<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 5, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CAMINUS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 7372 954684879
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
747 THIRD AVENUE
NEW YORK, NEW YORK 10017
(212) 888-3600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
DAVID M. STONER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CAMINUS CORPORATION
747 THIRD AVENUE
NEW YORK, NEW YORK 10017
(212) 888-3600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
JOHN A. BURGESS, ESQ. STEVEN P. ROSENTHAL, ESQ.
JAMES R. BURKE, ESQ. MINTZ, LEVIN, COHN, FERRIS,
HALE AND DORR LLP GLOVSKY AND POPEO, P.C.
60 STATE STREET ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02109 BOSTON, MASSACHUSETTS 02111
TELEPHONE: (617) 526-6000 TELEPHONE: (617) 542-6000
TELECOPY: (617) 526-5000 TELECOPY: (617) 542-2241
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date hereof.
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,
check the following box. [ ] ------------------
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE(2)
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<S> <C> <C>
Common Stock, $0.01 par value per share.................... $72,680,000 $20,206
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</TABLE>
(1) Estimated solely for the purpose of calculating the amount of registration
fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(2) Calculated pursuant to Rule 457(o) based on an estimate of the proposed
maximum aggregate offering price.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 5, 1999
[CAMINUS CORPORATION LOGO]
- --------------------------------------------------------------------------------
SHARES
COMMON STOCK
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This is Caminus Corporation's initial public offering. We are offering
shares of common stock, and the selling stockholders identified in
this prospectus are offering shares of common stock.
We expect that the public offering price will be between $ and $
per share.
We have filed an application for our common stock to be quoted on the Nasdaq
National Market under the symbol "CAMZ."
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 7.
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT
APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS, PROCEEDS,
PRICE TO DISCOUNTS AND BEFORE EXPENSES, BEFORE EXPENSES,
PUBLIC COMMISSIONS TO CAMINUS TO SELLING STOCKHOLDERS
<S> <C> <C> <C> <C>
Per Share $ $ $ $
Total $ $ $ $
</TABLE>
We and the selling stockholders have granted the underwriters the right to
purchase up to shares to cover any over-allotments, at any time until
30 days after the date of this prospectus.
DEUTSCHE BANC ALEX. BROWN
BEAR, STEARNS & CO. INC.
CIBC WORLD MARKETS
THE DATE OF THIS PROSPECTUS IS , 1999.
<PAGE> 3
[PICTURES AND CAPTIONS FOR INSIDE FRONT COVER.]
2
<PAGE> 4
PROSPECTUS SUMMARY
This summary may not contain all of the information that is important to
you. You should read the entire prospectus, including "Risk Factors" and the
financial statements and related notes, before deciding to invest in our common
stock.
CAMINUS CORPORATION
We are a leading provider of software solutions and strategic consulting
services to participants in energy markets throughout North America and Europe,
including utilities, electrical power generating companies, energy marketers,
electric power pools, gas producers, processors and pipelines. We offer a suite
of software solutions and associated services to enable energy market
participants to manage complex risk scenarios and effectively trade and manage
energy transactions, addressing multiple energy commodities and types of risk
across varied geographies. In addition, we provide strategic consulting services
to many of the leading European energy market participants.
The energy industry is currently one of the five largest vertical markets
in the United States, with 1998 revenue of approximately $300 billion. As a
result of global deregulation in the energy industry, vertically integrated
suppliers are breaking up and energy trading is becoming more complex. New
participants are entering the market, and trading volumes, price volatility and
risk exposure are increasing significantly. In order to compete, energy market
participants must find information technology solutions and services that are
targeted to address the risks associated with buying, selling and trading
multiple energy commodities in deregulating markets.
Our Zai*Net suite of software products offers a tightly integrated, multi-
functional solution to enable energy market participants to trade, process
transactions and manage risk from the wholesale acquisition of energy through
its sale and scheduling. Using our software solutions, energy market
participants can analyze and manage risk among multiple energy commodities,
including electric power and natural gas, traded via various energy trading
instruments across varied geographies.
Our strategic consulting practice provides energy market participants with
strategic advice on the deregulation and restructuring of the energy industry.
We assist energy companies with global operations in choosing and implementing
long-term strategies to remain competitive, including decisions relating to the
appropriate use of energy assets and the most effective operating strategies in
deregulating energy markets. We are recognized for our expertise in economics,
regulation and strategy and have been at the forefront of changes in the United
Kingdom energy sector, which has one of the most deregulated natural gas and
electric power markets in the world.
We currently have approximately 100 energy enterprise customers of our
software solutions and strategic consulting services. Many of our customers are
leaders in the energy industry, including American Electric Power, Consolidated
Edison, Conoco, PG&E Energy Trading, Preussen Elektra and TXU Electric and Gas.
3
<PAGE> 5
THIS OFFERING
Common stock offered by Caminus.......... shares
Common stock offered by the selling
stockholders........................... shares
Common stock to be outstanding after this
offering............................... shares
Use of proceeds.......................... - Repayment of borrowings under
our credit facility
- Payment of consulting and
advisory fees to GFI
- Working capital
- Other general corporate purposes,
including possible acquisitions
Proposed Nasdaq National Market symbol... CAMZ
The number of shares of our common stock that will be outstanding after
this offering excludes shares subject to outstanding options under our 1998 and
1999 stock incentive plans at a weighted average exercise price of $ per
share and additional shares available for issuance under our stock plans.
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell shares of common stock and
seeking offers to buy shares of common stock only in jurisdictions where offers
and sales are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or any sale of the common stock. In this prospectus,
"Caminus," "we," "us" and "our" refer to Caminus Corporation, its predecessor
entities and all subsidiaries.
------------------------
We were originally organized in April 1998 as a Delaware limited liability
company under the name "GFI Caminus LLC." We changed our name to "Caminus Energy
Ventures LLC" in September 1998 and "Caminus LLC" in January 1999. Immediately
prior to this offering, the limited liability company will merge with and into
Caminus Corporation, a Delaware corporation incorporated in September 1999. Our
principal executive offices are located at 747 Third Avenue, New York, New York
10017 and our telephone number is (212) 888-3600. Our World Wide Web site
address is www.caminus.com. The information in the Web site is not incorporated
by reference into this prospectus. For additional information regarding our
initial formation and subsequent acquisitions, please see "Caminus Corporation"
below.
GFI Energy Ventures, LLC and its affiliated entities, which are
collectively referred to in this prospectus as GFI, and an affiliate of Oaktree
Capital Management, LLC originated and were the principal investors in the
transactions that created us. RIT Capital Partners plc -- the publicly traded,
London-based investment company chaired by Lord Rothschild -- is also a
substantial investor.
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<PAGE> 6
SUMMARY CONSOLIDATED FINANCIAL DATA
The following tables present summary consolidated, pro forma and pro forma
as adjusted financial data for us and our predecessor, Zai*Net Software, Inc.
The consolidated financial data, except for the pro forma data, are based on the
historical financial statements of us and our predecessor as of and for the year
ended December 31, 1997, for the four months ended April 30, 1998, for the
period from our inception (April 29, 1998) through December 31, 1998 and for the
six months ended June 30, 1999, which are derived from the respective audited
consolidated financial statements of us and our predecessor. The consolidated
statement of operations data from our inception through June 30, 1998 are
derived from our unaudited consolidated financial statements and include, in the
opinion of our management, all adjustments, consisting only of normal recurring
adjustments, that are necessary for the fair presentation of our financial
position and results of operations as of and for such period. The pro forma
financial data give effect to the acquisitions of Zai*Net, Caminus Energy
Limited, which is now known as Caminus Limited, and DC Systems, Inc. as if the
acquisitions had occurred at the beginning of the respective periods presented.
The pro forma financial data do not give retroactive effect to our acquisition
of Positron Energy Consulting, whose results of operations prior to the
acquisition were immaterial to our results of operations. The following summary
historical and pro forma financial data should be read together with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and related notes included elsewhere in
this prospectus.
In the following table, "Adjusted EBITDA" is defined as earnings before
interest and other income, income taxes, depreciation, amortization, acquired
in-process research and development and non-cash compensation expense. We have
included information concerning Adjusted EBITDA because we believe that it is
useful to an investor in evaluating our operating performance as it compares to
other companies and because this measure is a widely accepted financial
indicator used by investors and analysts to compare the operating performance of
companies. While investors and analysts routinely use EBITDA, it may not
necessarily be comparable to other similarly titled measures used by other
companies due to potential differences in the methods of calculation. For
information about cash flows or results of operations in accordance with
generally accepted accounting principles, please see the audited consolidated
financial statements included elsewhere in this prospectus. Adjusted EBITDA
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles.
From the date of our formation as a limited liability company through June
30, 1999, we were not subject to federal and state income taxes, except for
certain New York income taxes on limited liability companies. The amounts in the
line item of the statement of operations and other data table below titled "Pro
forma net income (loss)" reflect the additional tax provision that we would have
recorded had we been a C corporation for the periods presented.
The pro forma as adjusted balance sheet data as of June 30, 1999 below give
effect to our sale of shares of common stock in this offering, at an
assumed initial public offering price of $ per share, after deducting
estimated underwriting discounts and our estimated offering expenses and after
the application of a portion of the proceeds to repay borrowings under our
credit facility.
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<PAGE> 7
<TABLE>
<CAPTION>
ZAI*NET
(PREDECESSOR) CAMINUS
------------------------- -------------------------------------------------------------------
INCEPTION PRO FORMA INCEPTION PRO FORMA
FOUR (APRIL 29, TWELVE (APRIL 29, SIX SIX
MONTHS 1998) MONTHS 1998) MONTHS MONTHS
YEAR ENDED ENDED THROUGH ENDED THROUGH ENDED ENDED
DECEMBER 31, APRIL 30, DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30, JUNE 30,
1997 1998 1998 1998 1998 1999 1999
------------ ---------- ------------ ------------ ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS AND
OTHER DATA:
Revenues:
Licenses...................... $1,521,447 $1,495,221 $ 3,639,143 $ 916,015 $ 4,295,325
Software services............. 2,667,807 1,334,473 3,090,758 676,000 4,006,590
Strategic consulting.......... -- -- 2,896,102 855,768 2,940,062
---------- ---------- ------------ ----------- -----------
Total revenues.............. 4,189,254 2,829,694 9,626,003 2,447,783 11,241,977
---------- ---------- ------------ ----------- -----------
Acquired in-process research and
development................... -- -- 4,822,000 3,053,000 --
Operating income (loss)......... (4,236) 436,030 (10,133,366) (3,390,943) (2,277,627)
Net income (loss)............... 13,355 420,508 (10,072,192) (3,410,016) (2,468,897)
Pro forma net income (loss)..... (9,860,233) (2,912,747)
Basic and diluted net loss per
membership interest........... $ (0.13) $ (0.03)
Weighted average membership
interests -- basic and
diluted....................... 77,839,447 84,183,991
Adjusted EBITDA................. $ 118,854 $ 482,171 $ 355,155 $ 389,398 $ 1,637,528
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1999
-------------------------------------
PRO FORMA
AS
ACTUAL PRO FORMA ADJUSTED
----------- --------- -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 886,907
Total assets................................................ 27,862,372
Borrowings under credit facility, net of current portion.... 2,500,000
Current portion of borrowings under credit facility......... 750,000
Members'/stockholders' equity............................... 16,591,108
</TABLE>
------------------------
Except as set forth in the financial statements and related notes or as
otherwise indicated, all information in this prospectus assumes:
- no exercise of the underwriters' over-allotment option;
- our reorganization as a corporation immediately prior to this offering,
and the conversion of membership interests in the limited liability
company into shares of common stock of the corporation; and
- that options to purchase common stock issued to GFI and SS&C
Technologies, Inc. are exercised prior to or in connection with this
offering.
We use the following registered trademarks: Caminus(R) and Zai*Net(R). We
also use the following trademarks: Zai*Net Manager(TM), Zai*Net Risk
Analytics(TM), Zai*Net Physicals(TM), Zai*Net Models(TM), PowerMarkets(TM),
PowerOptions(TM), GasOptions(TM), ProjectFinance(TM), Zai*Net Weather Delta(TM),
Gas*Master(TM), Power*Master(TM) and Plant*Master(TM). This prospectus also
contains trademarks and registered trademarks of other companies, which are the
property of those other companies.
6
<PAGE> 8
RISK FACTORS
You should consider carefully the following Risk Factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk. Any of the
following risks could materially harm our business and could result in a
complete loss of your investment.
RISKS RELATED TO OUR BUSINESS
WE HAVE A LIMITED HISTORY AS A COMBINED OPERATING ENTITY THAT PROVIDES BOTH
SOFTWARE SOLUTIONS AND STRATEGIC CONSULTING SERVICES, AND WE MAY FACE
DIFFICULTIES ENCOUNTERED BY RECENTLY COMBINED COMPANIES THAT OPERATE IN
DIFFERENT GEOGRAPHIC REGIONS AND PROVIDE VARIED PRODUCTS AND SERVICES
In April 1998, we were organized as a limited liability company for the
purpose of acquiring Zai*Net Software, L.P., a software company based in New
York, and Caminus Limited, a strategic consulting practice based in Cambridge,
England. Accordingly, we have a limited history of combined operations and may
face difficulties encountered by recently combined companies that operate in
different geographic regions and provide varied products and services,
especially in rapidly evolving markets such as the energy market. These risks
include our ability to:
- increase industry awareness and market acceptance of our products and
services
- manage our growth
- retain current customers and attract a large number of new customers
- respond effectively to competitive developments
- continue to develop and upgrade our technology
- attract, retain and motivate qualified personnel
If we are unsuccessful in addressing these risks, our business, results of
operations and financial condition would be materially adversely affected.
Please see "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for detailed information on our limited operating
history.
OUR HISTORICAL AND PRO FORMA FINANCIAL INFORMATION MAY NOT BE REPRESENTATIVE OF
OUR RESULTS AS A COMBINED COMPANY
The pro forma financial information included in this prospectus combines
the operating results of Zai*Net Software, Inc., Caminus Limited and DC Systems,
Inc. This information may not reflect what our results of operations, financial
position and cash flows would have been had we been a combined entity during the
periods presented, or what our results of operations, financial position and
cash flows will be in the future. The historical and pro forma financial
information does not reflect many significant changes that have occurred or may
occur in our
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<PAGE> 9
operational arrangements as a combined entity. Accordingly, we can provide no
assurance that our historical and pro forma financial information is indicative
of our future operating results or financial performance.
WE EXPECT OUR RESULTS OF OPERATIONS TO FLUCTUATE AND THE PRICE OF OUR COMMON
STOCK COULD FALL IF QUARTERLY RESULTS ARE LOWER THAN THE EXPECTATIONS OF
SECURITIES ANALYSTS
Our revenues and results of operations have fluctuated in the past and may
vary from quarter to quarter in the future. If our quarterly results fall below
the expectations of securities analysts, the price of our common stock could
fall. A number of factors, many of which are outside our control, may cause
variations in our results of operations, including:
- demand for our software solutions and strategic consulting services
- the timing and recognition of sales of our products and services
- unexpected delays in developing and introducing new products and services
- increased expenses, whether related to sales and marketing, product
development or administration
- changes in the rapidly evolving market for products and services in the
energy industry
- the mix of revenues derived from products and services
- the hiring, retention and utilization of personnel
- the mix of domestic and international revenues
- costs related to possible acquisitions of technologies or businesses
- general economic factors
- changes in the revenue recognition policies required by generally
accepted accounting principles
Accordingly, we believe that quarter-to-quarter comparisons of our results
of operations are not necessarily meaningful. You should not rely on the results
of one quarter as an indication of our future performance.
A substantial portion of our operating expenses is related to personnel
costs, marketing programs and overhead, which cannot be adjusted quickly and are
therefore relatively fixed in the short term. Our operating expense levels are
based, in significant part, on our expectations of future revenues on a
quarterly basis. As a result, if revenues for a particular quarter are below our
expectations, we may not be able to reduce operating expenses proportionately
for that quarter, and therefore this revenue shortfall would have a
disproportionately negative effect on our operating results and cash flows for
that quarter.
In addition, we plan to increase our operating expenses to expand our sales
and marketing operations, fund greater levels of research and development,
broaden strategic consulting and software services and improve our operational
and
8
<PAGE> 10
financial systems. If our revenues do not increase as quickly as these expenses,
our results of operations and cash flows may suffer and our stock price may
decline.
OUR LENGTHY SALES CYCLE MAKES IT DIFFICULT TO PREDICT OUR QUARTERLY RESULTS AND
THE PRICE OF OUR COMMON STOCK COULD FALL IF QUARTERLY RESULTS ARE LOWER THAN THE
EXPECTATIONS OF SECURITIES ANALYSTS
We have a long sales cycle due to the need to educate potential customers
regarding the use and benefits of our software solutions and strategic
consulting services. Our sales cycle varies depending on the size and type of
customer considering a purchase and whether we have conducted business with a
potential customer in the past. These potential customers frequently need to
obtain internal approvals from multiple decision makers prior to making purchase
decisions. Our long sales cycle, which can range from six to nine months or
more, makes it difficult to predict the quarter in which sales may occur or
revenues may be recognized. Delays in sales could cause significant variability
in our revenues and results of operations for any particular period. If our
quarterly results and cash flows fall below the expectations of securities
analysts, our stock price may decline.
THE MARKET FOR THE TYPES OF PRODUCTS AND SERVICES THAT WE OFFER TO THE ENERGY
INDUSTRY IS RAPIDLY EVOLVING, AND WE CANNOT BE CERTAIN THAT A VIABLE MARKET FOR
OUR PRODUCTS AND SERVICES WILL BE SUSTAINABLE
The market for products and services in the energy industry is rapidly
evolving. We need to continue to develop products and services that serve the
changing needs of energy market participants in this evolving market.
Accordingly, we cannot be certain that a viable market for our products and
services will be sustainable. Organizations that have already invested
substantial resources in proprietary or other third-party solutions for buying,
selling or trading energy assets may be reluctant or slow to adopt a new
approach that may replace, limit or compete with their existing systems. These
factors could inhibit the market's acceptance of our products and services in
particular.
THE MARKET FOR PRODUCTS AND SERVICES IN THE ENERGY INDUSTRY IS COMPETITIVE, AND
WE EXPECT COMPETITION TO INTENSIFY IN THE FUTURE; WE MAY NOT BE ABLE TO COMPETE
SUCCESSFULLY
The market for products and services in the energy industry is competitive,
and we expect competition to intensify in the future as participants in the
energy industry try to respond to increasing deregulation. Our primary
competition currently comes from internal development efforts of energy
participants for internal use or for sale to other market participants, vendors
of software solutions and providers of strategic consulting services.
Some of our current and many of our potential competitors have or may have
longer operating histories and significantly greater financial, technical,
marketing and other resources than we do, and may be able to respond more
quickly than we can to new or changing opportunities, technologies and customer
requirements. Also, our current and potential competitors have or may have
greater name recognition and more extensive customer bases that they can
leverage to gain
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<PAGE> 11
market share. These competitors may be able to undertake more extensive
promotional activities, adopt more aggressive pricing policies and offer more
attractive terms to purchasers than we can. In addition, our current and
potential competitors have established or may establish cooperative
relationships among themselves or with third parties to enhance their products
and services and expand their markets. Accordingly, new competitors or alliances
among competitors may emerge and rapidly acquire significant market share.
Increased competition could result in price reductions, reduced revenues and the
loss of customers, which could result in increased losses or reduced profits.
WE MAY NOT BE ABLE TO SUFFICIENTLY EXPAND OUR SALES AND DISTRIBUTION
CAPABILITIES AND STRATEGIC CONSULTING SERVICES IN ORDER TO INCREASE MARKET
AWARENESS OF OUR PRODUCTS AND SERVICES AND INCREASE OUR REVENUES
We must expand our direct sales operations and strategic consulting
services in order to increase market awareness of our products and services and
generate increased revenues. We require sales and consulting personnel with
significant subject matter expertise in the energy industry. We cannot be
certain, however, that we will be able to hire a sufficient number of sales and
consulting personnel in a timely, cost-effective manner. Moreover, all of our
strategic consultants are currently based in Europe, and we may encounter
significant start-up costs in connection with establishing strategic consulting
operations in the United States.
OUR REVENUES ARE SUBSTANTIALLY DEPENDENT UPON SALES OF A LIMITED NUMBER OF
SOFTWARE PRODUCTS AND RELATED SERVICES
To date, a significant percentage of our revenues has come from licensing
our Zai*Net Manager, Zai*Net Risk Analytics, Zai*Net Physicals and Zai*Net
Models software and providing related services. We currently expect that these
activities will account for a significant percentage of our revenues for the
foreseeable future. As a result, factors adversely affecting the pricing of or
demand for our products and services, such as competition or technological
change, could have a material adverse effect on our business, financial
condition and results of operations. Our future financial performance will
depend, in large part, on the continued market acceptance of our existing
products and the successful development, introduction and customer acceptance of
new or enhanced versions of our software products and services, including the
end-to-end energy software solution that we are developing with ABB Energy
Information Systems. There can be no assurance that we will continue to be
successful in developing and marketing our Zai*Net Manager, Zai*Net Risk
Analytics, Zai*Net Physicals and Zai*Net Models software.
WE MAY NOT BE ABLE TO MANAGE OUR EXPANDING OPERATIONS
We have expanded our operations rapidly and currently have three offices in
the United States and two in the United Kingdom. We intend to continue to expand
our U.S. and international operations in the foreseeable future to pursue
existing and potential market opportunities and to support our growing customer
base. Rapid growth in numerous geographic regions has placed and will continue
to place a significant demand on our management, financial and operational
resources. Such demands have already required us and may require us in the
future to engage third-party resources over which we have limited control to
assist us in
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<PAGE> 12
implementing our growth strategy. In order to manage growth effectively, we must
implement and improve our operational systems, procedures and controls on a
timely and cost-effective basis. If we fail to improve our operational systems
in a timely and cost-effective manner, we could experience customer
dissatisfaction, cost inefficiencies and lost revenue opportunities, which could
adversely affect our results of operations.
WE FACE RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS AND PLANS FOR
EXPANSION
We intend to continue to expand our international operations and sales and
marketing efforts. International operations, however, are subject to inherent
risks, including:
- the need to comply with the laws and regulations of different countries
- difficulties in enforcing contractual obligations and intellectual
property rights in some countries
- difficulties and costs of staffing and managing foreign operations
- fluctuations in currency exchange rates and the imposition of exchange or
price controls or other restrictions on the conversion of foreign
currencies
- difficulties in collecting international accounts receivable and the
existence of potentially longer payment cycles
- language and cultural differences
- restrictive export and import regulations, tariffs and other trade
barriers
- potentially adverse taxation issues
- political and economic instability
- local economic conditions in foreign markets
These risks may have a material adverse effect on our business, financial
condition and results of operations.
WE MAY NOT BE ABLE TO INTEGRATE THE OPERATIONS FROM OUR RECENT AND FUTURE
ACQUISITIONS
As part of our business strategy, we have completed and expect to enter
into additional business combinations and acquisitions, such as our August 1999
acquisition of DC Systems, Inc.
Acquisition transactions are accompanied by a number of risks, including,
among other things:
- the difficulty of assimilating the operations and personnel of the
acquired companies
- the potential disruption of our ongoing business
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- the inability of our management to maximize our financial and strategic
position through the successful incorporation of acquired technology or
products into our business
- expenses associated with the transactions
- additional expenses associated with amortization of acquired intangible
assets
- the difficulty of implementing and maintaining uniform standards,
controls, systems, procedures and policies
- the impairment of relationships with employees and customers as a result
of integrating new management personnel
- the potential unknown liabilities associated with acquired businesses
- the difficulties in managing operations in several countries, including
language and cultural differences
Our failure to adequately address these issues could have a material
adverse effect on our business, financial condition and results of operations.
SEVERAL MEMBERS OF OUR SENIOR MANAGEMENT HAVE ONLY RECENTLY JOINED US
Several members of our senior management recently joined us and have not
previously worked together. David M. Stoner, our chief executive officer, joined
us in October 1998, and Mark A. Herman, our chief financial officer, joined us
in February 1999. In addition, two of our founders, Nigel L. Evans, our senior
vice president and head of European operations, and Brian J. Scanlan, our chief
technology officer, have been working together only since our acquisitions of
Caminus Limited and Zai*Net Software, L.P. in May 1998. As a result, our senior
managers are still becoming integrated as a management team and may not work
effectively as a team to successfully manage our business.
IF WE FAIL TO ADAPT TO RAPID CHANGES IN THE ENERGY MARKET, OUR EXISTING PRODUCTS
COULD BECOME OBSOLETE
The market for our products is marked by rapid changes in the regulatory
environment, new product introductions and related technology enhancements,
uncertain product life cycles, changes in customer demands and evolving industry
standards. We cannot be certain that we will successfully develop and market new
products or product enhancements that comply with present or emerging technology
standards. Also, any new regulation or technology standard could increase our
cost of doing business or otherwise have a material adverse effect on our
business.
New products based on new technologies or new industry standards could
render our existing products obsolete and unmarketable. To succeed, we will need
to enhance our current products and develop new products on a timely basis to
keep pace with developments related to the energy market and to satisfy the
increasingly sophisticated requirements of customers. Software addressing the
trading and management of energy assets is complex and can be expensive to
12
<PAGE> 14
develop, and new products and product enhancements can require long development
and testing periods. Any delays in developing and releasing enhanced or new
products could cause us to lose revenue opportunities and customers, and any
increased cost of doing business could have a material adverse effect on our
business.
OUR SOFTWARE PRODUCTS MAY CONTAIN ERRORS OR DEFECTS THAT COULD RESULT IN LOST
REVENUES, DELAYED OR LIMITED MARKET ACCEPTANCE OR PRODUCT LIABILITY CLAIMS WITH
SUBSTANTIAL LITIGATION COSTS
Complex software products such as ours often contain errors or defects,
particularly when first introduced or when new versions or enhancements are
released. Despite internal testing and testing by customers, our current and
future products may contain serious defects, including Year 2000 errors. Serious
defects or errors could result in lost revenues or a delay in market acceptance.
Because our customers use our products for critical business applications,
errors, defects or other performance problems could result in damage to our
customers. They could seek significant compensation for losses from us. Although
our license agreements typically contain provisions designed to limit our
exposure to product liability claims, existing or future laws or unfavorable
judicial decisions could negate these limitations. Even if not successful, a
product liability claim brought against us would likely be costly and
time-consuming, which would require our management to spend time defending the
claim rather than operating our business.
