockholder proposing such business, (c) the class and number of the shares
of the Corporation which are beneficially owned by the stockholder, and (d) any
material interest of the stockholder in such business. Notwithstanding anything
in the Bylaws to the contrary, no business shall be conducted at any annual
meeting except in accordance with the procedures set forth in this Section 2.
The Chairman of the annual meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
and in accordance with the provisions of this Section 2, and if he should so
determine, he shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted.
Section 3. Special Meetings
Special meetings of the stockholders, for any purpose or purposes
whatsoever, may be called at any time by the President or by the board of
directors or the Chairman of the Board or by one or more stockholders holding
shares in the aggregate entitled to cast not less than ten percent (10%) of the
votes at that meeting.
If a special meeting is called by any person or persons other than the
board of directors, the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the Chairman of the Board, the President, the
Executive Vice President or the Secretary of the Corporation. The officer
receiving the request shall cause notice to be promptly given to the
stockholders entitled to vote, in accordance with the provisions of Sections 4
and 5 of this Article II, and the notice shall set forth that a meeting will be
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<PAGE> 7
held at the time requested by the person or persons calling the meeting, not
less than thirty-five (35) or more than sixty (60) days after the receipt of the
request. If the notice is not given within twenty (20) days after receipt of the
request, the person or persons requesting the meeting may give the notice.
Nothing contained in this paragraph of this Section 3 shall be construed as
limiting, fixing or affecting the time when a meeting of stockholders called by
action of the board of directors may be held.
Section 4. Notice of Stockholders' Meetings
All notices of meetings of stockholders shall be sent or otherwise given
in accordance with Section 5 of this Article II not less than ten (10) nor more
than sixty (60) days before the date of the meeting to each stockholder entitled
to vote at the meeting. The notice shall specify 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. The notice of any meeting at which directors are to be
elected shall include the name of any nominee or nominees whom, at the time of
the notice, the board of directors intends to present for election.
Section 5. Manner of Giving Notice; Affidavit of Notice
Notice of any stockholders' meeting shall be given in writing and either
delivered personally or by first-class mail by, telegraph, facsimile or other
form of written communication, charges prepaid, sent to each stockholder at the
address of that stockholder appearing on the books of the Corporation or given
by the stockholder to the Corporation for the purpose of notice. If no such
address appears on the Corporation's books or has been so given, notice shall be
deemed to have been given if sent to that stockholder by first-class mail, by
telegraph, facsimile or other written communication to the principal office of
the Corporation, or if published at least once in a newspaper of general
circulation in the county where that office is located. Notice shall be deemed
to have been given at the time when delivered personally, deposited in the mail,
delivered to a common carrier for transmission to the recipient, or actually
transmitted by facsimile or other electronic means to the recipient by the
person giving the notice, or sent by other means of written communication.
Whenever notice is required to be given to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notice of meetings to such
person between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by First Class Mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the Corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any person shall deliver to the Corporation a written notice setting
forth his then current address, the requirement that notice be given to such
person shall be reinstated.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting
- 3 -
<PAGE> 8
may be executed by the Secretary, Assistant Secretary, or any transfer agent of
the Corporation giving the notice, and filed and maintained in the minute book
of the Corporation.
Section 6. Adjourned Meetings and Notice Thereof
Any stockholders' meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by the vote of the majority of the
shares, the holders of which are either present in person or represented by
proxy thereat, but in the absence of a quorum, no other business may be
transacted at such meeting except in the case of the withdrawal of a stockholder
from a quorum as provided in Section 9 of this Article II.
When any stockholders' meeting, either annual or special, is adjourned
to a different date, time or place, notice need not be given of the new date,
time or place if the new date, time or place is announced at the meeting before
adjournment. The board of directors may fix a new record date for the adjourned
meeting. If the meeting is adjourned for more than thirty (30) days, or if after
the adjournment a new record date is fixed for the adjourned meeting, notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the adjourned meeting in accordance with the provisions of Sections 4
and 5 of this Article II. At any adjourned meetings the Corporation may transact
any business that might have been transacted at the regular meeting.
Section 7. Voting at Meetings of Stockholders
The stockholders entitled to vote at any meeting of the stockholders
shall be determined in accordance with the provisions of Section 8 of this
Article II.
Each stockholder shall, at each meeting of the stockholders, be entitled
to vote in person or by proxy each share or fractional share of the stock of the
Corporation having voting rights on the matter in question and which shall have
been held by him and registered in his name on the books of the Corporation on
the date fixed pursuant to Section 8 of these Bylaws as the record date for the
determination of stockholders entitled to notice of and to vote at such meeting,
or if no such record date shall have been so fixed, then on the dates set forth
in Section 8.
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 in such other Corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity shall
be entitled to vote such stock. Persons whose stock is pledged shall be entitled
to vote, unless in the transfer by the pledgor on the books of the Corporation
he shall have expressly empowered the pledgee to vote thereon, in which case
only the pledgee, or his proxy, may represent such stock and vote thereon. Stock
having voting power standing of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants in common, tenants
by entirety or otherwise, or with respect to which two or more persons have the
same fiduciary relationship, shall be voted in accordance with the provisions of
the General Corporation Law of the State of Delaware.
- 4 -
<PAGE> 9
Any such voting rights may be exercised by the stockholder entitled
thereto in person or by his proxy appointed by an instrument in writing,
subscribed by such stockholder or by his attorney thereunto authorized and
delivered to the Secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date unless said proxy
shall provide for a longer period. The attendance at any meeting of a
stockholder who may theretofore have given a proxy shall not have the effect of
revoking the same unless he shall in writing so notify the Secretary of the
meeting prior to the voting of the proxy. At any meeting of the stockholders all
matters, except as otherwise provided in the Certificate of Incorporation, in
these Bylaws or by law, shall be decided by the vote of a majority in voting
interest of the stockholders present in person or by proxy and entitled to vote
thereat and thereon, a quorum being present.
The vote at any meeting of the stockholders on any question need not be
by written ballot, unless so directed by the Chairman of the meeting; provided,
however, that any election of directors at any meeting must be conducted by
written ballot. On a vote by ballot each ballot shall be signed by the
stockholder voting, or by his proxy, if there be such proxy, and it shall state
the number of shares voted.
Except as otherwise required by the General Corporation Law for general
corporate action, or the Certificate of Incorporation of this Corporation, or
these Bylaws, the affirmative vote of the majority of shares present in person
or represented by proxy at the stockholders meeting, and entitled to vote on the
subject matter, is required.
Section 8. Record Date for Stockholder Notice
For purposes of determining the stockholders entitled to notice of any
meeting or to vote, the board of directors may fix, in advance, a record date,
which shall not be more than sixty (60) days or less than ten (10) days before
the date of any such meeting, and in this event only stockholders of record at
the close of business on the date so fixed are entitled to notice and to vote,
notwithstanding any transfer of any shares on the books of the Corporation after
the record date, except as otherwise provided in the Delaware General
Corporation Law. If the board of directors does not so fix a record date, 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 business day
next preceding the day on which notice is given or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held.
For purposes of determining a record date with respect to a dividend,
distribution, allotment of any rights or to determine the stockholders entitled
to exercise any right with respect to any change, conversion or exchange of
stock, or for any other lawful action, the board of directors may fix a record
date subsequent to the date upon which the resolution fixing the date is
adopted, and which date is not more than sixty (60) days prior to the action for
which a record date is being established. In the event no record date is fixed,
the record date for determining stockholders for any such purpose is deemed to
be 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
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which the meeting is held. 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.
Section 9. Quorum
A majority of the shares entitled to vote, represented in person or by
proxy, shall constitute a quorum of the stockholders for the transaction of
business at any meeting of the stockholders or any adjournment thereof.
The stockholders present at a duly called or held meeting at which a
quorum is present may continue to do business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum and by any greater number of shares otherwise
required to take such action by applicable law or in the certificate of
incorporation. In the absence of a quorum, any meeting of stockholders may be
adjourned from time to time by vote of a majority of the shares represented in
person or by proxy, or, in the absence therefrom, any officer entitled to
preside at, or to act as Secretary of, such meeting but no business may be
transacted except as hereinabove provided.
Section 10. Waiver of Notice
Whenever notice is required to be given under any provision of the
Delaware General Corporation Law or the Certificate of Incorporation or Bylaws,
a written waiver, signed by the person entitled to notice, whether before or
after the time stated therein, shall be deemed equivalent to notice.
Attendance by a person at a meeting shall constitute a waiver of notice
of that meeting, except when the person objects to the Secretary, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened, and except that attendance at a meeting is
not a waiver of any right to object to the consideration of matters required by
law to be included in the notice of the meeting, but not so included, if that
objection is expressly made at the meeting.
Section 11. Stockholder Action by Written Consent Without Meeting
Any action required to be taken at any annual or special meeting of
stockholders of the Corporation, or any action which may be taken at any annual
or special meeting of such 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. If the action taken without a meeting is approved by less
than unanimous written consent, prompt notice of such action shall be given to
those stockholders who have not consented in writing.
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If the Corporation has equity securities listed on the American Stock
Exchange, in accordance with the procedures contained in the American Stock
Exchange policies and rules, any corporate action to be taken by written consent
shall not be effective until, and the stockholders of the Corporation shall be
able to give or revoke written consents for, at least twenty (20) days from the
date of the commencement of a solicitation (as such term is defined in Rule
14a-l(l) promulgated under the Securities Exchange Act of 1934, as amended) of
consents, other than corporate action by written consent taken pursuant to
solicitations of not more than ten (10) persons. For purposes of this Section of
this Article II, a consent solicitation shall be deemed to have commenced when a
proxy statement or information statement containing the information required by
law is first furnished to the Corporation's stockholders.
Consents to corporate action shall be valid for a maximum of sixty (60)
days after the date of the earliest dated consent delivered to the Corporation
in the manner provided in Section 228(c) of the Delaware General Corporation
Law. Consents may be revoked by written notice (i) to the Corporation, (ii) to
the stockholder or stockholders soliciting consents or soliciting revocations in
opposition to action by consent proposed by the Corporation (the "Soliciting
Stockholders"), or (iii) to a proxy solicitor or other agent designated by the
Corporation or the Soliciting Stockholders.
Notwithstanding the foregoing, if independent counsel to the Corporation
delivers to the Corporation a written opinion stating, or a court of competent
jurisdiction determines, that this Section of this Article II, or any portion
thereof, is illegal with respect to any corporate action to be taken by written
consent for which a consent has theretofore been delivered to the Corporation,
in the manner provided in Section 228(c) of the Delaware General Corporation
Law, whether prior or subsequent to the date of the adoption of this Section of
this Article II, then this Section of this Article II, or such portion thereof,
as the case may be, shall after the date of such delivery of such opinion or
such determination be null and void and of no effect with respect to any other
corporate action to be taken by written consent.
Section 12. Proxies
A stockholder may execute a writing authorizing another person or
persons to act for him as proxy. Execution may be accompanied by the stockholder
or his authorized officer, director, employee or agent signing such writing or
causing his signature to be affixed to such writing by any reasonable means
including, but not limited to, by facsimile signature. A stockholder may
authorize another person or persons to act for him as proxy by transmitting or
authorizing the transmission of a telegram, cablegram, or other means of
electronic transmission to the person who will be the holder of the proxy or to
a proxy solicitation firm, proxy support service organization or like agent duly
authorized by the person who will be the holder of the proxy to receive such
transmission, provided that any such telegram, cablegram or other means of
electronic transmission must either set forth or be submitted with information
from which it can be determined that the telegram, cablegram or other electronic
transmission was authorized by the stockholder. If it is determined that such
telegram, cablegram or other electronic transmission is valid, the inspectors,
or, if there are no inspectors, such other persons making that determination
shall specify the information upon which they relied.
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Any copy, facsimile telecommunication or other reliable reproduction of
the writing or transmission created pursuant to this section may be substituted
or used in lieu of the original writing or transmission for any and all purposes
for which the original writing or transmission could be used, provided that such
copy, facsimile telecommunication or other reproduction shall be a complete
reproduction of the entire original writing or transmission.
A validly executed proxy that does not state that it is irrevocable
shall continue in full force and effect unless (i) revoked by the person
executing it by a writing delivered to the Corporation prior to the meeting
stating that the proxy is revoked, or if in attendance at the meeting, by a
writing delivered to the Secretary of the meeting prior to the voting of the
proxy, or by a subsequent proxy executed by the same person and delivered to the
Corporation prior to the meeting or to the Secretary of the meeting prior to the
voting of the proxy; or (ii) written notice of the death or incapacity of the
maker of that proxy is received by the Corporation before the vote pursuant to
that proxy is counted; provided, however, that no proxy shall be valid after the
expiration of three (3) years from the date of the proxy, unless otherwise
provided in the proxy. A duly executed proxy shall be irrevocable if it states
that it is irrevocable and if, and only as levy as, it is coupled with an
interest sufficient in law to support an irrevocable power.
Section 13. Voting Procedures and Inspectors of Election for Certain
Corporations
If the Corporation is listed on a national securities exchange, is
authorized for quotation on an inter-dealer quotation system or has shares held
of record by more than 2,000 stockholders the following provisions shall apply:
(a) The Corporation shall, in advance of any meeting of stockholders,
appoint one or more inspectors to act at the meeting and make a written report
thereof. The Corporation may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate is able to act at a meeting of stockholders, the person presiding at
the meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before entering upon the discharge of his duties, shall take and sign
an oath faithfully to execute the duties of inspector with strict impartiality
and according to the best of his ability.
(b) The inspectors shall (i) ascertain the number of shares outstanding
and the voting power of each, (ii) determine the shares represented at a meeting
and the validity of proxies and ballots, (ii) count all votes and ballots, (iv)
determine and retain for a reasonable period a record of the disposition of any
challenges made to any determination by the inspectors, and (v) certify their
determination of the number of shares represented at the meeting, and their
count of all votes and ballots. The inspectors may appoint or retain other
persons or entities to assist the inspectors in the performance of the duties of
the inspectors.
(c) The date and time of the opening and the closing of the polls for
each matter upon which the stockholders will vote at a meeting shall be
announced at the meeting. No ballot, proxies or votes, nor any revocation
thereof or changes thereto, shall be accepted by the inspectors after the
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closing of the polls unless the Delaware Court of Chancery upon application by a
stockholder shall determine otherwise.
(d) In determining the validity and counting of proxies and ballots, the
inspectors shall be limited to an examination of the proxies, any envelopes
submitted with those proxies, any information provided in accordance with
Section 212(c)(2) of the General Corporation Law of the State of Delaware,
ballots and the regular books and records of the Corporation, except that the
inspectors may consider other reliable information for the limited purpose of
reconciling proxies and ballots submitted by or on behalf of banks, brokers,
their nominees or similar persons which represent more votes than the holder of
a proxy is authorized by the record owner to cast or more votes than the
stockholder holds of record. If the inspectors consider other reliable
information for the limited purpose permitted herein, the inspectors at the time
they make their certification pursuant to subsection (b)(v) of this section
shall specify the precise information considered by them including the person or
persons from whom they obtained the information, when the information was
obtained, the means by which the information was obtained and the basis for the
inspectors' belief that such information is accurate and reliable.
Section 14. List of Stockholders
The Secretary of the corporation shall prepare and make, at least ten
(10) 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 (10) 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 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.
ARTICLE III - DIRECTORS
Section 1. Powers
Subject to limitations of the Certificate of Incorporation, or the
Bylaws, and of the Delaware General Corporation Law as to action which shall be
authorized or approved by the stockholders, by the outstanding shares or by a
less than majority vote of a class or series of preferred shares, and subject to
the duties of directors as prescribed by the Bylaws, all corporate powers shall
be exercised by or under the authority of, and the business and affairs of the
Corporation shall be controlled by, the board of directors. The board of
directors may elect a Chairman of the Board from among the members of the board
of directors.
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Section 2. Number of Directors
The number of directors of the Corporation which shall constitute the
whole board of directors shall be not less than one (1) nor more than seven (7)
with the exact number as the board shall from time to time fix by resolution.
Directors need not be stockholders. Each of the directors of the Corporation
shall hold office until his successor shall have been duly qualified or until he
shall resign or shall have been removed in the manner hereinafter provided.
Section 3. Election and Term of Office
The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the entire
Board permits with the term of office of one class expiring each year. Directors
of the first class shall be elected to hold office for an initial term expiring
at the next succeeding annual meeting, directors of the second class shall be
elected to hold office for a term expiring at the second succeeding annual
meeting and directors of the third class shall be elected to hold office for a
term expiring at the third succeeding annual meeting. Successors to directors
shall thereafter be elected for a term of three years. At each successive annual
meeting, directors of each class of directors whose term shall then expire shall
be elected by the stockholders at that meeting by written ballot, but if any
such annual meeting is not held or the directors are not elected thereat, the
class of directors subject to election may be elected at any special meeting of
stockholders held for that purpose.
Only persons who are nominated in accordance with the procedures set
forth in this Section 3 shall be eligible for election as Directors. Nominations
of persons for election to the Board of Directors of the Corporation may be made
at a meeting of stockholders by or at the direction of the Board of Directors or
by any stockholder of the Corporation entitled to vote for the election of
Directors at the meeting who complies with the notice procedures set forth in
this Section 3. Such nominations, other than those made by or at the direction
of the Board of Directors, shall be made pursuant to timely notice in writing to
the Secretary of the Corporation. To be timely, a stockholder's notice shall be
delivered to or mailed and received at the principal office of the Corporation
not less than 60 days nor more than 90 days prior to the meeting; provided,
however, that in the event that less than 70 days' notice or prior public
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be so received not later than the close of
business on the 10th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. Such stockholder's
notice shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or re-election as a Director, (i) the name, age, business
address and residence address of such person, (ii) the principal occupation or
employment of such person; (iii) the class and number of shares of the
Corporation which are beneficially owned by such person and (iv) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of Directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (including without limitation such persons' written consent to being
named in the proxy statement as a nominee and to serving as a Director if
elected); and (b) as to the stockholder giving
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the notice (i) the name and address, as they appear on the Corporation's books,
of such stockholder and (ii) the class and number of shares of the Corporation
which are beneficially owned by such stockholder. At the request of the Board of
Directors any person nominated by the Board of Directors for election as a
Director shall furnish to the Secretary of the Corporation that information
required to be set forth in a stockholder's notice of nomination which pertains
to the nominee. No person shall be eligible for election as a Director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 3. The Chairman of the meeting shall, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance with the
procedures prescribed by the Bylaws, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall be disregarded.
Section 4. Vacancies
Vacancies in the board of directors may be filled by a majority of the
remaining directors, though less than a quorum, or by a sole remaining director.
Each director so elected shall hold office until the next election of the class
for which such director shall have been chosen until he shall resign or shall
have been removed in the manner hereinafter provided.
A vacancy or vacancies in the board of directors shall be deemed to
exist in case of the death, resignation or removal of any director or if the
authorized number of directors be increased or if the stockholders fail, at any
annual or special meeting of stockholders at which any director or directors are
elected, to elect the full authorized number of directors to be voted for at
that meeting.
The stockholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors. If the board of directors
accepts the resignation of a director tendered to take effect at a future time,
the board or the stockholders shall have the power to elect a successor to take
office when the resignation is to become effective.
No reduction of the authorized number of directors shall have the effect
of removing any director prior to the expiration of his term of office.
Section 5. Removal of Directors
Any director or the entire board of directors may be removed, with or
without cause, by the holders of a majority of the shares then entitled to vote
at an election of directors, except as follows:
(1) Unless the Certificate of Incorporation otherwise provides, in the
case of a Corporation whose board is classified as provided in the Delaware
General Corporation Law, stockholders may effect such removal only for cause; or
(2) In the case of a Corporation having cumulative voting, if less than
the entire board is to be removed, no director may be removed without cause if
the votes cast against his removal would be sufficient to elect him if then
cumulatively voted at an election of the entire board of directors,
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or if there be classes of directors, at an election of the class of directors of
which he is a part.
Whenever the holders of any class or series are entitled to elect one or
more directors by the Certificate of Incorporation, this subsection shall apply
in respect to the removal without cause of a director or directors so elected,
to the vote of the holders of the outstanding shares of that class or series and
not to the vote of the outstanding shares as a whole.
Section 6. Resignation of Director
Any director may resign effective upon giving written notice to the
Corporation (to a board member or to every board member), unless the notice
specifies a later time for the effectiveness of such resignation. If the
resignation is effective at a future date, a successor may be elected to take
office when the resignation becomes effective.
Section 7. Place of Meeting
Regular meetings of the board of directors shall be held at any place
within or outside the State of Delaware which has been designated from time to
time by resolution of the board or by written consent of all members of the
board. In the absence of such designation, regular meetings shall be held at the
principal office of the Corporation. Special meetings of the board may be held
either at a place so designated or at the principal office. Members of the board
may participate in a meeting through use of a conference telephone or similar
communication equipment, so long as all members participating in such meeting
can hear one another. Participation in a meeting by means of the above-described
procedure shall constitute presence in person at such meeting.
Section 8. Annual Meeting
Immediately following each annual meeting of stockholders, the board of
directors shall hold a regular meeting for the purpose of organization, election
of officers and the transaction of other business. Notice of such meeting is
hereby dispensed with.
Section 9. Special Meetings
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the Chairman of the Board or the President or any
two directors.
Written notice of the date, time and place of special meetings shall be
delivered personally to each director or sent to each director by first-class
mail, by telegraph, facsimile or by other form of written communication, charges
prepaid, addressed to him at his address as it appears upon the records of the
Corporation or, if it is not so shown or is not readily ascertainable, at the
place in which the meetings of directors are regularly held. The notice need not
state the purpose of the meeting. In case such notice is mailed, it shall be
deposited in the United States mail in the place in which the principal office
of the Corporation is located at least five (5) days prior to the time of
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the meeting. In case such notice is delivered personally, transmitted by
facsimile or other electronic means or telegraphed, it shall be so delivered or
deposited with the telegraph company or electronically transmitted at least
forty-eight (48) hours prior to the time of the meeting. Such mailing, delivery,
telegraphing or transmitting, as above provided, shall be due, legal and
personal notice to such director.