OUR SUCCESS DEPENDS ON OUR ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS
We seek to protect the source code for our proprietary software both as a
trade secret and as a copyrighted work. Our policy is to enter into
confidentiality agreements with our employees, consultants, vendors and
customers and to control access to our software, documentation and other
proprietary information.
Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our products or obtain and use information that
we regard as proprietary. Policing unauthorized use of our products is
difficult, and while we are unable to determine the extent to which piracy of
our software products exists, such piracy can be expected to be a persistent
problem, particularly in international markets where the laws of foreign
countries are not as protective as they are in the U.S. There can also be no
assurance that our trade secrets or confidentiality agreements will provide
meaningful protection of our proprietary information. Furthermore, we can
provide no assurance that others will not independently develop similar
technologies or duplicate any technology developed by us. Our inability to
protect our proprietary rights could have a material adverse effect on our
business, financial condition or results of operations.
We rely on outside licensors for technology that is incorporated into and
is necessary for the operation of our products. Our success will depend in part
on our continued ability to have access to such technologies that are or may
become important to the functionality of our products. If we are unable to
continue to procure or use such technology, our business, financial condition or
results of operations could be materially adversely affected.
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<PAGE> 15
OTHERS MAY CLAIM THAT WE INFRINGE ON THEIR INTELLECTUAL PROPERTY RIGHTS
As the number of software products in the energy industry increases and the
functionality of products from different software developers further overlaps,
software developers and publishers may increasingly become subject to claims of
infringement or misappropriation of the intellectual property or proprietary
rights of others. We can provide no assurance that third parties will not assert
infringement or misappropriation claims against us in the future with respect to
current or future products. Further, we may be subject to additional risks as we
enter into transactions in countries where intellectual property laws are not
well developed or are poorly enforced. Legal protections of our rights may be
ineffective in such countries, and technology developed in such countries may
not be protectable in jurisdictions where protection is ordinarily available. In
addition, we are obligated to indemnify customers against claims that we
infringe the intellectual property rights of third parties. The results of any
intellectual property litigation to which we might become a party may force us
to do one or more of the following:
- cease selling or using products or services that incorporate the
challenged intellectual property
- obtain a license, which may not be available on reasonable terms or at
all, to sell or use the relevant technology
- redesign those products or services to avoid infringement
- refund license fees that we have previously received
OUR BUSINESS MAY BE HARMED IF WE LOSE THE SERVICES OF DAVID STONER, BRIAN
SCANLAN, NIGEL EVANS, RICHARD COURON OR OTHER KEY EMPLOYEES
Our success depends largely on the skills, experience and performance of
key employees, particularly David Stoner, our chief executive officer, Brian
Scanlan and Nigel Evans, two of our founders, and Richard Couron, the founder of
DC Systems. If we lose one or more of our key employees, our business could be
harmed.
IF WE FAIL TO CONTINUE TO ATTRACT AND RETAIN PERSONNEL WITH SALES EXPERIENCE,
SOFTWARE DEVELOPMENT SKILLS AND SUBJECT MATTER EXPERTISE IN THE ENERGY MARKET,
OUR BUSINESS MAY BE HARMED
Our future success will depend in large part on our ability to continue
attracting and retaining highly skilled personnel, particularly salespeople,
software developers and consultants who are both experts in their particular
fields and have strong customer relationship skills. Newly hired employees will
require training and it will take time for them to achieve full productivity. We
face intense competition in recruiting and cannot be certain that we will be
able to hire enough qualified individuals in the future or that newly hired
employees will achieve necessary levels of productivity.
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<PAGE> 16
WE MAY NEED ADDITIONAL FINANCING WHICH COULD BE DIFFICULT TO OBTAIN AND WHICH
COULD DILUTE YOUR OWNERSHIP INTEREST OR THE VALUE OF YOUR SHARES
We intend to grow our business rapidly and may require significant external
financing in the future. Obtaining additional financing will be subject to a
number of factors, including:
- market conditions
- our operating performance
- investor sentiment, particularly with respect to the emerging energy
market
These factors may make the timing, amount, terms and conditions of
additional financing unattractive for us. If we are unable to raise capital to
fund our operations, our business, financial condition and results of operations
could be materially and adversely affected.
If we raise additional funds through the sale of equity or convertible debt
securities, your percentage ownership will be reduced. In addition, these
transactions may dilute the value of our outstanding stock. We may have to issue
securities that have rights, preferences and privileges senior to our common
stock.
WE MAY BE ADVERSELY AFFECTED BY THE YEAR 2000 ISSUE
The "Year 2000 Issue" refers generally to the problems that software may
have in determining the correct century for the year. For example, software with
date-sensitive functions that are not Year 2000 compliant may not be able to
distinguish whether "00" means 1900 or 2000, which may result in failures or the
creation of erroneous results. We are subject to potential Year 2000 problems
affecting our products, our internal systems and the systems of our suppliers
and customers, any of which could disrupt our business and adversely affect our
results of operations.
Although we are not currently aware of any Year 2000 problems relating to
our products, we may discover Year 2000 problems in our products that will
require substantial revision and could subject us to liability claims. Our
products operate in complex network environments and directly or indirectly
interact with a number of other hardware and software systems that we cannot
adequately evaluate for Year 2000 problems. In addition, technology developed by
others and incorporated in our products could have Year 2000 problems. We may
face claims based on Year 2000 problems in other companies' products, or issues
arising from the integration of multiple products within an overall system even
if our products are otherwise year 2000 compliant.
Our failure to fix or replace our internally developed proprietary software
or third-party software, hardware or services on a timely basis could result in
lost revenues, increased operating costs, the loss of customers and other
business interruptions, any of which could seriously harm our business. Even if
we do not face Year 2000 problems, customers may delay new purchases of our
products until they have assessed their own Year 2000 exposure, which could
adversely affect our results of operations. Moreover, our failure to adequately
address Year 2000 compliance issues in our internally developed proprietary
software could result in
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<PAGE> 17
claims of mismanagement, misrepresentation or breach of contract and related
litigation, which could be costly and time-consuming to defend.
OUR EXISTING STOCKHOLDERS WILL BE ABLE TO CONTROL ALL MATTERS REQUIRING
STOCKHOLDER APPROVAL AND COULD DELAY OR PREVENT SOMEONE FROM ACQUIRING OR
MERGING WITH US ON TERMS FAVORED BY A MAJORITY OF OUR INDEPENDENT STOCKHOLDERS
OR OTHERWISE CONFLICT WITH OTHER STOCKHOLDERS' INTERESTS
On completion of this offering, our executive officers and directors and
their affiliates will beneficially own approximately % of our outstanding
common stock. As a result, these stockholders will be able to exercise control
over all matters requiring stockholder approval, including the election of
directors, certain amendments to our charter and bylaws and approval of
significant corporate transactions, such as a merger or a sale of our assets.
This could delay or prevent someone from acquiring or merging with us.
RISKS RELATED TO THE ENERGY INDUSTRY
OUR PERFORMANCE WILL DEPEND ON THE CONTINUED GROWTH IN DEMAND FOR ENERGY
PRODUCTS AND SERVICES
Our future success depends heavily on the continued growth in demand for
energy products and services. If demand for energy products and services does
not continue to grow or grows more slowly than expected, demand for our products
and services will be reduced. Utilities and other businesses may be slow to
adapt to changes in the energy marketplace or be satisfied with existing
services and solutions. This would cause there to be less demand for our
products and services than we currently expect. The market for energy trading
software and solutions that address the deregulating energy industry is
relatively new, and potential customers may wait for widespread adoption of
products before making purchase commitments. Even if there is significant market
acceptance of products and services for the energy industry, we may incur
substantial expenses adapting our solutions to changing or emerging
technologies.
THE GLOBAL ENERGY INDUSTRY IS SUBJECT TO EXTENSIVE AND VARIED GOVERNMENTAL
REGULATIONS, AND OUR BUSINESS MAY BE ADVERSELY AFFECTED IF WE ARE UNABLE TO
SUCCESSFULLY DEVELOP PRODUCTS AND SERVICES THAT ADDRESS NUMEROUS AND RAPIDLY
CHANGING REGULATORY REGIMES
Although the global energy industry is becoming increasingly deregulated,
the energy industry, which includes utilities, producers, energy marketers,
processors, storage operators, distributors, marketers, pipelines and others, is
still subject to extensive and varied local, national and regional regulation.
If we are unable to design and develop software solutions and strategic
consulting services that address the numerous and changing regulatory
requirements, or fail to alter our products and services rapidly enough, our
customers or potential customers may not purchase our products and services. Any
of these failures would have a material adverse effect on our business,
financial condition and results of operations.
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<PAGE> 18
OUR FINANCIAL SUCCESS IS CLOSELY LINKED TO THE HEALTH OF THE ENERGY INDUSTRY
We currently derive substantially all of our revenues from licensing our
software and providing strategic consulting services to participants in the
energy industry. Our customers include a number of organizations in the energy
industry, and the success of these customers is linked to the health of the
energy market. In addition, because of the capital expenditures required in
connection with investing in our products and services, we believe that demand
for our products and services could be disproportionately affected by
fluctuations, disruptions, instability or downturns in the energy market, which
may cause customers and potential customers to leave the industry or delay,
cancel or reduce any planned expenditures for software products and related
strategic consulting services. Any resulting decline in demand for our products
and services could have a material adverse effect on our business, financial
condition and results of operations.
PROJECTIONS INCLUDED IN THIS PROSPECTUS RELATING TO THE GROWTH OF THE ENERGY
INDUSTRY ARE BASED ON ASSUMPTIONS THAT COULD TURN OUT TO BE INCORRECT AND ACTUAL
RESULTS COULD BE MATERIALLY DIFFERENT FROM THE PROJECTIONS
This prospectus contains various data and projections related to revenues
generated by the market for products and services to the energy industry. These
data and projections have been included in studies prepared by ABB Energy
Information Systems. These projections include assumptions regarding the
expected growth in information technology spending by energy market
participants. Actual results or circumstances may be materially different from
the projections. This could reduce our revenues and adversely affect our
business, financial condition and results of operations. These data and
projections are inherently imprecise and you are cautioned not to place undue
reliance on them.
RISKS RELATED TO THIS OFFERING
OUR STOCK PRICE MAY BE VOLATILE
Prior to this offering, investors could not buy or sell our common stock
publicly. An active public market for our common stock may not develop or be
sustained after the offering and the market price might fall below the initial
public offering price. We will be negotiating the initial public offering price
with the representatives of the underwriters based on several factors. This
price may vary from the market price of the common stock after this offering.
Fluctuations in market price and volume are particularly common among technology
companies.
The market price of our common stock may fluctuate significantly in
response to the following factors, some of which are beyond our control:
- variations in quarterly operating results
- changes in market valuations of technology companies
- announcements, by us or our competitors, of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments
- additions or departures of key personnel
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<PAGE> 19
- future sales of common stock
- changes in financial estimates by securities analysts
- loss of a major customer
- any shortfall in revenues or net income or any increases in losses from
levels expected by securities analysts
- fluctuations in the price and volume of trading on the stock market
generally
WE MAY INCUR SIGNIFICANT COSTS FROM CLASS ACTION LITIGATION
In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
stock. We may in the future be the target of similar litigation. Securities
litigation could result in substantial costs and divert management's attention
and resources.
SUBSTANTIAL SALES OF OUR COMMON STOCK COULD CAUSE OUR STOCK PRICE TO DECLINE
If our existing stockholders sell a large number of shares of our common
stock or the public market perceives that existing stockholders might sell
shares of common stock, the market price of the common stock could significantly
decline. All of the shares offered under this prospectus will be freely tradable
without restriction or further registration under the federal securities laws
unless purchased by our "affiliates" as that term is defined in Rule 144 under
the Securities Act of 1933. Of the remaining shares outstanding at the
time of this offering:
- shares may be sold 90 days after the effective date of this
offering
- additional shares may be sold upon the expiration of 180-day
lock-up agreements
Deutsche Bank Securities Inc., as lead manager of the underwriters, may
release any or all shares from the lock-up agreements at any time and without
notice.
Existing stockholders holding an aggregate of shares of common
stock have the right to require us to register their shares of common stock with
the Securities and Exchange Commission. If we register their shares of common
stock, they can sell those shares in the public market.
After this offering, we intend to register approximately shares
of our common stock that we have issued or may issue under our stock plans. Once
we register these shares, they can be freely sold in the public market upon
issuance, subject to the "lock-up" agreements described above and the
restrictions imposed on our affiliates under Rule 144.
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<PAGE> 20
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD PREVENT
OR DELAY A CHANGE IN CONTROL OF US
Certain provisions of our certificate of incorporation and by-laws may
discourage, delay or prevent a merger, acquisition or other change in control,
even if the change in control would be beneficial to stockholders. Any of these
provisions could reduce the market price of our common stock. These provisions
include:
- providing for a classified board of directors with staggered, three-year
terms
- limiting the persons who may call special meetings of stockholders
- prohibiting stockholder action by written consent
- establishing advance notice requirements for nominations for election to
the board of directors or for proposing matters that can be acted on by
stockholders at stockholder meetings
Delaware law may also discourage, delay or prevent someone from acquiring
or merging with us.
OUR MANAGEMENT WILL HAVE DISCRETION OVER USING THE NET UNALLOCATED PROCEEDS OF
THIS OFFERING
Our board of directors and management will have significant flexibility in
applying the unallocated net proceeds of this offering. As of the date of this
prospectus, we do not have plans for use of most of the proceeds from this
offering. You will be relying on the judgment of our management about these
uses. See "Use of Proceeds."
YOU WILL EXPERIENCE IMMEDIATE DILUTION IN THE BOOK VALUE PER SHARE OF YOUR
COMMON STOCK
The initial public offering price is substantially higher than the book
value per share of the outstanding common stock immediately after this offering.
Accordingly, if you purchase common stock in the offering, you will incur
immediate and substantial dilution of approximately $ in the book value
per share of the common stock from the price you pay for the common stock.
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<PAGE> 21
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere in this prospectus constitute forward-
looking statements. In some cases, you can identify forward-looking statements
by terminology such as "may," "will," "should," "could," "expects," "plans,"
"intends," "anticipates," "believes," "estimates," "predicts," "potential" or
"continue" or other comparable expressions. These statements involve known and
unknown risks and uncertainties that may cause our actual results, levels of
activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied by
such forward-looking statements. These important factors include, among other
things, those listed under "Risk Factors" and elsewhere in this prospectus.
We cannot guarantee any future results, levels of activity, performance or
achievements. Moreover, neither we nor anyone else assumes responsibility for
the accuracy and completeness of these statements. We undertake no obligation to
update any of the forward-looking statements after the date of this prospectus.
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<PAGE> 22
CAMINUS CORPORATION
On April 29, 1998, we were organized as a Delaware limited liability
company under the name "GFI Caminus LLC." We subsequently acquired the assets
and operations of our business through the acquisition of a number of companies
in the energy industry.
On May 12, 1998, we purchased a 1% general partnership interest and a 70%
limited partnership interest in Zai*Net Software, L.P., which was founded in
1987 and was one of the leading providers of electric power and risk management
software in North America and Europe. On December 31, 1998, we acquired the
remaining partnership interest in Zai*Net Software, L.P., and in March 1999, we
merged Zai*Net Software, L.P. into us.
On May 12, 1998, we also purchased 100% of the shares of capital stock of
Cambridge, England-based Caminus Energy Limited, which is now known as Caminus
Limited. Founded in 1985, Caminus Limited is one of the leading European
strategic consultants to energy companies.
On November 13, 1998, we acquired substantially all of the business and
assets of Positron Energy Consulting, a leading risk analytics company founded
in Houston, Texas in 1996.
On August 31, 1999, we acquired all of the outstanding capital stock of DC
Systems, Inc., a Dallas-based software and services company specializing in
physical gas systems.
GFI Caminus LLC changed its name to "Caminus Energy Ventures LLC" on
September 21, 1998 and to "Caminus LLC" on January 12, 1999. On September 30,
1999, Caminus Corporation was formed as a Delaware corporation and wholly owned
subsidiary of Caminus LLC. Immediately prior to this offering, Caminus LLC will
merge with and into Caminus Corporation, which will be the surviving entity and
which is the registrant in connection with this initial public offering. The
associated membership interests in Caminus LLC will convert into an aggregate
of shares of common stock of Caminus Corporation in connection with the
merger.
All of the acquisitions described above have been accounted for under the
purchase method of accounting and, except as otherwise noted herein, all of the
financial information of the acquired companies have been included in this
prospectus since the respective dates of acquisition. For more information
regarding our initial formation and subsequent acquisitions, please see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Certain Transactions" and note 3 of the Caminus LLC financial
statements.
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<PAGE> 23
USE OF PROCEEDS
We estimate that the net proceeds from our sale of shares of common
stock will be approximately $ , assuming an initial public offering price of
$ per share and after deducting estimated underwriting discounts and our
estimated offering expenses. We will not receive any of the net proceeds from
the sale of shares by the selling stockholders. See "Principal and Selling
Stockholders."
The principal purposes of this offering are:
- to enhance our ability to use our common stock as a means of attracting
and retaining key employees;
- to raise capital in order to repay bank debt and advisory fees;
- to provide increased visibility and credibility in the marketplace;
- to enhance our ability to use our common stock as consideration for
acquisitions;
- to increase our equity capital;
- to facilitate our future access to public capital markets; and
- to provide liquidity to our existing stockholders.
We expect to use the net proceeds received from this offering for the
repayment of bank debt to Fleet Bank, which totaled $2,000,000 at September 30,
1999. The credit agreement with Fleet Bank consists of a revolving loan that
expires on May 31, 2001 and a working capital loan that expires on May 31, 2000
but may be extended to May 31, 2001. The interest rate under the loans was
8 1/4% at September 30, 1999. A portion of the proceeds of the Fleet Bank loans
was used to pay earnout provisions in connection with the acquisition of Zai*Net
Software, L.P. For a description of the bank debt and the acquisition of
Zai*Net, see notes 8 and 3 of the Caminus LLC financial statements. We intend to
use $1,000,000 of the net proceeds to pay consulting and advisory fees due to
GFI for financial, tax and general administrative services, including strategic
advisory services in connection with acquisitions. See "Certain Transactions."
We intend to use the remainder of the net proceeds for working capital and other
general corporate purposes, including possible acquisitions of businesses,
products and technologies.
From time to time we engage in discussions with potential acquisition
candidates. However, except for our discussions with Orion Systems AS, a
software and services company specializing in the Nordic energy market, we have
no current plans, commitments or agreements with respect to any acquisitions,
and we may not make any acquisitions.
Except as described above, we have not identified specific uses for the net
proceeds of this offering, and we will have discretion over their use and
investment. Pending use of the net proceeds, we intend to invest these proceeds
in short-term, investment grade, interest-bearing instruments.
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<PAGE> 24
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
intend to retain future earnings, if any, to finance our growth strategy. We do
not anticipate paying cash dividends on our common stock in the foreseeable
future. Payment of future dividends, if any, will be at the discretion of our
board of directors after taking into account various factors, including:
- our financial condition;
- our operating results;
- our current and anticipated cash needs;
- restrictions in our financing agreements; and
- our plans for expansion.
Our existing line of credit prohibits the declaration of payment of cash
dividends to our stockholders so long as any loan amount is outstanding and
until we have paid in full all amounts payable by us under the terms of the
agreement and the related promissory notes. See "Management's Discussion and
Analysis of Financial Condition -- Liquidity and Capital Resources" and note 8
of the Caminus LLC financial statements.
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<PAGE> 25
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999:
- On an actual basis;
- On a pro forma basis to give effect to:
(1) our reorganization as a corporation immediately prior to this
offering;
(2) the issuance of an aggregate of shares of common stock to
our stockholders in exchange for their membership interests in the
limited liability company;
(3) the issuance of an aggregate of shares of common stock upon
the expected exercise prior to or in connection with this offering of
options to purchase common stock issued to GFI and SS&C Technologies,
Inc.; and
(4) the acquisition of DC Systems in August 1999, including the issuance
of an aggregate of shares of common stock in connection with
such acquisition; and
- On a pro forma basis as adjusted to reflect the issuance and sale by us
of shares of common stock in this offering at an assumed
initial public offering price of $ per share and after deducting the
estimated underwriting discounts and our estimated offering expenses and
applying a portion of the net proceeds to repay borrowings under our
credit facility.
The number of shares outstanding is based on the number of shares of our
common stock outstanding (pro forma) on June 30, 1999. It excludes
shares subject to options outstanding under our 1998 stock incentive plan at a
weighted average exercise price of $ per share and additional
shares available for issuance under our stock plans. You should read this table
together with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and our financial statements and related notes included
elsewhere in this prospectus.
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<PAGE> 26
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
---------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
----------- --------- -----------
<S> <C> <C> <C>
Borrowings under credit facility, including
current portion.......................... $ 3,250,000 $ $
=========== ====== ======
MEMBERS'/STOCKHOLDERS' EQUITY:
Members' equity (actual)................... 16,636,397
Common stock, $0.01 par value per share; no
shares authorized, issued or outstanding
(actual); 50,000,000 shares authorized
(pro forma and pro forma as adjusted);
shares issued and outstanding
(pro forma); shares issued and
outstanding (pro forma as adjusted)......
Additional paid-in-capital.................
Accumulated deficit........................
Cumulative translation adjustment.......... (45,289)
----------- ------ ------
Total members'/stockholders' equity... 16,591,108
----------- ------ ------
Total capitalization, including
current portion of borrowings....... $19,841,108 $ $
=========== ====== ======
</TABLE>
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DILUTION
Our pro forma net tangible book value at June 30, 1999 was approximately
$ , or $ per share of common stock. Pro forma net tangible book
value per share represents the amount of our total tangible assets (total assets
less intangible assets) reduced by our total liabilities, divided by the number
of shares of common stock outstanding, after giving effect to our reorganization
as a corporation immediately prior to this offering, the acquisition of DC
Systems in August 1999 and the issuance of shares of common stock upon the
expected exercise of options by GFI and SS&C Technologies prior to or in
connection with this offering. After giving effect to our sale of
shares of common stock in this offering at an assumed initial public offering
price of $ per share and our receipt of the net proceeds, after deducting
the estimated underwriting discounts and our estimated offering expenses, our
pro forma net tangible book value as of June 30, 1999 would have been
approximately $ , or $ per share. This represents an immediate
increase in pro forma net tangible book value of $ per share to existing
stockholders and an immediate dilution in pro forma net tangible book value of
$ per share to new investors purchasing shares in this offering. The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share......... $
Pro forma net tangible book value per share as of June
30, 1999........................................... $
Increase per share attributable to this offering......
--------
Pro forma net tangible book value per share after this
offering..............................................
--------
Dilution per share to new investors..................... $
========
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1999,
the total number of shares of common stock purchased from us, the total
consideration paid and the average consideration paid per share by our existing
stockholders and by the new investors (at an assumed initial public offering
price of $ per share for shares purchased in this offering, before deducting
underwriting discounts and our estimated offering expenses). Shares owned by
existing stockholders will be reduced by the number of shares sold by them in
this offering. As a result, the number of shares owned by existing stockholders
will be reduced to % of the
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<PAGE> 28
shares of common stock after this offering ( % if the underwriters' over-
allotment option is exercised in full).
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------- ------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
-------- ------- -------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing
stockholders........ % $ % $
Options exercisable
after offering...... $
New investors......... $
-------- ----- -------- -----
Total............ 100.0% $ 100.0%
======== ===== ======== =====
</TABLE>
The foregoing table and calculation assumes the exercise of outstanding
stock options that will be exercisable as of the closing of this offering. As of
September 30, 1999, there were outstanding stock options to purchase
shares of common stock under our 1998 and 1999 stock incentive plans at a
weighted average exercise price of $ per share. To the extent that any of these
stock options are exercised, there will be further dilution to new investors.
See "Capitalization," "Management -- Benefit Plans" and "Description of Capital
Stock."
27
<PAGE> 29
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read together
with the consolidated financial statements and related notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations," which
are included elsewhere in this prospectus. The statement of operations data for
the years ended December 31, 1994 and 1995 and the balance sheet data at
December 31, 1994 and 1995 are derived from, and are qualified by reference to,
the audited financial statements of Zai*Net Software, Inc., our predecessor, not
included in this prospectus. The statement of operations data for the years
ended December 31, 1996 and 1997 and for the four-month period ended April 30,
1998 and the balance sheet data at December 31, 1996 and 1997 are derived from,
and are qualified by reference to, the audited financial statements of Zai*Net
Software, Inc. included elsewhere in this prospectus, which have been audited by
PricewaterhouseCoopers LLP, independent accountants. The consolidated statement
of operations data for the period ended December 31, 1998 and the six months
ended June 30, 1999 and the consolidated balance sheet data at December 31, 1998
and June 30, 1999 are derived from, and are qualified by reference to, the
audited financial statements of Caminus LLC, included elsewhere in this
prospectus, which have been audited by PricewaterhouseCoopers LLP, independent
accountants. The consolidated statement of operations data for the period ended
June 30, 1998 and the consolidated balance sheet data at June 30, 1998 are
derived from, and are qualified by reference to, the unaudited financial
statements of Caminus LLC not included in this prospectus and include, in the
opinion of management, all adjustments, consisting only of normal recurring
adjustments, that are necessary for the fair presentation of our financial
position and results of operations.
In the following table, "Adjusted EBITDA" is defined as earnings before
interest and other income, income taxes, depreciation, amortization, acquired
in-process research and development and non-cash compensation expense. We have
included information concerning Adjusted EBITDA because we believe that it is
useful to an investor in evaluating our operating performance as it compares to
other companies and because this measure is a widely accepted financial
indicator used by investors and analysts to compare the operating performance of
companies. While investors and analysts routinely use EBITDA, it may not
necessarily be comparable to other similarly titled measures used by other
companies due to potential differences in the methods of calculation. For
information about cash flows or results of operations in accordance with
generally accepted accounting principles, please see the audited consolidated
financial statements included elsewhere in this prospectus. Adjusted EBITDA
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles.
From the date of our formation as a limited liability company through June
30, 1999, we were not subject to federal and state income taxes, except for
certain New York income taxes on limited liability companies. The amounts in the
line item of the statement of operations and other data table below titled "Pro
forma net income (loss)" reflect the additional tax provision that we would have
recorded had we been a C corporation for the periods presented.
The pro forma financial data give effect to the acquisitions of Zai*Net,
Caminus Limited and DC Systems, Inc. as if the acquisitions occurred at the
beginning of the respective periods presented. The pro forma as adjusted
financial data give effect to the acquisitions referred to above and our sale of
shares of common stock in this offering, at an assumed initial public
offering price of
28
<PAGE> 30
$ per share, after deducting estimated underwriting discounts and our
estimated offering expenses and after the application of a portion of the
proceeds to repay borrowings under our credit facility.
<TABLE>
<CAPTION>
ZAI*NET
(PREDECESSOR)
--------------------------------------------------------------
FOUR
MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------------------------- APRIL 30,
1994 1995 1996 1997 1998
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS AND
OTHER DATA:
Revenues:
Licenses...................... $ 633,750 $1,575,104 $1,291,427 $1,521,447 $1,495,221
Software services............. 781,819 973,235 1,429,860 2,667,807 1,334,473
Strategic consulting.......... -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total revenues.............. $1,415,569 2,548,339 2,721,287 4,189,254 2,829,694
---------- ---------- ---------- ---------- ----------
Gross profit.................... 728,201 1,583,758 1,722,145 2,857,772 2,095,452
Operating expenses.............. 1,093,144 1,444,477 1,619,084 2,862,008 1,659,422
---------- ---------- ---------- ---------- ----------
Operating income (loss)......... (364,943) 139,281 103,061 (4,236) 436,030
Other income (expense), net..... 10,327 9,511 (2,197) 17,591 8,294
Provision for income taxes...... -- -- -- -- 23,816
---------- ---------- ---------- ---------- ----------
Net income (loss)............... $ (354,616) $ 148,792 $ 100,864 $ 13,355 $ 420,508
========== ========== ========== ========== ==========
Adjusted EBITDA................. $ (310,163) $ 217,426 $ 204,179 $ 118,854 $ 482,171
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------
1994 1995 1996 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents...... $ 155,089 $ 156,760 $ 242,208 $ 146,961
Total assets................... 541,410 834,257 1,274,792 2,193,379
Long-term debt................. -- 17,000 3,000 --
Members'/stockholders' equity
(deficit).................... (28,782) 120,010 220,874 234,229
</TABLE>
29
<PAGE> 31
<TABLE>
<CAPTION>
CAMINUS
------------------------------------------------------------------------------
PRO FORMA PRO FORMA
INCEPTION TWELVE INCEPTION SIX SIX
(APRIL 29, 1998) MONTHS (APRIL 29, 1998) MONTHS MONTHS
THROUGH ENDED THROUGH ENDED ENDED
DECEMBER 31, DECEMBER 31, JUNE, 30 JUNE, 30 JUNE, 30
1998 1998 1998 1999 1999
---------------- ------------ ---------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS AND
OTHER DATA:
Revenues:
Licenses........... $ 3,639,143 $ 916,015 $ 4,295,325
Software
services......... 3,090,758 676,000 4,006,590
Strategic
consulting....... 2,896,102 855,768 2,940,062
------------ ----------- -----------
Total revenues... 9,626,003 2,447,783 11,241,977
------------ ----------- -----------
Gross profit......... 5,135,953 1,404,460 7,571,334
Operating expenses... 15,269,319 4,795,403 9,848,961
------------ ----------- -----------
Operating loss....... (10,133,366) (3,390,943) (2,277,627)
Other income
(expense), net..... 96,909 25,438 (51,702)
Provision for income
taxes.............. 35,735 44,511 139,568
------------ ----------- -----------
Net loss............. $(10,072,192) $(3,410,016) $(2,468,897)
============ =========== ===========
Pro forma net loss... $ (9,860,233) $(2,912,747)
============ ===========
Basic and diluted net
loss per membership
interest........... $ (0.13) $ (0.03)
============ ===========
Weighted average
membership
interests -- basic
and diluted........ 77,839,447 84,183,991
============ ===========
Adjusted EBITDA...... $ 355,155 $ 389,398 $ 1,637,528
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1999
---------------------------------------
PRO FORMA
DECEMBER 31, AS
1998 ACTUAL PRO FORMA ADJUSTED
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents.......... $ 2,770,538 $ 886,907
Total assets........... 31,367,998 27,862,372
Borrowings under credit
facility, net of
current portion...... -- 2,500,000
Current portion of
credit facility...... 750,000
Members'/stockholders'
equity............... 17,458,778 16,591,108
</TABLE>
30
<PAGE> 32
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with "Selected Consolidated
Financial Data" and our financial statements and related notes thereto appearing
elsewhere in this prospectus. This discussion and analysis contains
forward-looking statements that involve risks, uncertainties and assumptions.
The actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including but not
limited to those set forth under "Risk Factors" and elsewhere in this
prospectus.
OVERVIEW
We are a leading provider of software solutions and strategic consulting
services to participants in energy markets throughout North America and Europe.
We were organized as a limited liability company on April 29, 1998 and acquired
Zai*Net Software, L.P. and Caminus Limited in May 1998 and Positron Energy
Consulting in November 1998. Since the completion of these acquisitions, we
expanded our organization by hiring personnel in key areas, particularly
marketing, sales and research and development. Our full-time employees increased
from 116 at December 31, 1998 to 147 at June 30, 1999, and we intend to continue
to increase our number of employees throughout 1999 and 2000.
We generate revenues from licensing our Zai*Net software products,
providing related services for implementation consulting and support and
providing strategic consulting services. We generally license one or more
Zai*Net products to our customers, who typically receive perpetual licenses to
use our products for a specified number of servers and concurrent users. After
the initial license, they may purchase licenses for additional products, servers
and users as needed. In addition, customers often purchase professional services
from us, including implementation and training services, and enter into
automatically renewable maintenance contracts that provide for software upgrades
and technical support over a stated term, typically 12 months. We also provide
strategic advice on deregulation and the restructuring of the energy industry
through our strategic consulting group. Implementation consulting and strategic
consulting are typically billed on a time and materials basis.
We follow the provisions of Statement of Position ("SOP") No. 97-2,
"Software Revenue Recognition," as amended by SOP No. 98-4, "Deferral of the
Effective Date of Certain Provisions of SOP No. 97-2 and SOP 98-9, "Modification
of SOP 97-2, Software Revenue Recognition with Respect to Certain Transactions."
Under SOP No. 97-2, we recognize license revenues when a license is executed,
the product has been delivered, all significant company obligations are
fulfilled, the fee is fixed or determinable and collectibility is probable.
Under our current standard license agreement, we generally recognize license
revenues upon the execution of a license and delivery of the software. For those
license agreements where customer acceptance is required or the licensee
requires significant enhancements, we recognize license revenues only when our
obligations under the license agreement are completed and the software has been
accepted. Accordingly, for these contracts, payments received are deferred until
our
31
<PAGE> 33
obligations under the license agreement are completed. Maintenance and support
revenues associated with new product licenses and renewals are deferred and
recognized ratably over the contract period. Software services revenues and
strategic consulting revenues are recognized as such services are performed.
We sell our products through our direct sales forces in North America and
Europe. Our strategic relationships with third parties assist in generating
sales leads and provide cooperative marketing support. In addition, our
strategic consulting group not only develops its own client base but assists in
generating software sales leads.
Revenues from customers outside the United States represented 52% of our
total revenues for the six months ended June 30, 1999. Substantially all of our
international revenues have been derived from sales of our strategic consulting
services and software products in the United Kingdom. We intend to continue to
expand our international operations and commit significant management time and
financial resources to developing our direct international sales channels.
International revenues may not, however, increase as a percentage of total
revenues.
We were formed as a limited liability company in April 1998. Accordingly,
we have not been subject to federal and state income taxes, except for certain
New York income taxes on limited liability companies. Immediately prior this
offering, the limited liability company will merge with and into Caminus
Corporation, a Delaware C corporation formed in September 1999. The adjustments
to the income tax provision reflect the additional tax provision we would have
recorded had we been a C corporation for the periods presented. See "Caminus
Corporation" for a description of our corporate history and acquisitions.
Due to our acquisitions and the respective dates of acquisition, and the
significant changes in our operations, the fluctuation of financial results,
including financial data expressed as a percentage of revenues for all periods,
did not necessarily provide a meaningful understanding of the expected future
results of our operations.
RESULTS OF OPERATIONS
COMPARISON OF THE PERIOD FROM INCEPTION (APRIL 29, 1998) THROUGH JUNE 30, 1998
TO THE SIX MONTHS ENDED JUNE 30, 1999
The following table sets forth the consolidated financial information
expressed as a percentage of revenues for the period from inception (April 29,
1998) through June 30, 1998 and for the six months ended June 30, 1999. The
consolidated financial information for the period from inception through June
30, 1998 is derived from the unaudited consolidated financial statements and
includes, in the opinion of our management, all adjustments, consisting only of
normal recurring adjustments, that are necessary for the fair presentation of
our financial position and results of operations. The consolidated financial
information for the six months ended June 30, 1999 is derived from our audited
consolidated financial statements. The period from Inception though June 30,
1998, which is approximately two months, is being compared to the six months
ended June 30, 1999. Accordingly increases in revenues and expenses are
primarily attributable to the
32
<PAGE> 34
comparison of periods containing different numbers of months. The discussion
below outlines other trends in the business.
<TABLE>
<CAPTION>
INCEPTION THROUGH SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1999
----------------- ----------------
<S> <C> <C>
Revenues:
Licenses....................................... 37% 38%
Software services.............................. 28 36
Strategic consulting........................... 35 26
----- ----
Total revenues.............................. 100 100
Cost of revenues:
Cost of software services...................... 19 17
Cost of strategic consulting................... 23 16
----- ----
Gross profit................................ 58 67
Operating expenses:
Sales and marketing............................ 4 10
Research and development....................... 10 15
General and administrative..................... 29 30
Acquired in-process research and development... 125 --
Amortization of intangible assets.............. 28 33
----- ----
Total operating expenses.................... 196 88
----- ----
Loss from operations............................. (139) (21)
Other income (expense)........................... 2 --
Provision for income taxes....................... (2) (1)
----- ----
Net loss......................................... (139)% (22)%
===== ====
</TABLE>
Revenues
LICENSE. License revenues increased $3.4 million, or 369%, from $0.9
million in the 1998 period to $4.3 million in 1999. This increase was primarily
attributable to sales to new customers, additional sales to existing customers
and, to a lesser extent, from an increase in the number of our sales personnel.
See "-- Liquidity and Capital Resources" for a discussion of deferred revenue.
SOFTWARE SERVICES. Software services revenues increased $3.3 million, or
493%, from $0.7 million in the 1998 period to $4.0 million in 1999. This
increase was primarily attributable to the increased licensing activity
described above, which resulted in increased revenues from customer
implementations and maintenance contracts.
STRATEGIC CONSULTING. Strategic consulting revenues increased $2.1
million, or 244%, from $0.9 million in the 1998 period to $2.9 million in 1999
and are derived from the Caminus Limited subsidiary acquired in May 1998. This
increase was primarily attributable to an increased number of engagements, which
was partially attributable to an increase in the number of our consultants.
33
<PAGE> 35
Cost of Revenues
COST OF SOFTWARE SERVICES. Cost of software services consists primarily of
personnel costs associated with providing implementations, support under
maintenance contracts and training through our professional service group. Cost
of software services increased $1.4 million, or 303%, from $0.5 million in the
1998 period to $1.9 million in 1999. This increase was primarily attributable to
the increase in the number of implementations, training and technical support
personnel, and related recruiting expenses, to support the growth of the
implementations and the installed customer base. During 1999, we established a
dedicated customer support desk, which also required additional personnel. We
plan to continue expanding our implementation and support services group and,
accordingly, expect the dollar amount of our cost of software implementation and
support services to increase.
COST OF STRATEGIC CONSULTING. Cost of strategic consulting consists of
personnel costs incurred in providing professional consulting services. Cost of
strategic consulting increased $1.2 million, or 210%, from $0.6 million in the
1998 period to $1.8 million in 1999. This increase was principally attributable
to an increase in the number of our consultants, and related recruiting
expenses, to support the growth in revenues. We plan to continue expanding our
strategic consulting organization and expect these expenses to increase.
Operating Expenses
SALES AND MARKETING. Sales and marketing expenses consist primarily of
sales and marketing personnel costs, promotional and travel expenses and
commissions. Sales and marketing expenses increased $1.0 million, or 1,093%,
from $0.1 million in the 1998 period to $1.1 million in 1999. This increase was
primarily due to an increase in headcount, recruiting expenses and promotional
and travel expenses associated with the hiring of additional sales and marketing
personnel to support the expansion of our domestic and international sales
organizations. We plan to continue expanding our sales and marketing
organization and expect our sales and marketing expenses to increase.
RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of personnel costs for product development personnel and other related
direct costs associated with the development of new products, the enhancement of
existing products, quality assurance and testing. Research and development
expenses increased $1.4 million, or 565%, from $0.2 million in the 1998 period
to $1.6 million in 1999. This increase was primarily due to an increased hiring
of personnel and to other expenses associated with the development of new
products and enhancements of existing products. We plan to continue expanding
our research and development organization and expect our research and
development expenses to increase.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of personnel costs of executive, financial, human resource and
information services personnel as well as facility costs and related office
expenses, management fees and outside professional fees. General and
administrative expenses increased $2.6 million, or 366%, from $0.7 million in
the 1998 period to $3.3 million in 1999. This increase was primarily due to
increased staffing required
34
<PAGE> 36
to support our expanded operations in the United States and internationally and,
to a lesser extent, increased costs of outside professional services and
management fees.
ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT. Acquired in-process research
and development expenses of $3.1 million during the 1998 period represented the
fair value of the in-process research and development acquired in connection
with the purchase of Zai*Net. In the opinion of management and the third-party
appraiser, the acquired in-process research and development had not yet reached
technological feasibility and had no alternative future uses. Accordingly, such
amount was expensed on the date of acquisition. See note 3 of the Caminus LLC
financial statements for a discussion of the calculation of acquired in-process
research and development.
AMORTIZATION OF INTANGIBLE ASSETS. The amortization of the intangible
assets represents the amortization of goodwill, which is the excess of the
purchase price over the net assets acquired from the acquisitions of Zai*Net,
Caminus Limited and Positron, and other intangible assets. Amortization of
intangible assets increased $3.1 million, or 445%, from $0.7 million in the 1998
period to $3.7 million in 1999. This increase was primarily attributable to our
incurring amortization expense related to the 1998 acquisitions for the full six
months ended June 30, 1999 versus two months in the 1998 period.
Loss From Operations
As a result of the write-off of the acquired in-process research and
development during the 1998 period, operating loss decreased from $3.4 million
in the 1998 period to $2.3 million in 1999. Excluding the effects of interest
and other income, taxes, depreciation, amortization of intangible assets, the
write-off of acquired in-process research and development and non-cash
compensation expense, earnings would have increased $1.2 million, or 313%, to
$1.6 million, or 14% of total revenues for 1999, as compared to $0.4 million, or
16% of revenues, in the 1998 period.
Provision for Income Taxes
Our provision for income taxes for 1999 was $0.1 million and related
primarily to foreign income taxes. Our provision for income taxes for the 1998
period related to state and local taxes and was not significant.
COMPARISON OF THE ZAI*NET (PREDECESSOR) YEAR ENDED DECEMBER 31, 1997 TO THE
PERIOD FROM INCEPTION THROUGH DECEMBER 31, 1998
The following table sets forth the consolidated financial information as a
percentage of revenues for the year ended December 31, 1997 of Zai*Net, our
predecessor, and for the period from our inception through December 31, 1998.
The consolidated financial information for us and Zai*Net is derived from the
audited consolidated financial statements included elsewhere in this prospectus.
The period from inception though December 31, 1998 is approximately eight months
and includes the consolidated results of operations of Zai*Net and Caminus
Limited, which is being compared to Zai*Net for the year ended
35
<PAGE> 37
December 31, 1997. Accordingly, there are fluctuations within the revenues and
expenses which are primarily attributable to the disparity between the periods
and the bases of the companies. The discussion below outlines other trends in
our business.
<TABLE>
<CAPTION>
CAMINUS
----------------
ZAI*NET INCEPTION
(PREDECESSOR) (APRIL 29, 1998)
----------------- THROUGH
YEAR ENDED DECEMBER 31,
DECEMBER 31, 1997 1998
----------------- ----------------
<S> <C> <C>
Revenues:
Licenses...................................... 36% 38 %
Software services............................. 64 32
Strategic consulting.......................... -- 30
--- -----
Total revenues............................. 100 100
Cost of revenues:
Cost of software services..................... 32 24
Cost of strategic consulting.................. -- 23
--- -----
Gross profit............................... 68 53
Operating expenses:
Research and development...................... 29 12
Selling, general and administrative........... 39 40
Acquired in-process research and development.. -- 50
Amortization of intangible assets............. -- 57
--- -----
Total operating expenses................... 68 159
--- -----
Loss from operations............................ -- (106)
--- -----
Other income.................................... -- 1
Provision for income taxes...................... -- --
--- -----
Net income (loss)............................... --% (105)%
=== =====
</TABLE>
Revenues
LICENSE. License revenues increased $2.1 million, or 139%, from $1.5
million in 1997 to $3.6 million in 1998. This increase was primarily
attributable to sales to new customers, additional sales to existing customers
and, to a lesser extent, from an increase in the number of our sales personnel.
SOFTWARE SERVICES. Software services revenues increased $0.4 million, or
16%, from $2.7 million in 1997 to $3.1 million in 1998. This increase was
primarily attributable to the increased licensing activity described above,
which resulted in increased revenues from customer implementations and
maintenance contracts.
STRATEGIC CONSULTING. Strategic consulting revenues were $2.9 million in
1998. There were no strategic consulting revenues in 1997 as the predecessor
company was not in that business.
36
<PAGE> 38
Cost of Revenues
COST OF REVENUES. Cost of revenues during 1998 consisted primarily of
personnel costs associated with providing implementations, strategic consulting,
support under maintenance contracts and training through our professional
service group. Cost of revenues during 1997 consisted primarily of personnel
costs associated with providing implementations, support under maintenance
contracts and training through our professional service group. Cost of licenses
was insignificant for the respective periods ended 1997 and 1998. Cost of
revenues increased $3.2 million, or 237%, from $1.3 million in 1997 to $4.5
million in 1998. This increase was primarily attributable to the increase in the
number of implementation, training and technical support personnel, and related
recruiting expenses, to support the growth of the implementations and the
installed customer base. Additionally, there was no cost associated with the
strategic consulting business during 1997.
Operating Expenses
RESEARCH AND DEVELOPMENT. Research and development expenses was
approximately $1.2 million in each of 1997 and 1998.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased $2.2 million, or 132%, from $1.6 million in 1997 to $3.8
million in 1998. This increase was primarily due to increased staffing required
to support our expanded operations in the United States and internationally and,
to a lesser extent, increased costs of outside professional services and
management fees.
ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT. Acquired in-process research
and development expenses of $4.8 million during 1998 represented the in-process
research and development costs related to the acquisition of Zai*Net. In the
opinion of management and the third-party appraiser, the acquired in-process
research and development had not yet reached technological feasibility and had
no alternative future uses. See note 3 of the Caminus LLC financial statements
for a discussion of the calculation of acquired in-process research and
development.
AMORTIZATION OF INTANGIBLE ASSETS. The amortization of the intangible
assets represents the amortization of goodwill, which is the excess of the
purchase price over the net assets acquired from the acquisitions of Zai*Net,
Caminus Limited and Positron, the amortization of intangible assets and the
write-off of the value of the SS&C Technologies, Inc. distribution agreement.
For a discussion of the SS&C distribution agreement, see note 14 of the Caminus
LLC financial statements. Amortization of intangible assets was $5.5 million in
1998. There was no intangible asset amortization in 1997.
Loss From Operations
As a result of the write-off of the acquired in-process research and
development and the amortization of intangible assets during 1998, operating
loss increased from $0.0 million in 1997 to $10.1 million in 1998. Excluding the
effects of interest and other income, taxes, depreciation, amortization of
intangible assets, the write-off of acquired in-process research and development
and non-cash
37
<PAGE> 39
compensation expense, earnings would have been $0.4 million in 1998, an
increase of $0.2 million, or 199%, compared to the period of the prior year.
COMPARISON OF THE ZAI*NET SOFTWARE YEAR ENDED DECEMBER 31, 1996 TO THE ZAI*NET
SOFTWARE YEAR ENDED DECEMBER 31, 1997
The following table sets forth the consolidated financial information as a
percentage of revenues of Zai*Net, our predecessor company, for the years ended
December 31, 1996 and 1997, which are derived from the audited financial
statements of Zai*Net.
<TABLE>
<CAPTION>
ZAI*NET (PREDECESSOR)
--------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Revenues:
Licenses.................................... 52% 64%
Software services........................... 48 36
Strategic consulting........................ -- --
--- ---
Total revenues........................... 100 100
Costs of revenues............................. 37 32
--- ---
Gross profit............................. 63 68
Operating expenses:
Research and development.................... 23 29
Selling, general and administrative......... 36 39
--- ---
Total operating expenses................. 59 68
--- ---
Income (loss) from operations................. 4 --
Other income.................................. -- --
--- ---
Net income.................................... 4% --%
=== ===
</TABLE>
Revenues
LICENSE. License revenues increased $0.2 million, or 18%, from $1.3
million in 1996 to $1.5 million in 1997. This increase was primarily
attributable to sales to new customers and additional sales to existing
customers.
SOFTWARE SERVICES. Software services revenues increased $1.2 million, or
87%, from $1.4 million in 1996 to $2.7 in 1997. This increase was primarily
attributable to the increased licensing activity described above, which resulted
in increased revenues from customer implementations and maintenance contracts.
Cost of Revenues
COST OF REVENUES. Cost of revenues consists primarily of personnel costs
associated with providing implementations, support under maintenance contracts
and training through our professional service group. Cost of licenses was
insignificant for 1996 and 1997. Cost of revenues increased $0.3 million, or
33%, from $1.0 million in 1996 to $1.3 million in 1997. This increase was
primarily attributable to the increase in the number of implementation, training
and
38
<PAGE> 40
technical support personnel to support the growth of the implementations and the
installed customer base.
Operating Expenses
RESEARCH AND DEVELOPMENT. Research and development expenses increased $0.6
million, or 95%, from $0.6 million in 1996 to $1.2 million in 1997. This
increase was primarily due to an increased hiring of personnel and to other
expenses associated with the development of new products and enhancements of
existing products.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased $0.6 million, or 65%, from $1.0 million in 1996 to $1.6
million in 1997. This increase was primarily due to increased staffing required
to support our expanded operations in the United States and abroad.
SELECTED QUARTERLY RESULTS OF OPERATIONS
The following tables represent certain unaudited consolidated statement of
operations information for each quarter in the ten quarters ended June 30, 1999,
as well as such information expressed as a percentage of total revenues for the
periods indicated. The information for the five quarters ended June 30, 1999 was
derived from unaudited financial statements and has been prepared on the same
basis as our audited consolidated financial statements and, in the opinion of
management, includes all adjustments, which consist of normal recurring
adjustments, that we consider necessary for the fair presentation of such
information when read in conjunction with our audited consolidated financial
statements and notes thereto, appearing elsewhere in this prospectus. The
information for the five quarters ended March 31, 1998 was derived from the
unaudited financial statements of Zai*Net, our predecessor company, and has been
prepared on the same basis as the audited financial statements of Zai*Net and,
in the opinion of management, includes all adjustments, which consist of normal
recurring adjustments, that we consider necessary for the fair presentation of
such information when read in conjunction with the audited financial statements
of Zai*Net and notes thereto, appearing elsewhere in this prospectus. Due to the
acquisitions completed during 1998 and the significant changes in our
operations, the comparison of fluctuations for these time periods would not
provide a meaningful understanding of our on-going operations. We believe
quarter-to-quarter comparisons of financial results should not be relied upon as
an indication of future performance, and operating results may fluctuate from
quarter to quarter in the future. See "Risk Factors" and the financial
statements contained elsewhere in this prospectus. We expect our results of
operations will fluctuate and the price of our common stock could fall if
quarterly results are lower than the expectation of securities analysts.
In the following table, "Adjusted EBITDA" is defined as earnings before
interest and other income, income taxes, depreciation, amortization, acquired
in-process research and development and non-cash compensation expense. We have
included information concerning Adjusted EBITDA because we believe that it is
useful to an investor in evaluating our operating performance as it compares to
other companies and because this measure is a widely accepted financial
indicator
39
<PAGE> 41
used by investors and analysts to compare the operating performance of
companies. While investors and analysts routinely use EBITDA, it may not
necessarily be comparable to other similarly titled measures used by other
companies due to potential differences in the methods of calculation. For
information about cash flows or results of operations in accordance with
generally accepted accounting principles, please see the audited consolidated
financial statements included elsewhere in this prospectus. Adjusted EBITDA
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles.
From the date of our formation as a limited liability company through June
30, 1999, we were not subject to federal and state income taxes, except for
certain New York income taxes on limited liability companies. The amounts in the
line item of the statement of operations and other data table below titled "Pro
forma net income (loss)" reflect the additional tax provision that we would have
recorded had we been a C corporation for the periods presented.
40
<PAGE> 42
<TABLE>
<CAPTION>
ZAI*NET
(PREDECESSOR)
----------------------------------------------------------------
QUARTER ENDED
----------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1997 1997 1997 1997 1998
--------- -------- ------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Licenses................... $293,263 $249,489 $ 401,481 $ 577,214 $1,100,344
Software services.......... 674,583 614,484 649,120 729,620 819,386
Strategic consulting.......