Section 10. Adjournment
A majority of the directors present, whether or not a quorum is present,
may adjourn any directors' meeting to another time and place.
Section 11. Notice of Adjournment
If a meeting is adjourned for more than twenty-four (24) hours, notice
of any adjournment to another time or place shall be given prior to the time of
the adjourned meeting to the directors who were not present at the time of
adjournment.
Section 12. Waiver of Notice
The transactions at any meeting of the board of directors, however
called and noticed, or wherever held, shall be as valid as though such
transactions had occurred at a meeting duly held after regular call and notice
if a quorum be present and if, either before or after the meeting, each of the
directors not present signs a written waiver of notice of or consent to holding
the meeting or an approval of the minutes thereof. All such waivers, consents or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. The waiver of notice need not state the purpose for
which the meeting is or was held.
Section 13. Quorum and Voting
A majority of the authorized number of directors shall be necessary to
constitute a quorum for the transaction of business, except to adjourn as
hereinabove provided. Every act or decision done or made by a majority of the
directors at a meeting duly held at which a quorum is present shall be regarded
as an act of the board of directors unless a greater number be required by law
or by the Certificate of Incorporation. However, a meeting at which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of directors, if any action taken is approved by at least a majority
of the required quorum for such meeting.
Section 14. Fees and Compensation
Directors shall not receive any stated salary for their services as
directors, but, by resolution of the board, a fixed fee, with or without
expenses of attendance, may be allowed to directors not receiving monthly
compensation for attendance at each meeting. Nothing herein contained shall be
construed to preclude any director from serving the Corporation in any other
capacity, as an officer,
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agent, employee or otherwise, from receiving compensation therefor.
Section 15. Action Without Meeting
Any action required or permitted to be taken by the board of directors
under the Delaware General Corporation Law may be taken without a meeting if all
members of the board individually or collectively consent in writing to such
action. Such consent or consents shall be filed with the minutes of the meetings
of the board.
Section 16. Committees of Directors
The board may, by resolution passed by a majority of the whole board,
designate one or more committees, each committee to consist of one (1) or more
of the directors of the Corporation. Any such committee, to the extent provided
in the resolution of the board and except as otherwise limited by law, shall
have and may exercise all the powers and authority of the board 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. Any
such committee shall keep written minutes of its meetings and report the same to
the board at the next regular meeting of the board. In the absence or
disqualification of a member of a 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 to
act at the meeting in the place of any such absent or disqualified member.
ARTICLE IV - OFFICERS
Section 1. Officers
The officers of the Corporation shall be chosen by the board of
directors and shall be a Chief Executive Officer and/or a President, and a
Secretary and Chief Financial Officer (Treasurer). The board of directors may
also choose a Chairman of the Board, a Chief Operating Officer, one or more
Vice-Presidents, one or more Executive Vice Presidents and one or more Assistant
Secretaries and Assistant Treasurers and such other officers with such titles
and duties as may be appointed in accordance with the provisions of Section 3 of
this Article. Any number of offices may be held by the same person.
Section 2. Election
The officers of the Corporation, except such officers as may be
appointed in accordance with the provisions of Section 3 or Section 5 of this
Article, shall be chosen annually by the board of directors, and each shall hold
his office until he shall resign or shall be removed or otherwise disqualified
to serve or his successor shall be elected and qualified.
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Section 3. Subordinate Officers
The board of directors may appoint such other officers as the business
of the Corporation may require, each of whom shall hold office for such period,
have such authority and perform such duties as are provided in the Bylaws or as
the board of directors may from time to time determine.
Section 4. Removal and Resignation
Any officer may be removed, either with or without cause, by a majority
of the directors at the time in office, at any regular or special meeting of the
board, or, except in the case of an officer chosen by the board of directors, by
any officer upon whom such power of removal may be conferred by the board of
directors.
Any officer may resign at any time by giving written notice to the board
of directors or to the Chief Executive Officer, President or to the Secretary of
the Corporation. Any such resignation shall take effect at the date of the
receipt of such notice or any later time specified therein; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 5. Vacancies
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
the Bylaws for regular appointments to such office.
Section 6. Chairman of the Board
The Chairman of the Board, if there shall be such an officer, shall, if
present, preside at all meetings of the board of directors and stockholders and
exercise and perform all such other powers and duties as may from time to time
be assigned to him by the board of directors or prescribed by the Bylaws.
Section 7. Chief Executive Officer
The Chief Executive Officer, if there shall be such an officer, shall be
the chief executive of the Corporation, shall preside at all meetings of the
stockholders and the board of directors in the absence of a Chairman of the
Board, and shall have general and active management of the business of the
Corporation and shall see that all orders and resolutions of the board of
directors are carried into effect. The Chief Executive Officer shall execute
bonds, mortgages and other contracts requiring a seal, under the seal of the
Corporation, except when required or permitted by law to be otherwise signed and
executed and except where the signing and execution thereof shall be expressly
delegated by the board of directors to some other officer or agent of the
Corporation.
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Section 8. President
In the event a Chief Executive Officer is not elected, or in the event
that the Chief Executive Officer elected by the board of directors is unable to
act, or refuses to act, the President, if there shall be such an officer, shall
perform the duties of the Chief Executive Officer, and when so acting, shall
have all the powers of, and be subject to all the restrictions upon, the Chief
Executive Officer. The President shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
Section 9. Vice Presidents
In the absence or disability of the President and the Chief Executive
Officer, the Executive Vice President or Vice Presidents in order of their rank
as fixed by the board of directors or, if not ranked, the Executive Vice
President shall perform all the duties of the President and, when so acting,
shall have all the powers of and be subject to all the restrictions upon the
President and Chief Executive Officer. Each Vice President shall have such other
powers and shall perform such other duties as from time to time may be
prescribed for him by the board of directors or the Bylaws, and the President or
the Chief Executive Officer.
Section 10. Secretary
The Secretary shall keep, or cause to be kept, at the principal office
of the Corporation, or such other place as the board of directors may order, a
book of minutes of all meetings of directors and stockholders, with the time and
place of holding, whether regular or special and, if special, how authorized,
the notice thereof given, the names of those present at directors' meetings, the
number of shares present or represented at stockholders' meeting and the
proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office
or at the office of the Corporation's transfer agent, a share register or a
duplicate share register showing the names of the stockholders and their
addresses, the number and classes of shares held by each, the number and the
date of certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the
meetings of the stockholders and of the board of directors required by the
Bylaws or by law to be given, shall keep the seal of the Corporation in safe
custody and shall have such other powers and shall perform such other duties as
from time to time may be prescribed by the board of directors, the Bylaws, or
the President or Chief Executive Officer.
Section 11. Assistant Secretaries
In the absence or disability of the Secretary, the Assistant secretaries
in order of their rank as fixed by the board of directors or, if not ranked, the
Assistant Secretary designated by the board
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<PAGE> 21
of directors shall perform all the duties of the Secretary and, when so acting,
shall have all the powers of and be subject to all the restrictions upon the
Secretary. Each Assistant Secretary shall have such other powers and shall
perform such other duties as from time to time may be prescribed by the board of
directors or the Bylaws.
Section 12. Chief Financial Officer (Treasurer)
The Chief Financial Officer shall be the Treasurer. The Treasurer shall
keep and maintain, or cause to be kept and maintained, adequate and correct
accounts of the properties and business transactions of the Corporation,
including accounts of its assets, liabilities, receipts, disbursements, gains,
losses, capital, surplus and shares.
The Treasurer shall deposit all moneys and other valuables in the name
and to the credit of the Corporation with such depositories as may be designated
by the board of directors. He shall be responsible for the proper disbursement
of the funds of the Corporation as may be ordered by the board of directors or
the President or Chief Executive Officer and shall render to the President or
board of directors, whenever they request it, an account of all of his
transactions as Treasurer and of the financial condition of the Corporation. The
Treasurer shall prepare a proper annual budget of income and expenses for each
calendar year, revised quarterly, for approval of or revision by the board of
directors and shall be responsible for the handling of finances in connection
therewith. He shall have such other powers and shall perform such other duties
as may be prescribed by the board of directors and the President or Chief
Executive Officer. He shall see that all officers signing checks are bonded in
such amounts as may be fixed from time to time by the board of directors.
Section 13. Assistant Financial Officers
In the absence of or disability of the Treasurer, the assistant
financial officers in order of their rank or, if not ranked, the assistant
financial officer designated by the board of directors shall perform all the
duties of the Treasurer and, when so acting, shall have the powers of and be
subject to all the restrictions upon the Treasurer. Each assistant financial
officer shall have such other powers and perform such other duties as from time
to time may be prescribed for him by the board of directors or the Bylaws and
the President or Chief Executive Officer.
Section 14. Salaries
Salaries of officers and other stockholders employed by the Corporation
shall be fixed periodically by the board of directors or established under
agreement with the officers or stockholders approved by the board of directors.
No officer shall be prevented from receiving this salary because he is also a
director of the Corporation.
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<PAGE> 22
ARTICLE V - SHARES OF STOCK
Section 1. Share Certificates
The certificates of shares of the capital stock of the Corporation shall
be in such form consistent with the articles of incorporation and the laws of
the State of Delaware as shall be approved by the board of directors. A
certificate or certificates for shares of the capital stock of the Corporation
shall be issued to each stockholder when any of these shares are fully paid, and
the board of directors may authorize the issuance of certificates or shares as
partly paid provided that these certificates shall state the amount of the
consideration to be paid for them and the amount paid. All such certificates
shall be signed by the Chairman of the Board or the President or a Vice
President, and by the Treasurer or an assistant financial officer or the
Secretary or any Assistant Secretary, certifying the number of shares and the
class or series of shares owned by the stockholder. Any or all of the signatures
on the certificate may be by facsimile.
Section 2. Transfer of Shares
Subject to the provisions of law, upon the surrender to the Corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
Section 3. Lost or Destroyed Certificate
The holder of any shares of stock of the Corporation shall immediately
notify the Corporation of any loss or destruction of the certificate therefor,
and the Corporation may issue a new certificate in the place of any certificate
theretofore issued by it alleged to have been lost or destroyed, upon approval
of the board of directors. The board may, in its discretion, as a condition to
authorizing the issue of such new certificate, require the owner of the lost or
destroyed certificate, or his legal representative, to make proof satisfactory
to the board of directors of the loss or destruction thereof and to give the
Corporation a bond or other security, in such amount and with such surety or
sureties as the board of directors may determine, as indemnity against any claim
that may be made against the Corporation on account of any such certificate so
alleged to have been lost or destroyed.
ARTICLE VI - INDEMNIFICATION
Section 1. Indemnity of Officers, Directors, Employees and Other Agents
The Corporation shall, to the maximum extent permitted by the Delaware
General Corporation Law, have power to indemnify each of its agents against
expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with any proceeding arising by reason of the
fact that any such person is or was an agent of the Corporation and shall
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<PAGE> 23
have power to advance to each such agent expenses incurred in defending any such
proceeding to the maximum extent permitted by that law. Any agreement of or
advancement of expenses to any agent may provide rights of indemnification or
advancement of expenses which are broader or otherwise different from those set
forth in these Bylaws but only to the extent permitted by law. For purposes of
this Article, an "agent" of the Corporation includes any person who is or was a
director, officer, employee or other 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; or was a director, officer, employee or agent of a corporation which
was a predecessor corporation of the Corporation or of another enterprise at the
request of such predecessor corporation.
Section 2. Insurance
Upon resolution passed by the board, the Corporation may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise or as a member of any
committee or similar body 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 or applicable law.
Section 3. Non-Exclusivity
The right of indemnity and advancement of expenses provided herein shall
not be deemed exclusive of any other rights to which any person seeking
indemnification or advancement of expenses from the Corporation may be entitled
under any bylaw, 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. Any agreement for indemnification of
or advancement of expenses to any director, officer, employee or other person
may provide rights of indemnification or advancement of expenses which are
broader or otherwise different from those set forth herein.
ARTICLE VII - RECORDS AND REPORTS
Section 1. Maintenance and Stockholder Inspection of Corporate and
Stockholder Records
The accounting books and records and minutes of proceedings of the
stockholders and the board of directors and any committee or committees of the
board of directors shall be kept at such place or places designated by the board
of directors, or, in the absence of such designation, at the principal executive
office of the Corporation. The minutes shall be kept in written form, and the
accounting books and records shall be kept either in written form or in any
other form capable of being converted into written form. The Corporation's stock
ledger, a list of its stockholders, and its other books and records shall be
open to inspection and to make copies or extracts therefrom, upon
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<PAGE> 24
the written demand of any stockholder of record or holder of a voting trust
certificate, under oath stating the purpose thereof at any reasonable time
during usual business hours. The inspection may be made in person or by an agent
or attorney and shall include the right to copy and make extracts. If the
inspection is made by an agent or attorney, the demand under oath shall be
accompanied by a power of attorney or such other writing which authorizes the
attorney or other agent to so act on behalf of the stockholder at its principal
office. Where the stockholder seeks to inspect the Corporation's books and
records other than its stock ledger or list of stockholders, he shall first
establish that (1) he has complied with this section respecting the form and
manner of making demand for inspection of such documents, and (2) that the
inspection he seeks is for a proper purpose. The demand under oath shall be
directed to the Corporation at its registered office in Delaware or at its
principal place of business.
Section 2. Inspection by Directors
Any director shall have the right to examine during usual business
hours, the Corporation's stock ledger, a list of its stockholders and its other
books and records for a purpose reasonably related to his position as a
director.
ARTICLE VIII - GENERAL PROVISIONS
Section 1. Dividends
Dividends upon the capital stock of the Corporation, subject to the
provisions of the certificate of incorporation, if any, may be declared by the
board of directors at any regular or special meeting, pursuant to law. Dividends
may be paid in cash, in property, or in shares of the capital stock, subject to
the provisions of the Certificate of Incorporation.
Section 2. Reserves
Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the board of
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the directors shall think conducive to the interest of the
Corporation, and the board of directors may modify or abolish any such reserve
in the manner in which it was created.
Section 3. Annual Statement
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the Corporation.
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<PAGE> 25
ARTICLE IX - MISCELLANEOUS
Section 1. Checks, Drafts, Etc.
All checks, drafts or other orders for payment of money, notes or other
evidences of indebtedness, issued in the name of or payable to the Corporation,
shall be signed or endorsed by such person or persons and in such manner as from
time to time shall be determined by resolution of the board of directors.
Section 2. Contracts, Etc., How Executed
The board of directors, except as otherwise provided in these Bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
Corporation; such authority may be general or confined to specific instances;
and, unless so authorized by the board of directors, no officer, agent or
employee shall have any power or authority to bind the Corporation by any
contract or engagement or to pledge its credit to render it liable for any
purpose or to any amount.
Section 3. Representation of Shares of Other Corporations
The President or Chief Executive Officer or, in the event of his absence
or inability to serve, any Vice President and the Secretary or Assistant
Secretary of this Corporation are authorized to vote, represent and exercise, on
behalf of this Corporation, all rights incidental to any and all shares of any
other corporation standing in the name of this Corporation. The authority herein
granted to said officers to vote or represent on behalf of this Corporation any
and all shares held by this Corporation in any other corporation may be
exercised either by such officers in person or by any person authorized to do so
by proxy or power of attorney duly executed by said officers.
Section 4. Loans to Officers
The board of directors alone is authorized to approve any loan or
guaranty to an officer of the Corporation, whether or not a director, or an
employee benefit plan authorizing such a loan or guaranty to an officer, by a
vote sufficient without counting the vote of any interested director or
directors if the board determines that such a loan or guaranty or plan may
reasonably be expected to benefit the Corporation.
ARTICLE X - AMENDMENTS OF BYLAWS
Section 1. Amendment by Stockholders
New Bylaws may be adopted or these Bylaws may be amended or repealed by
the vote or
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<PAGE> 26
written consent of the stockholders entitled to exercise a majority of the
voting power of the Corporation, except as otherwise provided by these Bylaws or
the certificate of incorporation.
Section 2. Amendment by Directors
Subject to the rights of the stockholders as provided in Section 1 of
this Article X, Bylaws may be adopted, amended, or repealed by the board of
directors if such power is conferred upon the directors in the Certificate of
Incorporation.
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<PAGE> 1
EXHIBIT 4.2
AREMISSOFT CORPORATION
(A Nevada Corporation)
----------
October 10, 1997
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
AT US$5.00 PER SHARE
----------
NEITHER THIS WARRANT NOR THE COMMON STOCK
UNDERLYING THIS WARRANT HAVE BEEN
REGISTERED UNDER EITHER THE SECURITIES ACT
OF 1933 OR THE SECURITIES LAWS OF ANY STATE.
CONSEQUENTLY, THIS WARRANT OR THE COMMON STOCK
UNDERLYING THIS WARRANT, MAY NOT BE SOLD, PLEDGED,
TRANSFERRED OR OTHERWISE HYPOTHECATED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
COMMON STOCK UNDERLYING THIS WARRANT, OR AN EXEMPTION
THEREFROM, OR AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THIS CERTIFIES THAT, for value received, _________________ or registered
assigns (the "holder"), is entitled to purchase, at any time or from time to
time during the Exercise Period (as defined in paragraph 1.1, below), up to a
maximum of 87,500 shares of fully paid and non-assessable common stock, par
value $0.001 per share ("Common Stock") of AremisSoft Corporation, a Nevada
corporation (the "Company"), at a per share purchase price (the "Exercise
Price") of U.S. Five Dollars (US$5.00), subject to adjustment.
1. EXERCISE OF WARRANT
The terms and conditions upon which this Warrant may be exercised, and
the Common Stock covered hereby may be purchased, are as follows:
1
<PAGE> 2
1.1 Method of Exercise. The holder of this Warrant, on or after six
months from the date hereof, as shown at the end of this instrument, and from
time to time thereafter until April 10, 2000 (the "Exercise Period"), may
exercise in whole or in part the purchase rights evidenced by this Warrant,
provided that the holder exercises the purchase rights evidenced by this Warrant
with respect to at least 100 shares of Common Stock. Such exercise shall be
effected by:
(a) the surrender of the Warrant, (together with a duly executed copy of
the form of subscription of the Warrant attached hereto), to the Secretary of
the Company at its principal offices; and
(b) the payment to the Company in U.S. funds, by certified check or bank
draft payable to its order, of an amount equal to the aggregate Exercise Price
for the number of shares of Common Stock for which the purchase rights hereunder
are being exercised.
1.2 Issuance of Common Stock and New Warrant. In the event the purchase
rights evidenced by this Warrant are exercised in whole or in part, one or more
certificates for the Common Stock shall be issued as soon as practicable
thereafter to the holder exercising such rights. Such holder shall also be
issued at such time a new Warrant representing the number of shares of Common
Stock (if any) for which the purchase rights under this Warrant remain
unexercised.
1.3 Reservation of Common Stock. The Company covenants and agrees that
during the period within which the rights represented by this Warrant maybe the
exercised, the Company will reserve and keep available out of its authorized but
unissued shares of Common Stock, for the purpose of issuance upon exercise of
this Warrant, a sufficient number of shares of Common Stock to provide for the
exercise of the rights represented by this Warrant.
2. ANTI-DILUTION PROVISIONS
2.1 Stock Splits and Combinations. If the Company shall at any
time subdivide or combine its outstanding Common Stock, or fix a record date for
payment of a dividend in Common Stock or other securities of the Company
exercisable, convertible or exchangeable for Common Stock (in which the latter
event the maximum number of shares of Common Stock issuable upon the exercise,
2
<PAGE> 3
conversion or exchange of such securities shall be deemed to have been
distributed), after that subdivision, combination or dividend, the number of
Common Stock shall be adjusted to that number of Common Stock which is
determined by (A) multiplying the number of Common Stock purchasable immediately
prior to such adjustment by the Exercise Price in effect immediately prior to
such adjustment, and then (B) dividing that product by the Exercise Price in
effect immediately after such adjustment. If the Company shall at any time
subdivide the outstanding shares of Common Stock or fix a record date for
payment of a dividend in Common Stock or other securities exercisable,
convertible or exchangeable into Common Stock, the Exercise Price then in effect
immediately before that subdivision or dividend shall be proportionately
decreased, and, if the Company shall at any time combine the outstanding shares
of Common Stock, then the Exercise Price in effect immediately before that
combination shall be proportionately increased. Any adjustment under this
Section 2.1 shall become effective at the close of business on the date the
subdivision or combination becomes effective or the dividend is distributed.
2.2 Reclassification, Exchange and Substitution. If the Common Stock
issuable upon exercise of this Warrant shall be changed into the same or a
different number of shares of any other class or classes of securities, whether
by capital reorganization, reclassification, or otherwise (other than a
subdivision or combination or payment of dividend of securities provided for
above), the holder of this Warrant shall, on its exercise, be entitled to
purchase for the same aggregate consideration, in lieu of the Common Stock which
the holder would have become entitled to purchase but for such change, a number
of shares of such other class or classes of securities which such holder would
have been entitled to receive as the holder of that number of Common Stock
subject to purchase by the holder on exercise of this Warrant immediately before
that change.
2.3 Reorganizations, Mergers, Consolidations or Sales of Assets. If at
any time there shall be a capital reorganization of the Common Stock (other than
a subdivision, combination, payment of dividend, reclassification or exchange of
Common Stock provided for above), or merger or consolidation of the Company with
or into another corporation, or the sale of the Company's properties and assets
as, or substantially as, an entirety to any other person, then, as a part of
such reorganization, merger, consolidation or sale, lawful provision shall be
made so that the holder of this Warrant shall
3
<PAGE> 4
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified in this Warrant and upon payment of the Exercise Price then in
effect, the number of shares of Common Stock or other securities or property of
the Company, or of the successor corporation resulting from such merger or
consolidation, to which a holder of the Common Stock issuable upon exercise of
this Warrant would have been entitled in such capital reorganization, merger, or
consolidation or sale if this Warrant had been exercised immediately before that
capital reorganization, merger, consolidation, or sale. In any such case,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the holder of this Warrant after the
reorganization, merger, consolidation, or sale such that the provisions of this
Warrant (including adjustment of the Exercise Price then in effect and number
and kind of securities purchasable upon exercise of this Warrant) shall be
applicable after that event in relation to any securities purchasable after that
event upon exercise of this Warrant. The Company shall, within thirty (30) days
after making such adjustment, give written notice (by first class mail, postage
prepaid) to the registered holder of this Warrant at the address of that holder
shown on the Company's books. That notice shall set forth, in reasonable detail,
the event requiring the adjustment and the method by which the adjustment was
calculated and specify the Exercise Price then in effect after the adjustment
and the change in securities purchasable upon exercise of this Warrant. When
appropriate, that notice may be given in advance and included as part of the
notice required under other provisions of this Warrant.