-------- -------- ---------- ---------- ----------
Total revenues........... 967,846 863,973 1,050,601 1,306,834 1,919,730
-------- -------- ---------- ---------- ----------
Gross profit................. 639,428 550,376 716,280 951,688 1,419,274
Operating expenses........... 556,593 593,425 672,340 1,039,650 1,223,799
-------- -------- ---------- ---------- ----------
Operating income (loss)...... 82,835 (43,049) 43,940 (87,962) 195,475
Other income (expense), net.. 1,200 9,295 (4,441) 11,537 10,966
Provision for income taxes... -- -- -- -- (90,948)
-------- -------- ---------- ---------- ----------
Net income (loss)............ $ 84,035 $(33,754) $ 39,499 $ (76,425) $ 115,493
======== ======== ========== ========== ==========
Adjusted EBITDA.............. $113,608 $(12,277) $ 74,712 $ (57,190) $ 230,081
</TABLE>
<TABLE>
<CAPTION>
ZAI*NET
(PREDECESSOR)
---------------------------------------------------------------
QUARTER ENDED
---------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1997 1997 1997 1997 1998
--------- -------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Licenses..................... 30% 29% 38% 44% 57%
Software services............ 70 71 62 56 43
Strategic consulting......... -- -- -- -- --
--- --- --- --- ---
Total revenues............. 100 100 100 100 100
--- --- --- --- ---
Gross profit................... 66 64 68 73 74
Operating expenses............. 58 69 64 80 64
--- --- --- --- ---
Operating income (loss)........ 9 (5) 4 (7) 10
Other income (expense), net.... -- 1 -- 1 1
Provision for income taxes..... -- -- -- -- (5)
--- --- --- --- ---
Net income (loss).............. 9% (4)% 4% (6)% 6%
=== === === === ===
Adjusted EBITDA................ 12% (1)% 7% (4)% 12%
</TABLE>
41
<PAGE> 43
<TABLE>
<CAPTION>
CAMINUS
----------------------------------------------------------------------
INCEPTION QUARTER ENDED
THROUGH --------------------------------------------------------
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1998 1998 1998 1999 1999
----------- ------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Licenses............... $ 916,015 $ 1,009,842 $ 1,713,286 $ 1,776,579 $ 2,518,746
Software services...... 676,000 1,205,417 1,209,341 1,949,373 2,057,217
Strategic consulting... 855,768 864,782 1,175,552 1,509,504 1,430,558
----------- ----------- ----------- ----------- -----------
Total revenues....... 2,447,783 3,080,041 4,098,179 5,235,456 6,006,521
----------- ----------- ----------- ----------- -----------
Gross profit............. 1,404,460 1,538,414 2,193,079 3,487,896 4,083,438
Operating expenses....... 4,795,403 2,637,238 7,836,678 4,643,847 5,205,114
----------- ----------- ----------- ----------- -----------
Operating income (loss).. (3,390,943) (1,098,824) (5,643,599) (1,155,951) (1,121,676)
Other income (expense),
net.................... 25,438 31,097 40,374 3,247 (54,949)
Provision for income
taxes.................. (44,511) (12,778) 21,554 (73,245) (66,323)
----------- ----------- ----------- ----------- -----------
Net loss................. $(3,410,016) $(1,080,505) $(5,581,671) $(1,225,949) $(1,242,948)
=========== =========== =========== =========== ===========
Pro forma net loss....... $(3,306,654) $(1,048,218) $(5,505,361) $(1,442,079) $(1,470,668)
=========== =========== =========== =========== ===========
Basic and diluted net
loss per membership
interest...............
Weighted average
membership
interests -- basic and
diluted................
Basic and diluted pro
forma net loss per
membership interest....
Adjusted EBITDA.......... $ 389,398 $ (7,047) $ (27,196) $ 792,634 $ 844,894
</TABLE>
<TABLE>
<CAPTION>
CAMINUS
----------------------------------------------------------------
INCEPTION QUARTER ENDED
THROUGH ----------------------------------------------------
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1998 1998 1998 1999 1999
--------- ------------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Licenses............... 37% 33% 42% 34% 42%
Software services...... 28 39 30 37 34
Strategic consulting... 35 28 29 29 24
---- --- ---- --- ---
Total revenues....... 100 100 100 100 100
---- --- ---- --- ---
Gross profit............. 57 50 54 67 68
Operating expenses....... 196 86 191 89 87
---- --- ---- --- ---
Operating income (loss).. (139) (36) (137) (22) (19)
Other income (expense),
net.................... 1 1 1 -- (1)
Provision for income
taxes.................. (2) -- 1 (1) (1)
---- --- ---- --- ---
Net loss................. (139)% (35)% (138)% (23)% (21)%
==== === ==== === ===
Pro forma net loss....... (135)% (34)% (134)% (28)% (24)%
==== === ==== === ===
Adjusted EBITDA.......... 16% --% (1)% 15% 14%
</TABLE>
42
<PAGE> 44
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents as of June 30, 1999 were approximately $0.9
million, a decrease of approximately $1.9 million from December 31, 1998. Net
cash used in operating activities for the six months ended June 30, 1999 was
approximately $0.3 million. Net cash used in operating activities primarily
resulted from our net loss, an increase in accounts receivable and a decrease in
accounts payable and deferred license revenues, partially offset by increases in
accrued liabilities and deferred maintenance revenues. Deferred license revenues
decreased approximately $1.0 million during the six months ended June 30, 1999
primarily due to completion of our obligations under the license agreements and
the acceptance of the software by the customers. Accordingly, the license
revenues which were deferred at December 31, 1998 were recognized during the six
months ended June 30, 1999. During 1999, we modified our standard license
agreement such that we generally recognize revenues upon the execution of the
license agreement and delivery of the software to the client. Deferred
maintenance revenues increased by $0.9 million primarily due to a change in
billing practice where customers are now invoiced on an annual or quarterly
basis instead of a monthly basis. The increase in accounts receivable and
accrued liabilities was primarily attributable to the growth of our business.
The decrease in accounts payable was primarily due to the payment of
professional fees and recruiting costs associated with the 1998 acquisitions and
the recruitment of additional personnel, respectively.
Net cash used in investing activities during the six months ended June 30,
1999 was approximately $0.4 million and resulted primarily from the result of
capital expenditures for computer and communications equipment, purchased
software, office equipment, furniture, fixtures and leasehold improvements.
Net cash used in financing activities during the six months ended June 30,
1999 was approximately $1.1 million. During the six months ended June 30, 1999,
financing activities provided cash of approximately $3.3 million from borrowings
under a credit agreement entered into in June with Fleet Bank and approximately
$2.2 million in subscriptions received primarily from several of our initial
investors. These funds were used for the payment of an earnout to the former
owners of Zai*Net, to repurchase an equity interest in us held by SS&C
Technologies, Inc. and to pay the amounts due under the distributor agreement
with SS&C.
On June 23, 1999, we entered into a credit agreement with Fleet Bank which
provides for total borrowings of up to $5.0 million under two facilities, a
revolving loan and a working capital loan. The revolving loan expires on May 31,
2001 and provides for borrowings of up to $2.5 million. The working capital loan
expires on May 31, 2000, which may be extended to May 31, 2001, and provides for
borrowings that are limited to 85% of eligible accounts receivable, less $0.5
million, which in the aggregate can not exceed $2.5 million. The loans under
this agreement bear interest either at the bank's reference rate, which is
generally equivalent to the published prime rate, or LIBOR plus an applicable
margin between 2.5% and 3.0%. The credit agreement requires maintenance of
customary financial ratios. We intend to use approximately $2,000,000 of the net
proceeds of this offering to repay the outstanding balance under the loans.
After repaying the
43
<PAGE> 45
outstanding balance, we intend to terminate our existing credit agreement and
enter into a new agreement.
We have funded our operations to date with cash generated from operations
on a cumulative basis. In order to execute our growth strategy, we have funded
our investments and acquisitions through capital contributions. We also have the
ability to borrow under a credit facility with a major bank. We intend to obtain
additional equity financing from an initial public offering of common stock
during 1999. Other financings may be obtained from additional borrowings and
leasing activities, among other things. There can be no assurance as to the
terms upon which such financings and equity might be obtained. Management
believes that, in the absence of new financing sources, existing financial
resources will be sufficient to meet our expenditure requirements for at least
the next twelve months.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products
electronically store dates using only the last two digits of the calendar year.
As a result, these systems may not be able to distinguish whether "00" means
1900 or 2000, which may cause system failures or erroneous results. This problem
is generally referred to as the "Year 2000 issue."
STATE OF READINESS. We have identified the information technology, or IT,
and non-IT systems, software and products that could be affected by Year 2000
issues, and have completed our assessment of the potential overall impact of the
impending century change on our business.
Based on our current assessment, we believe current and prior versions of
our software products are Year 2000 compliant. By Year 2000 compliant, we mean
that the use or occurrence of dates on or after January 1, 2000 will not
materially affect the performance of our software products or the ability of our
products to correctly create, store, process and output data involving dates,
provided that all other products, such as hardware and software used with our
products, are also Year 2000 compliant. However, our products are generally
integrated into, and process data extracted from, other enterprise systems
involving sophisticated hardware and complex software products that we cannot
adequately evaluate for Year 2000 compliance.
We have completed a Year 2000 assessment of our internal management
information systems and other computer systems. As part of this effort, we have
communicated with the vendors that supply us with our software and information
systems and with our significant suppliers to determine whether their products
and organizations are Year 2000 compliant. We received a written response from a
small percentage of the external vendors, and the significant suppliers that we
contacted indicated that their systems are Year 2000 compliant. Those who have
not responded have statements on their web sites indicating that their systems
are Year 2000 compliant.
The results of these readiness assessment initiatives indicate that
substantially all of our internal information technology systems and other
internal operating systems are currently Year 2000 compliant. We plan to replace
non-compliant
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<PAGE> 46
internal information systems or implement the necessary upgrades to these
systems by December 31, 1999.
COSTS. To date, costs directly associated with our Year 2000 compliance
efforts have not been material. In addition, we have incurred immaterial
expenses associated with our salaried employees who have devoted some of their
time to our Year 2000 assessment and compliance efforts. We do not expect the
total cost of Year 2000 problems to be material to our business. However, during
the months prior to the century change, we will continue to evaluate new
versions of our software products, new software and information systems provided
to us by third parties and any new infrastructure systems that we acquire to
determine whether they are Year 2000 compliant. Despite our current assessment,
we may not identify and correct all significant Year 2000 problems on a timely
basis. Year 2000 compliance efforts may involve significant time and expense and
uncured problems could seriously harm our business.
RISKS. We are not currently aware of any Year 2000 compliance problems
relating to our products that would seriously harm our business. We may discover
Year 2000 compliance problems in our products that will require substantial
revision and could subject us to liability claims. Our products operate in
complex network environments and directly or indirectly interact with a number
of other hardware and software systems that we cannot adequately evaluate for
Year 2000 compliance. In addition, technology developed by others and
incorporated into our products could have Year 2000 problems. We may face claims
based on Year 2000 problems in the products of other companies, or issues
arising from the integration of multiple products within an overall system even
if our products are otherwise Year 2000 compliant. Our failure to fix or replace
our internally developed proprietary software or third-party software, hardware
or services on a timely basis could result in lost revenues, increased operating
costs, the loss of customers and other business interruptions, any of which
could seriously harm our business. Moreover, our failure to adequately address
Year 2000 compliance issues in our internally developed proprietary software
could result in claims of mismanagement, misrepresentation or breach of contract
and related litigation, which could be costly and time-consuming to defend.
CONTINGENCY PLAN. As discussed above, we have conducted a Year 2000
assessment and have not found it necessary to implement any contingency plans.
Contingency plans will be implemented if it appears that we or any of our
vendors will not be Year 2000 compliant and such noncompliance is expected to
have a material adverse impact on our operations. The cost of developing and
implementing such plans may itself be material.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Our exposure to market risk for changes in interest rates relates primarily
to our long-term debt obligations. We primarily use proceeds from these debt
obligations to support general corporate requirements, including capital
expenditures and working capital needs. We have interest rate exposure on
borrowings under our revolving line of credit which bear interest at variable
rates based on LIBOR or the prime interest rate.
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<PAGE> 47
We have no derivative financial instruments in our cash and cash
equivalents. We invest our cash and cash equivalents in investment-grade, highly
liquid investments, consisting of money market instruments and bank certificates
of deposit. We anticipate investing our net proceeds from this offering in
similar investment-grade and highly liquid investments pending their use as
described in this prospectus.
Approximately 33% of our revenues and 30% of our operating expenses are
denominated in British pounds. Historically, the effect of fluctuations in
currency exchange rates has not had a material impact on our operations. As we
expand our operations outside the United States, our exposure to fluctuations in
currency exchange rates could increase.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Financial
Accounting Standards Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which is effective for the Company beginning in 2001.
FAS 133 establishes accounting and reporting standards for derivative financial
instruments and hedging activities related to those instruments, as well as
other hedging activities. Because we do not currently hold any derivative
financial instruments and do not engage in hedging activities, we expect the
adoption of FAS 133 will not have a material impact on our consolidated
financial condition, results of operations or cash flows.
46
<PAGE> 48
BUSINESS
OVERVIEW
We are a leading provider of software solutions and strategic consulting
services to participants in energy markets throughout North America and Europe,
including utilities, electrical power generating companies, energy marketers
electric power pools, gas producers, processors and pipelines. We offer a suite
of software solutions and associated services to enable energy market
participants to manage complex risk scenarios and effectively trade and manage
energy transactions, addressing multiple energy commodities and types of risk
across varied geographies. In addition, our strategic consulting practice, which
is one of the leading consulting organizations in the European energy industry,
provides energy market participants with strategic advice regarding where to
compete and how to compete. Our team of subject matter experts provides
strategic advice on long-term energy investment decisions, including decisions
relating to the appropriate use of energy assets and the most effective
operating strategies in deregulating energy markets. We currently have
approximately 100 energy enterprise customers of our software solutions and
strategic consulting services. Many of our customers are leaders in the energy
industry, including American Electric Power, Consolidated Edison, Conoco, PG&E
Energy Trading, Preussen Elektra and TXU Electric and Gas.
INDUSTRY BACKGROUND
The energy industry, which includes the electric power, natural gas and
energy trading markets, is currently one of the five largest vertical markets in
the United States, with 1998 revenues of approximately $300 billion. We believe
the global energy market, excluding the United States, is approximately twice as
large as the U.S. market. Energy market participants have historically been
single, highly integrated organizations undertaking all activities of the energy
value chain, from exploration and generation to distribution and end-user
support. In order to introduce and stimulate competition in the energy industry,
governments in the United States, the United Kingdom and continental Europe have
dramatically reduced or eliminated their regulation of natural gas and electric
power markets.
In the United States, the deregulation of the natural gas industry began in
the early 1990s, while electric power deregulation began in the mid 1990s.
Deregulation is currently underway in more than half of the states, being
undertaken on a statewide basis in some jurisdictions and on a
provider-by-provider basis in others. The pace of this deregulation, both
nationally and on a statewide basis, is accelerating. Deregulation in the United
Kingdom and the Nordic region of Europe began in the late 1980s and early 1990s.
As a result of this deregulation:
- Vertically integrated suppliers are breaking up, energy trading is
becoming more complex and opportunities are being created for new market
entrants;
- Trading volumes are growing rapidly, and price volatility and risk
exposure are increasing significantly;
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<PAGE> 49
- Energy market participants must find information technology solutions and
services that enable them to compete effectively in deregulating energy
markets; and
- Few solutions exist that are specifically targeted to address the buying,
selling and trading of energy in deregulating environments.
Vertically integrated suppliers are breaking up, energy trading is becoming more
complex and opportunities are being created for new market entrants
Traditional, vertically integrated utilities are breaking up on their own
initiative in order to remain competitive and in response to deregulation. This
is creating substantial opportunities for new entrants in the changing energy
marketplace. Vertically integrated monopoly control of wholesale and retail
energy transactions has weakened, creating the necessity for traditional
utilities and new entrants to buy, sell and hedge energy in a rapidly
deregulating wholesale market. For example, in some regions, electric power is
being sold by generators into electric power pools and then purchased from the
pool by electric power marketers and end users. In other cases, competing
suppliers are negotiating contracts directly with end users. Often the market is
a hybrid of these approaches. Today, energy purchase and sale agreements contain
different durations, terms, delivery points and volumes. In addition, the
definition of the product increasingly varies from contract to contract in terms
of power quality, reliability and other measurable attributes.
These factors have increased the range and number of participants in the
electric power, natural gas and energy trading markets. They include the
following:
<TABLE>
<CAPTION>
MARKET PARTICIPANTS
- ------ ------------
<S> <C>
ELECTRIC POWER Power generating companies
Independent power producers
Independent system operators
Power pools
Transmission companies
Distributors
Marketers
Retailers
End users
NATURAL GAS Producers
Gatherers
Processors
Storage operators
Pipelines
Local distribution companies
Marketers
Retailers
End users
ENERGY TRADING Commodity exchanges
Over-the-counter traders
Brokers
Financial institutions
</TABLE>
48
<PAGE> 50
Trading volumes are growing rapidly, and price volatility and risk exposure are
increasing significantly
The increase in the number of market participants has in turn greatly
increased the number and complexity of energy transactions that must be managed
and associated trading risks that must be controlled. According to Enron Corp.,
the world's largest electric power trader, global wholesale electric power
trading volume increased tenfold from 1996 to 1998. In 1998, over 70% of
wholesale electric power trading was among energy marketers who neither produce,
transport nor consume electric power. This growth in market participants has
resulted in increased trading velocity, which is the number of times power is
traded before it is ultimately consumed.
The nature of energy commodities also adds to the complexity of the market.
For example, electric power has distinctive attributes that create more price
volatility than other commodities. Electric power, which is worth different
amounts in different locations, cannot be stored in significant quantities or
transported long distances at economic costs, and costs of generation and
transmission vary significantly. Demand and price in turn can vary dramatically,
with variations dependent upon time of day, day of the week and weather
conditions. All of these factors contribute to substantial price volatility and
thus growing risk exposure.
For example, during the summer of 1998, the electricity market in the
midwestern U.S. witnessed significant increases in wholesale spot market prices.
On June 25 and 26, 1998, prices for electric energy rose from $25 per megawatt
hour to as much as $2,600 per megawatt hour, with at least one hourly price
reaching $7,500 per megawatt hour. One month later, more abnormally large price
increases occurred. Several factors occurred simultaneously to cause these price
"spikes." Above average temperatures increased demand to near record levels, and
generating capacity could not keep pace. Transmission constraints also reduced
the ability of utilities to transport electric power. In addition, the overall
lack of accurate information and market experience among various market
participants contributed to the surge in prices, and several parties defaulted
on large electric power sales contracts, thereby forcing their customers to buy
electric power on short notice at substantial prices. In addition, during the
summer of 1999 there were similar spikes in spot market prices. These incidents
are indicative of the significant price volatility of electric power.
Energy market participants must find information technology solutions and
services that enable them to compete effectively in deregulating energy markets
Deregulation of the energy industry is forcing market participants to
- better understand their current roles in the energy value chain;
- assess their long-term energy strategies, including where to compete and
how to compete; and
- invest in the right information technology solutions to analyze,
implement and support their energy strategies.
To compete in this rapidly changing market, energy market participants need
advice on how to make the transition from participating in a non-competitive,
49
<PAGE> 51
regulated market to a highly complex, competitive market. For example, they need
to understand their role in interacting with multiple and diverse market
participants, trading multiple energy commodities and competing in several
markets.
The deregulating energy environment has created an immediate and growing
need for the same operational, trading and risk management infrastructure that
has supported other long-standing markets but, until recently, has been handled
in a rudimentary way in the energy sector. A study conducted by ABB Energy
Information Systems estimates that global energy information technology spending
will grow from $14 billion in 1999 to $24 billion in 2005. To successfully
compete in an environment of greater competition and price volatility, and
significant risk exposure, energy market participants require systems that
provide:
- transaction confirmation;
- portfolio management;
- risk management;
- trading system controls;
- demand, supply and price forecasting;
- decision support; and
- transaction management tools.
Few solutions exist that are specifically targeted to address the buying,
selling and trading of energy in deregulating environments
In response to deregulation in the natural gas industry in the U.S.,
software systems have been developed to manage the physical flow and trading of
natural gas. However, many of these systems are not capable of supporting the
requirements of energy participants in today's deregulating energy markets
because they do not adequately support electric power trading or multiple types
of risk and cannot be integrated with other segments of the energy value chain.
A number of existing solutions, including most internal solutions, are point
solutions that are designed to address costs in the energy market but cannot
conduct trades, manage risks or record and analyze the numerous market-based
variables affecting multiple energy assets across different geographies. These
point solutions, which may consist of little more than off-the-shelf software
applications, first-generation portfolio management tools and spreadsheets, are
often not integrated with the operational and analytical functions of the
enterprise and may be unable to interface with other participants in the energy
industry, such as the emerging energy power pools.
In addition, energy participants have been analyzing energy assets with
traditional analytical models from the financial services industry, such as the
industry-standard Black-Scholes option pricing model, which may be appropriate
for financial instruments but does not account for all the variables relevant to
energy trading, such as volume risk. We believe that over the next several years
energy market participants will require new energy trading systems in order to
effectively compete in the continually changing energy marketplace.
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<PAGE> 52
CAMINUS SOLUTION
We are a leading provider of software solutions and strategic consulting
services to participants in energy markets throughout North America and Europe.
We provide participants in the energy industry with sophisticated software
solutions to manage complex risk scenarios and effectively trade and manage
energy transactions. We also provide our customers with strategic advice
regarding where to compete, both by geographic region and position within the
energy value chain, and how to compete.
We provide energy market participants with sophisticated software systems
to compete in deregulated markets. Our Zai*Net suite of software features:
- AN INTEGRATED, MULTI-FUNCTIONAL SOLUTION TO TRADE AND MANAGE ENERGY
TRANSACTIONS THROUGHOUT THE ENERGY VALUE CHAIN. Our Zai*Net suite of
software products provides decision support for trading, corporate-wide
risk and credit management and complete tracking and invoicing of energy
as it flows through the energy value chain. We offer a solution with
modules ranging from sophisticated analytical tools for understanding and
measuring the unique opportunities and risks in the energy industry to
tools designed to electronically confirm energy flows with gas pipelines,
electric power pools and independent system operators.
- THE ABILITY TO SUPPORT MULTIPLE COMMODITIES AND TYPES OF RISKS ACROSS
VARIED GEOGRAPHIES. Our Zai*Net suite of integrated software products
supports multiple traded energy commodities, including electric power and
natural gas via various energy trading instruments. Our software includes
not only U.S. and European gas and electric power functionality, but also
specific geographic business capabilities, including functions tailored
for the North Sea and Asian crude oil markets.
We also have one of the leading strategic consulting practices in the
European energy industry. Based in Cambridge, England, our team of subject
matter experts provides strategic advice on long-term energy investment
decisions, including decisions relating to the appropriate use of energy assets
and the most effective operating strategies in deregulating energy markets. Our
26 strategic consultants are among Europe's most respected energy experts and,
through their extensive consulting work with regulators, understand what
deregulated market participants require to be effective competitors.
Our customers seek solutions that enable them to compete globally in
rapidly changing energy markets. We believe that our strong presence in the
United States and Europe gives us a significant advantage over our competitors
and positions us for strong penetration of these and other markets. We have
three offices in the United States and two in the United Kingdom. Our 100
customers represent some of the world's largest energy enterprises. We are the
leading consultants on energy policy to regulators in the United Kingdom, one of
Europe's most deregulated energy markets.
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<PAGE> 53
STRATEGY
Our objective is to become the leading provider of software solutions and
strategic consulting services to participants in energy markets throughout the
world. Key elements of our strategy include:
Extending our product leadership
We offer a sophisticated suite of software solutions for the energy
industry and plan to continue to introduce new products that bring added value
to energy market participants. We intend to expand our product offerings by
taking advantage of the flexible structure of our existing software solutions,
which allows us to integrate new product offerings easily. Leveraging the
significant subject matter expertise of our strategic consultants, we continue
to develop software solutions responsive to the evolving needs of our current
and potential customers. For example, during 2000 we plan to introduce our
Zai*Net Weather Delta product, which we believe will significantly improve the
ability of our customers to manage weather risk. We are also continuing to
systematically configure our products to be Web-enabled. We have also
established Web-based hosting of some of our applications to make our products
available cost-effectively to smaller market participants, and improve the
effectiveness of larger enterprises. We plan to invest heavily in the growth of
our global development capability and hire additional product development
personnel in both the United States and Europe.
Maintaining and expanding our strategic consulting leadership
Our experience and in-depth understanding of competitive energy markets has
enabled our team of strategic consultants to be at the forefront of changes in
the U.K. and continental European energy sectors. This leadership provides us
with a special understanding of the needs of our energy clients. We intend to
build on this leadership position by expanding our strategic consulting services
in deregulating energy markets, including Germany, Spain and Italy, and we plan
to begin building strategic consulting operations in the United States in 2000.
Continuing to build a global distribution channel
The selling and marketing of sophisticated software solutions to address
the needs of global energy markets requires a highly trained sales channel with
comprehensive subject matter expertise. We have hired a significant number of
experts who can bring added value to the sales and marketing process. We plan to
double the size of our sales channel by the end of 2000 and to expand its scope
beyond the larger energy enterprises to target mid and small market
participants. We also intend to actively pursue opportunities to sell our
software solutions to our installed base of strategic consulting customers as
well as provide strategic consulting services to our software customers.
Expanding global presence
We currently have three offices in the United States and two in the United
Kingdom. As of September 30, 1999, we had 104 employees in the United States and
70 employees in Europe. We believe that our strong international presence
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provides us with a competitive advantage in providing solutions to energy market
participants that are seeking to compete globally in rapidly changing energy
markets. We intend to continue to expand in the foreseeable future to pursue
market opportunities in other markets experiencing energy deregulation. We plan
to expand our presence in Europe and, in 2000, to begin operations in Asia and
Latin America.
Developing strategic alliances to address the evolving needs of energy market
participants
We are seeking to form relationships with leading providers of products and
services that complement our software solutions. In July 1999, we formed a
strategic alliance with ABB Energy Information Systems, a unit of the ABB Group,
which is one of the world's largest vendors serving the energy industry.
Together with ABB Energy Information Systems, we are developing a comprehensive
end-to-end software solution designed to enable vertically integrated energy
suppliers to manage transactions and risks along the entire energy value chain,
from generation and wholesale acquisition of energy through retail sales. We
believe our combined solution will be one of the first end-to-end solutions in
the energy industry and will strengthen our leadership position in the industry.
We have also entered into strategic marketing arrangements with other companies,
including Siemens, Financial Engineering Associates, PH Energy Analysis and SS&C
Technologies, Inc. We plan to develop additional strategic relationships that
will assist our sales and marketing efforts in new geographic markets.
Continuing to grow through acquisitions
We have achieved a leadership position through acquisitions that have
helped us implement our business strategy. We were formed as a limited liability
company in April 1998 for the purpose of acquiring Zai*Net Software, L.P. and
Caminus Limited. In November 1998, we acquired Positron Energy Consulting. We
have successfully integrated the operations of these companies. In August 1999,
we acquired DC Systems, Inc., a software and services company specializing in
physical gas systems. We plan to pursue acquisitions that continue to add to our
subject matter expertise, bring us new products and services and help us
aggressively grow our market share throughout the world. Although we are
currently in discussions to acquire Orion Systems AS, a software and services
company specializing in the Nordic energy market, we currently have no
commitments or agreements with respect to any acquisition. We intend to analyze
potential acquisitions and pursue those opportunities that complement or
supplement our business strategy.
PRODUCTS AND SERVICES
Software Products
Our suite of software products is one of the most comprehensive in the
energy industry. Branded under the "Zai*Net" name, our product suite provides an
integrated energy trading, risk management, scheduling and analytics system to
support multiple functional areas of the energy enterprise. It also allows
energy
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professionals to model physical assets so they can be effectively employed in
conjunction with a firm's trading and marketing operations.
The Zai*Net product suite offers a tightly integrated solution covering a
range of functions, including trading, transaction management, risk management,
analytics and physical scheduling across front, middle and back office
operations. Full integration among the Zai*Net product suite enables energy
market participants to trade, process transactions and manage risk from the
wholesale acquisition of energy through its sale and scheduling. Key benefits of
our product suite include the ability to:
- Manage risk among multiple energy commodities on an enterprise-wide
basis;
- Provide and track operational results from a trader level to a business
unit or enterprise level;
- Maintain trading data in a centralized database with a single,
consolidated, auditable solution;
- Integrate energy trading, risk/control, credit, back office,
treasury/finance and management reporting on a single system;
- Analyze the financial risk and potential impact of long-term energy
investment decisions; and
- Simulate the behavior of deregulating energy markets to forecast future
market prices.
Our software solutions consist of the following three tightly integrated
product groups:
- Zai*Net Manager, our core product, supports energy trading operations and
records and manages transactions and risks of energy commodities
- Zai*Net Risk Analytics provides advanced risk assessment and management
tools for competitive energy markets
- Zai*Net Physicals manages physical energy scheduling operations and
invoicing
We also offer a fourth product group, Zai*Net Models, to analyze
competitive electric power and natural gas markets, and value energy assets.
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[ZaiNet Product Suite Flowchart]
The omitted graphic is a visual model of our Zai*Net product suite. There
are two boxes. The upper box contains the Zai*Net Models product group:
PowerMarkets, PowerOptions, GasOptions, and ProjectFinance. Below that, there is
a bullet-point list of their functions: long term energy investment analysis,
asset valuation and option valuation.
Below the Zai*Net Models box lies a second, larger box, containing three
smaller boxes within, each representing one of three tightly integrated product
groups. The first box is labeled "Zai*Net Risk Analytics." Inside the box is a
description of its purpose, Corporate Risk Management, and a bullet-point list
of its functions: basis exposure, profit & loss attribution, Monte Carlo
Value-at-Risk and potential credit exposure.
The second box is labeled "Zai*Net Manager." Inside the box is a
description of its purpose, Trading, Transaction & Risk Management and a
three-column list of its functions. The first column, "Front Office", lists
trade capture, position/ portfolio management, and pricing & profit & loss. The
second column, "Middle Office", lists Value-at-Risk, credit exposure, portfolio
stress analysis, and audit trail. The third column, "Back Office" lists
reporting confirmations and invoicing.
The third box is labeled "ZaiNet Physicals". This box is divided-side into
three software subgroups. The first subgroup is titled Power*Master. Its listed
functions are: hourly power schedules, curtailments & actualization, pathing
information, and tagging. The second software subgroup is titled Gas*Master and
lists as its functions: gas schedules, pipeline rate schedules, interconnect
movements, and storage. The third software subgroup is Plant*Master, which lists
its functions as: gas plants and processing management.
Zai*Net Manager Product Group
The Zai*Net Manager software is designed to increase the efficiency of a
customer's daily trading operations by recording and managing transactions and
associated risks of energy related commodities. It is used by energy traders and
marketers, risk managers, credit officers and others involved in trading energy
commodities and managing energy risk exposure. The Zai*Net Manager software
serves as the core system and integrates front, middle and back office trading
functionality for multiple traded energy commodities, including electric power,
natural gas, crude oil, refined products, natural gas liquids, coal, emission
allowances and weather derivatives as well as foreign exchange transactions for
those hedging currency risk. The software also provides pricing and back office
support for all traded instruments, including multiple types of physicals,
swaps, over-the-counter options, listed options and futures.
The Zai*Net Manager software's real-time risk management capability
provides aggregated portfolio numbers that instantaneously reflect position and
price changes. The software is designed to handle enterprise-wide, high-level
risk management and is also capable of detailed energy commodity position
tracking, analysis and accounting for diverse local trading requirements.
The Value-at-Risk, or VaR, functionality computes corporate-wide VaR, a
widely accepted method for evaluating and measuring market risk, by a number of
categories. The VaR software analyzes information about the risk, or likely gain
or loss, in a given portfolio. The software also provides credit risk analysis
on a real-time basis to minimize current exposure. Portfolio stress analysis
enables risk
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managers to monitor the impact of price and volatility movements, and the
passage of time on a specified portfolio's position and profit and loss. Full
system audit capability tracks "who did what when" in the system, and "as of"
reporting -- the ability to recreate a previous day's profit and loss
position -- is integrated throughout the system.
Zai*Net Risk Analytics Product Group
Zai*Net Risk Analytics software provides an advanced set of risk assessment
and management tools designed specifically for competitive energy markets. It is
used by energy traders and marketers, risk managers, credit officers and others
involved in managing energy risk exposure. The software utilizes sophisticated
modeling, analysis and simulation methods to help understand business risks.
Zai*Net Risk Analytics software complements and is integrated with Zai*Net
Manager and Zai*Net Physicals software to facilitate the accurate valuation and
management of energy portfolios.
The Zai*Net Risk Analytics software allows users to track portfolio
performance versus projected risks so they can better understand the behavior of
the portfolio under a range of possible price movements, enabling them to more
effectively manage trading and risk.
Zai*Net Risk Analytics software provides capabilities that allow energy
market participants to carefully monitor their risk profiles and credit
positions to manage, analyze and isolate specific risks. It includes the
following modules:
- BASIS BREAKDOWN REPORTING breaks down the risk factors of a single
transaction or group of transactions according to varying price
movements, which are commonly referred to as fixed, basis and index
prices. This enables more detailed analysis of each element of portfolio
risk.
- PROFIT & LOSS (P&L) ATTRIBUTION REPORTING analyzes profit and loss
changes over specified time periods, and attributes such changes to (1)
variations in a commodity's price and volatility, (2) the passage of time
in the specified period and (3) new, changed or voided transactions
during the period.
- MONTE CARLO VALUE-AT-RISK (VAR) ANALYSIS uses the industry-standard Monte
Carlo VaR methodology optimized specifically for energy portfolios. This
analysis runs a portfolio through thousands of simulated market price and
volatility movements and reports a distribution for VaR, which is the
likely gain or loss.
- POTENTIAL CREDIT EXPOSURE ANALYSIS provides close monitoring of credit
risk by capturing volatility in credit exposure calculation to help
contain potential losses.
Zai*Net Physicals Product Group
The Zai*Net Physicals software allows electric power and natural gas
traders and schedulers as well as management and back office staff to manage
physical energy scheduling operations and invoicing. The Zai*Net Physicals group
consists of three major products: Gas*Master, Power*Master and Plant*Master
software.
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-GAS*MASTER software supports all aspects of physical natural gas
transportation, including scheduling, pipeline nominations and wellhead -- or
production-level -- accounting. Gas*Master software includes the following
modules:
-- GAS SCHEDULING assists users in planning and scheduling natural gas
transportation by pipelines, in and out of storage facilities, and to
and from gas pipeline interconnect and storage points.
-- GAS NOMINATIONS manages natural gas scheduling information and formats
the information to the specific requirements of various gas pipeline
systems, enabling bids and confirmations of complex physical gas
transactions. A Web-based electronic data interface, or EDI, allows
automatic transfer of all information exchange with the pipelines,
without requiring user intervention or data re-entry.
-- WELLHEAD ACCOUNTING enables companies with interest at the wellhead
level -- or production site -- to manage the division of interest and
royalty payments.
-POWER*MASTER allows users to schedule electric power across the various
transmission systems and electric power markets worldwide. It includes the
following modules:
-- LONG-TERM POWER SCHEDULING tracks power curtailments, actual electric
power flow and physical and financial transmission line losses by
transaction. The user-friendly interface matches energy transactions
(buys with sells), tracks the "paths" that the energy has flowed
through on the power grid and creates daily and monthly schedules of
planned power flows down to a minute level.
-- REAL-TIME POWER SCHEDULING captures and schedules purchases and sales
of power and transmission capacity, which is the flow of power between
points on the electrical grid networks, on a convenient, single-entry
screen. We designed this module in conjunction with traders and
schedulers to support hourly and real-time trading in the deregulating
power markets.
-PLANT*MASTER enables natural gas processing plant operators to track the
physical flows of gas through the facility and to manage title and allocation
throughout the process.
Zai*Net Models Product Group
Zai*Net Models provide support for long-term energy decisions with a
comprehensive suite of software solutions to analyze competitive electric power
and natural gas markets. Using sophisticated techniques, the models allow
accurate appraisals, capturing the embedded risk prevalent in many energy
assets. These models also perform sensitivity analysis, which involves valuation
testing against varying assumptions relating to fuel costs, price volatility,
operating costs and characteristics, and discount rates. The models use advanced
methods for valuing physical options -- options that reflect the risks of the
physical energy market --
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and can be used for mark-to-market valuation and risk reporting. The Zai*Net
Models include:
- POWERMARKETS is a model that simulates the dynamics of competitive
electricity markets, including forward prices, operating performance of
generators and trading flows between markets and regions.
- POWEROPTIONS is a set of models that uses sophisticated analyses to value
energy assets.
- GASOPTIONS is a set of models that uses sophisticated analyses to value
storage assets and complex purchase and sale transactions.
- PROJECTFINANCE is a financial model that values new and existing assets
using a number of analytical techniques.
Product Pricing
We license our software for a one-time license fee, which typically
consists of a base fee plus charges for optional modules and system users. The
one-time license fee for base packages can range from $200,000 to $400,000 for a
system with basic functionality and a small number of users. Adding additional
functionality through optional modules, which are priced from $20,000 to over
$100,000, and additional users can increase system license fees to a range of
$500,000 to over $1 million. Customers also typically enter into an annual
maintenance agreement providing them with regular software upgrades and help
desk support. Customers pay an annual maintenance fee that is typically equal to
20% of the customer's license fee.
Software Services
We offer a broad range of professional services to assist our customers in
implementing our software products to meet their business needs. Our philosophy
is to focus on the needs of each specific customer and to tailor our services
accordingly. We provide the following services, primarily on a time and
materials basis:
- IMPLEMENTATION CONSULTING SERVICES to assist customers with the initial
installation of the software or newly licensed modules, conversion of the
customer's historical data, setting the operational parameters of the
system and ongoing training and support.
- APPLICATION CONSULTING SERVICES to help our customers gain the maximum
benefit from our systems and implement best practices in their trading
and risk management operations.
- POST-IMPLEMENTATION CUSTOMER SUPPORT to answer customer questions and
resolve problems through remote diagnosis and telephone hotline support.
These services and the professionals that deliver them contribute to a
strong relationship with our customers, enabling us to assess the future
requirements of our customers and sell them additional products and services. As
of September 30, 1999, our software consulting staff consisted of 41 employees
located in the U.S. and Europe.
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STRATEGIC CONSULTING SERVICES
Based in Cambridge, England, our 26 strategic consultants provide European
governments with strategic advice on the deregulation and restructuring of the
energy industry and assist energy companies with global operations in choosing
and implementing strategies to remain competitive in deregulating energy
markets. Our reputation in strategic consulting is based on our experience and
in-depth understanding of competitive energy markets. We are recognized for our
expertise in economics, regulation and strategy, and have been at the forefront
of changes in the United Kingdom energy sector, which has one of the most
deregulated natural gas and electric power markets in the world. Our knowledge
and information base covers the entire energy value chain from fuel production
through generation, transmission, distribution and trading, and we have a
detailed understanding of competitive wholesale trading arrangements in
international gas and electricity markets.
Our strategic consulting expertise, which is billed primarily on a time and
materials basis, is diverse and includes specialization in the following areas:
ACQUISITIONS. New entrants and existing players in deregulating markets
may choose to strengthen their market position through acquisitions of assets or
businesses. We have significant experience in the economic evaluation of new and
existing energy projects and have provided advice on more than 20 power projects
in the U.K., as well as a number of projects in Europe.
QUANTITATIVE ANALYSIS. We are experts in analyzing complex issues in
competitive energy markets. Our quantitative approach encompasses, among other
things, the effect of changing market structures on the key price drivers. Our
strategic consulting group first developed our suite of analytical models of the
England and Wales energy power pool in the late 1980s to assist our clients in
their negotiations with the U.K. government over the structure of the energy
power pool. Since then, we have refined these models into our comprehensive
suite of analytical Zai*Net Models that support strategic energy decisions.
RISK MANAGEMENT. Throughout Europe, competition is forcing natural gas and
electric utilities to re-evaluate their strategies for managing the risks in
their businesses. We offer a complete range of risk management consultancy
services, independently or in conjunction with our Zai*Net software suite. We
have developed electricity trading and risk management training courses for a
number of U.K., continental European and North American power companies. We have
also run several successful electricity trading and risk management workshops at
major European power conferences.
POLICY FORMULATION. Over the years, we have worked very closely with
British gas and electricity regulators to help design and establish the world's
first fully competitive gas and electricity markets. We are currently lead
economic advisors to the U.K. gas and electricity regulatory body, OFGEM, on the
Reform of Electricity Trading Arrangements. We have also developed a leading
advisory position on the transition to competition in other European energy
markets.
SALES AND MARKETING
We sell our products and services through a direct sales channel. We
believe the product and market expertise necessary to sell our highly
sophisticated
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products cannot be delegated successfully to third parties, and we seek to hire
subject matter experts who can bring added value to the sales process. We do
believe, however, that third parties can provide us with valuable assistance in
our marketing efforts, especially in new geographic regions.
Direct Sales Model
As of September 30, 1999, our direct sales force consisted of 21 employees
selling from our U.S. and European offices. We have a single sales organization
in each region that is responsible for selling our entire suite of products and
services in that region. Each of the U.S. and European sales organizations is
led by a highly experienced vice president with a strong background in building
and leading large enterprise sales teams.
We use a team sales approach in which professional account representatives
work with pre-sales product and service experts. The account representative
generates and qualifies leads, manages the sales process and is responsible for
closing the sale. Most new customer sales cycles typically range from six to
nine months from lead generation to contract execution. Territories are assigned
to account representatives on a geographic and named-account basis. Pre-sales
consultants support the sales process by assessing the prospect's business needs
and creating and delivering technical sales information and demonstrations.
Subject matter experts from strategic consulting and product development
supplement the sales team as the sales situation dictates. In addition, our
strategic and software consultants work closely with the sales team to identify
additional sales opportunities with existing customers. We have closely
coordinated team selling between the U.S. and European channels on global
enterprise opportunities.
Marketing Communications
To support our growing direct sales channel, we have devoted significant
resources to building strong marketing support. Our main marketing objectives
are to generate sales leads and increase the market's awareness and accurate
perception of us and our products and services. These efforts are focused on
industry advertising, public relations, trade shows, direct mailings, the
Internet and platform participation in major industry seminars. As of September
30, 1999, we had four marketing personnel.
STRATEGIC RELATIONSHIPS
We continue to develop relationships with third parties that can assist us
in generating sales leads and provide cooperative marketing support. Most of
these are informal alliances where the value of our products and services to the
third party's marketing efforts motivates them to assist us. We formed the most
significant of our formal marketing relationships in July 1999 with ABB Energy
Information Systems, a unit of ABB Group. ABB Group is one of the world's
largest vendors serving the energy industry. Together with ABB Energy
Information Systems, we are developing a comprehensive end-to-end solution to
provide vertically integrated energy suppliers with the ability to manage risk
along the entire energy value chain, from wholesale acquisition of energy
through retail sales. We also have joint marketing arrangements with Siemens,
Financial Engineering Associates, PH Energy Analysis, Unified Information and
SS&C Technologies.
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RESEARCH AND DEVELOPMENT
A strong development capability is essential to delivering responsive
products to an emerging market, continually improving the quality and
functionality of our current products and enhancing our core technology. As of
September 30, 1999, we had 41 employees in our research and development area. We
spent approximately $0.6 million, $1.2 million, $1.7 million and $1.6 million on
research and development during the years ended December 31, 1996 and 1997, the
period from inception (April 29, 1998) through December 31, 1998 and the six
months ended June 30, 1999, respectively.
We believe the best way to maximize our development capability is to have
small, entrepreneurial development teams, each of which is focused on a specific
product group. Our teams operate under a structure that provides an "umbrella"
of common strategy, plans, technology, standards, methodologies, processes and
culture. Our product teams consist of product mangers, programmers and
documentation and quality assurance specialists, and overall development
management consists of the leaders of each development team, led by the chief
technology officer. The leaders ensure that the teams operate under the common
umbrella and that they work closely with product marketing in a process designed
to ensure that we develop products that the market requires. The team leaders
manage the integration between products and coordinate overall product suite
quality assurance.
We are developing a variety of new products and product enhancements. One
product that we are developing is our Zai*Net Weather Delta product, which we
are designing to provide tools for energy risk professionals to integrate
weather data, one of the key factors in energy demand, into energy load
forecasts. We are designing Zai*Net Weather Delta to analyze the relationships
among load, price and weather. We are also designing the software to deliver
comprehensive reports showing financial volume-at-risk with the traditional
rigor of utility load forecasting. The product is in the design phase, and we
currently plan to release Zai*Net Weather Delta during 2000.
TECHNOLOGY
Written primarily in C/C++ with standard graphical user interfaces, the
Zai*Net software suite has an open, three-tier client/server architecture and
runs on Unix and NT servers with Windows95 and WindowsNT clients on Oracle,
Microsoft or Sybase database platforms. We typically store business logic in
objects that reside on the client or server side of the application. Objects are
usually coded in C++ using object-oriented programming techniques for improved
scalability.
The ability to integrate easily with other systems is a key competitive
advantage. To facilitate integration with a variety of architectures, the
Zai*Net suite of solutions provides standard interfaces to accept trades and
prices from other systems and sources. The suite processes trades and prices
into standard formats, easily processed by the risk system. It performs this
activity in random access memory-based server objects keeping slow disk access
to a minimum. The integrated result is an object-oriented, high-performance
system that will run on a variety of servers and databases.
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CUSTOMERS
Our customers include a wide range of entities in the energy market,
including utilities, natural gas and electric power marketers, energy retailers,
natural gas and oil producers, local distribution companies, pipelines,
independent power producers, financial institutions and regulatory agencies. We
currently have approximately 100 energy enterprise customers located primarily
in the U.S., Canada, the U.K., Germany, Austria, Belgium, the Netherlands, Spain
and Venezuela. Our customers include:
UTILITIES
American Electric Power
Austin Energy (City of Austin, TX)
Bayernwerk
BC Hydro/Powerex
Consolidated Edison
Electrabel
GPU Energy
Ontario Power Generation
Pennsylvania Power & Light
Preussen Elektra
Public Service Electric & Gas
TXU Electric and Gas
SEP
NATURAL GAS AND ELECTRIC POWER MARKETERS
Bord Gais
Eastern Electricity plc
Merchant Energy Group of the Americas
PG&E Energy Trading
Valero Refining and Marketing
AES Electric Limited
ENERGY RETAILERS
DukeSolutions
NewEnergy
FINANCIAL INSTITUTIONS
Barclay's Capital
Credit Suisse First Boston
GE Capital
REGULATORY AGENCIES
OFGEM
GAS AND OIL PRODUCERS
Amerada Hess
Anadarko Petroleum
Conoco
Ocean Energy/Seagull Energy
Petroleos de Venezuela S.A.
Phillips Petroleum Company
Ultramar Diamond Shamrock
Unocal Corporation
LOCAL DISTRIBUTION COMPANIES
Southwestern Energy
TXU Lone Star Gas
PIPELINES
Coastal Gas Services
Colorado Interstate Gas
INDEPENDENT POWER PRODUCERS
AES Electric
Edison Mission
TRANSMISSION COMPANIES
TenneT
National Grid Company plc
COMPETITION
We compete in a market that is new, rapidly evolving and very competitive.
We expect competition to persist and intensify. We currently face competition
from a number of sources.
The companies that compete against us in the provision of software
solutions to the energy industry include:
- internal development departments of a number of energy participants
developing systems for internal use or for sale to other market
participants;
- a small number of companies that provide a wide range of products and
services exclusively to the energy market but currently do not have a
strong international presence;
- a number of smaller companies that offer point solutions exclusively to
the energy market but do not provide the full range of products and
services required by market participants and do not have a significant
international presence; and
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- large multi-product/market software companies or financial institutions
that offer or, in the future, may offer financial risk management and
other software addressing the energy market.
We believe that the principal competitive factors with respect to our
software solutions include knowledge of market needs: product performance,
scope, functionality, ease of use and scalability; the existence of an
international presence; the ability to integrate external data sources; product
and company reputation; the existence of a referencable customer base; customer
service and support; and price.
The principal competitors for our strategic consulting services are
customers who have internal expertise as well as large international consulting
and strategy firms.
We believe that the principal competitive factors with respect to our
strategic consulting services include subject matter expertise, responsiveness
to customer needs, reputation, comprehensive delivery methodologies and price.
INTELLECTUAL PROPERTY
We rely on a combination of copyright, trademark and trade secret laws,
nondisclosure agreements and other contractual provisions to establish, maintain
and protect our proprietary rights. We have copyright and trade secret rights
for our products, consisting mainly of source code and product documentation. We
attempt to protect our trade secrets and other proprietary information through
agreements with suppliers, non-disclosure agreements with employees and
consultants and other security measures. We rely on outside licensors for
technology that is incorporated into and is necessary for the operation of our
products.
EMPLOYEES
As of September 30, 1999, we had 174 full-time employees, consisting of 67
employees in consulting and services, 41 employees in research and development,
32 employees in finance and administration, 25 employees in sales and marketing
and nine employees in customer support. Of such employees, 104 were located in
the United States and 70 were employed in Europe. None of these employees is
covered by any collective bargaining agreements, and to date, we have not
experienced a work stoppage. We believe our relationship with our employees is
good.
PROPERTIES
Our principal administrative, sales, marketing, services and research and
development facility occupies approximately 14,000 square feet of office space
in New York, New York. The leases expire in September 2004. In addition, we
lease sales, services and research and development offices in Dallas and
Houston, Texas and London and Cambridge, England. We believe that our facilities
are adequate for our current needs and that suitable additional or substitute
space will be available as needed to accommodate expansion of our operations.
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LEGAL PROCEEDINGS
From time to time we may be subject to legal proceedings and claims in the
ordinary course of our business. We are not aware of any legal proceedings or
claims that are believed will have, individually or in the aggregate, a material
adverse effect on our business, financial condition or results of operations.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors, and their respective ages and
positions as of September 30, 1999, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ---- --- -----------
<S> <C> <C>
David M. Stoner...................... 58 President, Chief Executive Officer and
Director
Nigel L. Evans....................... 45 Senior Vice President, Director of European
Operations and Director
Brian J. Scanlan..................... 37 Senior Vice President, Chief Technology
Officer and Director
Mark A. Herman....................... 39 Vice President, Chief Financial Officer,
Secretary and Treasurer
Lawrence D. Gilson................... 50 Chairman of the Board of Directors
Christopher S. Brothers*............. 33 Director
Anthony H. Bloom*.................... 60 Director
Richard K. Landers*.................. 51 Director
</TABLE>
- -------------------------
* Member of audit and compensation committees.
DAVID M. STONER has served as our President and Chief Executive Officer and
as a director since October 1998. From April 1997 to October 1998, Mr. Stoner
served as President and Chief Operating Officer at SS&C Technologies, Inc., a
provider of asset management software to the financial services industry. From
August 1995 to February 1997, Mr. Stoner was President and Chief Operating
Officer of The Dodge Group, Inc., a software company providing PC-based general
ledger systems. From December 1987 to August 1995, Mr. Stoner served as
Executive Vice President, Worldwide Operations at Marcam Corporation, an
international provider of enterprise applications and services.
NIGEL L. EVANS has served as our Senior Vice President and Director of
European Operations and as a director since May 1998. From 1985 to May 1998, Dr.
Evans served as Chairman and Chief Executive Officer of Caminus Limited,
formerly known as Caminus Energy Limited.
BRIAN J. SCANLAN has served as our Senior Vice President and Chief
Technology Officer since January 1999 and as a director since May 1998. From May
1998 to December 1998, Mr. Scanlan served as President of Zai*Net Software, L.P.
and from 1987 to May 1998 served as President of Zai*Net Software, Inc. See
"Certain Transactions."
MARK A. HERMAN has served as our Chief Financial Officer since February
1999. Mr. Herman worked at GT Interactive Software Corp., a publicly held
software company, as Corporate Controller from November 1994 to March 1996 and
as Vice President and Corporate Controller from March 1996 to February 1999.
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Prior to 1994, Mr. Herman held various management positions at companies such
as Grand Union, Deloitte & Touche LLP and PricewaterhouseCoopers LLP.
LAWRENCE D. GILSON has served as chairman of our board of directors since
May 1998. Mr. Gilson is President of GFI and a founder of each GFI entity
beginning in 1995. He previously founded and was President of Venture
Associates, a leading energy industry consulting firm from 1985 to 1995. When he
and his partners sold Venture Associates to Arthur Andersen & Co. in a two-stage
transaction in 1990 and 1992, Mr. Gilson also became Worldwide Head of Arthur
Andersen's Utility Consulting Practice. Prior to founding Venture Associates,
Mr. Gilson served as Vice President for Corporate Development and Government
Affairs of Amtrak from 1979 to 1983. He is the board chair of Power Measurement
Ltd. and Statordyne LLC and a member of the board of Trace Holdings, LLC.