3. TRANSFERS AND EXCHANGES
3.1 Transfers. The holder acknowledges that this Warrant and the Common
Stock underlying this Warrant have not been registered with the Securities and
Exchange Commission (the "SEC") or any other state securities laws pursuant to
an exemption from such registration requirements. As such, this Warrant and the
Common Stock underlying the Warrant, may not be sold, pledged, transferred or
otherwise hypothecated without registration under the Securities Act of 1933
(the "Act") except in certain limited circumstances where an exemption from
registration exists, supported by an opinion of counsel satisfactory to the
Company and its counsel that registration is not required thereunder.
4
<PAGE> 5
3.2 Exchange For New Warrants. This Warrant may be exchanged at the
principal offices of the Company for two or more Warrants for the purchase of
the same aggregate number of Common Stock as is purchasable hereunder. Each
Warrant shall evidence the right to purchase such number of Common Stock as the
holder shall designate at the time of the exchange. All Warrants issued in
connection with transfers or exchanges of this Warrant shall bear the same date
as this Warrant and shall be identical in form and provision to this Warrant
except for the number of Common Stock purchasable thereunder.
4. FRACTIONAL SHARES
No fractional shares of Common Stock shall be issued in connection with
any exercise of this Warrant. In lieu of the issuance of such fractional share,
the Company shall make a cash payment equal to the then fair market value of
such fractional share as determined in good faith by the Company's Board of
Directors.
5. PRIVILEGE OF STOCK OWNERSHIP
Prior to exercise of this Warrant, the holder shall not be entitled to
any rights as a shareholder of the Company, including (without limitation) the
right to vote, receive dividends or other distributions, exercise preemptive
rights or be notified of shareholder meetings, and such holder shall not be
entitled to any notice or other communication concerning the business or affairs
of the Company except that notice shall be given not less than 15 days prior to
any event referred to in Section 2.
6. SUCCESSORS AND ASSIGNS
The terms and provisions of this Warrant shall inure to the benefit of,
and be binding upon the Company and the holder thereof and their respective
successors and assigns.
7. NOTICES
All notices, requests, demands and other communications under this
Warrant shall be in writing and shall be deemed to have been duly given on the
date of service if served personally on the party to whom notice is to be given,
or on the date of mailing if mailed to the party to whom notice is to be given,
by first class mail, registered or certified, postage prepaid, and properly
addressed
5
<PAGE> 6
as follows: if to the holder, at his address as shown in the Company records;
and if to the Company, at its principal office. Any party may change its address
for purposes of this paragraph by giving the other party written notice of the
new address in the manner set forth above.
8. GOVERNING LAW
This Warrant shall be governed by and construed in accordance with the
laws of California.
9. COUNTERPARTS
This Warrant may be executed in one or more counterparts (including
facsimile signatures), each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.
6
<PAGE> 7
DATED: October 10, 1997 AremisSoft Corporation,
a Nevada corporation
By:
------------------------------
Dr. L.K. Kiprianou, CEO
Attest
- -------------------------------
Corporate Secretary or Assistant
7
<PAGE> 8
ASSIGNMENT
FOR VALUE RECEIVED, _____________________________________________
hereby sell(s), assign(s), and transfer(s) unto ________________________________
______________________________________________ , of ______________________ , the
right to purchase Shares evidenced by the within Warrant issued by AremisSoft
Corporation, a Nevada corporation (the "Company"), and does hereby irrevocably
constitute and appoint _________________________________________________________
______________ to transfer such right on the books of the Company,
with full power of substitution.
DATED:____________________ , 19__.
- ----------------------------------
Signature
- --------------------------------------------------------------------------------
NOTICE:
Neither this Warrant, nor the Common Stock underlying this Warrant, have been
registered under the Securities Act of 1933 (the "Act") or any states'
securities laws (the "laws") and may not be sold, pledged, transferred or
otherwise disposed of in the absence of an effective registration statement
covering these securities under the Act or laws, or an available exemption
therefrom, or an opinion of counsel satisfactory to the Company and its counsel
that registration is not required thereunder.
8
<PAGE> 9
The signature to this Assignment must correspond with the name as written upon
the face of the within Warrant, in every particular, without alteration or
enlargement, or any change whatsoever.
9
<PAGE> 10
SUBSCRIPTION
AremisSoft Corporation
60 Bishopsgate
London England EC2N 4AJ
Attn: Corporate Secretary
(the
-----------------------------------------------------
(Type or Print Name)
"Undersigned) hereby elects to purchase, pursuant to the provisions of the
AremisSoft Corporation September 30, 1997 Warrant held by the Undersigned,
___________ shares of the Common Stock of AremisSoft Corporation.
As an inducement to your acceptance hereunder, the undersigned certifies
that the Common Stock is being purchased for the undersigned's own account, for
investment purposes, and not with a view towards a public distribution in
violation of the registration requirements of the Securities Act of 1933, as
amended.
Payment of the purchase price of US$5.00 per share of Common Stock in
U.S. funds required under such Warrant accompanies this subscription.
DATED: __________________ , 19__.
Signature:
------------------------------
Address:
--------------------------------
--------------------------------
10
<PAGE> 1
EXHIBIT 10.5
AREMISSOFT CORPORATION
1998 STOCK OPTION PLAN
1. PURPOSE; DEFINITIONS.
1.1 PURPOSE. The purpose of the Plan is to attract, retain and motivate
officers, employees, consultants and directors of the Company by giving them the
opportunity to acquire Stock ownership in the Company.
1.2 DEFINITIONS. For purposes of the Plan, the following terms shall
have the following meanings:
1.2.1 "Administrator" shall mean the Compensation Committee
referred to in Section 4 in its capacity as administrator of
the Plan in accordance with Section 4.
1.2.2 "Board" shall mean the Board of Directors of the Company.
1.2.3 "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
1.2.4 "Company" shall mean AremisSoft Corporation, a Delaware
corporation and its subsidiaries.
1.2.5 "Director" shall mean a member of the Board.
1.2.6 "Effective Date" shall have the meaning set forth in Section
2.
1.2.7 "Eligible Person" shall mean, in the case of the grant of an
Incentive Stock Option, all employees of the Company, and in
the case of a Non-qualified Stock Option, any director
(including a director who is also a member of the
Compensation Committee), officer or employee of the Company
or other person who, in the opinion of the Board, is
rendering valuable services to the Company.
1.2.8 "Fair Market Value" shall mean (i) if the stock is listed or
admitted to trade on a national securities exchange, the
closing price of the Stock on the Composite Tape, as
published in the Western Edition of the Wall Street Journal,
of the principal national securities exchange on which the
Stock is so listed or admitted to trade, on such date, or,
if there is no trading of the Stock on such date, then the
closing price of the Stock as quoted on such Composite Tape
on the next preceding date on which there was trading in
such Stock; (ii) if the Stock is not listed or admitted to
trade on a national securities exchange, the last price for
the Stock on such date, as furnished by the National
Association of Securities Dealers, Inc. ("NASD") through the
NASDAQ National Market Reporting System or a similar
organization if the NASD is no longer reporting such
information; (iii) if the stock is not reported on the
National Market Reporting
-1-
<PAGE> 2
System, the mean between the closing bid and asked price for
the stock on such date, as furnished by the NASD; and (iv)
if the stock is not reported on the National Market
Reporting System and if bid and asked prices for the stock
are not furnished by the NASD or a similar organization, the
value established by the Administrator for purposes of
granting Options under the Plan.
1.2.9 "Grant Date" shall mean the date of grant of any Option.
1.2.10 "Incentive Stock Option" shall mean an Option within the
meaning of Section 422 of the Code, the award of which
contains such provisions as are necessary to comply with
that section.
1.2.11 "Non-qualified Stock Option" shall mean an Option which is
designated a Nonqualified Stock Option.
1.2.12 "Option" shall mean an option to purchase Common Stock under
this Plan. An Option shall be designated by the Committee as
either an Incentive Stock Option or a Non-qualified Stock
Option.
1.2.13 "Option Agreement" shall mean the written option agreement
with respect to an Option.
1.2.14 "Optionee" shall mean the holder of an Option.
1.2.15 "Plan" shall mean this AremisSoft Corporation 1998 Stock
Option Plan, as amended from time to time.
1.2.16 "Stock" shall mean the Common Stock, $.001 par value, of the
Company, and any successor entity.
1.2.17 "Vesting Date" shall mean the date on which an Option
becomes wholly or partially exercisable, as determined by
the Administrator in its sole discretion.
2. EFFECTIVE DATE; TERM OF PLAN.
The Effective Date of this Plan shall be upon stockholder approval of
this Plan pursuant to Delaware General Corporation Law Section 212, which shall
occur within 12 months of the date of Board approval. This Plan, but not Options
already granted, shall terminate automatically ten (10) years after its adoption
by the Board, unless terminated earlier by the Board under Section 13. No
Options shall be granted after termination of this Plan but all Options granted
prior to termination shall remain in effect in accordance with their terms.
3. NUMBER AND SOURCE OF SHARES OF STOCK SUBJECT TO THE PLAN.
Subject to the provisions of Section 8, the total number of shares of
Stock with respect to which Options may be granted under this Plan is One
Million Five Hundred Thousand (1,500,000) shares of Stock. The shares of Stock
covered by any canceled, expired or terminated Option or the unexercised portion
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thereof shall become available again for grant under this Plan. The shares of
Stock to be issued hereunder upon exercise of an Option may consist of
authorized and unissued shares or treasury shares.
4. ADMINISTRATION OF THE PLAN.
This Plan shall be administered by a committee of at least two (2)
members of the Board to which administration of this Plan is delegated by the
Board (the "Compensation Committee"). The "Administrator" shall mean the
"Compensation Committee" referred to in this Section 4 in its capacity as
administrator of the Plan in accordance with this Section 4. The Administrator
may delegate nondiscretionary administrative duties to such employees of the
Company as it deems proper. Each member of the Compensation Committee shall be a
disinterested person within the meaning of Rule 16b-3(c)(2)(i) of the Securities
Exchange Act of 1934.
Subject to the express provisions of this Plan, the Administrator shall
have the authority to construe and interpret this Plan and any agreements
defining the rights and obligations of the Company and Optionees under this
Plan; to further define the terms used in this Plan; to prescribe, amend and
rescind rules and regulations relating to the administration of this Plan; to
determine the duration and purposes of leaves of absence which may be granted to
Optionees without constituting a termination of their employment for purposes of
this Plan; and to make all other determinations necessary or advisable for the
administration of this Plan.
Any decision or action of the Administrator in connection with this Plan
or Options granted or shares of Stock purchased under this Plan shall be final
and binding. The Administrator shall not be liable for any division, action or
omission respecting this Plan, or any Options granted or shares of Stock sold
under this Plan. The Board at any time may abolish the Compensation Committee
and revest in the Board the administration of the Plan.
To the extent permitted by applicable law in effect from time to time,
no member of the Compensation Committee or the Board of Directors shall be
liable for any action or omission of any other member of the Compensation
Committee or the Board of Directors nor for any act or omission on the member's
own part, excepting only the member's own willful misconduct or gross
negligence, arising out of or related to the Plan. The Company shall pay
expenses incurred by, and satisfy a judgment or fine rendered or levied against,
a present or former director or member of the Compensation Committee or Board in
any action against such person (whether or not the Company is joined as a party
defendant) to impose liability or a penalty on such person for an act alleged to
have been committed by such person while a director or member of the
Compensation Committee or Board arising with respect to the Plan or
administration thereof, or out of membership on the Compensation Committee or
Board, or by the Company, or all or any combination of the preceding; provided,
the director or Compensation Committee member was acting in good faith, within
what such director or Compensation Committee member reasonably believed to have
been within the scope of his or her employment or authority, and for a purpose
which he or she reasonably believed to be in the best interests of the Company
or its stockholders. Payments authorized hereunder include amounts paid and
expenses incurred in settling any such action or threatened action. The
provisions of this section shall apply to the estate, executor, administrator,
heirs, legatees or devisees of a director or Compensation Committee member, and
the term "person" as used in this section shall include the estate, executor,
administrator, heirs, legatees or devisees of such person.
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5. GRANT OF OPTIONS; TERMS AND CONDITIONS OF GRANT.
5.1 GRANT OF OPTIONS. One or more Options may be granted to any Eligible
Person. Subject to the express provisions of the Plan, the Administrator shall
determine from the Eligible Persons those individuals to whom Options under the
Plan may be granted. Each Option so granted shall be designated by the
Administrator as either a Non-qualified Stock Option or an Incentive Stock
Option.
Subject to the express provisions of this Plan, the Administrator shall
specify the Grant Date, the number of shares of Stock covered by the Option, the
exercise price and the terms and conditions for exercise of the Options. If the
Administrator fails to specify the Grant Date, the Grant Date shall be the date
of the action taken by the Administrator to grant the Option. As soon as
practicable after the Grant Date, the Company shall provide the Optionee with a
written Option Agreement in the form approved by the Administrator, which sets
out the Grant Date, the number of shares of Stock covered by the Option, the
exercise price and the terms and conditions for exercise of the Option.
The Administrator may, in its absolute discretion, grant Options under
this Plan to an Eligible Person at any time and from time to time before the
expiration of ten (10) years from the Effective Date.
5.2 GENERAL TERMS AND CONDITIONS. Except as otherwise provided herein,
the Options shall be subject to the following terms and conditions and such
other terms and conditions not inconsistent with this Plan as the Administrator
may impose.
5.3 EXERCISE OF OPTION. In order to exercise all or any portion of any
Option granted under this Plan, an Optionee must remain as an officer, employee,
consultant or director of the Company, until the Vesting Date. The Option shall
be exercisable on or after each Vesting Date in accordance with the terms set
forth in the Option Agreement.
5.4 OPTION TERM. Each Option and all rights or obligations thereunder
shall expire on such date as shall be determined by the Administrator, but not
later than ten (10) years after the grant of the Option (five (5) years in the
case of an Incentive Stock Option when the Optionee owns more than 10% of the
total combined voting power of all classes of Stock of the Company), and shall
be subject to earlier termination as hereinafter provided.
5.5 EXERCISE PRICE. The Exercise Price of any Option shall be determined
by the Administrator, but in the case of Incentive Stock Options shall not be
less than 100% (110% in the case of an Optionee who owns more than 10% of the
total combined voting power of all classes of stock of the Company) of the Fair
Market Value of the Stock on the date the Incentive Stock Option is granted, and
100% of the Fair Market Value of the Stock on the date the Non-qualified Stock
Option is granted.
5.6 METHOD OF EXERCISE. To the extent the right to purchase shares of
Stock has accrued, Options may be exercised, in whole or in part, from time to
time in accordance with their terms by written notice from the Optionee to the
Company stating the number of shares of Stock with respect to which the Option
is being exercised, and accompanied by payment in full of the exercise price.
Payment may be made in cash, certified check or, at the absolute discretion of
the Administrator, by non-certified check.
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5.7 RESTRICTIONS ON STOCK; OPTION AGREEMENT. At the time it grants
Options under this Plan, the Company may retain, for itself or others, rights to
repurchase the shares of Stock acquired under the Option, or impose other
restrictions on such shares. The terms and conditions of any such rights or
other restrictions shall be set forth in the Option Agreement evidencing the
Option. No Option shall be exercisable until after execution of the Option
Agreement by the Company and the Optionee.
5.8 NON-ASSIGNABILITY OF OPTION RIGHTS. No Option shall be transferable
other than by will or by the laws of descent and distribution. During the
lifetime of an Optionee, only the Optionee may exercise an Option.
5.9 EXERCISE AFTER CERTAIN EVENTS.
5.9.1 Termination as an employee, director or consultant. If for any
reason other than permanent and total disability or death (as defined below) an
Optionee ceases to be employed by or to be a consultant or director of the
Company, Options held at the date of such termination (to the extent then
exercisable) may be exercised, in whole or in part, at any time within three (3)
months after the date of such termination or such lesser period specified in the
Option Agreement (but in no event after the earlier of (i) the expiration date
of the Option as set forth in the Option Agreement, and (ii) ten years from the
Grant Date).
If an Optionee granted an Incentive Stock Option terminates
employment but continues as a consultant, advisor or in a similar capacity to
the Company, Optionee need not exercise the Option within three months of
termination of employment but shall be entitled to exercise within three months
of termination of services to the Company (one (1) year in the event of
permanent disability or death). However, if Optionee does not exercise within
three (3) months of termination of employment, the Option will not qualify as an
Incentive Stock Option.
5.9.2 Permanent disability and death. If an Optionee becomes
permanently and totally disabled (within the meaning of section 22(e)(3) of the
Code), or dies while employed by the Company, or while acting as an officer,
consultant or director of the Company,(or, if the Optionee dies within the
period that the Option remains exercisable after termination of employment or
affiliation), Options then held (to the extent then exercisable) may be
exercised by the Optionee, the Optionee's personal representative, or by the
person to whom the Option is transferred by will or the laws of descent and
distribution, in whole or in part, at any time within one (1) year after the
disability or death or any lesser period specified in the Option Agreement (but
in no event after the earlier of (i) the expiration date of the Option as set
forth in the Option Agreement, and (ii) ten (10) years from the Grant Date).
5.10 COMPLIANCE WITH SECURITIES LAWS. The Company shall not be obligated
to issue any shares of Stock upon exercise of an Option unless such shares are
at that time effectively registered or exempt from registration under the
federal securities laws and the offer and sale of the shares of Stock are
otherwise in compliance with all applicable securities laws. Upon exercising all
or any portion of an Option, an Optionee may be required to furnish
representations or undertakings deemed appropriate by the Company to enable the
offer and sale of the shares of Stock or subsequent transfers of any interest in
such shares to comply with applicable securities laws. Evidences of ownership of
shares of Stock acquired upon exercise of Options shall bear any legend required
by, or useful for purposes of compliance with, applicable securities laws, this
Plan or the Option Agreement evidencing the Option.
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6. LIMITATIONS ON GRANT OF INCENTIVE STOCK OPTIONS.
6.1 ONE HUNDRED THOUSAND DOLLARS RULE. The aggregate Fair Market Value
(determined as of the Grant Date) of the Stock for which Incentive Stock Options
may first become exercisable by any Optionee during any calendar year under this
Plan, together with that of Stock subject to Incentive Stock Options first
exercisable (other than as a result of acceleration pursuant to Section 9) by
such Optionee under any other plan of the Company, shall not exceed $100,000.
6.2 OPTION AGREEMENTS. There shall be imposed in the Option Agreement
relating to Incentive Stock Options such terms and conditions as are required in
order that the Option be an "incentive stock option" as that term is defined in
section 422 of the Code.
6.3 TEN PERCENT RULE. No Incentive Stock Option may be granted to any
person who, at the time the Incentive Stock Option is granted, owns shares of
outstanding Stock possessing more than 10% of the total combined voting power of
all classes of Stock of the Company, unless the exercise price of such Option is
at least 110% of the Fair Market Value of the Stock (determined as of the Grant
Date) subject to the Option, and such Option by its terms is not exercisable
after the expiration of five (5) years from the Grant Date.
6.4 NON-EMPLOYEES. No Incentive Stock Option may be granted to any
person who is not an employee of the Company.
7. PAYMENT OF TAXES.
Upon the disposition by an Optionee or other person of shares of an
Option prior to satisfaction of the holding period requirements of Section 422
of the Code, or upon the exercise of a Non-qualified Stock Option, the Company
shall have the right to require such Optionee or such other person to pay by
cash, or check payable to the Company, the amount of any taxes which the Company
may be required to withhold with respect to such transactions. Any such payment
must be made promptly when the amount of such obligation becomes determinable.
The Administrator may, in lieu of such cash payment, withhold that number of
shares sufficient to satisfy such withholding.
8. ADJUSTMENT FOR CHANGES IN CAPITALIZATION.
The existence of outstanding Options shall not affect the Company's
right to effect adjustments, recapitalizations, reorganizations or other changes
in its or any other corporation's capital structure or business, any merger or
consolidation, any issuance of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Stock, the dissolution or liquidation of the
Company's or any other corporation's assets or business, or any other corporate
act, whether similar to the events described above or otherwise. Subject to
Section 9, if the outstanding shares of the Stock are increased or decreased in
number or changed into or exchanged for a different number or kind of securities
of the Company or any other corporation by reason of a recapitalization,
reclassification, stock split, combination of shares, stock dividend or other
event, an appropriate adjustment of the number and kind of securities with
respect to which Options may be granted under this Plan, the number and kind of
securities as to which outstanding Options may be exercised, and the exercise
price at which outstanding Options may be exercised, will be made.
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9. DISSOLUTION, LIQUIDATION OR MERGER.
9.1 COMPANY NOT THE SURVIVOR. In the event of a dissolution or
liquidation of the Company, a merger, consolidation, combination, or
reorganization in which the Company is not the surviving corporation, or a sale
of substantially all of the assets of the Company, any outstanding Option shall
become fully vested immediately upon the Company's public announcement of any
one of the foregoing. The Board of Directors shall determine, in its sole and
absolute discretion, when the Company shall be deemed to survive for purposes of
this paragraph. If the Optionee does not exercise the entire Option within
ninety (90) days, the Administrator, in its sole and absolute discretion, may,
with respect to the unexercised portion of the Option:
9.1.1 cancel the Option upon payment to the Optionee of an amount
equal to the difference between the closing price of the Stock underlying the
Option quoted the day before such liquidation, dissolution, merger,
consolidation, combination or reorganization and the exercise price of the
Option; or
9.1.2 assign the Option and all rights and obligations under it to
the successor entity, with all such rights and obligations being assumed by the
successor entity.