CHRISTOPHER S. BROTHERS has served as a director since May 1998. Mr.
Brothers is a Senior Vice President of Oaktree Capital Management, LLC. Prior to
joining Oaktree in 1996, Mr. Brothers worked at the New York headquarters of
Salomon Brothers Inc., where he served as a Vice President in the Mergers and
Acquisitions group. Prior to 1992, Mr. Brothers was a Manager in the Valuation
Services group of PricewaterhouseCoopers LLP. Mr. Brothers serves on the boards
of directors of Cherokee International LLC, National Mobile Television, Inc.,
Power Measurement, Ltd. and Trace Holdings, LLC.
ANTHONY H. BLOOM has served as a director since May 1998. Mr. Bloom is an
international investor now based in London. Prior to his relocation to London in
July 1988, he lived in South Africa where he was the Chairman and Chief
Executive of The Premier Group, a multi-billion dollar conglomerate involved in
agribusiness, retail and consumer products, and a member of the boards of
directors of Barclays Bank, Liberty Life Assurance and South African Breweries.
Since moving to the United Kingdom, he has been a member of the board of
directors of RIT Capital Partners plc, the publicly traded, London-based
investment company chaired by Lord Rothschild. He is also currently Deputy
Chairman of Sketchley plc and is Chairman of Cine-UK Ltd.
RICHARD K. LANDERS has served as a director since May 1998. Mr. Landers is
a principal of GFI and a founder of each GFI entity beginning in 1995. From 1986
to 1995, he was a partner of Venture Associates and of Arthur Andersen & Co.
following that firm's acquisition of Venture Associates. From 1979 to 1986, Mr.
Landers held senior planning and strategy positions in Los Angeles and
Washington, D.C. with Southern California Gas Company and its holding company,
Pacific Enterprises. Before joining Southern California Gas, Mr. Landers served
as a foreign service officer in the U.S. State Department with special
responsibilities for international energy matters.
EXECUTIVE OFFICERS
Each executive officer serves at the discretion of our board of directors
and holds office until his successor is elected and qualified or until his
earlier resignation or removal. There are no family relationships among any of
our directors or executive officers, except that Messrs. Gilson and Stoner are
brothers-in-law.
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ELECTION OF DIRECTORS
Our board of directors is divided into three classes, with the members of
each class serving for a staggered three-year term. Our board currently consists
of two Class I directors (Anthony H. Bloom and Richard K. Landers), three Class
II directors (Nigel L. Evans, Lawrence D. Gilson and Brian J. Scanlan) and two
Class III directors (Christopher S. Brothers and David M. Stoner). At each
annual meeting of stockholders, a class of directors will be elected for a
three-year term to succeed the directors of the same class whose terms are then
expiring. The terms of the Class I directors expire upon the election and
qualification of successor directors at the annual meeting of stockholders to be
held in 2000. The terms of the Class II directors expire upon the election and
qualification of successor directors at the annual meeting of stockholders to be
held in 2001. The terms of the Class III directors expire upon the election and
qualification of successor directors at the annual meeting of stockholders to be
held in 2002.
BOARD COMMITTEES
Our board of directors has an audit committee and a compensation committee.
The audit committee reviews the results and scope of the audit and other
services provided by our independent public accountant. The compensation
committee establishes the compensation policies applicable to our executive
officers and administers and grants stock options pursuant to our stock plans.
The current members of the audit and compensation committees are Messrs. Bloom,
Brothers and Landers.
DIRECTOR COMPENSATION
We reimburse directors for reasonable out-of-pocket expenses incurred in
attending meetings of the board of directors and any meetings of its committees.
Each non-employee director is paid $1,500 for attendance at each meeting of the
board of directors or for each telephonic meeting of the board in which he
participates. Each non-employee director is further entitled to $1,500 for each
meeting of a committee of the board attended by the director which is held on a
day other than the day of, or the day before or after, the date of any meeting
of the full board of directors. Other directors are not entitled to compensation
in their capacities as directors. We may, in our discretion, grant stock options
and other equity awards to our non-employee directors from time to time under
our stock plans.
On September 30, 1999, we granted each of our non-employee directors an
option under our 1999 stock incentive plan to purchase shares of common
stock at the initial public offering price. Each option cumulatively vests as to
25% of the underlying shares on the first anniversary of the date of grant and
monthly thereafter for an additional three years. See "-- Benefit Plans -- 1999
Stock Incentive Plan" for a description of our 1999 stock incentive plan.
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EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued for
the year ended December 31, 1998 to our:
- president and chief executive officer; and
- our two other executive officers at year-end.
We refer to all of these officers collectively as our Named Executive Officers.
The total compensation paid or accrued below includes compensation paid or
accrued by Caminus LLC, as well as Zai*Net and Caminus Limited. In accordance
with the rules of the Securities and Exchange Commission, the compensation set
forth in the table below does not include medical, group life or other benefits
which are available to all of our salaried employees, and perquisites and other
benefits, securities or property which do not exceed the lesser of $50,000 or
10% of the person's salary and bonus shown in the table. In the table below,
columns required by the regulations of the Securities and Exchange Commission
have been omitted where no information was required to be disclosed under those
columns. During the year ended December 31, 1998, we did not grant any options
as compensation to any of our Named Executive Officers, and none of our Named
Executive Officers exercised any options during 1998 or held any options
received as compensation at the end of the year. The compensation listed below
in the "All Other Compensation" column represents Caminus Limited's contribution
to Dr. Evans' personal pension plan. Dr. Evans' compensation in U.S. dollars is
based on an exchange ratio of $1.65 per L1 as of December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION
- --------------------------- -------- -------- ------------
<S> <C> <C> <C>
David M. Stoner.......................... $ 42,242 $ -- $ --
President and Chief Executive Officer
Nigel L. Evans........................... 307,450 124,278 21,522
Senior Vice President and Director of
European Operations
Brian J. Scanlan......................... 150,000 46,042 --
Senior Vice President and Chief
Technology Officer
</TABLE>
BENEFIT PLANS
1998 STOCK INCENTIVE PLAN. Our 1998 stock incentive plan was adopted by
our former management committee and approved by our former members in February
1999. The 1998 plan authorizes the issuance of up to shares of our
common stock. As of August 31, 1999, options to purchase an aggregate of
shares of our common stock at a weighted average exercise price of
$ per share were outstanding under the 1998 plan. Upon the closing of this
offering, no additional grants of stock options or other awards will be made
under the 1998 plan.
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1999 STOCK INCENTIVE PLAN. Our 1999 stock incentive plan was adopted by
our board of directors and approved by our stockholders in September 1999. The
1999 plan is intended to replace our 1998 plan. Up to shares of our
common stock (subject to adjustment in the event of stock splits and other
similar events) may be issued pursuant to awards granted under the 1999 plan.
The 1999 plan provides for the grant of incentive stock options intended to
qualify under Section 422 of the Internal Revenue Code, nonstatutory stock
options, restricted stock awards and other stock-based awards.
Our officers, employees, directors, consultants and advisors and those of
our subsidiaries are eligible to receive awards under the 1999 plan. Under
present law, however, incentive stock options may only be granted to employees.
No participant may receive any award for more than shares in any
calendar year. As of September 30, 1999, options to purchase an aggregate of
shares of our common stock at an exercise price per share equal to the
initial public offering price were outstanding under the 1999 plan.
Optionees receive the right to purchase a specified number of shares of our
common stock at a specified option price and subject to such other terms and
conditions as are specified in connection with the option grant. We may grant
options at an exercise price less than, equal to or greater than the fair market
value of our common stock on the date of grant. Under present law, incentive
stock options and options intended to qualify as performance-based compensation
under Section 162(m) of the Internal Revenue Code may not be granted at an
exercise price less than the fair market value of the common stock on the date
of grant or less than 110% of the fair market value in the case of incentive
stock options granted to optionees holding more than 10% of our voting power.
The 1999 plan permits our board of directors to determine how optionees may pay
the exercise price of their options, including by cash, check or in connection
with a "cashless exercise" through a broker, by surrender to us of shares of
common stock, by delivery to us of a promissory note, or by any combination of
the permitted forms of payment.
As of September 30, 1999, approximately 178 persons would have been
eligible to receive awards under the 1999 plan, including our four executive
officers and our four non-employee directors. The granting of awards under the
1999 plan is discretionary.
Our board of directors administers the 1999 plan. Our board of directors
has the authority to adopt, amend and repeal the administrative rules,
guidelines and practices relating to the plan and to interpret its provisions.
It may delegate authority under the 1999 plan to one or more committees of the
board of directors and, subject to certain limitations, to one or more of our
executive officers. Subject to any applicable limitations contained in the 1999
plan, our board of directors or a committee of the board of directors or
executive officer to whom our board of directors delegates authority, as the
case may be, selects the recipients of awards and determines:
- the number of shares of common stock covered by options and the dates
upon which such options become exercisable;
- the exercise price of options;
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- the duration of options; and
- the number of shares of common stock subject to any restricted stock or
other stock-based awards and the terms and conditions of such awards,
including the conditions for repurchase, issue price and repurchase
price.
In the event of a merger, liquidation or other acquisition event, our board
of directors is authorized to provide for outstanding options or other
stock-based awards to be assumed or substituted for by the acquiror. If the
acquiror refuses to assume or substitute for outstanding options, they will
accelerate, becoming fully exercisable and free of restrictions, prior to
consummation of the acquisition event. In addition, following an acquisition
event, under some circumstances, an assumed or substituted award will accelerate
if the employment of its holder with the acquiror is terminated within one year
of the acquisition event.
No award may be granted under the 1999 plan after September 2009, but the
vesting and effectiveness of awards previously granted may extend beyond that
date. Our board of directors may at any time amend, suspend or terminate the
1999 plan, except that no award granted after an amendment of the 1999 plan and
designated as subject to Section 162(m) of the Internal Revenue Code by our
board of directors shall become exercisable, realizable or vested, to the extent
the amendment was required to grant such award, unless and until such amendment
is approved by our stockholders.
1999 EMPLOYEE STOCK PURCHASE PLAN. Our 1999 employee stock purchase plan
was adopted by our board of directors and approved by our stockholders in
September 1999. The purchase plan authorizes the issuance of up to a total of
shares of our common stock to participating employees.
The following employees, including our directors who are employees and
employees of any participating subsidiaries, are eligible to participate in the
purchase plan:
- Employees who are customarily employed for more than 20 hours per week
and for more than five months per year; and
- Employees employed for at least three months prior to enrolling in the
purchase plan.
Employees who would immediately after the grant own 5% or more of the total
combined voting power or value of our stock or any subsidiary are not eligible
to participate.
On the first day of a designated payroll deduction period, or "offering
period," we will grant to each eligible employee who has elected to participate
in the purchase plan an option to purchase shares of our common stock as
follows: the employee may authorize between 1% to 10% of his or her base pay to
be deducted by us from his or her base pay during the offering period. On the
last day of the offering period, the employee is deemed to have exercised the
option, at the option exercise price, to the extent of accumulated payroll
deductions. Under the terms of the purchase plan, the option price is an amount
equal to 85% of the per share closing price of our common stock on either the
first day or the last day of the offering period, whichever is lower. In no
event may an employee purchase under the purchase plan in any year a number of
shares which exceeds the
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number of shares determined by dividing $25,000 by the average market price of a
share of common stock on the commencement date of the offering period. Our board
of directors will choose the timing and length of each offering periods.
An employee who is not a participant on the last day of the offering period
is not entitled to exercise any option, and the employee's accumulated payroll
deductions will be refunded. An employee's rights under the purchase plan
terminate upon voluntary withdrawal from the purchase plan at any time, or when
the employee ceases employment for any reason.
401(k) PLAN. We have adopted an employee savings and retirement plan
qualified under Section 401 of the Internal Revenue Code and covering all of our
employees. Pursuant to the 401(k) plan, employees may elect to reduce their
current compensation by up to the statutorily prescribed annual limit and have
the amount of such reduction contributed to the 401(k) plan. We may make
matching or additional contributions to the 401(k) plan in amounts to be
determined annually by our board of directors.
EMPLOYMENT AGREEMENTS
On October 21, 1998, we entered into an employment agreement with David M.
Stoner. Under the terms of his agreement, Mr. Stoner's employment as president
and chief executive officer will continue until October 21, 2001, unless sooner
terminated. Mr. Stoner receives a base salary of $250,000 per year and is
eligible to receive a bonus for service during 1999 of up to $125,000. Mr.
Stoner's eligibility for bonuses for years after 1999 will be determined by our
board of directors.
In connection with Mr. Stoner's employment agreement, we have provided Mr.
Stoner with two loans. The first loan is for $100,000 at an annual interest rate
of 9% and is evidenced by a one-year demand recourse promissory note, dated
October 30, 1998. The second loan is for $1,000,000 at an annual interest rate
of 9% and is evidenced by a ten-year secured recourse promissory note dated
October 21, 1998. It is secured by Mr. Stoner's equity, profits and ownership of
us pursuant to a pledge and security agreement. The purpose of the second loan
was to provide Mr. Stoner with the entire purchase price for 3,364,396 shares of
Series A membership interest in Caminus LLC, which will convert into
shares of common stock prior to this offering.
Upon the closing of this offering, Mr. Stoner will receive a bonus payment
equal to (1) the then outstanding principal balance of the second loan, which
was approximately $1,083,500 as of September 30, 1999, and (2) an award of
shares of common stock.
If we terminate Mr. Stoner's employment with cause or if Mr. Stoner resigns
for no good reason, he will receive all accrued compensation and vested
benefits, excluding any bonus amounts. If we terminate his employment without
cause or if Mr. Stoner resigns for good reason, Mr. Stoner will receive all
unpaid accrued compensation, vested benefits -- including any unpaid minimum
bonus with respect to the first twelve months of his employment -- and a
severance benefit equal to his base salary until the earlier of October 21, 2001
or twelve months following the date of termination. Upon Mr. Stoner's
termination, we have the right
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to purchase all Caminus securities then owned by Mr. Stoner. In most cases, the
purchase price paid by us will be the fair market value of the securities on the
date of termination.
Mr. Stoner's agreement contains a confidentiality provision and further
provides that Mr. Stoner may not work for, or hold 5% or more of the outstanding
capital stock of a publicly traded corporation, which is a competing business
anywhere in the world for one year after the conclusion of his employment. A
competing business is one that develops and markets (1) software or consulting
advisory services used to analyze or influence client and industry decisions
regarding energy pricing, investments, regulatory policy and financial and
strategic planning for clients in the natural gas, crude oil, refined products,
electric power and utility industries and (2) software or related products or
services which otherwise facilitate transactions or other participation in
competitive energy markets.
On May 12, 1998, Caminus Energy Limited, our wholly owned subsidiary,
entered into a service agreement with Dr. Nigel L. Evans. Under the terms of his
agreement, Dr. Evans' employment as chief executive officer of Caminus Limited
will continue until May 5, 2001, renewing annually for successive one-year terms
unless sooner terminated. Dr. Evans receives a base salary of L200,000 ($329,218
as of September 30, 1999) per year, subject to annual review and increases, and
is eligible to receive an annual performance bonus, targeted at L100,000
($164,609 as of September 30, 1999). Dr. Evans is also eligible to participate
in Caminus Limited's profit sharing plan for key employees. If we terminate Dr.
Evans' employment without cause or Dr. Evans terminates his employment due to a
constructive dismissal, he will receive his current salary, bonus and other
benefits for twelve months from the date of termination. If Dr. Evans resigns,
he will receive all salary, bonus and other benefits that have accrued as of the
date of termination.
Dr. Evans' agreement contains a confidentiality provision and further
provides that he may not directly or indirectly act as an employee or
consultant, or hold more than a 5% investment in any class of securities quoted
on a stock exchange, in a competing business for one year after the date of
termination. A competing business has the same meaning in Dr. Evans' agreement
as in Mr. Stoner's agreement, as described above. On May 12, 1998, Dr. Evans
also entered into a covenant not to compete with Caminus Energy Limited, which
extends his obligations not to compete for two years after termination in
certain circumstances.
On May 12, 1998, Zai*Net Software, L.P., which was our majority-owned
subsidiary at the time, entered into an employment agreement with Brian J.
Scanlan. In March 1999, we assumed the employment agreement when Zai*Net
Software, L.P. was merged into us. Under the terms of his agreement, Mr.
Scanlan's employment as Chief Technology Officer will continue until May 12,
2001, unless sooner terminated. Mr. Scanlan currently receives a base salary of
$175,000 per year, subject to annual review and increases, and is eligible to
participate in our annual profit sharing plan for key employees. If we terminate
Mr. Scanlan's employment with cause or if he resigns for no good reason, Mr.
Scanlan will receive all accrued compensation and vested benefits as of the
termination date. If we terminate Mr. Scanlan's employment without cause or if
he resigns for good reason, Mr. Scanlan will receive all accrued compensation
and vested benefits as of
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the termination date and a severance benefit of his base salary for the
remainder of the term of his agreement.
Mr. Scanlan is also a party to a covenant not to compete, dated May 12,
1998, which contains a confidentiality provision and further provides that he
may not perform services, or hold 5% or more of the outstanding capital stock of
a publicly traded corporation, in a competing business other than on behalf of
us or our affiliates anywhere in the world for the greater of (1) three and
one-half years from the date of the agreement or (2) two years after the date of
termination. A competing business includes developing, licensing, installing and
maintaining commodities trading and risk management software and providing
consulting and support services related to such software activities to the
foreign exchange, natural gas, crude oil, refined products and electric power
industries and software or related products or services which otherwise
facilitate transactions or other participation in competitive energy markets.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No executive officer has served as a director or member of the compensation
committee or other committee serving an equivalent function of any other entity
whose executive officers served as a director or member of the compensation
committee of our board of directors. During 1998, our board of directors,
including our chief executive officer, determined the compensation of our
executive officers.
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CERTAIN TRANSACTIONS
ZAI*NET SOFTWARE, L.P.
On May 12, 1998, we entered into a purchase agreement with Zai*Net
Software, Inc., Zai*Net Software, L.P. and Brian Scanlan, our Chief Technology
Officer and a director. At the time of the transaction, Mr. Scanlan was
unaffiliated with us. Pursuant to the agreement, we purchased a 1% general
partnership interest and a 70% limited partnership interest in Zai*Net Software,
L.P. from Mr. Scanlan and Zai*Net Software, Inc., respectively. We paid
$7,740,000 to Zai*Net Software, Inc., an entity wholly owned by Mr. Scanlan, for
such interests. Lawrence D. Gilson, Richard K. Landers and Christopher S.
Brothers, three of our original management committee members and affiliates of
either GFI or Oaktree Capital Management, were primarily responsible for
negotiating the terms of the purchase agreement on our behalf, and Mr. Scanlan
was primarily responsible for negotiating on behalf of Zai*Net Software, L.P. In
determining the purchase price for our interest in Zai*Net Software, L.P., we
examined consideration paid for comparable companies and in comparable
transactions and considered the expected synergies from the acquisition. On May
12, 1998, Mr. Scanlan entered into a three-year employment agreement with
Zai*Net Software L.P. For details in connection with Mr. Scanlan's employment
agreement, see "Management -- Employment Agreements."
As part of a closing adjustment in connection with our purchase of the
membership interest in Zai*Net Software, L.P., we loaned Zai*Net Software, L.P.
$400,000 to be paid to Zai*Net Software, Inc. as a cash distribution. Zai*Net
Software, L.P. issued us a one-year note payable for the principal amount plus
interest, due May 12, 1999. Zak Associates, Inc. repaid approximately $121,000
of the $400,000 on behalf of Zai*Net Software, L.P. pursuant to the conversion
agreement dated December 31, 1998 and the balance of the note from Zai*Net
Software, L.P. to us was cancelled.
In connection with our acquisition of partnership interests in Zai*Net
Software, L.P., we and certain of our original limited liability company
investors paid an additional $2,187,500 to Zak Associates, Inc., the successor
to Zai*Net Software, Inc., in June 1999 and will pay an additional $2,187,500 to
Zak Associates, Inc. on April 15, 2000. These investors include GFI, OCM Caminus
Investment, Inc. and RIT Capital Partners plc, which entities are each principal
stockholders of us.
Subsequent to the closing of the Zai*Net acquisition, Zai*Net Software,
Inc. transferred and assigned its remaining 29% partnership interest in Zai*Net
Software, L.P. to Rooney Software, L.L.C. On December 31, 1998, Rooney entered
into a conversion agreement with us, Zak Associates, Inc., Zai*Net Software,
L.P. and Brian Scanlan whereby the remaining 29% partnership interest in Zai*Net
Software, L.P. was converted into 21,579,728 shares of Series A membership
interest of Caminus LLC, which will convert into shares of our common
stock prior to this offering. Upon the closing of the December 1998 transaction,
we owned 100% of the membership interest in Zai*Net Software, L.P., thereby
creating a wholly owned subsidiary. In March 1999, Zai*Net Software, L.P. was
merged with and into us.
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CAMINUS LIMITED
On May 12, 1998, we entered into a stock purchase agreement with Caminus
Energy Limited, an English corporation currently known as Caminus Limited, and
its two stockholders, Dr. Nigel L. Evans and Dr. Michael B. Morrison. Dr. Evans
is our Director of European Operations and a director and Dr. Morrison is a
principal stockholder of us. At the time of the acquisition, Drs. Evans and
Morrison were unaffiliated with us. Pursuant to the agreement, we paid
$3,022,924 cash for all of the issued and outstanding shares, an aggregate of
950 ordinary shares, of Caminus Limited held by Drs. Evans and Morrison. Drs.
Evans and Morrison also received 6,055,912 and 4,037,275 shares of Series A
membership interest in us, respectively, which will convert into and
shares of our common stock, respectively, prior to this offering. As
additional consideration, Drs. Evans and Morrison received an option to purchase
3,030,000 and 2,020,000 shares of Series B membership interest in us,
respectively, at an exercise price per share of $ per share ($ per share
of common stock on an as-converted basis) which will convert into options to
purchase and shares of our common stock, respectively, prior
to this offering. The options will vest in full upon the closing of this
offering. Messrs. Gilson, Landers and Brothers were primarily responsible for
negotiating the terms of the stock purchase agreement on our behalf, and Drs.
Evans and Morrison were primarily responsible for negotiating on behalf of
Caminus Limited. In determining the purchase price for Caminus Limited, we
examined the consideration paid for comparable companies and in comparable
transactions and considered the expected synergies from the acquisition. On May
12, 1998, each of Drs. Evans and Morrison also entered into a three-year
employment agreement with Caminus Limited. For details in connection with Dr.
Evans' employment agreement, see "Management -- Employment Agreements."
On May 12, 1998, Caminus Limited, our wholly owned subsidiary, entered into
a service agreement with Dr. Michael B. Morrison. Under the terms of his
agreement, Dr. Morrison's employment as managing director of Caminus Limited
will continue until May 5, 2001, renewing annually for successive one-year terms
unless sooner terminated. Dr. Morrison receives a base salary of L167,000
($274,897 as of September 30, 1999) per year, subject to annual review and
increases, and is eligible to receive an annual performance bonus, targeted at
L83,000 ($136,626 as of September 30, 1999). Dr. Morrison is also eligible to
participate in our profit sharing plan for key employees. If we terminate Dr.
Morrison's employment without cause, he will receive his current salary, bonus
and other benefits for twelve months from the date of termination. If Dr.
Morrison resigns, he will receive all salary, bonus and other benefits that have
accrued as of the date of termination.
Dr. Morrison's agreement contains a confidentiality provision and further
provides that he may not directly or indirectly act as an employee or
consultant, or hold more than a 5% investment in any class of securities quoted
on a stock exchange, in a competing business for one year after the date of
termination. A competing business has the same meaning in Dr. Morrison's
agreement as in Mr. Stoner's agreement, as described above. On May 12, 1998, Dr.
Morrison also entered into a covenant not to compete with Caminus Limited, which
extends his obligations not to compete for two years after termination in
certain circumstances.
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GFI
In April 1998, GFI purchased 1,682,198 shares of Series A membership
interest at a purchase price of $0.297 per share. These shares will convert into
an aggregate of shares of our common stock prior to this offering.
GFI holds % of our issued and outstanding common stock and two members
of our board of directors, Lawrence D. Gilson and Richard K. Landers, are GFI
principals. As part of our ongoing relationship with GFI, we entered into an
arrangement pursuant to our operating agreement whereby GFI provides substantial
ongoing strategic advice, as well as financial, tax and general administrative
services for us and, in return, we pay GFI an annual fee, payable in monthly
installments. During the period from our inception (April 29, 1998) through
December 31, 1998 and the six months ended June 30, 1999, such fees were
$160,000 and $113,749, respectively. We and GFI have agreed to terminate GFI's
advisory arrangement effective as of December 31, 1999. As consideration for
GFI's agreement to terminate the formal advisory arrangement, and as
consideration for advisory services provided by GFI relating to strategic
acquisitions and other matters, we have agreed to pay GFI a $1,000,000 fee from
the net proceeds of the initial public offering.
Additionally, as consideration for its investment in us, we granted an
option to GFI to acquire a 10% membership interest in us. This percentage
interest is protected from any dilution which would result from the issuance of
additional membership interests in us; however, the anti-dilution provision does
not extend to common stock to be issued upon the conversion of the membership
interest. The exercise price of the option is the sum of $1,837,500 less 10% of
any distributions of cash or property from us to our membership interest
holders, plus 10% of any additional cash or property paid to us from our
membership interest holders. GFI will exercise its option immediately prior to
this offering for shares of our Series C membership interest (which
will convert into shares of our common stock) at an aggregate exercise
price of $ .
SS&C TECHNOLOGIES, INC.