9.2 COMPANY IS THE SURVIVOR. In the event of a merger, consolidation,
combination or reorganization in which the Company is the surviving corporation,
the Board of Directors shall determine the appropriate adjustment of the number
and kind of securities with respect to which outstanding Options may be
exercised, and the exercise price at which outstanding Options may be exercised.
The Board of Directors shall determine, in its sole and absolute discretion,
when the Company shall be deemed to survive for purposes of this Plan.
10. CHANGE OF CONTROL.
If there is a "change of control" in the Company, all outstanding
Options shall fully vest immediately upon the Company's public announcement of
such a change. A "change of control" shall mean an event involving one
transaction or a related series of transactions, in which (i) the Company issues
securities equal to 25% or more of the Company's issued and outstanding voting
securities, determined as a single class, to any individual, firm, partnership,
limited liability company or other entity, including a "group" within the
meaning of SEC Exchange Act Rule 13d-3, (ii) the Company issues voting
securities equal to 25% or more of the issued and outstanding voting stock of
the Company in connection with a merger, consolidation or other business
combination, (iii) the Company is acquired in a merger or other business
combination transaction in which the Company is not the surviving company, or
(iv) all or substantially all of the Company's assets are sold or transferred.
See Section 9 with respect to Options vesting upon the occurrence of either of
the events described in (iii) or (iv) of this Section 10 and the result upon the
non-exercise of the Options.
11. SUSPENSION AND TERMINATION.
In the event the Board or the Administrator reasonably believes an
Optionee has committed an act of misconduct, including, but not limited to,
those specified below, the Administrator may suspend the
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<PAGE> 8
Optionee's right to exercise any Option granted hereunder pending final
determination by the Board or the Administrator. If the Board or Administrator
determines that an Optionee has committed an act of misconduct, including,
without limitation, if an Optionee commits an act of embezzlement, fraud, breach
of fiduciary duty or deliberate disregard of the Company rules resulting in
loss, damage or injury to the Company, or if an Optionee makes an unauthorized
disclosure of any Company trade secret or confidential information, engages in
any conduct constituting unfair competition, induces any Company customer to
breach a contract with the Company, or induces any principal for whom the
Company acts as agent to terminate such agency relationship, neither the
Optionee nor his estate shall be entitled to exercise any Option hereunder. The
determination of the Board or the Administrator shall be final and conclusive.
12. NO RIGHTS AS STOCKHOLDER OR TO CONTINUED EMPLOYMENT.
An Optionee shall have no rights as a stockholder with respect to any
shares of Stock covered by an Option. An Optionee shall have no right to vote
any shares of Stock, or to receive distributions of dividends or any assets or
proceeds from the sale of Company assets upon liquidation until such Optionee
has effectively exercised the Option and fully paid for such shares of Stock.
Subject to Sections 8 and 9, no adjustment shall be made for dividends or other
rights for which the record date is prior to the date title to the shares of
Stock has been acquired by the Optionee. The grant of an Option shall in no way
be construed so as to confer on any Optionee the rights to continued employment
by the Company.
13. TERMINATION; AMENDMENT.
The Board may amend, suspend or terminate this Plan at any time and for
any reason, but no amendment, suspension or termination shall be made which
would impair the right of any person under any outstanding Options without such
person's consent not unreasonably withheld. Further, any amendment which
materially increases the benefits accruing to participants under this Plan shall
be subject to the approval of the Company's stockholders.
14. GOVERNING LAW.
This Plan and the rights of all persons under this Plan shall be
construed in accordance with and under applicable provisions of the laws of the
State of Delaware.
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EXHIBIT 10.6
DATE OF GRANT: _____________
AREMISSOFT CORPORATION
INCENTIVE STOCK OPTION AGREEMENT
THIS OPTION AGREEMENT MAY BE EXERCISED ONLY IN ACCORDANCE WITH THE TERMS AND
CONDITIONS OF THE AREMISSOFT CORPORATION 1998 STOCK OPTION PLAN (THE "PLAN"),
INCORPORATED HEREIN. A COPY OF THE PLAN CAN BE OBTAINED FROM THE COMPANY UPON
REQUEST OF THE HOLDER HEREUNDER. THE GRANT OF THIS OPTION SHALL NOT IMPOSE AN
OBLIGATION UPON THE OPTIONEE TO EXERCISE THIS OPTION.
THIS AGREEMENT is made by and between AremisSoft Corporation, a Delaware
corporation (the "Company") and _________________________________ ("Optionee"),
as of ____________ ___, ______.
In consideration of the mutual covenants contained herein and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the parties hereto agree as follows:
1. GRANT OF OPTION. The Company hereby grants to Optionee, in the manner and
subject to the conditions hereinafter provided, the right, privilege and option
to purchase (the "Option") an aggregate of _________________________________
(_______________) shares of the Company's common stock, $.001 par value, (the
"Shares" or "Common Stock"). This Option is specifically conditioned on
compliance with the terms and conditions set forth herein and in the Plan.
2. TERM OF OPTION. Subject to the terms, conditions and restrictions set forth
herein, the term of this Option shall be ten (10) years from the date of grant
(the "Expiration Date"). Any portion of this Option not exercised prior to the
Expiration Date shall thereupon become null and void.
3. EXERCISE OF OPTION.
3.1. VESTING OF OPTION. This Option shall become exercisable as follows:
Number of Shares Vesting Date
------------------------ ------------------
------------------------ ------------------
------------------------ ------------------
Each of the foregoing dates shall be referred to as a "Vesting Date" for that
portion of this Option vested on such date ("Vested Portion").
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All or any portion of the Shares underlying a Vested Portion of this
Option may be purchased during the term of this Option, but not as to less than
100 Shares (unless the remaining Shares then constituting the Vested Portion of
this Option is less than 100 Shares) at any time.
3.2. MANNER OF EXERCISE. The Vested Portion of this Option may be
exercised from time to time, in whole or in part, by presentation of a "Request
to Exercise Form," substantially in the form attached hereto, to the Company at
its principal office, which form must be duly executed by Optionee and
accompanied by payment, in cash, to the Company, in the aggregate amount of the
Exercise Price (as defined below), multiplied by the number of Shares the
Optionee is purchasing at such time, subject to reduction for withholding for
tax obligations as provided in Section 13.
Upon receipt and acceptance by the Company of such form accompanied by
the payment specified, the Optionee shall be deemed to be the record owner of
the Shares purchased, notwithstanding that the stock transfer books of the
Company may then be closed or that certificates representing the Shares
purchased under this Option may not then be actually delivered to the Optionee.
3.3. EXERCISE PRICE. The exercise price (the "Exercise Price") payable
upon exercise of this Option shall be $____________ per Share.
4. EXERCISE AFTER CERTAIN EVENTS.
4.1. TERMINATION OF EMPLOYMENT. If for any reason other than permanent
and total disability (as defined below) or death, an Optionee ceases to be
employed by the Company, Options held at the date of such termination (to the
extent then exercisable) may be exercised, in whole or in part, at any time
within three (3) months after the date of such termination or such lesser period
specified in the Option Agreement (but in no event after the expiration date of
the Option).
4.2. PERMANENT DISABILITY AND DEATH. If an Optionee becomes permanently
and totally disabled (within the meaning of Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended), or dies while employed by the Company, (or if
the Optionee dies within the period that the Option remains exercisable after
termination of employment or affiliation), Options then held (to the extent then
exercisable) may be exercised by the Optionee, the Optionee's personal
representative, or by the person to whom the Option is transferred by will or
the laws of descent and distribution, in whole or in part, at any time within
one (1) year after the disability or death (but in no event after the expiration
date of the Option).
5. RESTRICTIONS ON TRANSFER OF OPTION. This Option is not transferable by
Optionee other than by will or the laws of descent and distribution and is
exercisable only by the Optionee during his lifetime except as provided in
Section 4.2. above. In accordance with the Plan, the Option and the Shares
underlying the Option shall not be available for the debts or obligations of the
Optionee, nor shall it be subject to disposition by transfer, alienation, pledge
or other means of disposition, whether voluntary or involuntary, or by operation
of law through judgment, levy, attachment, garnishment or other legal proceeding
(including bankruptcy).
6. ADJUSTMENT FOR CHANGES IN CAPITALIZATION. The existence of this Option shall
not affect the Company's right to effect adjustments, recapitalizations,
reorganizations or other changes in its or any other corporation's capital
structure or business, any merger or consolidation, any issuance of bonds,
debentures, preferred or prior preference stock ahead of or affecting the
Shares, the dissolution or liquidation of the
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<PAGE> 3
Company's or any other corporation's assets or business, or any other corporate
act, whether similar to the events described above or otherwise. If the
outstanding Shares of the Company's Common Stock are increased or decreased in
number or changed into or exchanged for a different number or kind of securities
of the Company or any other corporation by reason of a recapitalization,
reclassification, stock split, reverse stock split, combination of shares, stock
dividend or other similar event, an appropriate adjustment of the number and
kind of securities with respect to which this Option may be exercised and the
exercise price at which this Option may be exercised will be made.
7. DISSOLUTION, LIQUIDATION AND MERGER.
7.1. COMPANY NOT THE SURVIVOR. In the event of a dissolution or
liquidation of the Company, a merger, consolidation, combination or
reorganization in which the Company is not the surviving corporation, or a sale
of substantially all of the assets of the Company (as determined in the sole
discretion of the Board of Directors), the Administrator, in its absolute
discretion, may cancel each outstanding Option upon payment in cash to the
Optionee of the amount by which any cash and the fair market value of any other
property which the Optionee would have received as consideration for the Shares
of Common Stock covered by the Option if the Option had been exercised before
such liquidation, dissolution, merger, consolidation or sale, exceeds the
exercise price of the Option. In addition to the foregoing, in the event of a
dissolution or liquidation of the Company, or a merger, consolidation,
combination or reorganization, in which the Company is not the surviving
corporation, the Administrator, in its absolute discretion, may accelerate the
time within which each outstanding Option may be exercised.
7.2. COMPANY IS THE SURVIVOR. In the event of a merger, consolidation,
combination or reorganization in which the Company is the surviving corporation,
the Board of Directors shall determine the appropriate adjustment of the number
and kind of securities with respect to which outstanding Options may be
exercised, and the exercise price at which outstanding Options may be exercised.
The Board of Directors shall determine, in its sole and absolute discretion,
when the Company shall be deemed to survive for purposes of this Plan.
8. RESERVATION OF SHARES. The Company agrees that prior to the earlier of the
expiration of this Option and the exercise and purchase of the total number of
Shares represented by this Option, there shall be reserved for issuance and
delivery upon exercise of this Option such number of the Company's authorized
and unissued Shares as shall be necessary to satisfy the terms and conditions of
this Agreement.
9. NO RIGHTS AS SHAREHOLDER. The Optionee shall have no rights as a shareholder
with respect to any Shares covered by this Option unless the Optionee shall have
exercised this Option, and then only with respect to the Shares underlying the
portion of the Option exercised. The Optionee shall have no right to vote any
Shares, or to receive distributions of dividends or any assets or proceeds from
the sale of Company assets upon liquidation until Optionee has effectively
exercised this Option and fully paid for such Shares. Subject to Section 6, no
adjustment shall be made for dividends or other rights for which the record date
is prior to the date title to the Shares has been acquired by the Optionee.
10. NO RIGHTS TO EMPLOYMENT OR CONTINUED EMPLOYMENT. The grant of this Option
shall in no way be construed so as to confer on Optionee the rights to
employment or continued employment by the Company. Nothing in the Plan or
hereunder shall confer upon any Optionee any right to employment or to continue
in the employ of the Company, or to interfere with or restrict in any way the
rights of the Company, which are hereby expressly reserved, to terminate or
discharge any Optionee at any time for any reason
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<PAGE> 4
whatsoever, with or without cause.
11. SUSPENSION AND TERMINATION. In the event the Board or the Administrator
reasonably believes that the Optionee has committed an act of misconduct
specified below, the Administrator may suspend the Optionee's right to exercise
any Option pending final determination by the Board or the Administrator, which
final determination shall be made within five (5) business days of such
suspension. If the Administrator determines that an Optionee has committed an
act of embezzlement, fraud, breach of fiduciary duty or deliberate disregard of
the Company rules resulting in loss, damage or injury to the Company, or if an
Optionee makes an unauthorized disclosure of any Company trade secret or
confidential information, engages in any conduct constituting unfair
competition, induces any Company customer to breach a contract with the Company,
or induces any principal for whom the Company acts as agent to terminate such
agency relationship, neither the Optionee nor his estate shall be entitled to
exercise any Option hereunder. In making such determination, the Board or the
Administrator shall act fairly and in good faith and shall give the Optionee an
opportunity to appear and present evidence on the Optionee's behalf.
12. PARTICIPATION IN OTHER OPTION PLANS. The grant of this Option shall not
prevent Optionee from participating or being granted other options in the same
or other plans; provided, however, that the Optionee meets the eligibility
requirements, and such participation or grant does not prevent the other plan
from meeting the requirements of the Internal Revenue Code of 1986, as amended.
13. PAYMENT OF TAXES. Unless the Administrator of the Plan permits otherwise,
the Optionee shall pay the Company in cash all local, state and federal
withholding taxes applicable, in the Administrator's absolute discretion, to the
grant or exercise of this Option, or the transfer or other disposition of Shares
acquired upon exercise of this Option. Any such payment must be made promptly
when the amount of such obligation becomes determinable. The Administrator may,
in lieu of such cash payment, withhold that number of Shares sufficient to
satisfy such withholding.
14. ISSUE AND TRANSFER TAX. The Company will pay all issuance taxes, if any,
attributable to the initial issuance of Shares upon the exercise of the Option;
provided, however, that the Company shall not be required to pay any tax or
taxes which may be payable in respect of any transfer involved in the issue or
delivery of any certificates for Shares in a name other than that of the
Optionee.
15. ARBITRATION. Any controversy, dispute or claim arising out of or relating to
this Option which cannot be amicably settled including, but not limited to, the
suspension or termination of Optionee's right in accordance with Section 11
above, shall be settled by arbitration. Said arbitration shall be conducted in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association at a time and place as selected by the arbitrator(s).
15.1. INITIATION OF ARBITRATION. After seven (7) days prior written
notice to the other, either party hereto may formally initiate arbitration under
this Agreement by filing a written request therefor, and paying the appropriate
filing fees, if any.
15.2. HEARING AND DETERMINATION DATES. The hearing before the arbitrator
shall occur within thirty (30) days from the date the matter is submitted to
arbitration. Further, a determination by the arbitrator shall be made within
forty-five (45) days from the date the matter is submitted to arbitration.
Thereafter, the arbitrator shall have fifteen (15) days to provide the parties
with his or her decision in writing. However, any failure to meet the deadlines
in this section will not affect the validity of any decision or award.
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<PAGE> 5
15.3. BINDING NATURE OF DECISION. The decision of the arbitrator shall
be binding on the parties. Judgment thereon shall be entered in a court of
competent jurisdiction.
15.4. INJUNCTIVE ACTIONS. Nothing herein contained shall bar the right
of either party to seek to obtain injunctive relief or other provisional
remedies against threatened or actual conduct that will cause loss or damages
under the usual equity rules including the applicable rules for obtaining
preliminary injunctions and other provisional remedies.
15.5. COSTS. The cost of arbitration, including the fees of the
arbitrator, shall initially be borne equally by the parties; provided, the
prevailing party shall be entitled to recover such costs, in addition to
attorneys' fees and other costs, in accordance with Section 18 of this
Agreement.
16. NOTICES. All notices to be given by either party to the other shall be in
writing and may be transmitted by personal delivery, facsimile transmission,
overnight courier or mail, registered or certified, postage prepaid with return
receipt requested; provided, however, that notices of change of address or telex
or facsimile number shall be effective only upon actual receipt by the other
party. Notices shall be delivered at the following addresses, unless changed as
provided for herein:
To the Optionee:
-------------------------------------
-------------------------------------
-------------------------------------
To the Company:
Mr. _______________
AREMISSOFT CORPORATION
3323 Watt Avenue, Suite 150
Sacramento, California 95821
Telephone: 916/431-4199
Facsimile: 916/
17. APPLICABLE LAW. This Option and the relationship of the parties in
connection with its subject matter shall be governed by, and construed under,
the laws of the state of Delaware.
18. ATTORNEYS FEES. In the event of any litigation, arbitration or other
proceeding arising out of this Option, the prevailing party shall be entitled to
an award of costs, including an award of reasonable attorneys' fees. Any
judgment, order or award entered in any such proceeding shall designate a
specific sum as such an award of attorneys' fees and costs incurred. This
attorneys' fee provision is intended to be severable from the other provisions
of this Agreement, shall survive any judgment or order entered in any
proceeding, and shall not be deemed merged into any such judgment or order, so
that such further fees and costs as may be incurred in the enforcement of an
award or judgment or in defending it on appeal shall likewise be recoverable by
further order of a court or panel or in a separate action as may be appropriate.
5
<PAGE> 6
19. BINDING EFFECT. This Agreement shall inure to the benefit of, and be binding
upon, the parties hereto and their respective heirs, executors and successors.
20. TAX EFFECT. For the options to receive possible treatment as incentive stock
options under the Internal Revenue Code, Internal Revenue Service Rules and
Treasury Regulations governing incentive stock options, the Optionee must meet
certain holding period requirements, as follows: the Optionee must (a) not
dispose of any Common Stock acquired upon exercise of this Option within two
years from the date of the grant hereby, and (b) not dispose of any Common Stock
acquired upon exercise of the Option within one year from the date of exercise.
The tax consequences to Optionee from the exercise of this Option and/or sale of
the underlying Common Stock is dependent on Optionee's circumstances, and the
applicable Internal Revenue Service rules and Treasury Regulations then in
effect. The Company makes no representation with respect to tax consequences.
Each person should consult with his or her tax advisor before exercising any
Option or disposing of any Common Stock acquired upon the exercise of an Option.
IN WITNESS WHEREOF, this Option Agreement has been executed on the ____
day of _________________, _______, at Sacramento, California.
AREMISSOFT CORPORATION
------------------------------------
------------------------------------
------------------------------------
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<PAGE> 7
REQUEST TO EXERCISE FORM
Dated:___________________________
The undersigned hereby irrevocably elects to exercise all or part, as
specified below, of the Vested Portion of the option granted to him or her
pursuant to that certain Incentive Stock Option Agreement effective
_____________________, between the undersigned and AremisSoft Corporation (the
"Company") to purchase an aggregate of __________________ (________) shares of
the Company's common stock, $.001 par value (the "Shares").
The undersigned hereby tenders cash in the amount of $__________ per
Share multiplied by ________________________________ (___________), the number
of Shares he is purchasing at this time, for a total of $______________, which
constitutes full payment of the total exercise price thereof.
INSTRUCTIONS FOR REGISTRATION OF SHARES
IN COMPANY'S TRANSFER BOOKS
Name:
--------------------------------------------
(Please typewrite or print in block letters)
Address:
--------------------------------------------
--------------------------------------------
Signature:
--------------------------------------------
Accepted by AremisSoft Corporation:
By:
-------------------------------
------------------------------
Name
------------------------------
Title
7
<PAGE> 1
EXHIBIT 10.7
DATE OF GRANT: _______________________
AREMISSOFT CORPORATION
NONQUALIFIED STOCK OPTION AGREEMENT
THIS OPTION AGREEMENT MAY BE EXERCISED ONLY IN ACCORDANCE WITH THE TERMS AND
CONDITIONS OF THE AREMISSOFT CORPORATION 1998 STOCK OPTION PLAN (THE "PLAN"),
INCORPORATED HEREIN. A COPY OF THE PLAN CAN BE OBTAINED FROM THE COMPANY UPON
REQUEST OF THE HOLDER HEREUNDER. THE GRANT OF THIS OPTION SHALL NOT IMPOSE AN
OBLIGATION UPON THE OPTIONEE TO EXERCISE THIS OPTION.
THIS OPTION AGREEMENT (the "Agreement") is made by and between
AremisSoft Corporation, a Delaware corporation (the "Company") and
_____________________________ ("Optionee"), as of ____________,_________.
In consideration of the mutual covenants contained herein and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the parties hereto agree as follows:
1. GRANT OF OPTION. The Company hereby grants to Optionee, in the manner and,
subject to the conditions hereinafter provided, the right, privilege and option
to purchase (the "Option") an aggregate of ______________________________
(__________) shares of the Company's common stock, $.001 par value, (the
"Shares" or "Common Stock"). This Option is specifically conditioned on
compliance with the terms and conditions set forth herein.
2. TERM OF OPTION. Subject to the terms, conditions and restrictions set forth
herein, the term of this Option shall be ten (10) years from the date of grant
(the "Expiration Date"). Any portion of this Option not exercised prior to the
Expiration Date shall thereupon become null and void.
3. EXERCISE OF OPTION.
3.1. VESTING OF OPTION. This Option shall become exercisable as follows:
Number of Shares Vesting Date
------------------------ ------------------
------------------------ ------------------
------------------------ ------------------
Each of the foregoing dates shall be referred to as a "Vesting Date" for that
portion of this Option vested on such date ("Vested Portion").
All or any portion of the Shares underlying a Vested Portion of this
Option may be purchased during
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<PAGE> 2
the term of this Option, but not as to less than 100 Shares (unless the
remaining Shares then constituting the Vested Portion of this Option is less
than 100 Shares) at any time.
3.2. MANNER OF EXERCISE. The Vested Portion of this Option may be
exercised from time to time, in whole or in part, by presentation of a "Request
To Exercise Form," substantially in the form attached hereto, to the Company at
its principal office, which form must be duly executed by Optionee and
accompanied by payment, in cash, to the Company, in the aggregate amount of the
Exercise Price (as defined below), multiplied by the number of Shares the
Optionee is purchasing at such time, subject to reduction for withholding for
tax obligations as provided in Section 13.