Prior to assuming his position as our president and chief executive officer
in October 1998, David M. Stoner was president and chief operating officer and a
director of SS&C Technologies, Inc., a founding investor in Caminus LLC. On May
12, 1998, SS&C invested $5,500,000 in us and received 18,504,176 shares of our
Series A membership interest and an option to purchase 8,410,000 shares of our
Series B membership interest. We also entered into two distributor agreements
with SS&C -- one in which we appointed SS&C as a non-exclusive distributor and
marketer of certain of our products, and another in which SS&C appointed us as
the exclusive distributor and marketer of certain of its products. The first
agreement provided that the option to purchase membership interests would vest
incrementally according to the sales of our products by SS&C. Such agreement was
effectively terminated when we purchased the option from SS&C, as described in
the immediately following paragraph. The second agreement was terminated and
replaced with a new distributor agreement on December 31, 1998. The new
distribution agreement, as amended, provides that we must purchase licenses to
distribute SS&C products on a quarterly basis through the fourth quarter of the
year
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<PAGE> 78
2000, for a total aggregate license distribution fee of not less than
$2,750,000. We have not licensed SS&C products nor do we currently intend to
license any SS&C products. If, however, we determine in the future to license
SS&C products, fees collected by us would be applied as an offset against the
aggregate license distribution fees we owe SS&C.
On December 31, 1998, we repurchased all of SS&C's shares of Series A
membership interest and its option to purchase shares of Series B membership
interest for a total consideration of $2,250,000. At this time we granted SS&C a
new option to purchase 3,636,309 shares of Series B membership interest, which
became fully vested and exercisable on the same day for an aggregate exercise
price of $2,250,000. On March 29, 1999, we entered into an agreement with SS&C
to reduce the size of its option to purchase shares of Series B membership
interest to 2,909,047 and the exercise price was proportionately reduced to
$1,800,000. In consideration for this reduction we will pay SS&C $250,000 on
December 31, 1999. The option to purchase 2,909,047 shares of Series B
membership interest at an exercise price of $1.62 per share will be exercised in
connection with this offering for shares of our common stock ($
per share of common stock on an as-converted basis).
OCM CAMINUS INVESTMENT, INC.
OCM Caminus Investment, Inc. is a founding investor in Caminus LLC and
presently owns % of our issued and outstanding common stock. In March 1999,
we borrowed $1,250,000 from OCM Principal Opportunities Fund, L.P., an affiliate
of OCM Caminus Investment, Inc. On March 31, 1999 we issued a promissory note in
the principal amount of such loan to OCM Principal Opportunities Fund at an
annual interest rate of 10%. The promissory note required us to pay a 1%
origination fee upon funding of the loan. We paid the loan in full on its due
date of June 30, 1999.
FLEET BANK PLEDGE AGREEMENTS
On June 23, 1999, we entered into a credit agreement with Fleet Bank, which
provides for revolving loans and working capital loans in an aggregate principal
amount of up to $5,000,000. Pursuant to the agreement, Fleet Bank maintains a
first and prior security interest in and lien on at least 75% of our capital
stock. To meet this demand, three of our stockholders pledged their capital
stock as collateral for the loan in pledge agreements with Fleet Bank, dated
June 23, 1999:
- Brian J. Scanlan granted a security interest to the bank with respect to
12,555,478 shares of Series A membership interest, which will convert
into shares of our common stock prior to this offering.
- GFI granted a security interest to the bank with respect to 1,682,198
shares of Series A membership interest, which will convert into
shares of our common stock prior to this offering, and 11,392,731 shares
of Series C membership interest which were subject to the exercise of an
option at the time, which will convert into an option to purchase an
amount of in shares of our common stock prior to this offering.
GFI will exercise this option prior to this offering.
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<PAGE> 79
- OCM Caminus Investment, Inc., a principal stockholder of our company,
granted a security interest to the bank with respect to 37,176,571 shares
of Series A membership interest, which will convert into shares
of our common stock prior to this offering.
As of September 30, 1999, there was $2,000,000 outstanding under our credit
agreement with Fleet Bank. We intend to use a portion of the proceeds from this
offering to repay all amounts outstanding under the credit agreement and to
terminate the credit agreement upon the closing of this offering.
EMPLOYMENT ARRANGEMENTS
On May 12, 1998, Zai*Net Software, L.P., which was our majority owned
subsidiary at the time, entered into an employment agreement with Simon Young,
who owns more than 5% of our outstanding stock. Under the terms of his
agreement, Mr. Young's employment will continue until May 12, 2001, unless
sooner terminated. Mr. Young currently receives a base salary of $153,500 per
year, subject to annual review and increases. If we terminate Mr. Young's
employment with cause or if he resigns for no good reason, Mr. Young will
receive all accrued compensation and vested benefits as of the termination date.
If we terminate Mr. Young's employment without cause or if he resigns for good
reason, Mr. Young will receive all accrued compensation and vested benefits as
of the termination date and a severance benefit of his base salary for the
remainder to the term of his agreement.
Mr. Young is also a party to a covenant not to compete, dated May 12, 1998,
which contains a confidentiality provision and further provides that he may not
perform services, or hold 5% or more of the outstanding capital stock of a
publicly traded corporation, in a competing business, other than on behalf of us
or our affiliates, anywhere in the world for the greater of (1) three and
one-half years from the date of the agreement or (2) two years after the date of
termination of his employment. A competing business includes developing,
licensing, installing and maintaining commodities trading and risk management
software and providing consulting and support services related to such software
activities to the foreign exchange, natural gas, crude oil, refined products and
electric power industries.
For a description of certain employment and other arrangements between our
Named Executive Officers and us, see "Management -- Employment Agreements."
RIGHTS OFFERING
In July 1999, we conducted a rights offering whereby existing holders of
shares of our Series A membership interest were given the opportunity to
purchase additional Series A shares at a rate of $ per share (which
represents $ per share of common stock on an as-converted basis). We used
the proceeds from the rights offering to purchase DC Systems, pay the related
transaction fees and for working capital. In connection with the rights
offering, the following directors, executive officers and 5% stockholders
purchased the stated number of shares of Series A membership interest:
- David Stoner purchased 254,618 shares, which will convert into
shares of our common stock prior to this offering;
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<PAGE> 80
- Nigel Evans purchased 212,182 shares, which will convert into
shares of our common stock prior to this offering;
- Brian Scanlan purchased 212,182 shares, which will convert into
shares of our common stock prior to this offering;
- OCM Caminus Investment, Inc. purchased 4,493,143 shares, which will
convert into shares of our common stock prior to this offering;
- RIT Capital Partners plc purchased 3,394,909 shares, which will convert
into shares of our common stock prior to this offering; and
- Michael Morrison purchased 127,309 shares, which will convert into
shares of our common stock prior to this offering.
CONFLICT-OF-INTEREST POLICY
We have adopted a policy providing that all material transactions between
us and our officers, directors and other affiliates must be:
- Approved by a majority of the members of our board of directors and by a
majority of the disinterested members of our board of directors; and
- On terms no less favorable to us than could be obtained from unaffiliated
third parties.
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<PAGE> 81
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock as of September 30, 1999, and as adjusted to
reflect the sale of the shares of common stock in this offering, by:
- each person or entity we know to own beneficially more than 5% of our
common stock;
- each of our directors;
- each of the Named Executive Officers;
- all directors and executive officers as a group; and
- each of the other selling stockholders.
Except as indicated below, none of these persons or entities has a
relationship with us or, to our knowledge, any of the underwriters or their
respective affiliates. Unless otherwise indicated, each person or entity named
in the table has sole voting power and investment power, or shares such power
with his or her spouse, with respect to all shares of capital stock listed as
owned by such person or entity.
As of September 30, 1999, there were shares of common stock
outstanding. The number of shares beneficially owned by each stockholder is
determined under rules promulgated by the Securities and Exchange Commission and
assumes the underwriters do not exercise their over-allotment option. The
information is not necessarily indicative of beneficial ownership for any other
purpose. Under these rules, beneficial ownership includes any shares as to which
the stockholder has sole or shared voting power or investment power and any
shares as to which the stockholder has the right to acquire beneficial ownership
within 60 days after September 30, 1999 through the exercise of any stock
option, warrant or other right. The inclusion in the following table of those
shares, however, does not constitute an admission that the named stockholder is
a direct or indirect beneficial owner of those shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR OWNED AFTER
TO THE OFFERING NUMBER OF THE OFFERING
------------------- SHARES --------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------ -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
5% STOCKHOLDERS
OCM Caminus Investment,
Inc.(1).......................
333 South Grand Avenue
28th Floor
Los Angeles, CA 90071
GFI Two LLC(2)..................
11611 San Vicente Blvd.
Suite 710
Los Angeles, CA 90049
Brian J. Scanlan(3).............
747 Third Avenue
New York, NY 10017
Nigel L. Evans(4)...............
Caminus Energy Limited
Caminus House, Castle Park
Cambridge CB3 0RA
United Kingdom
</TABLE>
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<PAGE> 82
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR OWNED AFTER
TO THE OFFERING NUMBER OF THE OFFERING
------------------- SHARES --------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------ -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
RIT Capital Partners plc(5).....
Spencer House
27 St. James's Place
London SWIA 1NR
United Kingdom
Simon Young(6)..................
Caminus LLC
3 America Square
London EC3N 2LR
United Kingdom
Michael B. Morrison(7)..........
Caminus Energy Limited
Caminus House, Castle Park
Cambridge CB3 0RA
United Kingdom
OTHER DIRECTORS AND EXECUTIVE
OFFICERS
David M. Stoner.................
Lawrence D. Gilson(2)...........
Christopher S. Brothers(1)......
Anthony H. Bloom(5).............
Richard K. Landers(2)...........
All executive officers and
directors as a group (8
persons)(8)...................
OTHER SELLING STOCKHOLDERS
</TABLE>
- -------------------------
* Less than 1%
(1) Christopher S. Brothers is a Senior Vice President of Oaktree Capital
Management, LLC, which is the general partner of OCM Principal Opportunities
Fund, L.P., the sole shareholder of OCM Caminus Investment, Inc., and may be
deemed to beneficially own these shares. Mr. Brothers disclaims beneficial
ownership of such shares, except to the extent of his direct pecuniary
interest therein.
(2) Lawrence D. Gilson is President of GFI Two LLC and Richard K. Landers is a
principal of GFI Two LLC. Therefore, Messrs. Gilson and Landers may be
deemed to beneficially own these shares. Each of Messrs. Gilson and Landers
disclaims beneficial ownership of such shares, except to the extent of his
direct pecuniary interest therein.
(3) Includes shares subject to outstanding stock options held by Mr.
Scanlan's wife which are exercisable within the 60-day period following
September 30, 1999. Mr. Scanlan shares voting and dispositive power for his
shares of common stock with his wife.
(4) Includes shares subject to outstanding stock options which are
exercisable upon the closing of this offering.
(5) Anthony H. Bloom is a director of RIT Capital Partners plc and may be deemed
to beneficially own these shares. Mr. Bloom disclaims beneficial
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<PAGE> 83
ownership of such shares, except to the extent of his direct pecuniary
interest therein.
(6) Includes shares owned by Mr. Young's wife and shares
subject to outstanding stock options held by Mr. Young's wife which are
exercisable within the 60-day period following September 30, 1999.
(7) Includes shares subject to outstanding stock options which are
exercisable upon the closing of this offering.
(8) Includes shares subject to outstanding stock options which are
exercisable within the 60-day period following September 30, 1999.
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<PAGE> 84
DESCRIPTION OF CAPITAL STOCK
After this offering, our authorized capital stock will consist of
50,000,000 shares of common stock, $0.01 par value per share. Immediately prior
to the closing of this offering, we will have outstanding:
- shares of common stock held by 37 stockholders of record; and
- options to purchase an aggregate of shares of common stock with a
weighted average exercise price of $ .
The following summary of provisions of our common stock, certificate of
incorporation and by-laws is qualified by reference to the provisions of
applicable law and to our certificate of incorporation and by-laws included as
exhibits to the registration statement of which this prospectus is a part. See
"Where You Can Find More Information."
COMMON STOCK
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of common stock are entitled to receive
proportionately any dividends as may be declared by our board of directors. Upon
our liquidation, dissolution or winding up, the holders of common stock are
entitled to receive proportionately our net assets available after the payment
of all debts and other liabilities. Holders of common stock have no preemptive,
subscription, redemption or conversion rights. Our outstanding shares of common
stock are, and the shares offered by us in this offering will be, when issued
and paid for, fully paid and nonassessable.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
We are subject to the provisions of Section 203 of the General Corporation
Law of Delaware. Section 203 prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the person became an interested stockholder, unless
the business combination is approved in a prescribed manner. A "business
combination" includes mergers, asset sales and other transactions resulting in a
financial benefit to the interested stockholder. Subject to certain exceptions,
an "interested stockholder" is a person who, together with affiliates and
associates, owns, or within the prior three years did own, 15% or more of the
corporation's voting stock.
Our certificate of incorporation divides our board of directors into three
classes with staggered three-year terms. See "Management." In addition, with a
staggered board, directors may be removed only for cause by the affirmative vote
of the holders of a majority of our shares of capital stock entitled to vote.
Under our certificate of incorporation, any vacancy on our board of directors,
including a vacancy resulting from an enlargement of our board of directors, may
only be filled by vote of a majority of our directors then in office. The
classification of our board of directors and the limitations on the removal of
directors and filling of vacancies
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<PAGE> 85
could make it more difficult for a third party to acquire, or discourage a third
party from acquiring, control of us.
Our certificate of incorporation also provides that any action required or
permitted to be taken by our stockholders at an annual meeting or special
meeting of stockholders may only be taken if it is properly brought before such
meeting and may not be taken by written action in lieu of a meeting. Our
certificate of incorporation further provides that special meetings of the
stockholders may only be called by our chairman of the board, president or board
of directors. Under our by-laws, in order for any matter to be considered
"properly brought" before a meeting, a stockholder must comply with advance
notice requirements. These provisions could have the effect of delaying until
the next stockholders' meeting stockholder actions which are favored by the
holders of a majority of our outstanding voting securities. These provisions may
also discourage a third party from making a tender offer for our common stock,
because even if it acquired a majority of our outstanding voting securities, the
third party would be able to take action as a stockholder (such as electing new
directors or approving a merger) only at a duly called stockholders' meeting,
and not by written consent.
The General Corporation Law of Delaware provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or by-laws,
unless a corporation's certificate of incorporation or by-laws, as the case may
be, requires a greater percentage. Our certificate of incorporation and by-laws
require the affirmative vote of the holders of at least 75% of the shares of our
capital stock issued and outstanding and entitled to vote to amend or repeal any
of the provisions described in the prior two paragraphs.
Our certificate of incorporation contains certain provisions permitted
under the General Corporation Law of Delaware relating to the liability of
directors. The provisions eliminate a director's liability for monetary damages
for a breach of fiduciary duty, except in certain circumstances involving
wrongful acts, such as the breach of a director's duty of loyalty or acts or
omissions that involve intentional misconduct or a knowing violation of law.
Further, our certificate of incorporation contains provisions to indemnify our
directors and officers to the fullest extent permitted by the General
Corporation Law of Delaware. We believe that these provisions will assist us in
attracting and retaining qualified individuals to serve as directors.
REGISTRATION RIGHTS
After this offering, the holders of approximately shares of common
stock and rights to acquire common stock will be entitled to rights with respect
to the registration of those shares under the Securities Act. Under terms of our
original limited liability company operating agreement, if we propose to
register any of our securities under the Securities Act, those holders are
entitled to notice of and to include shares of common stock in the registration.
The managing underwriter of any underwritten public offering would, however,
have the right, for marketing reasons, to cut-back the number of shares that the
stockholders could include in such registration.
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<PAGE> 86
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has been no public market for our securities.
After we complete this offering, based upon the number of shares outstanding at
September 30, 1999, there will be shares of our common stock
outstanding, assuming no exercise of outstanding options to purchase common
stock. Of these outstanding shares, the shares sold in this offering will
be freely tradeable without restriction or further registration under the
Securities Act of 1933, except that any shares purchased by our "affiliates," as
that term is defined in Rule 144 under the Securities Act, may generally only be
sold in compliance with the limitations of Rule 144 described below.
SALES OF RESTRICTED SHARES
The remaining shares of common stock outstanding after this
offering are deemed "restricted securities" under Rule 144. Of these securities:
- shares may be sold 90 days after the effective date of this
offering; and
- additional shares may be sold upon expiration of the 180-day
lock-up agreements described below.
Our officers and directors and our stockholders and optionholders holding
an aggregate of shares of common stock (including shares
issuable upon the exercise of options) have signed lock-up agreements in favor
of the underwriters. As a result, these individuals are generally not permitted
to offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any shares of common stock, for a period of 180 days after the date
of this prospectus, without the prior written consent of Deutsche Bank
Securities Inc. Deutsche Bank Securities Inc. currently has no plans to release
any portion of the securities subject to lock-up agreements, but may do so
without notice. When determining whether or not to release shares from the
lock-up agreements, Deutsche Bank Securities Inc. will consider, among other
factors, the number of shares proposed to be sold, the stockholder's reasons for
requesting the release and market conditions at the time.
In general, under Rule 144 a stockholder, including one of our affiliates,
who has beneficially owned his or her restricted securities for at least one
year is entitled to sell, within any three-month period commencing 90 days after
the date of this prospectus, a number of shares that does not exceed the greater
of 1% of the then outstanding shares of our common stock (approximately
shares immediately after this offering) or the average weekly trading
volume in our common stock during the four calendar weeks preceding the date on
which notice of such sale was filed under Rule 144, provided certain
requirements concerning availability of public information, manner of sale and
notice of sale are satisfied. In addition, a stockholder that is not one of our
affiliates at any time during the three
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<PAGE> 87
months preceding a sale and who has beneficially owned the shares proposed to be
sold for at least two years is entitled to sell the shares immediately under
Rule 144(k) without compliance with the above described requirements under Rule
144.
Securities issued in reliance on Rule 701 (such as shares of our common
stock acquired pursuant to the exercise of certain options granted under our
stock plans) are also restricted securities and, beginning 90 days after the
date of this prospectus, may be sold by stockholders other than our affiliates
subject only to the manner of sale provisions of Rule 144 and by affiliates
under Rule 144 without compliance with its one-year holding period requirement.
STOCK OPTIONS
We intend to file registration statements on Form S-8 under the Securities
Act to register an aggregate of shares of common stock issuable under
the 1998 plan, the 1999 plan and the purchase plan. Shares issued upon the
exercise of stock options after the effective date of the Form S-8 registration
statements will be eligible for resale in the public market without restriction,
subject to Rule 144 limitations applicable to affiliates and the lock-up
agreements noted above, if applicable.
EFFECT OF SALES OF SHARES
Prior to this offering, there has been no public market for our common
stock, and no prediction can be made as to the effect, if any, that market sales
of shares of common stock or the availability of shares for sale will have on
the market price of our common stock prevailing from time to time. Nevertheless,
sales of significant numbers of shares of our common stock in the public market
could adversely affect the market price of the common stock and could impair our
future ability to raise capital through an offering of our equity securities.
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<PAGE> 88
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives Deutsche Bank Securities
Inc., Bear, Stearns & Co. Inc. and CIBC World Markets Corp., have severally
agreed to purchase from us and the selling stockholders the following respective
numbers of shares of common stock at the initial public offering price less the
underwriting discounts and commissions set forth on the cover page of this
prospectus:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
- ----------- ----------------
<S> <C>
Deutsche Bank Securities Inc............................
Bear, Stearns & Co. Inc.................................
CIBC World Markets Corp.................................
--------
Total..............................................
========
</TABLE>
The underwriting agreement provides that the obligations of the
underwriters are subject to specified conditions and that the underwriters will
purchase all of the shares of common stock offered in this offering, other than
those covered by the over-allotment option described below, if any of the shares
are purchased.
We have been advised by the underwriters' representatives that the
underwriters propose to offer the shares of common stock to the public at the
initial public offering price set forth on the cover page of this prospectus and
to dealers at that price less a concession not in excess of $ per share. The
underwriters may allow, and the dealers may reallow, a concession not in excess
of $ per share to other dealers. After the initial public offering, the
underwriters' representatives may change this offering price and other selling
terms. The expenses of this offering, all of which are payable by us, are
estimated to be $ million. The following table sets forth the public
offering price and all discounts and commissions to be allowed to the
underwriters:
<TABLE>
<CAPTION>
PUBLIC UNDERWRITING PROCEEDS TO
OFFERING DISCOUNTS PROCEEDS TO SELLING
PRICE AND COMMISSIONS CAMINUS STOCKHOLDERS
-------- --------------- ----------- ------------
<S> <C> <C> <C> <C>
Per share.................. $ $ $ $
Total...................... $ $ $ $
</TABLE>
We and the selling stockholders have granted to the underwriters an option,
exercisable not later than 30 days after the date of this prospectus, to
purchase up to additional shares of common stock at the initial public
offering price less the underwriting discounts and commissions set forth on the
cover page of this prospectus. If the underwriters exercise the option, each of
the underwriters will have a firm commitment to purchase approximately the same
percentage of the option shares that the number of shares of common stock to be
purchased by it in the above table bears to , and we and the selling
stockholders will be obligated to sell these shares to the underwriters. The
underwriters may exercise the option only to cover over-allotments made in
connection with the sale of the common stock offered in this offering. If
purchased, the underwriters will offer the additional shares on the same terms
as those on which the shares are being offered.
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At our request, the underwriters have reserved up to shares of common
stock for sale, at the initial public offering price, to employees and friends
of ours through a directed share program. The number of shares of common stock
available for sale to the general public in the public offering will be reduced
to the extent that employees and friends purchase the reserved shares.
The underwriting agreement contains covenants of indemnity among the
underwriters, the selling stockholders and us against specified liabilities,
including liabilities under the Securities Act of 1933, as amended.
We have agreed not to offer, sell, sell short, transfer, hypothecate,
pledge or otherwise dispose of any shares of our common stock or other
securities convertible into or exchangeable or exercisable for shares of our
common stock or derivatives of our common stock or to enter into any agreement
or transaction which is designed to effect, or could be expected to result in,
any such transaction for a period of 180 days after the date of this prospectus,
directly or indirectly, by us or otherwise, except as consideration for business
acquisitions, on exercise of currently outstanding stock options or on the
issuance of options under our stock plans and the exercise of such options,
without the prior written consent of Deutsche Bank Securities Inc.
Our officers, directors and principal stockholders, who hold or will hold
in the aggregate shares of our common stock, have entered into lock-up
agreements in which they have agreed, subject to certain exceptions, not to
directly or indirectly offer, sell, pledge, contract to sell (including any
short sale), grant any option to purchase or otherwise dispose of any shares of
our common stock (including shares of common stock which may be deemed
beneficially owned and shares of common stock which may be issued upon exercise
of a stock option or warrant, but excluding any shares of common stock being
sold in this offering) or to enter into any agreement or transaction which is
designed to effect, or could be expected to result in, any such transaction, for
a period of 180 days after the date of this prospectus, without the consent of
Deutsche Bank Securities Inc. In the event a request for consent to a transfer
within the lock-up period is made, Deutsche Bank Securities Inc. may consider
the following factors in determining whether to consent to the proposed
transfer:
- the number of shares proposed to be sold;
- the reason for the sale;
- the proximity in time to this offering; and
- the trading volume of our stock at the time of the requested transfer.
The decision to consent to a proposed transfer during the lock-up period is
within the sole discretion of Deutsche Bank Securities Inc.
The underwriters' representatives have advised us and the selling
stockholders that the underwriters do not intend to confirm sales to any account
over which they exercise discretionary authority.
In order to facilitate this offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the market price of
our common stock. Specifically, the underwriters may over-allot shares of our
common stock in
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connection with this offering, thereby creating a short position in the
underwriters' syndicate account. A short position results when an underwriter
sells more shares of common stock than the underwriter is committed to purchase.
Additionally, to cover over-allotments or to stabilize the market price of our
common stock, the underwriters may bid for, and purchase, shares of our common
stock in the open market. Any of these activities may maintain the market price
of our common stock at a level above that which might otherwise prevail in the
open market. The underwriters are not required to engage in these activities,
and, if commenced, the activities may be discontinued at any time. The
underwriters' representatives, on behalf of the underwriters, also may reclaim
selling concessions allowed to an underwriter or dealer, if the syndicate
repurchases shares distributed by that underwriter or dealer.
The underwriters and their respective affiliates may be lenders to, engage
in transactions with, and perform services for us in the ordinary course of
business.
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for our common stock will
be determined by negotiations among us, representatives of the selling
stockholders and the underwriters' representatives. Among the factors to be
considered in the negotiations will be prevailing market conditions, our results
of operations in recent periods, the market capitalizations and stages of
development of other companies that we and the underwriters' representatives
believe to be comparable to us, estimates of our business potential, the present
stage of our development and other factors deemed relevant.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for us by Hale and Dorr LLP, Boston, Massachusetts. Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., Boston, Massachusetts will pass upon certain
legal matters in connection with this offering for the underwriters.
EXPERTS
The audited financial statements included in this prospectus have been
audited by various independent accountants. The companies and periods covered by
these audits are indicated in the individual accountants' reports. Such
financial statements have been so included in reliance on the reports of the
various independent accountants given on the authority of such firms as experts
in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 with the Securities and
Exchange Commission for the stock being offered by this prospectus. This
prospectus does not include all of the information contained in the registration
statement. You should refer to the registration statement and its exhibits for
additional information. Whenever we make reference in this prospectus to any of
89
<PAGE> 91
our contracts, agreements or other documents, the references are not necessarily
complete and you should refer to the exhibits attached to the registration
statement for copies of the actual contract, agreement or other document. When
we complete this offering, we will also be required to file annual, quarterly
and special reports, proxy statements and other information with the SEC.
You can read our SEC filings, including the registration statement, over
the Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy any document we file at the SEC's following locations:
- Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549;
- New York Regional Office, Seven World Trade Center, Suite 1300, New York,
New York 10048; and
- Chicago Regional Office, Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511.
You may also obtain copies of the documents at prescribed rates by writing
to the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference facilities.
90
<PAGE> 92
CAMINUS CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
CAMINUS LLC AND SUBSIDIARIES
Report of Independent Accountants....................... F-2
Consolidated Balance Sheets as of December 31, 1998 and
June 30, 1999......................................... F-3
Consolidated Statements of Operations for the Period
From Inception (April 29, 1998) Through December 31,
1998 and the Six Months Ended June 30, 1999........... F-4
Consolidated Statements of Changes in Members' Equity
for the Period From Inception (April 29, 1998) Through
December 31, 1998 and for the Six Months Ended June
30, 1999.............................................. F-5
Consolidated Statements of Cash Flows for the Period
From Inception (April 29, 1998) Through December 31,
1998 and for the Six Months Ended June 30, 1999....... F-6
Notes to Consolidated Financial Statements.............. F-7
Supplementary Financial Statement Schedules have been
omitted because the information required to be set
forth therein is either not applicable or is shown in
the financial statements or notes thereto.