Upon receipt and acceptance by the Company of such form accompanied by
the payment specified, the Optionee shall be deemed to be the record owner of
the Shares purchased, notwithstanding that the stock transfer books of the
Company may then be closed or that certificates representing the Shares
purchased under this Option may not then be actually delivered to the Optionee.
3.3. EXERCISE PRICE. The exercise price (the "Exercise Price") payable
upon exercise of this Option shall be $_____ per Share.
4. EXERCISE AFTER CERTAIN EVENTS.
4.1. TERMINATION OF EMPLOYMENT. If for any reason other than permanent
and total disability (as defined below) or death, an Optionee ceases to be
employed by the Company, Options held at the date of such termination (to the
extent then exercisable) may be exercised, in whole or in part, at any time
within three (3) months after the date of such termination or such lesser period
specified in the Option Agreement (but in no event after the expiration date of
the Option).
4.2. PERMANENT DISABILITY AND DEATH. If an Optionee becomes permanently
and totally disabled (within the meaning of Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended), or dies while employed by the Company, (or if
the Optionee dies within the period that the Option remains exercisable after
termination of employment or affiliation), Options then held (to the extent then
exercisable) may be exercised by the Optionee, the Optionee's personal
representative, or by the person to whom the Option is transferred by will or
the laws of descent and distribution, in whole or in part, at any time within
one (1) year after the disability or death (but in no event after the expiration
date of the Option).
5. RESTRICTIONS ON TRANSFER OF OPTION. This Option is not transferable by
Optionee other than by will or the laws of descent and distribution and is
exercisable only by the Optionee during his or her lifetime except as provided
in Section 4.2. above. In accordance with the Plan, the Option and the Shares
underlying the Option shall not be available for the debts or obligations of the
Optionee, nor shall it be subject to disposition by transfer, alienation, pledge
or other means of disposition, whether voluntary or involuntary, or by operation
of law through judgment, levy, attachment, garnishment or other legal proceeding
(including bankruptcy).
6. ADJUSTMENT FOR CHANGES IN CAPITALIZATION. The existence of this Option shall
not affect the Company's right to effect adjustments, recapitalizations,
reorganizations or other changes in its or any other corporation's capital
structure or business, any merger or consolidation, any issuance of bonds,
debentures, preferred or prior preference stock ahead of or affecting the
Shares, the dissolution or liquidation of the Company's or any other
corporation's assets or business, or any other corporate act, whether similar to
the
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<PAGE> 3
events described above or otherwise. If the outstanding Shares of the Company's
Common Stock are increased or decreased in number or changed into or exchanged
for a different number or kind of securities of the Company or any other
corporation by reason of a recapitalization, reclassification, stock split,
reverse stock split, combination of shares, stock dividend or other similar
event, an appropriate adjustment of the number and kind of securities with
respect to which this Option may be exercised and the exercise price at which
this Option may be exercised will be made.
7. DISSOLUTION, LIQUIDATION AND MERGER.
7.1. COMPANY NOT THE SURVIVOR. In the event of a dissolution or
liquidation of the Company, a merger, consolidation, combination or
reorganization in which the Company is not the surviving corporation, or a sale
of substantially all of the assets of the Company (as determined in the sole
discretion of the Board of Directors), the Administrator, in its absolute
discretion, may cancel each outstanding Option upon payment in cash to the
Optionee of the amount by which any cash and the fair market value of any other
property which the Optionee would have received as consideration for the Shares
of Common Stock covered by the Option if the Option had been exercised before
such liquidation, dissolution, merger, consolidation or sale, exceeds the
exercise price of the Option. In addition to the foregoing, in the event of a
dissolution or liquidation of the Company, or a merger, consolidation,
combination or reorganization, in which the Company is not the surviving
corporation, the Administrator, in its absolute discretion, may accelerate the
time within which each outstanding Option may be exercised.
7.2. COMPANY IS THE SURVIVOR. In the event of a merger, consolidation,
combination or reorganization in which the Company is the surviving corporation,
the Board of Directors shall determine the appropriate adjustment of the number
and kind of securities with respect to which outstanding Options may be
exercised, and the exercise price at which outstanding Options may be exercised.
The Board of Directors shall determine, in its sole and absolute discretion,
when the Company shall be deemed to survive for purposes of this Plan.
8. RESERVATION OF SHARES. The Company agrees that prior to the earlier of the
expiration of this Option and the exercise and purchase of the total number of
Shares represented by this Option, there shall be reserved for issuance and
delivery upon exercise of this Option such number of the Company's authorized
and unissued Shares as shall be necessary to satisfy the terms and conditions of
this Agreement.
9. NO RIGHTS AS SHAREHOLDER. The Optionee shall have no rights as a shareholder
with respect to any Shares covered by this Option unless the Optionee shall have
exercised this Option, and then only with respect to the Shares underlying the
portion of the Option exercised. The Optionee shall have no right to vote any
Shares, or to receive distributions of dividends or any assets or proceeds from
the sale of Company assets upon liquidation until Optionee has effectively
exercised this Option and fully paid for such Shares. Subject to Section 6, no
adjustment shall be made for dividends or other rights for which the record date
is prior to the date title to the Shares has been acquired by the Optionee.
10. NO RIGHTS TO EMPLOYMENT OR CONTINUED EMPLOYMENT. The grant of this Option
shall in no way be construed so as to confer on Optionee the rights to
employment or continued employment by the Company. Nothing in the Plan or
hereunder shall confer upon any Optionee any right to employment or to continue
in the employ of the Company, or to interfere with or restrict in any way the
rights of the Company, which are hereby expressly reserved, to terminate or
discharge any Optionee at any time for any reason whatsoever, with or without
cause.
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<PAGE> 4
11. SUSPENSION AND TERMINATION. In the event the Board or the Administrator
reasonably believes that the Optionee has committed an act of misconduct
specified below, the Administrator may suspend the Optionee's right to exercise
any Option pending final determination by the Board or the Administrator, which
final determination shall be made within five (5) business days of such
suspension. If the Administrator determines that an Optionee has committed an
act of embezzlement, fraud, breach of fiduciary duty, or deliberate disregard of
the Company rules resulting in loss, damage or injury to the Company, or if an
Optionee makes an unauthorized disclosure of any Company trade secret or
confidential information, engages in any conduct constituting unfair
competition, induces any Company customer to breach a contract with the Company,
or induces any principal for whom the Company acts as agent to terminate such
agency relationship, neither the Optionee nor his or her estate shall be
entitled to exercise any Option hereunder. In making such determination, the
Board or the Administrator shall act fairly and in good faith and shall give the
Optionee an opportunity to appear and present evidence on the Optionee's behalf.
12. PARTICIPATION IN OTHER OPTION PLANS. The grant of this Option shall not
prevent Optionee from participating or being granted other options in the same
or other plans; provided, however, that the Optionee meets the eligibility
requirements, and such participation or grant does not prevent the other plan
from meeting the requirements of the Internal Revenue Code of 1986, as amended.
13. PAYMENT OF TAXES. Unless the Administrator of the Plan permits otherwise,
the Optionee shall pay the Company in cash all local, state and federal
withholding taxes applicable, in the Administrator's absolute discretion, to the
grant or exercise of this Option, or the transfer or other disposition of Shares
acquired upon exercise of this Option. Any such payment must be made promptly
when the amount of such obligation becomes determinable. The Administrator may,
in lieu of such cash payment, withhold that number of Shares sufficient to
satisfy such withholding.
14. ISSUE AND TRANSFER TAX. The Company will pay all issuance taxes, if any,
attributable to the initial issuance of Shares upon the exercise of the Option;
provided, however, that the Company shall not be required to pay any tax or
taxes which may be payable in respect of any transfer involved in the issue or
delivery of any certificates for Shares in a name other than that of the
Optionee.
15. ARBITRATION. Any controversy, dispute or claim arising out of or relating to
this Option which cannot be amicably settled including, but not limited to, the
suspension or termination of Optionee's right in accordance with Section 11
above, shall be settled by arbitration. Said arbitration shall be conducted in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association at a time and place as selected by the arbitrator(s).
15.1. INITIATION OF ARBITRATION. After seven (7) days prior written
notice to the other, either party hereto may formally initiate arbitration under
this Agreement by filing a written request therefor, and paying the appropriate
filing fees, if any.
15.2. HEARING AND DETERMINATION DATES. The hearing before the arbitrator
shall occur within thirty (30) days from the date the matter is submitted to
arbitration. Further, a determination by the arbitrator shall be made within
forty-five (45) days from the date the matter is submitted to arbitration.
Thereafter, the arbitrator shall have fifteen (15) days to provide the parties
with his or her decision in writing. However, any failure to meet the deadlines
in this section will not affect the validity of any decision or award.
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<PAGE> 5
15.3. BINDING NATURE OF DECISION. The decision of the arbitrator shall
be binding on the parties. Judgment thereon shall be entered in a court of
competent jurisdiction.
15.4. INJUNCTIVE ACTIONS. Nothing herein contained shall bar the right
of either party to seek to obtain injunctive relief or other provisional
remedies against threatened or actual conduct that will cause loss or damages
under the usual equity rules including the applicable rules for obtaining
preliminary injunctions and other provisional remedies.
15.5. COSTS. The cost of arbitration, including the fees of the
arbitrator, shall initially be borne equally by the parties; provided, the
prevailing party shall be entitled to recover such costs, in addition to
attorneys' fees and other costs, in accordance with Section 18 of this
Agreement.
16. NOTICES. All notices to be given by either party to the other shall be in
writing and may be transmitted by personal delivery, facsimile transmission,
overnight courier or mail, registered or certified, postage prepaid with return
receipt requested; provided, however, that notices of change of address or telex
or facsimile number shall be effective only upon actual receipt by the other
party. Notices shall be delivered at the following addresses, unless changed as
provided for herein:
To the Optionee:
-------------------------------------
-------------------------------------
-------------------------------------
To the Company:
Mr.
---------------------------
---------------------------
AREMISSOFT CORPORATION
3323 Watt Avenue, Suite 150
Sacramento, California 95821
Telephone: 916/431-4199
Facsimile: 916/________
17. APPLICABLE LAW. This Option and the relationship of the parties in
connection with its subject matter shall be governed by, and construed under,
the laws of the state of Delaware.
18. ATTORNEYS FEES. In the event of any litigation, arbitration or other
proceeding arising out of this Option, the prevailing party shall be entitled to
an award of costs, including an award of reasonable attorneys' fees. Any
judgment, order or award entered in any such proceeding shall designate a
specific sum as such an award of attorneys' fees and costs incurred. This
attorneys' fee provision is intended to be severable from the other provisions
of this Agreement, shall survive any judgment or order entered in any
proceeding, and shall not be deemed merged into any such judgment or order, so
that such further fees and costs as may be incurred in the enforcement of an
award or judgment or in defending it on appeal shall likewise be recoverable by
further order of a court or panel or in a separate action as may be appropriate.
19. BINDING EFFECT. This Agreement shall inure to the benefit of, and be binding
upon, the parties hereto
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<PAGE> 6
and their respective heirs, executors and successors.
20. TAX EFFECT. The federal tax consequences of stock options are complex and
subject to change. Each person should consult with his or her tax advisor before
exercising any Option or disposing of any Shares acquired upon the exercise of
an Option.
IN WITNESS WHEREOF, this Option Agreement has been executed on the ____
day of _________________, _______, at Sacramento, California.
AREMISSOFT CORPORATION
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REQUEST TO EXERCISE FORM
Dated:___________________________
The undersigned hereby irrevocably elects to exercise all or part, as
specified below, of the Vested Portion of the option granted to him or her
pursuant to that certain Non-qualified Stock Option Agreement effective
_____________________, between the undersigned and AremisSoft Corporation (the
"Company") to purchase an aggregate of __________________ (________) shares of
the Company's common stock, $.001 par value (the "Shares").
The undersigned hereby tenders cash in the amount of $__________ per
Share multiplied by ________________________________ (___________), the number
of Shares he is purchasing at this time, for a total of $______________, which
constitutes full payment of the total exercise price thereof.
INSTRUCTIONS FOR REGISTRATION OF SHARES
IN COMPANY'S TRANSFER BOOKS
Name:
--------------------------------------------
(Please typewrite or print in block letters)
Address:
--------------------------------------------
--------------------------------------------
Signature:
--------------------------------------------
Accepted by AremisSoft Corporation:
By:
------------------------------
------------------------------
Name
------------------------------
Title
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<PAGE> 1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
BETWEEN
AREMISSOFT CORPORATION
AND
DR. LYCOURGOS K. KYPRIANOU
THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated June 1, 1998, is
entered into by and between AremisSoft Corporation, a Delaware corporation (the
"Company") and Dr. Lycourgos K. Kyprianou (the "Executive"), collectively
referred to herein as the "parties."
WHEREAS, the Company wishes to employ the Executive to serve as its
Chief Executive Officer and Chairman of the Board of Directors as well as to
perform other duties on behalf of the Company, as determined by the Board of
Directors of the Company (the "Board").
NOW, THEREFORE, for and in consideration of the mutual promises and
conditions made herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows.
ARTICLE I
EMPLOYMENT AND TERM OF EMPLOYMENT
1.1. EMPLOYMENT AND TERM. The Company hereby employs Executive to render
full-time services to the Company on an exclusive basis, upon the terms and
conditions set forth below, from the date of this Agreement until the employment
relationship is terminated in accordance with the provisions of this Agreement.
This Agreement is for a term of three (3) years (the "Stated Term") unless
terminated earlier as provided for herein (the "Employment Term").
1.2. ACCEPTANCE. Executive hereby accepts employment with the Company
and agrees to devote his full-time attention and best efforts exclusively to
rendering the services described below. The Executive shall accept and follow
the direction and authority of the Board in the performance of his duties, and
shall comply with all existing and future regulations applicable to employees of
the Company and to the Company's business.
ARTICLE II
DUTIES OF EMPLOYEE
2.1. GENERAL DUTIES. Executive shall serve as Chief Executive Officer
and Chairman of the Board of Directors of the Company. In such capacities,
Executive shall do and perform all services, acts, or other things necessary or
advisable to manage and conduct the business of the Company, including, but not
limited to, the supervision, direction and control of the business and other
employees of the Company, subject to the policies and direction of the Board. To
the extent consistent with the Company's Certificate of Incorporation
("articles") and Bylaws ("bylaws"), Executive shall have all
1
<PAGE> 2
powers, duties and responsibilities necessary to carry out his duties, and such
other powers and duties as the Board may prescribe consistent with the Company's
articles and bylaws.
2.2. EXCLUSIVE SERVICES. It is understood and agreed that the Executive
may not engage in any other business activity during the Employment Term,
whether or not for profit or other remuneration, without the prior written
consent of the Company; provided, however, that the Executive may make personal
financial investments which do not involve any material active participation on
his part, and may engage in charitable, philanthropic, educational, religious,
civic and similar types of activities to the extent that such activities do not
hinder or otherwise interfere with the business of the Company or any affiliate
or subsidiary of the Company, or the performance of the Executive's duties under
this Agreement. Notwithstanding the foregoing, during the Employment Term,
Executive shall not directly or indirectly acquire any stock or interest in any
corporation, partnership, or other business entity that competes, directly or
indirectly, with the business of the Company without obtaining the prior written
consent of the Company.
It is also understood and agreed that the Executive will not compete
with the Company during the Employment Term. For purposes of this Agreement, the
phrase "compete with the Company," or the substantial equivalent thereof, means
that Executive, either alone or as a partner, member, director, employee,
shareholder or agent of any other business, or in any other individual or
representative capacity, directly or indirectly owns, manages, operates,
controls, or participates in the ownership, management, operation or control of,
or works for or provides consulting services to, or permits the use of his name
by, or lends money to, any business or activity which is or which becomes, at
the time of the acts or conduct in question, directly or indirectly competitive
with the development, financing and/or marketing of the products, proposed
products or services of the Company.
2.3. REPORTING OBLIGATIONS. In connection with the performance of his
duties hereunder, unless otherwise instructed by the Board, the Executive shall
report directly to the Board.
ARTICLE III
COMPENSATION AND BENEFITS OF EMPLOYEE
3.1. ANNUAL BASE SALARY. The Company shall pay the Executive salary for
the services to be rendered by him during the term of this Agreement at the rate
of two hundred fifty thousand dollars ($250,000) annually (prorated for any
portion of a year), subject to increases, if any, as the Company's Compensation
Committee may determine in its sole discretion after periodic review of the
Executive's performance of his duties hereunder. Such base salary shall be
payable in periodic installments in accordance with the terms of the Company's
regular payroll practices in effect from time to time during the term of this
Agreement, but in no event less frequently than once each month.
3.2. BONUSES. In addition to the base salary and other benefits provided
to Executive hereunder, Executive is eligible to receive bonuses based on
performance and Executive's attainment of objectives established by the Board or
Compensation Committee periodically. The bonuses to be provided to the Executive
shall not exceed seventy five percent (75%) of his annual base salary, as
defined in Section 3.1. above, then in effect.
3.3. STOCK OPTIONS. Upon stockholder approval of the Company's 1998
Stock Option Plan, Executive may be granted stock options to purchase shares of
the Company's common stock, as
2
<PAGE> 3
determined from time to time by the Board or Compensation Committee and subject
to (a) the terms and conditions contained in the Company's 1998 Stock Option
Plan, (b) the terms and conditions set forth herein and (c) the Executive's
execution of a stock option agreement and all documents customarily required by
the Company to effect the grant of the options.
3.4. EXPENSES. The Company shall pay or reimburse the Executive for all
reasonable, ordinary and necessary business expenses actually incurred or paid
by the Executive in the performance of Executive's services under this Agreement
in accordance with the expense reimbursement policies of the Company in effect
from time to time during the Employment Term, upon presentation of proper
expense statements or vouchers or such other written supporting documents as the
Company may reasonably require.
3.5. VACATION. The Executive shall be entitled to four (4) weeks paid
vacation for each calendar year (prorated for any portion of a year, as
applicable). Notwithstanding anything to the contrary in this Agreement,
vacation time shall cease to accrue beyond eight weeks at any given time during
the Employment Term.
3.6. INDEMNIFICATION. Consistent with the terms of the Company's
articles and bylaws, the Company shall indemnify Executive against any losses,
costs, damages or expenses incurred as a direct consequence of the discharge of
his duties or by reason of his status as an agent of the Company and hold
Executive harmless for any actions taken or decisions made by him in good faith
while performing services in his capacity as Chief Executive Officer and
Chairman of the Board of the Company during the Employment Term.
3.7. GENERAL EMPLOYMENT BENEFITS. Except where expressly provided for
herein, the Executive shall be entitled to participate in, and to receive the
benefits under, any pension, health, life, accident and disability insurance
plans or programs and any other employee benefit or fringe benefit plans that
the Company makes available generally to its employees, as the same may be in
effect from time to time during the Employment Term.
ARTICLE IV
TERMINATION OF EMPLOYMENT
4.1. TERMINATION. This Agreement may be terminated earlier as provided
for in this Article IV, or extended by further written agreement of the parties.
4.2. TERMINATION FOR CAUSE. The Company reserves the right to terminate
this Agreement for cause upon: (a) Executive's willful and continued failure to
substantially perform his duties with the Company (other than such failure
resulting from his incapacity due to physical or mental illness) (b) Executive's
willful engagement in gross misconduct, as determined by the Board, which is
materially and demonstrably injurious to the Company; or (c) Executive's
commission of a felony, or an act of fraud against the Company or its
affiliates.
Executive shall not be entitled to any severance benefits and all
options which have not vested shall be canceled upon termination for cause.
4.3. TERMINATION WITHOUT CAUSE. Notwithstanding anything to the contrary
in this Agreement, the Company reserves the right to terminate this Agreement at
any time upon thirty (30) days written notice to Executive, without cause,
subject to the express terms and provisions below.
3
<PAGE> 4
4.4. SEVERANCE BENEFIT UPON TERMINATION WITHOUT CAUSE. Notwithstanding
anything to the contrary in this Agreement, if Executive is terminated without
cause, Executive shall receive a lump sum cash payment equal to the annual base
salary of Executive, as contained in Section 3.1 of this Agreement, then in
effect.
4.5. VOLUNTARY TERMINATION BY EXECUTIVE. Notwithstanding anything to the
contrary in this Agreement, Executive may terminate this Agreement at any time
upon thirty (30) days written notice to the Company, subject to the terms and
provisions below.
Other than termination "without cause", as contained in Section 4.4 of
this Agreement, or a "change of control" of the Company, as contained in Section
4.6 of this Agreement, the Company shall not be obligated to pay any severance
benefit to Executive if Executive terminates this Agreement pursuant to this
Section 4.5.
4.6. SEVERANCE BENEFIT UPON CHANGE IN CONTROL. Notwithstanding anything
to the contrary in this Agreement, if the Company terminates this Agreement for
any reason, other than "for cause" pursuant to Section 4.2 of this Agreement,
within one hundred eighty (180) days of a "change of control" as hereinafter
defined, the Company shall pay Executive a lump sum cash payment equal to 2.99
times the annual base salary of Executive, as contained in Section 3.1 of this
Agreement, or Executive's then current rate of compensation, whichever is
greater. For purposes of this Section 4.6, a "change of control" shall mean an
event involving one transaction or a series of related transactions in which (i)
the Company issues securities equal to more than fifty percent (50%) of the
issued and outstanding capital stock of the Company to any individual, firm,
partnership, or other entity, including a "group" within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934 (the "Exchange Act"), (ii) the
Company issues securities equal to more than fifty percent (50%) of the issued
and outstanding capital stock of the Company in connection with a merger,
consolidation or other business combination (other than for purposes of
reincorporation), (iii) the Company is acquired in a merger or other business
combination transaction in which the Company is not the surviving corporation
(other than a reincorporation), or (iv) more than fifty percent (50%) of the
Company's consolidated assets or earning power are sold or transferred.
4.7. DISABILITY. If Executive becomes permanently and totally disabled,
this Agreement shall be terminated. Executive shall be deemed permanently and
totally disabled if he is unable to engage in the activities required by this
Agreement by reason of any medically determinable physical or mental impairment,
as confirmed by three independent physicians, which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months. Upon termination due to disability, Executive shall be
entitled to receive a lump sum payment equal to his annual base salary, as
contained in Section 3.1 of this Agreement, then in effect.
4.8. DEATH. If Executive dies during the term of this Agreement, this
Agreement shall be terminated on the last day of the calendar month of his death
subject to the express terms and provisions below.
Upon termination due to death, the designated beneficiary, as provided
in Section 6.8 below, or the estate or representative of Executive, shall be
entitled to receive a lump sum payment equal to his annual base salary, as
contained in Section 3.1 of this Agreement, then in effect.
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4.9. EFFECT OF TERMINATION. Except as expressly provided for in this
Agreement, the termination of employment shall not impair any obligation that
accrued prior to termination, nor shall it excuse the performance of any
obligation which is required or contemplated hereunder to be performed after
termination, and any such obligation shall survive the termination of employment
and this Agreement.
ARTICLE V
COVENANTS AND REPRESENTATIONS OF EMPLOYEE
5.1. UNFAIR AND NON-COMPETITION. The Executive acknowledges that he will
have access at the highest level to, and the opportunity to acquire knowledge
of, the Company's customer lists, customer needs, business plans, trade secrets
and other confidential and proprietary information from which the Company may
derive economic or competitive advantage, and that he is entering into the
covenants and representations in this Article V in order to preserve the
goodwill and going concern value of the Company, and to induce the Company to
enter into this Agreement. The Executive agrees not to compete with the Company
or to engage in any unfair competition with Employer during the Employment Term,
but not limited to the acts and conduct described below.
5.2. CONFIDENTIAL INFORMATION. During the Employment Term, Executive
agrees to keep secret and to retain in the strictest confidence all confidential
matters which relate to the Company or its "affiliate" (as that term is defined
in the Exchange Act), including, without limitation, customer lists, client
lists, trade secrets, pricing lists, business plans, financial projections and
reports, business strategies, internal operating procedures, and other
confidential business information from which the Company derives an economic or
competitive advantage, or from which the Company might derive such advantage in
its business, labeled "secret" or "confidential" or some similar term, and not
to disclose any such information to anyone outside of the Company, whether
during or after the Employment Term, except as required in connection with
performing the services to the Company.
5.3. NON-SOLICITATION OF CUSTOMERS. During the Employment Term, the
Executive will have access to confidential records and data pertaining to the
Company's customers, their needs, and the relationship between the Company and
its customers. Such information is considered secret and is disclosed during the
Employment Term in confidence. Accordingly, during the Employment Term,
Executive and any entity controlled by him or with which he is associated (as
the terms "control" and "associate" are defined in the Exchange Act) shall not,
directly or indirectly (i) solicit for a competitive purpose, interfere with,
induce or entice away any person or entity that is or was a client, customer or
agent of the Company or its affiliates (as the term "affiliate" is defined in
the Exchange Act), or (ii) in any manner persuade or attempt to persuade any
such person or entity (A) to discontinue its business relationship with the
Company or its affiliates, or (B) to enter into a business relationship with any
other entity or person the loss of which the Executive should reasonably
anticipate would be detrimental to the Company or its affiliates in any respect.
5.4. NON-SOLICITATION OF EXECUTIVES. The Executive and any entity
controlled by him or with which he is associated (as the terms "control" and
"associate" are defined in the Exchange Act) shall not, during the Employment
Term, directly or indirectly solicit, interfere with, offer to hire or induce
any person who is or was an officer or employee of the Company or any affiliate
(as the term "affiliate" is defined in the Exchange Act) (other than secretarial
personnel) to discontinue his or her relationship with the Company or an
affiliate of the Company, in order to accept employment by, or enter into a
business relationship with, any other entity or person. (These acts are
hereinafter referred to as the "prohibited
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acts of solicitation.") The foregoing restriction, however, shall not apply to
any business with which Executive may become associated after the Employment
Term.
5.5. RETURN OF PROPERTY. Upon termination of employment, and at the
request of the Company, the Executive agrees to promptly deliver to the Company
all Company or affiliate memoranda, notes, records, reports, manuals, drawings,
designs, computer files in any media, and other documents (including extracts
and copies thereof) relating to the Company or its affiliates, and all other
property of the Company.
5.6. INVENTIONS. All processes, inventions, patents, copyrights,
trademarks, and other intangible rights that may be conceived or developed by
the Executive, either alone or with others, during the Employment Term, whether
or not conceived or developed during Executive's working hours, and with respect
to which the equipment, supplies, facilities or trade secret information of the
Company was used, or that relate at the time of conception or reduction to
practice of the invention to the business of the Company, or to the Company's
actual or demonstrably anticipated research or development, or that result from
any work performed by Executive for the Company, shall be the sole property of
the Company. Upon the request of the Company, Executive shall disclose to the
Company all inventions or ideas conceived during the Employment Term, whether or
not the property of the Company under the terms of this provision, provided that
such disclosure shall be received by the Company in confidence. Upon the request
of the Company, Executive shall execute all documents, including patent
applications and assignments, required by the Company to establish the Company's
rights under this provision.
5.7. REPRESENTATIONS. The Executive represents and warrants to the
Company that he has full power to enter into this Agreement and perform his
duties hereunder, and that his execution and delivery of this Agreement and the
performance of his duties shall not result in a breach of, or constitute a
default under, any agreement or understanding, whether oral or written,
including, without limitation, any restrictive covenant or confidentiality
agreement, to which he is a party or by which he may be bound.
5.8. NON-PAYMENT UPON NON-COMPLIANCE. Should Executive breach any one of
the covenants set forth in this Article V, the Company shall have no obligation
to make the payments or to provide Executive the benefits described in Sections
4.4 or 4.6 above, as applicable, in addition to all other rights and remedies
the Company may have available at law or in equity. The Company shall provide
written notice to Executive, ten (10) days prior to an expected payment, of the
breach of a covenant and the ensuing non-payment thereof; provided, however,
that if the Company learns of the breach without sufficient time to provide ten
(10) days notice, the Company shall provide written notice as soon thereafter as
practicable.
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ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1. NOTICES. All notices to be given by either party to the other shall
be in writing and may be transmitted by personal delivery, facsimile
transmission, overnight courier or mail, registered or certified, postage
prepaid with return receipt requested; provided, however, that notices of change
of address or telex or facsimile number shall be effective only upon actual
receipt by the other party. Notices shall be delivered at the following
addresses, unless changed as provided for herein.
To the Executive:
Dr. Lycourgos K. Kyprianou
------------
------------
------------
To the Company:
AremisSoft Corporation
60 Bishopsgate
London, England EC2N 4AJ
Facsimile: 011-44-171-309-1555
With Copy to:
Scott E. Bartel
BARTEL ENG LINN & SCHRODER
300 Capitol Mall, Suite 1100
Sacramento, California 95814
Facsimile: (916) 442-3442
6.2. NO ASSIGNMENT, IN GENERAL. Except as provided below, this
Agreement, and the rights and obligations of the parties, may not be assigned by
either party without the prior written consent of the other party.
6.3. WITHHOLDING TAXES. All amounts payable under this Agreement,
whether such payment is to be made in cash or other property, including without
limitation stock of the Company, shall be subject to withholding for Federal,
state and local income taxes, employment and payroll taxes, and other legally
required withholding taxes and contributions to the extent appropriate in the
determination of the Company, and the Executive agrees to report all such
amounts as ordinary income on his personal income tax returns and for all other
purposes, as called for.
6.4. SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable by any judgment of a tribunal of competent
jurisdiction, the remaining provisions and terms of this
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Agreement shall not be affected by such judgment, and this Agreement shall be
carried out as nearly as possible according to its original terms and intent
and, to the full extent permitted by law, any provision or restrictions found to
be invalid shall be amended with such modifications as may be necessary to cure
such invalidity, and such restrictions shall apply as so modified, or if such
provisions cannot be amended, they shall be deemed severable from the remaining
provisions and the remaining provisions shall be fully enforceable in accordance
with law.
6.5. EFFECT OF WAIVER. The failure of either party to insist on strict
compliance with any provision of this Agreement by the other party shall not be
deemed a waiver of such provision, or a relinquishment of any right thereunder,
or to affect either the validity of this Agreement, and shall not prevent
enforcement of such provision, or any similar provision, at any time.
6.6. DESIGNATION OF BENEFICIARY. If the Executive shall die before
receipt of all payments and benefits to which he is entitled under this
Agreement, payment of such amounts or benefits in the manner provided herein
shall be made to such beneficiary as he shall have designated in writing filed
with the Secretary of the Company or, in the absence of such designation, to his
estate or personal representative.
6.7. ATTORNEYS FEES. In the event of any litigation arising out of this
Agreement, or the parties' performance as outlined herein, the prevailing party
shall be entitled to an award of costs, including an award of reasonable
attorney's fees.
6.8. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which when taken together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
COMPANY: AREMISSOFT CORPORATION
By:
--------------------------------------
Roys Poyiadjis
President
EXECUTIVE:
--------------------------------------
Dr. Lycourgos K. Kyprianou
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<PAGE> 1
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
BETWEEN
AREMISSOFT CORPORATION
AND
ROYS POYIADJIS
THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated June 1, 1998, is
entered into by and between AremisSoft Corporation, a Delaware corporation (the
"Company") and Roys Poyyiadjis (the "Executive"), collectively referred to
herein as the "parties."
WHEREAS, the Company wishes to employ the Executive to serve as its
President and Vice Chairman of the Board of Directors as well as to perform
other duties on behalf of the Company, as determined by the Board of Directors
of the Company (the "Board").
NOW, THEREFORE, for and in consideration of the mutual promises and
conditions made herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows.
ARTICLE I
EMPLOYMENT AND TERM OF EMPLOYMENT
1.1. EMPLOYMENT AND TERM. The Company hereby employs Executive to
render full-time services to the Company on an exclusive basis, upon the terms
and conditions set forth below, from the date of this Agreement until the
employment relationship is terminated in accordance with the provisions of this
Agreement. This Agreement is for a term of three (3) years (the "Stated Term")
unless terminated earlier as provided for herein (the "Employment Term").
1.2. ACCEPTANCE. Executive hereby accepts employment with the Company
and agrees to devote his full-time attention and best efforts exclusively to
rendering the services described below. The Executive shall accept and follow
the direction and authority of the Board in the performance of his duties, and
shall comply with all existing and future regulations applicable to employees of
the Company and to the Company's business.
ARTICLE II
DUTIES OF EMPLOYEE
2.1. GENERAL DUTIES. Executive shall serve as President and Vice
Chairman of the Board of Directors of the Company. In such capacities, Executive
shall do and perform all services, acts, or other things necessary or advisable
to manage and conduct the business of the Company, including, but not limited
to, the supervision, direction and control of the business and other employees
of the Company, subject to the policies and direction of the Board. To the
extent consistent with the Company's Certificate
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<PAGE> 2
of Incorporation ("articles") and Bylaws ("bylaws"), Executive shall have all
powers, duties and responsibilities necessary to carry out his duties, and such
other powers and duties as the Board may prescribe consistent with the Company's
articles and bylaws.
2.2. EXCLUSIVE SERVICES. It is understood and agreed that the
Executive may not engage in any other business activity during the Employment
Term, whether or not for profit or other remuneration, without the prior written
consent of the Company; provided, however, that the Executive may make personal
financial investments which do not involve any material active participation on
his part, and may engage in charitable, philanthropic, educational, religious,
civic and similar types of activities to the extent that such activities do not
hinder or otherwise interfere with the business of the Company or any affiliate
or subsidiary of the Company, or the performance of the Executive's duties under
this Agreement. Notwithstanding the foregoing, during the Employment Term,
Executive shall not directly or indirectly acquire any stock or interest in any
corporation, partnership, or other business entity that competes, directly or
indirectly, with the business of the Company without obtaining the prior written
consent of the Company.
It is also understood and agreed that the Executive will not compete
with the Company during the Employment Term. For purposes of this Agreement, the
phrase "compete with the Company," or the substantial equivalent thereof, means
that Executive, either alone or as a partner, member, director, employee,
shareholder or agent of any other business, or in any other individual or
representative capacity, directly or indirectly owns, manages, operates,
controls, or participates in the ownership, management, operation or control of,
or works for or provides consulting services to, or permits the use of his name
by, or lends money to, any business or activity which is or which becomes, at
the time of the acts or conduct in question, directly or indirectly competitive
with the development, financing and/or marketing of the products, proposed
products or services of the Company.
2.3. REPORTING OBLIGATIONS. In connection with the performance of his
duties hereunder, unless otherwise instructed by the Board, the Executive shall
report directly to the Board.
ARTICLE III
COMPENSATION AND BENEFITS OF EMPLOYEE
3.1. ANNUAL BASE SALARY. The Company shall pay the Executive salary
for the services to be rendered by him during the term of this Agreement at the
rate of two hundred thousand dollars ($200,000) annually (prorated for any
portion of a year), subject to increases, if any, as the Company's Compensation
Committee may determine in its sole discretion after periodic review of the
Executive's performance of his duties hereunder. Such base salary shall be
payable in periodic installments in accordance with the terms of the Company's
regular payroll practices in effect from time to time during the term of this
Agreement, but in no event less frequently than once each month.
3.2. BONUSES. In addition to the base salary and other benefits
provided to Executive hereunder, Executive is eligible to receive bonuses based
on performance and Executive's attainment of objectives established by the Board
or Compensation Committee periodically. The bonuses to be provided to the
Executive shall not exceed seventy five percent (75%) of his annual base salary,
as defined in Section 3.1. above, then in effect.
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<PAGE> 3
3.3. STOCK OPTIONS. Upon stockholder approval of the Company's 1998
Stock Option Plan, Executive may be granted stock options to purchase shares of
the Company's common stock, as determined from time to time by the Board or
Compensation Committee and subject to (a) the terms and conditions contained in
the Company's 1998 Stock Option Plan, (b) the terms and conditions set forth
herein and (c) the Executive's execution of a stock option agreement and all
documents customarily required by the Company to effect the grant of the
options.
3.4. EXPENSES. The Company shall pay or reimburse the Executive for
all reasonable, ordinary and necessary business expenses actually incurred or
paid by the Executive in the performance of Executive's services under this
Agreement in accordance with the expense reimbursement policies of the Company
in effect from time to time during the Employment Term, upon presentation of
proper expense statements or vouchers or such other written supporting documents
as the Company may reasonably require.
3.5. VACATION. The Executive shall be entitled to four (4) weeks paid
vacation for each calendar year (prorated for any portion of a year, as
applicable). Notwithstanding anything to the contrary in this Agreement,
vacation time shall cease to accrue beyond eight weeks at any given time during
the Employment Term.
3.6. INDEMNIFICATION. Consistent with the terms of the Company's
articles and bylaws, the Company shall indemnify Executive against any losses,
costs, damages or expenses incurred as a direct consequence of the discharge of
his duties or by reason of his status as an agent of the Company and hold
Executive harmless for any actions taken or decisions made by him in good faith
while performing services in his capacity as President and Vice Chairman of the
Board of the Company during the Employment Term.
3.7. GENERAL EMPLOYMENT BENEFITS. Except where expressly provided for
herein, the Executive shall be entitled to participate in, and to receive the
benefits under, any pension, health, life, accident and disability insurance
plans or programs and any other employee benefit or fringe benefit plans that
the Company makes available generally to its employees, as the same may be in
effect from time to time during the Employment Term.
ARTICLE IV
TERMINATION OF EMPLOYMENT
4.1. TERMINATION. This Agreement may be terminated earlier as provided
for in this Article IV, or extended by further written agreement of the parties.
4.2. TERMINATION FOR CAUSE. The Company reserves the right to
terminate this Agreement for cause upon: (a) Executive's willful and continued
failure to substantially perform his duties with the Company (other than such
failure resulting from his incapacity due to physical or mental illness) (b)
Executive's willful engagement in gross misconduct, as determined by the Board,
which is materially and demonstrably injurious to the Company; or (c)
Executive's commission of a felony, or an act of fraud against the Company or
its affiliates.
Executive shall not be entitled to any severance benefits and all
options which have not vested shall be canceled upon termination for cause.
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<PAGE> 4
4.3. TERMINATION WITHOUT CAUSE. Notwithstanding anything to the
contrary in this Agreement, the Company reserves the right to terminate this
Agreement at any time upon thirty (30) days written notice to Executive, without
cause, subject to the express terms and provisions below.
4.4. SEVERANCE BENEFIT UPON TERMINATION WITHOUT CAUSE. Notwithstanding
anything to the contrary in this Agreement, if Executive is terminated without
cause, Executive shall receive a lump sum cash payment equal to the annual base
salary of Executive, as contained in Section 3.1 of this Agreement, then in
effect.
4.5. VOLUNTARY TERMINATION BY EXECUTIVE. Notwithstanding anything to
the contrary in this Agreement, Executive may terminate this Agreement at any
time upon thirty (30) days written notice to the Company, subject to the terms
and provisions below.
Other than termination "without cause", as contained in Section 4.4 of
this Agreement, or a "change of control" of the Company, as contained in Section
4.6 of this Agreement, the Company shall not be obligated to pay any severance
benefit to Executive if Executive terminates this Agreement pursuant to this
Section 4.5.
4.6. SEVERANCE BENEFIT UPON CHANGE IN CONTROL. Notwithstanding
anything to the contrary in this Agreement, if the Company terminates this
Agreement for any reason, other than "for cause" pursuant to Section 4.2 of this
Agreement, within one hundred eighty (180) days of a "change of control" as
hereinafter defined, the Company shall pay Executive a lump sum cash payment
equal to 2.99 times the annual base salary of Executive, as contained in Section
3.1 of this Agreement, or Executive's then current rate of compensation,
whichever is greater. For purposes of this Section 4.6, a "change of control"
shall mean an event involving one transaction or a series of related
transactions in which (i) the Company issues securities equal to more than fifty
percent (50%) of the issued and outstanding capital stock of the Company to any
individual, firm, partnership, or other entity, including a "group" within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934 (the
"Exchange Act"), (ii) the Company issues securities equal to more than fifty
percent (50%) of the issued and outstanding capital stock of the Company in
connection with a merger, consolidation or other business combination (other
than for purposes of reincorporation), (iii) the Company is acquired in a merger
or other business combination transaction in which the Company is not the
surviving corporation (other than a reincorporation), or (iv) more than fifty
percent (50%) of the Company's consolidated assets or earning power are sold or
transferred.
4.7. DISABILITY. If Executive becomes permanently and totally
disabled, this Agreement shall be terminated. Executive shall be deemed
permanently and totally disabled if he is unable to engage in the activities
required by this Agreement by reason of any medically determinable physical or
mental impairment, as confirmed by three independent physicians, which can be
expected to result in death or which has lasted or can be expected to last for a
continuous period of not less than 12 months. Upon termination due to
disability, Executive shall be entitled to receive a lump sum payment equal to
his annual base salary, as contained in Section 3.1 of this Agreement, then in
effect.
4.8. DEATH. If Executive dies during the term of this Agreement, this
Agreement shall be terminated on the last day of the calendar month of his death
subject to the express terms and provisions below.
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Upon termination due to death, the designated beneficiary, as provided
in Section 6.8 below, or the estate or representative of Executive, shall be
entitled to receive a lump sum payment equal to his annual base salary, as
contained in Section 3.1 of this Agreement, then in effect.
4.9. EFFECT OF TERMINATION. Except as expressly provided for in this
Agreement, the termination of employment shall not impair any obligation that
accrued prior to termination, nor shall it excuse the performance of any
obligation which is required or contemplated hereunder to be performed after
termination, and any such obligation shall survive the termination of employment
and this Agreement.
ARTICLE V
COVENANTS AND REPRESENTATIONS OF EMPLOYEE
5.1. UNFAIR AND NON-COMPETITION. The Executive acknowledges that he
will have access at the highest level to, and the opportunity to acquire
knowledge of, the Company's customer lists, customer needs, business plans,
trade secrets and other confidential and proprietary information from which the
Company may derive economic or competitive advantage, and that he is entering
into the covenants and representations in this Article V in order to preserve
the goodwill and going concern value of the Company, and to induce the Company
to enter into this Agreement. The Executive agrees not to compete with the
Company or to engage in any unfair competition with Employer during the
Employment Term, but not limited to the acts and conduct described below.
5.2. CONFIDENTIAL INFORMATION. During the Employment Term, Executive
agrees to keep secret and to retain in the strictest confidence all confidential
matters which relate to the Company or its "affiliate" (as that term is defined
in the Exchange Act), including, without limitation, customer lists, client
lists, trade secrets, pricing lists, business plans, financial projections and
reports, business strategies, internal operating procedures, and other
confidential business information from which the Company derives an economic or
competitive advantage, or from which the Company might derive such advantage in
its business, labeled "secret" or "confidential" or some similar term, and not
to disclose any such information to anyone outside of the Company, whether
during or after the Employment Term, except as required in connection with
performing the services to the Company.
5.3. NON-SOLICITATION OF CUSTOMERS. During the Employment Term, the
Executive will have access to confidential records and data pertaining to the
Company's customers, their needs, and the relationship between the Company and
its customers. Such information is considered secret and is disclosed during the
Employment Term in confidence. Accordingly, during the Employment Term,
Executive and any entity controlled by him or with which he is associated (as
the terms "control" and "associate" are defined in the Exchange Act) shall not,
directly or indirectly (i) solicit for a competitive purpose, interfere with,
induce or entice away any person or entity that is or was a client, customer or
agent of the Company or its affiliates (as the term "affiliate" is defined in
the Exchange Act), or (ii) in any manner persuade or attempt to persuade any
such person or entity (A) to discontinue its business relationship with the
Company or its affiliates, or (B) to enter into a business relationship with any
other entity or person the loss of which the Executive should reasonably
anticipate would be detrimental to the Company or its affiliates in any respect.
5.4. NON-SOLICITATION OF EXECUTIVES. The Executive and any entity
controlled by him or with which he is associated (as the terms "control" and
"associate" are defined in the Exchange Act) shall not, during the Employment
Term, directly or indirectly solicit, interfere with, offer to hire or induce
any person
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<PAGE> 6
who is or was an officer or employee of the Company or any affiliate (as the
term "affiliate" is defined in the Exchange Act) (other than secretarial
personnel) to discontinue his or her relationship with the Company or an
affiliate of the Company, in order to accept employment by, or enter into a
business relationship with, any other entity or person. (These acts are
hereinafter referred to as the "prohibited acts of solicitation.") The foregoing
restriction, however, shall not apply to any business with which Executive may
become associated after the Employment Term.
5.5. RETURN OF PROPERTY. Upon termination of employment, and at the
request of the Company, the Executive agrees to promptly deliver to the Company
all Company or affiliate memoranda, notes, records, reports, manuals, drawings,
designs, computer files in any media, and other documents (including extracts
and copies thereof) relating to the Company or its affiliates, and all other
property of the Company.
5.6. INVENTIONS. All processes, inventions, patents, copyrights,
trademarks, and other intangible rights that may be conceived or developed by
the Executive, either alone or with others, during the Employment Term, whether
or not conceived or developed during Executive's working hours, and with respect
to which the equipment, supplies, facilities or trade secret information of the
Company was used, or that relate at the time of conception or reduction to
practice of the invention to the business of the Company, or to the Company's
actual or demonstrably anticipated research or development, or that result from
any work performed by Executive for the Company, shall be the sole property of
the Company. Upon the request of the Company, Executive shall disclose to the
Company all inventions or ideas conceived during the Employment Term, whether or
not the property of the Company under the terms of this provision, provided that
such disclosure shall be received by the Company in confidence. Upon the request
of the Company, Executive shall execute all documents, including patent
applications and assignments, required by the Company to establish the Company's
rights under this provision.
5.7. REPRESENTATIONS. The Executive represents and warrants to the
Company that he has full power to enter into this Agreement and perform his
duties hereunder, and that his execution and delivery of this Agreement and the
performance of his duties shall not result in a breach of, or constitute a
default under, any agreement or understanding, whether oral or written,
including, without limitation, any restrictive covenant or confidentiality
agreement, to which he is a party or by which he may be bound.
5.8. NON-PAYMENT UPON NON-COMPLIANCE. Should Executive breach any one
of the covenants set forth in this Article V, the Company shall have no
obligation to make the payments or to provide Executive the benefits described
in Sections 4.4 or 4.6 above, as applicable, in addition to all other rights and
remedies the Company may have available at law or in equity. The Company shall
provide written notice to Executive, ten (10) days prior to an expected payment,
of the breach of a covenant and the ensuing non-payment thereof; provided,
however, that if the Company learns of the breach without sufficient time to
provide ten (10) days notice, the Company shall provide written notice as soon
thereafter as practicable.
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ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1. NOTICES. All notices to be given by either party to the other
shall be in writing and may be transmitted by personal delivery, facsimile
transmission, overnight courier or mail, registered or certified, postage
prepaid with return receipt requested; provided, however, that notices of change
of address or telex or facsimile number shall be effective only upon actual
receipt by the other party. Notices shall be delivered at the following
addresses, unless changed as provided for herein.
To the Executive:
Roys Poyiadjis
--------------
--------------
--------------
To the Company:
AremisSoft Corporation
60 Bishopsgate
London, England EC2N 4AJ
Facsimile: 011-44-171-309-1555
Attn: Dr. L.K. Kyprianou
With Copy to:
Scott E. Bartel
BARTEL ENG LINN & SCHRODER
300 Capitol Mall, Suite 1100
Sacramento, California 95814
Facsimile: (916) 442-3442
6.2. NO ASSIGNMENT, IN GENERAL. Except as provided below, this
Agreement, and the rights and obligations of the parties, may not be assigned by
either party without the prior written consent of the other party.
6.3. WITHHOLDING TAXES. All amounts payable under this Agreement,
whether such payment is to be made in cash or other property, including without
limitation stock of the Company, shall be subject to withholding for Federal,
state and local income taxes, employment and payroll taxes, and other legally
required withholding taxes and contributions to the extent appropriate in the
determination of the Company, and the Executive agrees to report all such
amounts as ordinary income on his personal income tax returns and for all other
purposes, as called for.
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6.4. SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable by any judgment of a tribunal of competent
jurisdiction, the remaining provisions and terms of this Agreement shall not be
affected by such judgment, and this Agreement shall be carried out as nearly as
possible according to its original terms and intent and, to the full extent
permitted by law, any provision or restrictions found to be invalid shall be
amended with such modifications as may be necessary to cure such invalidity, and
such restrictions shall apply as so modified, or if such provisions cannot be
amended, they shall be deemed severable from the remaining provisions and the
remaining provisions shall be fully enforceable in accordance with law.
6.5. EFFECT OF WAIVER. The failure of either party to insist on strict
compliance with any provision of this Agreement by the other party shall not be
deemed a waiver of such provision, or a relinquishment of any right thereunder,
or to affect either the validity of this Agreement, and shall not prevent
enforcement of such provision, or any similar provision, at any time.
6.6. DESIGNATION OF BENEFICIARY. If the Executive shall die before
receipt of all payments and benefits to which he is entitled under this
Agreement, payment of such amounts or benefits in the manner provided herein
shall be made to such beneficiary as he shall have designated in writing filed
with the Secretary of the Company or, in the absence of such designation, to his
estate or personal representative.
6.7. ATTORNEYS FEES. In the event of any litigation arising out of
this Agreement, or the parties' performance as outlined herein, the prevailing
party shall be entitled to an award of costs, including an award of reasonable
attorney's fees.
6.8. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which when taken together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
COMPANY: AREMISSOFT CORPORATION
By:
------------------------------
Dr. Lycourgos K. Kyprianou
Chief Executive Officer
EXECUTIVE:
------------------------------
Roys Poyiadjis
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EXHIBIT 10.10
EMPLOYMENT AGREEMENT
BETWEEN
AREMISSOFT CORPORATION
AND
NOEL R. VOICE
THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated June 1, 1998, is
entered into by and between AremisSoft Corporation, a Delaware corporation (the
"Company") and Noel R. Voice (the "Executive"), collectively referred to herein
as the "parties."
WHEREAS, the Company wishes to employ the Executive to serve as its
Chief Operating Officer as well as to perform other duties on behalf of the
Company, as determined by the Board of Directors of the Company (the "Board").
NOW, THEREFORE, for and in consideration of the mutual promises and
conditions made herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows.
ARTICLE I
EMPLOYMENT AND TERM OF EMPLOYMENT
1.1. EMPLOYMENT AND TERM. The Company hereby employs Executive to render
full-time services to the Company on an exclusive basis, upon the terms and
conditions set forth below, from the date of this Agreement until the employment
relationship is terminated in accordance with the provisions of this Agreement.
This Agreement is for a term of one (1) year (the "Stated Term") unless
terminated earlier as provided for herein (the "Employment Term").
1.2. ACCEPTANCE. Executive hereby accepts employment with the Company
and agrees to devote his full-time attention and best efforts exclusively to
rendering the services described below. The Executive shall accept and follow
the direction and authority of the Board in the performance of his duties, and
shall comply with all existing and future regulations applicable to employees of
the Company and to the Company's business.
ARTICLE II
DUTIES OF EMPLOYEE
2.1. GENERAL DUTIES. Executive shall serve as Chief Operating Officer of
the Company. In such capacity, Executive shall do and perform all services,
acts, or other things necessary or advisable to manage and conduct the business
of the Company, including, but not limited to, the supervision, direction and
control of the business and other employees of the Company, subject to the
policies and direction of the Board, the Chief Executive Officer and President.
To the extent consistent with the Company's Certificate of Incorporation
("articles") and Bylaws ("bylaws"), Executive shall have all
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powers, duties and responsibilities necessary to carry out his duties, and such
other powers and duties as the Board may prescribe consistent with the Company's
articles and bylaws.
2.2. EXCLUSIVE SERVICES. It is understood and agreed that the Executive
may not engage in any other business activity during the Employment Term,
whether or not for profit or other remuneration, without the prior written
consent of the Company; provided, however, that the Executive may make personal
financial investments which do not involve any material active participation on
his part, and may engage in charitable, philanthropic, educational, religious,
civic and similar types of activities to the extent that such activities do not
hinder or otherwise interfere with the business of the Company or any affiliate
or subsidiary of the Company, or the performance of the Executive's duties under
this Agreement. Notwithstanding the foregoing, during the Employment Term,
Executive shall not directly or indirectly acquire any stock or interest in any
corporation, partnership, or other business entity that competes, directly or
indirectly, with the business of the Company without obtaining the prior written
consent of the Company.
It is also understood and agreed that the Executive will not compete
with the Company during the Employment Term. For purposes of this Agreement, the
phrase "compete with the Company," or the substantial equivalent thereof, means
that Executive, either alone or as a partner, member, director, employee,
shareholder or agent of any other business, or in any other individual or
representative capacity, directly or indirectly owns, manages, operates,
controls, or participates in the ownership, management, operation or control of,
or works for or provides consulting services to, or permits the use of his name
by, or lends money to, any business or activity which is or which becomes, at
the time of the acts or conduct in question, directly or indirectly competitive
with the development, financing and/or marketing of the products, proposed
products or services of the Company.
2.3. REPORTING OBLIGATIONS. In connection with the performance of his
duties hereunder, unless otherwise instructed by the Board, the Executive shall
report to the Chief Executive Officer, President and the Board.
ARTICLE III
COMPENSATION AND BENEFITS OF EMPLOYEE
3.1. ANNUAL BASE SALARY. The Company shall pay the Executive salary for
the services to be rendered by him during the term of this Agreement at the rate
of one hundred thousand dollars ($100,000) annually (prorated for any portion of
a year), subject to increases, if any, as the Company's Compensation Committee
may determine in its sole discretion after periodic review of the Executive's
performance of his duties hereunder. Such base salary shall be payable in
periodic installments in accordance with the terms of the Company's regular
payroll practices in effect from time to time during the term of this Agreement,
but in no event less frequently than once each month.
3.2. BONUSES. In addition to the base salary and other benefits provided
to Executive hereunder, Executive is eligible to receive bonuses based on
performance and Executive's attainment of objectives established by the Board or
Compensation Committee periodically. The bonuses to be provided to the Executive
shall not exceed fifty percent (50%) of his annual base salary, as defined in
Section 3.1. above, then in effect.
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3.3. STOCK OPTIONS. Upon stockholder approval of the Company's 1998
Stock Option Plan, Executive may be granted stock options to purchase shares of
the Company's common stock, as determined from time to time by the Board or
Compensation Committee and subject to (a) the terms and conditions contained in
the Company's 1998 Stock Option Plan, (b) the terms and conditions set forth
herein and (c) the Executive's execution of a stock option agreement and all
documents customarily required by the Company to effect the grant of the
options.
3.4. EXPENSES. The Company shall pay or reimburse the Executive for all
reasonable, ordinary and necessary business expenses actually incurred or paid
by the Executive in the performance of Executive's services under this Agreement
in accordance with the expense reimbursement policies of the Company in effect
from time to time during the Employment Term, upon presentation of proper
expense statements or vouchers or such other written supporting documents as the
Company may reasonably require.
3.5. VACATION. The Executive shall be entitled to four (4) weeks paid
vacation for each calendar year (prorated for any portion of a year, as
applicable). Notwithstanding anything to the contrary in this Agreement,
vacation time shall cease to accrue beyond eight weeks at any given time during
the Employment Term.
3.6. INDEMNIFICATION. Consistent with the terms of the Company's
articles and bylaws, the Company shall indemnify Executive against any losses,
costs, damages or expenses incurred as a direct consequence of the discharge of
his duties or by reason of his status as an agent of the Company and hold
Executive harmless for any actions taken or decisions made by him in good faith
while performing services in his capacity as Chief Operating Officer of the
Company during the Employment Term.
3.7. GENERAL EMPLOYMENT BENEFITS. Except where expressly provided for
herein, the Executive shall be entitled to participate in, and to receive the
benefits under, any pension, health, life, accident and disability insurance
plans or programs and any other employee benefit or fringe benefit plans that
the Company makes available generally to its employees, as the same may be in
effect from time to time during the Employment Term.
ARTICLE IV
TERMINATION OF EMPLOYMENT
4.1. TERMINATION. This Agreement may be terminated earlier as provided
for in this Article IV, or extended by further written agreement of the parties.
4.2. TERMINATION FOR CAUSE. The Company reserves the right to terminate
this Agreement for cause upon: (a) Executive's willful and continued failure to
substantially perform his duties with the Company (other than such failure
resulting from his incapacity due to physical or mental illness) (b) Executive's
willful engagement in gross misconduct, as determined by the Board, which is
materially and demonstrably injurious to the Company; or (c) Executive's
commission of a felony, or an act of fraud against the Company or its
affiliates.
Executive shall not be entitled to any severance benefits and all
options which have not vested shall be canceled upon termination for cause.
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4.3. TERMINATION WITHOUT CAUSE. Notwithstanding anything to the contrary
in this Agreement, the Company reserves the right to terminate this Agreement at
any time upon thirty (30) days written notice to Executive, without cause,
subject to the express terms and provisions below.
4.4. SEVERANCE BENEFIT UPON TERMINATION WITHOUT CAUSE. Notwithstanding
anything to the contrary in this Agreement, if Executive is terminated without
cause, Executive shall receive a lump sum cash payment equal to 1/12 of the
annual base salary of Executive, as contained in Section 3.1 of this Agreement,
then in effect.
4.5. VOLUNTARY TERMINATION BY EXECUTIVE. Notwithstanding anything to the
contrary in this Agreement, Executive may terminate this Agreement at any time
upon thirty (30) days written notice to the Company, subject to the terms and
provisions below.
Other than termination "without cause", as contained in Section 4.4 of
this Agreement, the Company shall not be obligated to pay any severance benefit
to Executive if Executive terminates this Agreement pursuant to this Section
4.5.
4.6. DISABILITY. If Executive becomes permanently and totally disabled,
this Agreement shall be terminated. Executive shall be deemed permanently and
totally disabled if he is unable to engage in the activities required by this
Agreement by reason of any medically determinable physical or mental impairment,
as confirmed by three independent physicians, which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months. Upon termination due to disability, Executive shall be
entitled to continue to receive monthly payments of his annual base salary, as
contained in Section 3.1 of this Agreement, then in effect for the remaining
period of this Agreement.
4.8. DEATH. If Executive dies during the term of this Agreement, this
Agreement shall be terminated on the last day of the calendar month of his death
subject to the express terms and provisions below.
Upon termination due to death, the designated beneficiary, as provided
in Section 6.8 below, or the estate or representative of Executive, shall be
entitled to receive monthly payments of his annual base salary, as contained in
Section 3.1 of this Agreement, then in effect for the remaining period of this
Agreement.
4.9. EFFECT OF TERMINATION. Except as expressly provided for in this
Agreement, the termination of employment shall not impair any obligation that
accrued prior to termination, nor shall it excuse the performance of any
obligation which is required or contemplated hereunder to be performed after
termination, and any such obligation shall survive the termination of employment
and this Agreement.
ARTICLE V
COVENANTS AND REPRESENTATIONS OF EMPLOYEE
5.1. UNFAIR AND NON-COMPETITION. The Executive acknowledges that he will
have access at the highest level to, and the opportunity to acquire knowledge
of, the Company's customer lists, customer needs, business plans, trade secrets
and other confidential and proprietary information from which the Company may
derive economic or competitive advantage, and that he is entering into the
covenants and
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representations in this Article V in order to preserve the goodwill and going
concern value of the Company, and to induce the Company to enter into this
Agreement. The Executive agrees not to compete with the Company or to engage in
any unfair competition with Employer during the Employment Term, but not limited
to the acts and conduct described below.
5.2. CONFIDENTIAL INFORMATION. During the Employment Term, Executive
agrees to keep secret and to retain in the strictest confidence all confidential
matters which relate to the Company or its "affiliate" (as that term is defined
in the Exchange Act), including, without limitation, customer lists, client
lists, trade secrets, pricing lists, business plans, financial projections and
reports, business strategies, internal operating procedures, and other
confidential business information from which the Company derives an economic or
competitive advantage, or from which the Company might derive such advantage in
its business, labeled "secret" or "confidential" or some similar term, and not
to disclose any such information to anyone outside of the Company, whether
during or after the Employment Term, except as required in connection with
performing the services to the Company.
5.3. NON-SOLICITATION OF CUSTOMERS. During the Employment Term, the
Executive will have access to confidential records and data pertaining to the
Company's customers, their needs, and the relationship between the Company and
its customers. Such information is considered secret and is disclosed during the
Employment Term in confidence. Accordingly, during the Employment Term,
Executive and any entity controlled by him or with which he is associated (as
the terms "control" and "associate" are defined in the Exchange Act) shall not,
directly or indirectly (i) solicit for a competitive purpose, interfere with,
induce or entice away any person or entity that is or was a client, customer or
agent of the Company or its affiliates (as the term "affiliate" is defined in
the Exchange Act), or (ii) in any manner persuade or attempt to persuade any
such person or entity (A) to discontinue its business relationship with the
Company or its affiliates, or (B) to enter into a business relationship with any
other entity or person the loss of which the Executive should reasonably
anticipate would be detrimental to the Company or its affiliates in any respect.
5.4. NON-SOLICITATION OF EXECUTIVES. The Executive and any entity
controlled by him or with which he is associated (as the terms "control" and
"associate" are defined in the Exchange Act) shall not, during the Employment
Term, directly or indirectly solicit, interfere with, offer to hire or induce
any person who is or was an officer or employee of the Company or any affiliate
(as the term "affiliate" is defined in the Exchange Act) (other than secretarial
personnel) to discontinue his or her relationship with the Company or an
affiliate of the Company, in order to accept employment by, or enter into a
business relationship with, any other entity or person. (These acts are
hereinafter referred to as the "prohibited acts of solicitation.") The foregoing
restriction, however, shall not apply to any business with which Executive may
become associated after the Employment Term.
5.5. RETURN OF PROPERTY. Upon termination of employment, and at the
request of the Company, the Executive agrees to promptly deliver to the Company
all Company or affiliate memoranda, notes, records, reports, manuals, drawings,
designs, computer files in any media, and other documents (including extracts
and copies thereof) relating to the Company or its affiliates, and all other
property of the Company.
5.6. INVENTIONS. All processes, inventions, patents, copyrights,
trademarks, and other intangible rights that may be conceived or developed by
the Executive, either alone or with others, during the Employment Term, whether
or not conceived or developed during Executive's working hours, and with respect
to which the equipment, supplies, facilities or trade secret information of the
Company
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was used, or that relate at the time of conception or reduction to practice of
the invention to the business of the Company, or to the Company's actual or
demonstrably anticipated research or development, or that result from any work
performed by Executive for the Company, shall be the sole property of the
Company. Upon the request of the Company, Executive shall disclose to the
Company all inventions or ideas conceived during the Employment Term, whether or
not the property of the Company under the terms of this provision, provided that
such disclosure shall be received by the Company in confidence. Upon the request
of the Company, Executive shall execute all documents, including patent
applications and assignments, required by the Company to establish the Company's
rights under this provision.
5.7. REPRESENTATIONS. The Executive represents and warrants to the
Company that he has full power to enter into this Agreement and perform his
duties hereunder, and that his execution and delivery of this Agreement and the
performance of his duties shall not result in a breach of, or constitute a
default under, any agreement or understanding, whether oral or written,
including, without limitation, any restrictive covenant or confidentiality
agreement, to which he is a party or by which he may be bound.
5.8. NON-PAYMENT UPON NON-COMPLIANCE. Should Executive breach any one of
the covenants set forth in this Article V, the Company shall have no obligation
to make the payments or to provide Executive the benefits described in Sections
4.4 or 4.6 above, as applicable, in addition to all other rights and remedies
the Company may have available at law or in equity. The Company shall provide
written notice to Executive, ten (10) days prior to an expected payment, of the
breach of a covenant and the ensuing non-payment thereof; provided, however,
that if the Company learns of the breach without sufficient time to provide ten
(10) days notice, the Company shall provide written notice as soon thereafter as
practicable.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1. NOTICES. All notices to be given by either party to the other shall
be in writing and may be transmitted by personal delivery, facsimile
transmission, overnight courier or mail, registered or certified, postage
prepaid with return receipt requested; provided, however, that notices of change
of address or telex or facsimile number shall be effective only upon actual
receipt by the other party. Notices shall be delivered at the following
addresses, unless changed as provided for herein.
To the Executive:
Noel R. Voice
------------
------------
------------
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To the Company:
AremisSoft Corporation
60 Bishopsgate
London, England EC2N 4AJ
Facsimile: 011-44-171-309-1555
Attn: Dr. L.K. Kyprianou
With Copy to:
Scott E. Bartel
BARTEL ENG LINN & SCHRODER
300 Capitol Mall, Suite 1100
Sacramento, California 95814
Facsimile: (916) 442-3442
6.2. NO ASSIGNMENT, IN GENERAL. Except as provided below, this
Agreement, and the rights and obligations of the parties, may not be assigned by
either party without the prior written consent of the other party.
6.3. WITHHOLDING TAXES. All amounts payable under this Agreement,
whether such payment is to be made in cash or other property, including without
limitation stock of the Company, shall be subject to withholding for Federal,
state and local income taxes, employment and payroll taxes, and other legally
required withholding taxes and contributions to the extent appropriate in the
determination of the Company, and the Executive agrees to report all such
amounts as ordinary income on his personal income tax returns and for all other
purposes, as called for.
6.4. SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable by any judgment of a tribunal of competent
jurisdiction, the remaining provisions and terms of this Agreement shall not be
affected by such judgment, and this Agreement shall be carried out as nearly as
possible according to its original terms and intent and, to the full extent
permitted by law, any provision or restrictions found to be invalid shall be
amended with such modifications as may be necessary to cure such invalidity, and
such restrictions shall apply as so modified, or if such provisions cannot be
amended, they shall be deemed severable from the remaining provisions and the
remaining provisions shall be fully enforceable in accordance with law.
6.5. EFFECT OF WAIVER. The failure of either party to insist on strict
compliance with any provision of this Agreement by the other party shall not be
deemed a waiver of such provision, or a relinquishment of any right thereunder,
or to affect either the validity of this Agreement, and shall not prevent
enforcement of such provision, or any similar provision, at any time.
6.6. DESIGNATION OF BENEFICIARY. If the Executive shall die before
receipt of all payments and benefits to which he is entitled under this
Agreement, payment of such amounts or benefits in the manner provided herein
shall be made to such beneficiary as he shall have designated in writing filed
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with the Secretary of the Company or, in the absence of such designation, to his
estate or personal representative.
6.7. ATTORNEYS FEES. In the event of any litigation arising out of this
Agreement, or the parties' performance as outlined herein, the prevailing party
shall be entitled to an award of costs, including an award of reasonable
attorney's fees.
6.8. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which when taken together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
COMPANY: AREMISSOFT CORPORATION
By:
----------------------------------------
Dr. Lycourgos K. Kyprianou
Chief Executive Officer
EXECUTIVE:
----------------------------------
Noel R. Voice
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<PAGE> 1
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
BETWEEN
AREMISSOFT CORPORATION
AND
NIGEL A. SPENCE
THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated June 1, 1998, is
entered into by and between AremisSoft Corporation, a Delaware corporation (the
"Company") and Nigel A. Spence (the "Executive"), collectively referred to
herein as the "parties."
WHEREAS, the Company wishes to employ the Executive to serve as its
Chief Financial Officer as well as to perform other duties on behalf of the
Company, as determined by the Board of Directors of the Company (the "Board").
NOW, THEREFORE, for and in consideration of the mutual promises and
conditions made herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows.
ARTICLE I
EMPLOYMENT AND TERM OF EMPLOYMENT
1.1. EMPLOYMENT AND TERM. The Company hereby employs Executive to render
full-time services to the Company on an exclusive basis, upon the terms and
conditions set forth below, from the date of this Agreement until the employment
relationship is terminated in accordance with the provisions of this Agreement.
This Agreement is for a term of one (1) year (the "Stated Term") unless
terminated earlier as provided for herein (the "Employment Term").
1.2. ACCEPTANCE. Executive hereby accepts employment with the Company
and agrees to devote his full-time attention and best efforts exclusively to
rendering the services described below. The Executive shall accept and follow
the direction and authority of the Board in the performance of his duties, and
shall comply with all existing and future regulations applicable to employees of
the Company and to the Company's business.
ARTICLE II
DUTIES OF EMPLOYEE
2.1. GENERAL DUTIES. Executive shall serve as Chief Financial Officer of
the Company. In such capacities, Executive shall do and perform all services,
acts, or other things necessary or advisable to manage and conduct the business
of the Company, including, but not limited to, the supervision, direction and
control of the business and other employees of the Company, subject to the
policies and direction of the Board, the Chief Executive Officer and President.
To the extent consistent with the Company's Certificate
of Incorporation ("articles") and Bylaws ("bylaws"), Executive shall have all
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powers, duties and responsibilities necessary to carry out his duties, and such
other powers and duties as the Board may prescribe consistent with the Company's
articles and bylaws.
2.2. EXCLUSIVE SERVICES. It is understood and agreed that the Executive
may not engage in any other business activity during the Employment Term,
whether or not for profit or other remuneration, without the prior written
consent of the Company; provided, however, that the Executive may make personal
financial investments which do not involve any material active participation on
his part, and may engage in charitable, philanthropic, educational, religious,
civic and similar types of activities to the extent that such activities do not
hinder or otherwise interfere with the business of the Company or any affiliate
or subsidiary of the Company, or the performance of the Executive's duties under
this Agreement. Notwithstanding the foregoing, during the Employment Term,
Executive shall not directly or indirectly acquire any stock or interest in any
corporation, partnership, or other business entity that competes, directly or
indirectly, with the business of the Company without obtaining the prior written
consent of the Company.
It is also understood and agreed that the Executive will not compete
with the Company during the Employment Term. For purposes of this Agreement, the
phrase "compete with the Company," or the substantial equivalent thereof, means
that Executive, either alone or as a partner, member, director, employee,
shareholder or agent of any other business, or in any other individual or
representative capacity, directly or indirectly owns, manages, operates,
controls, or participates in the ownership, management, operation or control of,
or works for or provides consulting services to, or permits the use of his name
by, or lends money to, any business or activity which is or which becomes, at
the time of the acts or conduct in question, directly or indirectly competitive
with the development, financing and/or marketing of the products, proposed
products or services of the Company.
2.3. REPORTING OBLIGATIONS. In connection with the performance of his
duties hereunder, unless otherwise instructed by the Board, the Executive shall
report to the Chief Executive Officer, President and the Board.
ARTICLE III
COMPENSATION AND BENEFITS OF EMPLOYEE
3.1. ANNUAL BASE SALARY. The Company shall pay the Executive salary for
the services to be rendered by him during the term of this Agreement at the rate
of one hundred thousand dollars ($100,000) annually (prorated for any portion of
a year), subject to increases, if any, as the Company's Compensation Committee
may determine in its sole discretion after periodic review of the Executive's
performance of his duties hereunder. Such base salary shall be payable in
periodic installments in accordance with the terms of the Company's regular
payroll practices in effect from time to time during the term of this Agreement,
but in no event less frequently than once each month.
3.2. BONUSES. In addition to the base salary and other benefits provided
to Executive hereunder, Executive is eligible to receive bonuses based on
performance and Executive's attainment of objectives established by the Board or
Compensation Committee periodically. The bonuses to be provided to the Executive
shall not exceed fifty percent (50%) of his annual base salary, as defined in
Section 3.1. above, then in effect.
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3.3. STOCK OPTIONS. Upon stockholder approval of the Company's 1998
Stock Option Plan, Executive may be granted stock options to purchase shares of
the Company's common stock, as determined from time to time by the Board or
Compensation Committee and subject to (a) the terms and conditions contained in
the Company's 1998 Stock Option Plan, (b) the terms and conditions set forth
herein and (c) the Executive's execution of a stock option agreement and all
documents customarily required by the Company to effect the grant of the
options.
3.4. EXPENSES. The Company shall pay or reimburse the Executive for all
reasonable, ordinary and necessary business expenses actually incurred or paid
by the Executive in the performance of Executive's services under this Agreement
in accordance with the expense reimbursement policies of the Company in effect
from time to time during the Employment Term, upon presentation of proper
expense statements or vouchers or such other written supporting documents as the
Company may reasonably require.
3.5. VACATION. The Executive shall be entitled to four (4) weeks paid
vacation for each calendar year (prorated for any portion of a year, as
applicable). Notwithstanding anything to the contrary in this Agreement,
vacation time shall cease to accrue beyond eight weeks at any given time during
the Employment Term.
3.6. INDEMNIFICATION. Consistent with the terms of the Company's
articles and bylaws, the Company shall indemnify Executive against any losses,
costs, damages or expenses incurred as a direct consequence of the discharge of
his duties or by reason of his status as an agent of the Company and hold
Executive harmless for any actions taken or decisions made by him in good faith
while performing services in his capacity as Chief Financial Officer and a
Director of the Company during the Employment Term.
3.7. GENERAL EMPLOYMENT BENEFITS. Except where expressly provided for
herein, the Executive shall be entitled to participate in, and to receive the
benefits under, any pension, health, life, accident and disability insurance
plans or programs and any other employee benefit or fringe benefit plans that
the Company makes available generally to its employees, as the same may be in
effect from time to time during the Employment Term.
ARTICLE IV
TERMINATION OF EMPLOYMENT
4.1. TERMINATION. This Agreement may be terminated earlier as provided
for in this Article IV, or extended by further written agreement of the parties.
4.2. TERMINATION FOR CAUSE. The Company reserves the right to terminate
this Agreement for cause upon: (a) Executive's willful and continued failure to
substantially perform his duties with the Company (other than such failure
resulting from his incapacity due to physical or mental illness) (b) Executive's
willful engagement in gross misconduct, as determined by the Board, which is
materially and demonstrably injurious to the Company; or (c) Executive's
commission of a felony, or an act of fraud against the Company or its
affiliates.
Executive shall not be entitled to any severance benefits and all
options which have not vested shall be canceled upon termination for cause.
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4.3. TERMINATION WITHOUT CAUSE. Notwithstanding anything to the contrary
in this Agreement, the Company reserves the right to terminate this Agreement at
any time upon thirty (30) days written notice to Executive, without cause,
subject to the express terms and provisions below.
4.4. SEVERANCE BENEFIT UPON TERMINATION WITHOUT CAUSE. Notwithstanding
anything to the contrary in this Agreement, if Executive is terminated without
cause, Executive shall receive a lump sum cash payment equal to 1/12 of the
annual base salary of Executive, as contained in Section 3.1 of this Agreement,
then in effect.
4.5. VOLUNTARY TERMINATION BY EXECUTIVE. Notwithstanding anything to the
contrary in this Agreement, Executive may terminate this Agreement at any time
upon thirty (30) days written notice to the Company, subject to the terms and
provisions below.
Other than termination "without cause", as contained in Section 4.4 of
this Agreement, the Company shall not be obligated to pay any severance benefit
to Executive if Executive terminates this Agreement pursuant to this Section
4.5.
4.6. DISABILITY. If Executive becomes permanently and totally disabled,
this Agreement shall be terminated. Executive shall be deemed permanently and
totally disabled if he is unable to engage in the activities required by this
Agreement by reason of any medically determinable physical or mental impairment,
as confirmed by three independent physicians, which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months. Upon termination due to disability, Executive shall be
entitled to continue to receive monthly payments of his annual base salary, as
contained in Section 3.1 of this Agreement, then in effect for the remaining
period of this Agreement.
4.8. DEATH. If Executive dies during the term of this Agreement, this
Agreement shall be terminated on the last day of the calendar month of his death
subject to the express terms and provisions below.
Upon termination due to death, the designated beneficiary, as provided
in Section 6.8 below, or the estate or representative of Executive, shall be
entitled to receive monthly payments of his annual base salary, as contained in
Section 3.1 of this Agreement, then in effect for the remaining period of this
Agreement.
4.9. EFFECT OF TERMINATION. Except as expressly provided for in this
Agreement, the termination of employment shall not impair any obligation that
accrued prior to termination, nor shall it excuse the performance of any
obligation which is required or contemplated hereunder to be performed after
termination, and any such obligation shall survive the termination of employment
and this Agreement.
ARTICLE V
COVENANTS AND REPRESENTATIONS OF EMPLOYEE
5.1. UNFAIR AND NON-COMPETITION. The Executive acknowledges that he will
have access at the highest level to, and the opportunity to acquire knowledge
of, the Company's customer lists, customer needs, business plans, trade secrets
and other confidential and proprietary information from which the Company may
derive economic or competitive advantage, and that he is entering into the
covenants and
4
<PAGE> 5
representations in this Article V in order to preserve the goodwill and going
concern value of the Company, and to induce the Company to enter into this
Agreement. The Executive agrees not to compete with the Company or to engage in
any unfair competition with Employer during the Employment Term, but not limited
to the acts and conduct described below.
5.2. CONFIDENTIAL INFORMATION. During the Employment Term, Executive
agrees to keep secret and to retain in the strictest confidence all confidential
matters which relate to the Company or its "affiliate" (as that term is defined
in the Exchange Act), including, without limitation, customer lists, client
lists, trade secrets, pricing lists, business plans, financial projections and
reports, business strategies, internal operating procedures, and other
confidential business information from which the Company derives an economic or
competitive advantage, or from which the Company might derive such advantage in
its business, labeled "secret" or "confidential" or some similar term, and not
to disclose any such information to anyone outside of the Company, whether
during or after the Employment Term, except as required in connection with
performing the services to the Company.
5.3. NON-SOLICITATION OF CUSTOMERS. During the Employment Term, the
Executive will have access to confidential records and data pertaining to the
Company's customers, their needs, and the relationship between the Company and
its customers. Such information is considered secret and is disclosed during the
Employment Term in confidence. Accordingly, during the Employment Term,
Executive and any entity controlled by him or with which he is associated (as
the terms "control" and "associate" are defined in the Exchange Act) shall not,
directly or indirectly (i) solicit for a competitive purpose, interfere with,
induce or entice away any person or entity that is or was a client, customer or
agent of the Company or its affiliates (as the term "affiliate" is defined in
the Exchange Act), or (ii) in any manner persuade or attempt to persuade any
such person or entity (A) to discontinue its business relationship with the
Company or its affiliates, or (B) to enter into a business relationship with any
other entity or person the loss of which the Executive should reasonably
anticipate would be detrimental to the Company or its affiliates in any respect.
5.4. NON-SOLICITATION OF EXECUTIVES. The Executive and any entity
controlled by him or with which he is associated (as the terms "control" and
"associate" are defined in the Exchange Act) shall not, during the Employment
Term, directly or indirectly solicit, interfere with, offer to hire or induce
any person who is or was an officer or employee of the Company or any affiliate
(as the term "affiliate" is defined in the Exchange Act) (other than secretarial
personnel) to discontinue his or her relationship with the Company or an
affiliate of the Company, in order to accept employment by, or enter into a
business relationship with, any other entity or person. (These acts are
hereinafter referred to as the "prohibited acts of solicitation.") The foregoing
restriction, however, shall not apply to any business with which Executive may
become associated after the Employment Term.
5.5. RETURN OF PROPERTY. Upon termination of employment, and at the
request of the Company, the Executive agrees to promptly deliver to the Company
all Company or affiliate memoranda, notes, records, reports, manuals, drawings,
designs, computer files in any media, and other documents (including extracts
and copies thereof) relating to the Company or its affiliates, and all other
property of the Company.
5.6. INVENTIONS. All processes, inventions, patents, copyrights,
trademarks, and other intangible rights that may be conceived or developed by
the Executive, either alone or with others, during the Employment Term, whether
or not conceived or developed during Executive's working hours, and with
respect to which the equipment, supplies, facilities or trade secret information
of the Company
5
<PAGE> 6
was used, or that relate at the time of conception or reduction to practice of
the invention to the business of the Company, or to the Company's actual or
demonstrably anticipated research or development, or that result from any work
performed by Executive for the Company, shall be the sole property of the
Company. Upon the request of the Company, Executive shall disclose to the
Company all inventions or ideas conceived during the Employment Term, whether or
not the property of the Company under the terms of this provision, provided that
such disclosure shall be received by the Company in confidence. Upon the request
of the Company, Executive shall execute all documents, including patent
applications and assignments, required by the Company to establish the Company's
rights under this provision.
5.7. REPRESENTATIONS. The Executive represents and warrants to the
Company that he has full power to enter into this Agreement and perform his
duties hereunder, and that his execution and delivery of this Agreement and the
performance of his duties shall not result in a breach of, or constitute a
default under, any agreement or understanding, whether oral or written,
including, without limitation, any restrictive covenant or confidentiality
agreement, to which he is a party or by which he may be bound.
5.8. NON-PAYMENT UPON NON-COMPLIANCE. Should Executive breach any one of
the covenants set forth in this Article V, the Company shall have no obligation
to make the payments or to provide Executive the benefits described in Sections
4.4 or 4.6 above, as applicable, in addition to all other rights and remedies
the Company may have available at law or in equity. The Company shall provide
written notice to Executive, ten (10) days prior to an expected payment, of the
breach of a covenant and the ensuing non-payment thereof; provided, however,
that if the Company learns of the breach without sufficient time to provide ten
(10) days notice, the Company shall provide written notice as soon thereafter as
practicable.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1. NOTICES. All notices to be given by either party to the other shall
be in writing and may be transmitted by personal delivery, facsimile
transmission, overnight courier or mail, registered or certified, postage
prepaid with return receipt requested; provided, however, that notices of change
of address or telex or facsimile number shall be effective only upon actual
receipt by the other party. Notices shall be delivered at the following
addresses, unless changed as provided for herein.
To the Executive:
Nigel A. Spence
------------
------------
------------
6
<PAGE> 7
To the Company:
AremisSoft Corporation
60 Bishopsgate
London, England EC2N 4AJ
Facsimile: 011-44-171-309-1555
Attn: Dr. L.K. Kyprianou
With Copy to:
Scott E. Bartel
BARTEL ENG LINN & SCHRODER
300 Capitol Mall, Suite 1100
Sacramento, California 95814
Facsimile: (916) 442-3442
6.2. NO ASSIGNMENT, IN GENERAL. Except as provided below, this
Agreement, and the rights and obligations of the parties, may not be assigned by
either party without the prior written consent of the other party.
6.3. WITHHOLDING TAXES. All amounts payable under this Agreement,
whether such payment is to be made in cash or other property, including without
limitation stock of the Company, shall be subject to withholding for Federal,
state and local income taxes, employment and payroll taxes, and other legally
required withholding taxes and contributions to the extent appropriate in the
determination of the Company, and the Executive agrees to report all such
amounts as ordinary income on his personal income tax returns and for all other
purposes, as called for.
6.4. SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable by any judgment of a tribunal of competent
jurisdiction, the remaining provisions and terms of this Agreement shall not be
affected by such judgment, and this Agreement shall be carried out as nearly as
possible according to its original terms and intent and, to the full extent
permitted by law, any provision or restrictions found to be invalid shall be
amended with such modifications as may be necessary to cure such invalidity, and
such restrictions shall apply as so modified, or if such provisions cannot be
amended, they shall be deemed severable from the remaining provisions and the
remaining provisions shall be fully enforceable in accordance with law.
6.5. EFFECT OF WAIVER. The failure of either party to insist on strict
compliance with any provision of this Agreement by the other party shall not be
deemed a waiver of such provision, or a relinquishment of any right thereunder,
or to affect either the validity of this Agreement, and shall not prevent
enforcement of such provision, or any similar provision, at any time.
6.6. DESIGNATION OF BENEFICIARY. If the Executive shall die before
receipt of all payments and benefits to which he is entitled under this
Agreement, payment of such amounts or benefits in the manner provided herein
shall be made to such beneficiary as he shall have designated in writing filed
7
<PAGE> 8
with the Secretary of the Company or, in the absence of such designation, to his
estate or personal representative.
6.7. ATTORNEYS FEES. In the event of any litigation arising out of this
Agreement, or the parties' performance as outlined herein, the prevailing party
shall be entitled to an award of costs, including an award of reasonable
attorney's fees.
6.8. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which when taken together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
COMPANY: AREMISSOFT CORPORATION
By:
-----------------------------
Dr. Lycourgos K. Kyprianou
Chief Executive Officer
EXECUTIVE: -----------------------------
Nigel A. Spence
8
<PAGE> 1
EXHIBIT 21.1
Subsidiaries
<TABLE>
<CAPTION>
Name of Company Country or State of Organization
--------------- --------------------------------
<S> <C>
LK Global Information Systems BV Netherlands corporation
LK Global Information Systems (UK) Plc United Kingdom corporation
LK Global Healthcare Systems (UK) Ltd United Kingdom corporation
LK Global Hospitality Systems (UK) Ltd United Kingdom corporation
LK Global Field Engineering Systems (UK) Ltd United Kingdom corporation
LK Global Manufacturing Systems (UK) Ltd United Kingdom corporation
LK Global Construction Systems (UK) Ltd United Kingdom corporation
Briter Computer Systems Limited United Kingdom corporation
LK Global Financial Systems (UK) Limited United Kingdom corporation
LK Global Software Engineering (UK) Limited United Kingdom corporation
LK Global Human Resources (UK) Limited United Kingdom corporation
LK Global Software Engineering (India) Private Limited Indian corporation
LK Global Information Systems (Cyprus) Limited Cyprus corporation
LK Global Hospitality Systems (Cyprus) Limited Cyprus corporation
LK Global Software Engineering (Cyprus) Limited Cyprus corporation
LK Global Systems Integration (Cyprus) Limited Cyprus corporation
LK Global Commercial Systems (Cyprus) Limited Cyprus corporation
LK Global Manufacturing Systems (US) Inc Delaware corporation
Online Applications Inc. Delaware corporation
</TABLE>
<PAGE> 1
EXHIBIT 23.2
CONSENT OF PANNELL KERR FORSTER, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated June 30, 1998, in the Registration Statement (Form
S-1) and related Prospectus of AremisSoft Corporation for the registration of
shares of its common stock.
London, England
June 30, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF ERNST AND YOUNG, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated June 30, 1998, in the Registration Statement (Form
S-1) and related Prospectus of AremisSoft Corporation for the registration of
shares of its common stock.
Reading, England
June 30, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S FORM S-1 FILED WITH THE
COMMISSION JULY 1, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
(B) FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1996 JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1996 DEC-31-1997 MAR-31-1998
<CASH> 867 239 5,270
<SECURITIES> 0 0 0
<RECEIVABLES> 11,017 9,458 9,628
<ALLOWANCES> 0 0 0
<INVENTORY> 1,283 1,070 1,153
<CURRENT-ASSETS> 14,705 13,606 20,407
<PP&E> 2,386 2,040 2,059
<DEPRECIATION> 0 0 0
<TOTAL-ASSETS> 18,449 17,242 24,059
<CURRENT-LIABILITIES> 30,143 26,577 23,681
<BONDS> 0 0 0
0 0 0
0 2 2
<COMMON> 13 13 15
<OTHER-SE> (25,116) (19,549) (9,901)
<TOTAL-LIABILITY-AND-EQUITY> 18,449 17,242 24,059
<SALES> 18,593 23,384 5,533
<TOTAL-REVENUES> 34,432 42,374 10,096
<CGS> 7,315 7,226 1,620
<TOTAL-COSTS> 15,035 12,673 2,892
<OTHER-EXPENSES> 12,058 6,330 1,519
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> (1,917) (1,901) (485)
<INCOME-PRETAX> (15,354) (1,585) 248
<INCOME-TAX> (50) 35 0
<INCOME-CONTINUING> 0 0 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (15,304) (1,620) 248
<EPS-PRIMARY> (1.19) (0.13) 0.02
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</TABLE>