ZAI*NET SOFTWARE, INC. (Predecessor)
Report of Independent Accountants....................... F-27
Balance Sheets as of December 31, 1996, December 31,
1997 and April 30, 1998............................... F-28
Statements of Operations and Retained Earnings for the
Years Ended December 31, 1996 and 1997 and for the
Four Months Ended April 30, 1998...................... F-29
Statements of Cash Flows for the Years Ended December
31, 1996 and 1997 and for the Four Months Ended April
30, 1998.............................................. F-30
Notes to the Financial Statements....................... F-31
Supplementary Financial Statement Schedules have been
omitted because the information required to be set
forth therein is either not applicable or is shown in
the financial statements or notes thereto.
CAMINUS LIMITED (formerly Caminus Energy Limited)
Report of Independent Auditors.......................... F-37
Profit and Loss Accounts for the Years Ended April 30,
1997 and 1998......................................... F-38
Balance Sheets as at April 30, 1997 and 1998............ F-39
Cash Flow Statements for the Years Ended April 30, 1997
and 1998.............................................. F-40
Notes to the Financial Statements....................... F-41
</TABLE>
F-1
<PAGE> 93
REPORT OF INDEPENDENT ACCOUNTANTS
To the Management Committee of
Caminus LLC
In our opinion, the consolidated financial statements listed in the
accompanying index on page F-1 present fairly, in all material respects, the
financial position of Caminus LLC and its subsidiaries (the "Company") at
December 31, 1998 and June 30, 1999, and the results of their operations and
their cash flows for the period from inception (April 29, 1998) through December
31, 1998 and for the six months ended June 30, 1999, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
New York, New York
September 23, 1999
F-2
<PAGE> 94
CAMINUS LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 2,770,538 $ 886,907
Accounts receivable, net.......................... 3,244,018 4,909,416
Prepaid expenses and other current assets......... 306,774 466,982
----------- -----------
Total current assets........................... 6,321,330 6,263,305
Fixed assets, net................................... 780,076 1,067,533
Developed technology, net........................... 2,307,361 1,872,784
Other intangibles, net.............................. 1,789,859 1,502,245
Goodwill, net....................................... 20,162,544 17,148,761
Other assets........................................ 6,828 7,744
----------- -----------
Total assets................................... $31,367,998 $27,862,372
=========== ===========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable.................................. $ 1,615,547 $ 699,573
Accrued liabilities............................... 1,029,139 2,033,571
Borrowings under credit facility.................. -- 750,000
Due to member..................................... 2,187,500 2,187,500
Payable to affiliate.............................. 4,000,000 750,000
Deferred revenue.................................. 2,139,534 2,100,620
----------- -----------
Total current liabilities...................... 10,971,720 8,521,264
Due to member....................................... 2,187,500 --
Borrowings under credit facility.................... -- 2,500,000
Payable to affiliate................................ 750,000 250,000
----------- -----------
Total liabilities.............................. 13,909,220 11,271,264
Commitments and contingencies....................... -- --
Members' equity (83,652,827 and 84,269,114
membership interests issued and outstanding at
December 31, 1998 and June 30, 1999,
respectively)..................................... 17,445,123 16,636,397
Cumulative translation adjustment................... 13,655 (45,289)
----------- -----------
Total members' equity.......................... 17,458,778 16,591,108
----------- -----------
Total liabilities and members' equity.......... $31,367,998 $27,862,372
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 95
CAMINUS LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION
(APRIL 29, 1998) THROUGH SIX MONTHS ENDED
DECEMBER 31, 1998 JUNE 30, 1999
------------------------ ----------------
<S> <C> <C>
Revenues:
Licenses........................... $ 3,639,143 $ 4,295,325
Software services.................. 3,090,758 4,006,590
Strategic consulting............... 2,896,102 2,940,062
------------ -----------
Total revenues.................. 9,626,003 11,241,977
------------ -----------
Cost of revenues:
Cost of software services.......... 2,278,433 1,891,830
Cost of strategic consulting....... 2,211,617 1,778,813
------------ -----------
Total cost of revenues.......... 4,490,050 3,670,643
------------ -----------
Gross profit.................. 5,135,953 7,571,334
------------ -----------
Operating expenses:
Sales and marketing................ 470,549 1,089,860
Research and development........... 1,153,470 1,649,543
General and administrative......... 3,325,535 3,373,584
Acquired in-process research and
development..................... 4,822,000 --
Amortization of intangible
assets.......................... 5,497,765 3,735,974
------------ -----------
Total operating expenses........ 15,269,319 9,848,961
------------ -----------
Loss from operations................. (10,133,366) (2,277,627)
Other income and (expense):
Interest income.................... 96,909 25,345
Interest expense................... -- (70,346)
Other income (expense), net........ -- (6,701)
------------ -----------
Total other income (expense).... 96,909 (51,702)
------------ -----------
Loss before provision for income
taxes.............................. (10,036,457) (2,329,329)
Provision for income taxes........... 35,735 139,568
------------ -----------
Net loss............................. $(10,072,192) $(2,468,897)
============ ===========
Basic and diluted loss per membership
interest........................... $ (0.13) $ (0.03)
============ ===========
Weighted average membership interests
used in computing net loss per
membership interest................ 77,839,447 84,183,991
Pro forma (unaudited):
Loss before provision for income
taxes........................... $(10,036,457) $(2,329,329)
Pro forma income tax provision
(benefit)....................... (176,224) 583,418
------------ -----------
Pro forma net loss................. $ (9,860,233) $(2,912,747)
============ ===========
Pro forma basic and diluted loss
per membership interest......... $ (0.13) $ (0.03)
============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 96
CAMINUS LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY
<TABLE>
<CAPTION>
NUMBER OF CUMULATIVE
MEMBERSHIP MEMBERS' SUBSCRIPTION UNEARNED ACCUMULATED TRANSLATION
INTERESTS INTERESTS RECEIVABLE COMPENSATION DEFICIT ADJUSTMENT
----------- ----------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at April 29, 1998
(inception).................... $ -- $ -- $ -- $ -- $ --
Capital contributions -- Caminus
LLC............................ 70,484,088 20,189,130
Issuance of membership interests
in connection with the
acquisition of Caminus Energy
Limited........................ 10,093,187 3,000,000
Issuance of membership interests
in connection with the
acquisition of Zai*Net Software
L.P............................ 21,579,728 10,339,350
Membership subscriptions
receivable..................... (4,739,493)
Issuance of membership options
in connection with
acquisitions................... 3,144,995
Reacquisition of membership
interest....................... (18,504,176) (4,416,667)
Net loss........................ (10,072,192)
Translation adjustment.......... 13,655
----------- ----------- ----------- --------- ------------ --------
Balance at December 31,
1998........................... 83,652,827 32,256,808 (4,739,493) -- (10,072,192) 13,655
----------- ----------- ----------- --------- ------------ --------
Comprehensive loss for the
period from inception through
December 31, 1998..............
Receipt of membership
subscription receivable........ 1,832,428
Issuance of additional
membership interests........... 616,287 338,937
Reacquisition of option to
acquire membership interests... (250,000)
Distribution to members......... (290,000)
Unearned compensation........... 398,816 (398,816)
Amortization of unearned
compensation................... 28,806
Net loss........................ (2,468,897) --
Translation adjustment.......... (58,944)
----------- ----------- ----------- --------- ------------ --------
Balance at June 30, 1999........ 84,269,114 $32,454,561 $(2,907,065) $(370,010) $(12,541,089) $(45,289)
=========== =========== =========== ========= ============ ========
Comprehensive loss for the six
months ended June 30, 1999.....
<CAPTION>
TOTAL
MEMBERS' COMPREHENSIVE
EQUITY LOSS
------------ -------------
<S> <C> <C>
Balance at April 29, 1998
(inception).................... $ --
Capital contributions -- Caminus
LLC............................ 20,189,130
Issuance of membership interests
in connection with the
acquisition of Caminus Energy
Limited........................ 3,000,000
Issuance of membership interests
in connection with the
acquisition of Zai*Net Software
L.P............................ 10,339,350
Membership subscriptions
receivable..................... (4,739,493)
Issuance of membership options
in connection with
acquisitions................... 3,144,995
Reacquisition of membership
interest....................... (4,416,667)
Net loss........................ (10,072,192) $(10,072,192)
Translation adjustment.......... 13,655 13,655
------------ ------------
Balance at December 31,
1998........................... 17,458,778
------------
Comprehensive loss for the
period from inception through
December 31, 1998.............. $(10,058,537)
============
Receipt of membership
subscription receivable........ 1,832,428
Issuance of additional
membership interests........... 338,937
Reacquisition of option to
acquire membership interests... (250,000)
Distribution to members......... (290,000)
Unearned compensation...........
Amortization of unearned
compensation................... 28,806
Net loss........................ (2,468,897) (2,468,897)
Translation adjustment.......... (58,944) (58,944)
------------ ------------
Balance at June 30, 1999........ $ 16,591,108
============
Comprehensive loss for the six
months ended June 30, 1999..... $ (2,527,841)
============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 97
CAMINUS LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(APRIL 29, 1998) SIX MONTHS
THROUGH ENDED
DECEMBER 31, 1998 JUNE 30, 1999
----------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.............................................. $(10,072,192) $(2,468,897)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization...................... 5,666,521 3,886,349
Acquired in-process research and development....... 4,822,000 --
Deferred taxes..................................... -- (9,285)
Non-cash compensation expense...................... 28,806
Changes in operating assets and liabilities:
Accounts receivable................................ (849,920) (1,671,546)
Prepaid expenses and other current assets.......... (97,456) (151,573)
Accounts payable................................... 183,433 (912,499)
Accrued liabilities................................ 635,030 1,000,838
Deferred revenue................................... 704,450 (39,253)
Other.............................................. (40,190) (916)
------------ -----------
Net cash provided by (used in) operating activities..... 951,676 (337,976)
------------ -----------
Cash flows from investing activities:
Purchases of fixed assets............................. (500,597) (435,024)
Acquisition of Caminus Energy Limited, net of cash
acquired........................................... (2,502,567) --
Acquisition of Zai*Net Software L.P., net of cash
acquired........................................... (7,242,258) --
Acquisition of Positron............................... (151,667) --
Other acquisition costs............................... (495,817) --
------------ -----------
Net cash used in investing activities................... (10,892,906) (435,024)
------------ -----------
Cash flows from financing activities:
Payments of obligation to affiliate................... (250,000) (4,000,000)
Payments of obligation to member...................... -- (2,187,500)
Proceeds from borrowings under credit facility........ -- 3,250,000
Payments of distribution to members................... -- (290,000)
Cash received for membership subscription
receivable......................................... -- 1,832,428
Cash received for membership interests................ 12,949,637 338,937
------------ -----------
Net cash provided by (used in) financing activities..... 12,699,637 (1,056,135)
------------ -----------
Effect of exchange rates on cash flows.................. 12,131 (54,496)
------------ -----------
Net increase (decrease) in cash and cash equivalents.... 2,770,538 (1,883,631)
Cash and cash equivalents, beginning of period.......... -- 2,770,538
------------ -----------
Cash and cash equivalents, end of period................ $ 2,770,538 $ 886,907
============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 98
CAMINUS LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
FORMATION OF THE BUSINESS
Caminus LLC ("Caminus", the "Company" or the "LLC") is a Delaware Limited
Liability Company which was formed on April 29, 1998 ("Inception") by an
investor group. Caminus was formed for the purpose of acquiring equity interests
in and managing the business affairs of Caminus Energy Limited ("CEL") and
Zai*Net Software, L.P. ("ZNLP"), and to provide industry expertise and risk
management software products in the evolving competitive gas and energy markets
worldwide. The Company's charter states that it will continue in existence until
the 30th anniversary of the formation date or such earlier time as specified in
the limited liability company agreement.
On May 12, 1998, Caminus acquired a 71% ownership interest in ZNLP and a
100% ownership interest in CEL; on December 31, 1998, Caminus acquired the
remaining 29% ownership interest in ZNLP. (see Note 3 -- Acquisitions).
LIMITED LIABILITY COMPANY AGREEMENT
The Company has been organized as a limited liability company. The owners
of an interest in a limited liability company are called "members" and are not
individually liable for the obligations and liabilities of the entity.
Pursuant to the Limited Liability Company Agreement (the "Agreement"), the
members of the LLC have approved a Management Committee. The Agreement also
contains certain restrictions with regard to the disposition/transfer of
individual membership interests.
As consideration for the formation of the Company, and the identification
of the acquired entities, an option to acquire a membership interest was granted
to the investor group. This option represents the right to acquire a 10%
membership interest in the Company. Such percentage interest shall not be
subject to dilution as a result of the issuance of additional membership
interests in the Company. The exercise price shall equal the sum of $1,837,500
less 10% of any distributions of cash or property (as defined), to the members,
plus 10% of any additions of cash or property (as defined) to the Company from
its members. The option expires ten years from the date of the LLC Agreement.
The LLC shall continue until dissolved and liquidated in accordance with
the Agreement. The Company will not make any distribution to its members, unless
determined by the Management Committee. Allocations to members' capital accounts
for items of income, gain, loss, deduction and credit of the Company shall be
allocated to the members in accordance with their respective percentage
ownership and period of ownership.
F-7
<PAGE> 99
CAMINUS LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Caminus LLC and its subsidiaries. All intercompany transactions and balances
have been eliminated.
REVENUE RECOGNITION
The Company generates revenue from several sources, including the licensing
of its software products, performing services related to the implementation,
training and support of these products, and through providing strategic
consulting services to clients in the areas where the Company has subject matter
expertise. The Company follows the provisions of Statements of Position ("SOP")
97-2 "Software Revenue Recognition", SOP 98-4 "Deferral of the Effective Date of
Certain Provisions of SOP 97-2, and SOP 98-9, "Modification of SOP 97-2,
Software Revenue Recognition, With Respect to Certain Transactions".
License revenue is recognized upon the execution of a license agreement,
when the licensed product has been delivered, fees are fixed and determinable,
collectibility is probable and when all other significant obligations have been
fulfilled. For license agreements in which customer acceptance is a condition to
earning the license fees, revenue is not recognized until acceptance occurs. For
arrangements containing multiple elements, such as software license fees,
consulting services and maintenance, and where vendor-specific objective
evidence of fair value exists for all undelivered elements, the Company accounts
for the delivered elements in accordance with the "residual method" prescribed
by SOP 98-9.
Software Services revenue includes consulting fees for installation, data
conversion, training and product support services related to the use of the
Company's licensed products. Customers often enter into arrangements for these
services concurrent with execution of license agreements. The services do not
require significant modification of the licensed products, are not essential to
their functionality and are available from other vendors. Payment obligations
with respect to the licensed products are not dependent upon the performance of
these services. Accordingly, the Company recognizes revenues for these services
as they are performed. Maintenance and support revenues associated with new
product licenses and renewals are deferred and recognized ratably over the
contract period.
Strategic consulting revenue is recognized as such services are performed.
FOREIGN CURRENCY TRANSLATION
The Company's foreign subsidiaries maintain their accounting records in the
local currency, which is their functional currency. The assets and liabilities
are translated into U.S. dollars based on exchange rates at the end of the
respective reporting periods and the effect of the foreign currency translation
is reflected as a
F-8
<PAGE> 100
CAMINUS LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
component of members' equity. Income and expense items are translated at an
average exchange rate during the period. Transaction gains and losses are
included in the determination of the results from operations.
SOFTWARE DEVELOPMENT COSTS
Capitalization of software development costs begins upon establishment of
technological feasibility of the product. After technological feasibility is
established, material software development costs are capitalized. The
capitalized cost is then amortized on a straight-line basis over the estimated
product life, or on the ratio of current revenues to total projected product
revenues, whichever is greater. To date, the period between achieving
technological feasibility, which the Company has defined as establishment of a
working model which typically occurs when beta testing commences, and the
general release of such software has been short, and software development costs
qualifying for capitalization have been insignificant. Accordingly, the Company
has not capitalized any software development costs to date.
CASH AND CASH EQUIVALENTS
Cash equivalents consist of short-term, highly liquid investments with
original maturities of three months or less.
ACCOUNTS RECEIVABLE
The Company periodically reviews accounts receivable for collectibility and
provides for an allowance for doubtful accounts to the extent that amounts are
not expected to be collected. The allowance for doubtful accounts was
approximately $229,000 at December 31, 1998 and June 30, 1999.
FIXED ASSETS
Fixed assets are recorded at cost. Depreciation is calculated using the
straight-line method over the estimated useful life of the related asset, which
generally ranges from three to seven years. Leasehold improvements are amortized
using the straight-line method over the lesser of the remaining lease term or
the estimated useful lives of the related assets.
GOODWILL, DEVELOPED TECHNOLOGY AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets are amortized on a straight-line basis
over the estimated future periods to be benefited ranging from three to five
years. Developed technology is amortized on a straight-line basis over the
estimated product life, generally three years, or on the ratio of current
revenues to total projected product revenues, whichever is greater. Goodwill and
other intangible assets are periodically reviewed for impairment based upon
anticipated cash flows generated from such underlying assets.
F-9
<PAGE> 101
CAMINUS LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES
The Company, as an LLC, is taxed as a partnership for federal and state tax
purposes. There are no entity level income taxes imposed by jurisdictions in
which the Company conducts its business and, therefore, these financial
statements do not reflect any federal or state income tax expense. The profit or
loss is deemed passed through to the members of the LLC and they are obligated
to report such profit or loss on their own tax returns in the relevant
jurisdictions.
The Company has a wholly owned subsidiary located in the United Kingdom. As
such, the entity is liable for taxes to the Inland Revenue. For U.S. purposes,
an election was made to include the foreign income and expenses in the U.S. tax
returns. As a result of this election, the Company will be liable for U.K.
taxes. Foreign tax credits are passed through to the partners/members of the
LLC.
New York City, one of the local jurisdictions in which the Company conducts
its business, imposes an Unincorporated Business Tax at a rate of 4%, on
unincorporated entities, such as the Company. This tax is reduced to the extent
any partner/member is itself subject to New York City income tax. In addition,
this tax is imposed only on the portion of taxable income allocable to New York
City as per certain allocation factors (i.e., receipts, payroll and property).
The tax expense recorded in these financial statements reflects foreign
taxes and the New York City Unincorporated Business Tax on the Company's
allocable portion of the taxable income.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash and cash
equivalents, accounts receivable, accounts payable, accrued liabilities and
notes payable. The current carrying amount of these instruments approximates
fair market value due to the relatively short period of time to maturity for
these instruments.
EARNINGS PER MEMBERSHIP INTEREST
The Company computes net income (loss) per membership interest in
accordance with the provisions of Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings per Share" ("SFAS 128") and SEC Staff Accounting
Bulletin No. 98 ("SAB 98"). Under the provisions of SFAS 128 and SAB 98, basic
and diluted net loss per membership interest is computed by dividing net loss
for the period by the weighted average number of membership interests
outstanding for the period. The calculation of diluted net loss per membership
interest excludes options to purchase membership interests as the effect would
be antidilutive.
At December 31, 1998 and June 30, 1999, outstanding options to purchase
6,351,365 and 9,148,652 membership interests, respectively, with exercise prices
ranging from $.22 to $.55 as well as conditional options to purchase 20,322,594
F-10
<PAGE> 102
CAMINUS LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and 19,893,812 membership interests, respectively, with exercise prices ranging
from $.18 to $.62 were excluded from the calculation of diluted loss per
membership interest, as the effect would have been anti-dilutive.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company follows SFAS No. 123, "Accounting for Stock-Based
Compensation," ("SFAS 123"). As permitted by this statement, the Company
continues to apply Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," ("APB 25") to account for its stock-based employee
compensation arrangements.
USE OF ESTIMATES
The accompanying consolidated financial statements are prepared in
conformity with generally accepted accounting principles which require
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133")
which is effective for the Company beginning in 2001. SFAS 133 establishes
accounting and reporting standards for derivative financial instruments and
hedging activities related to those instruments, as well as other hedging
activities. Because the Company does not currently hold any derivative financial
instruments and does not engage in hedging activities, the adoption of SFAS 133
is not expected to have a material impact on the consolidated financial
position, results of operations or cash flows of the Company.
3. ACQUISITIONS
ZAI*NET SOFTWARE, L.P.
On May 12, 1998, the Company acquired a 71% ownership interest in ZNLP for
$7,740,000 in cash. ZNLP licenses, customizes and services Zai*Net, an
integrated real-time front, middle, and back office software trading system for
foreign exchange, commodities, energy, options and other financial products. The
terms of the purchase agreement required the payment of additional consideration
totaling $4,375,000 to the former shareholder of ZNLP if revenues from ZNLP
products were in excess of certain thresholds as defined in the purchase
agreement. Payment of this additional consideration was guaranteed in connection
with the acquisition of the remaining 29% interest in ZNLP by the Company in
December 1998 (see discussion below). The acquisition of the 71% ownership
interest was accounted for using the purchase method of accounting, and
F-11
<PAGE> 103
CAMINUS LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
accordingly, the results of ZNLP's operations are included in the Company's
consolidated financial statements from the date of acquisition.
On December 31, 1998, the Company acquired the remaining 29% interest in
ZNLP in exchange for a 21% membership interest in the Company. The acquisition
of the minority interest was accounted for using the purchase method of
accounting. Also as of December 31, 1998, the Company converted all the options
outstanding under the ZNLP Membership Interest Option Plan to options to
purchase Caminus LLC membership interests. The options were valued on December
31, 1998 using the Black-Scholes option pricing model and recorded as additional
consideration for the acquisition of ZNLP. In March 1999, in connection with
this transaction, ZNLP was merged into the Company. In addition, the Company
agreed that the amounts included as earnout payments in the original acquisition
agreement will be due and payable in various installments through April 15,
2000.
A summary of the total purchase price for the acquisition of ZNLP is as
follows:
<TABLE>
<S> <C>
Cash..................................................... $ 7,740,000
Issuance of notes payable................................ 4,375,000
Issuance of membership interests......................... 10,339,350
Issuance of options to acquire membership interests...... 2,669,534
Other direct acquisition costs........................... 602,969
-----------
$25,726,853
===========
</TABLE>
A summary of the allocation of the total purchase price is as follows:
<TABLE>
<S> <C>
Tangible net assets acquired............................. $ 600,195
Acquired in-process research and development............. 4,822,000
Developed technology..................................... 2,607,457
Other identifiable intangible assets..................... 2,029,845
Goodwill................................................. 15,667,356
-----------
$25,726,853
===========
</TABLE>
The fair value assigned to intangible assets acquired was based on a
valuation prepared by an independent third-party appraiser of the purchased
in-process technology, developed technology, and other intangible assets. Of the
acquired intangible assets, $4,822,000 represents acquired in-process research
and development (IPR&D) that had not yet reached technological feasibility and
had no alternative future use. Accordingly, this amount was immediately expensed
in the consolidated statement of operations upon acquisition. The value assigned
to IPR&D, based on a valuation prepared by an independent third-party appraiser,
was determined by identifying research projects in areas for which technological
feasibility had not been established. The value was determined by estimating the
costs to develop the IPR&D into commercially viable products, estimating the
F-12
<PAGE> 104
CAMINUS LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
resulting net cash flows from such projects, and discounting the net cash flows
back to their present value. The discount rate included a factor that takes into
account the uncertainty surrounding the successful development of the IPR&D.
Additionally, consideration was given to the stage of completion of each
research and development project at the date of acquisition.
The acquired IPR&D includes the power trading and scheduling, gas trading
and scheduling and the foreign exchange products. The Company estimated that
these products were approximately 87.5%, 75% and 90% complete at the date of
acquisition based on costs incurred through the date of acquisition as compared
to total estimated expenditures over the product's development cycle. The
Company expects to have these products available for general release during 1999
with estimated future development costs totaling approximately $435,000 at the
time of acquisition. The Company has released certain of these products. The
Company intends to offer other products to its customers under general release
once completed.
The nature of the efforts required to develop and integrate the acquired
IPR&D into a commercially viable product, feature or functionality within the
Company's suite of existing products related to the completion of all planning,
design and testing activities that are necessary to establish that the product
can be produced to meet design and performance requirements. The Company
currently expects that the product utilizing the acquired IPR&D will be
successful, but there can be no assurance that commercial viability of any of
these products will be achieved. Further, future developments in the software
industry, changes in the technology, changes in other products and offerings or
other developments may cause the Company to alter, or abandon, its product
plans.
Developed technology represents the fair value of applications and
technologies existing at the date of acquisition. Other intangible assets
represent the fair value of other acquired intangible assets including primarily
customer lists and work force in place. Goodwill represents the excess of the
purchase price over the fair value of identifiable tangible and intangible
assets acquired.
CAMINUS ENERGY LIMITED
On May 12, 1998, the Company acquired CEL, a consulting and professional
services organization, which provides services and research to companies in the
energy market sector, for $3,022,924 in cash, plus a membership interest of
10.1% of the Company valued at $3.0 million. The acquisition was accounted for
using the purchase method of accounting, and accordingly, the results of CEL's
operations are included in the Company's consolidated financial statements from
the date of acquisition.
F-13
<PAGE> 105
CAMINUS LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the purchase price for the acquisition is as follows:
<TABLE>
<S> <C>
Issuance of membership interest........................... $3,000,000
Cash...................................................... 3,022,924
Issuance of options to acquire membership interests....... 475,461
Other direct acquisition costs............................ 100,000
----------
$6,598,385
==========
</TABLE>
A summary of the allocation of the purchase price is as follows:
<TABLE>
<S> <C>
Tangible net assets acquired.............................. $ 380,515
Goodwill.................................................. 6,217,870
----------
$6,598,385
==========
</TABLE>
Goodwill represents the excess of the purchase price over the fair value of
identifiable tangible and intangible assets acquired.
Pursuant to the Agreement, the Company also granted options to purchase
5,050,000 membership interests to two officers of CEL (3,030,000 and 2,020,000
units, respectively) for $.297 per membership interest (total proceeds to
Caminus LLC of $1.5 million). These membership options are exercisable only in
the event of a sale or public offering, compliance with a service agreement and
achievement of certain internal rates of return. The number of membership
interests that ultimately vest and become exercisable is contingent upon all of
these conditions. No amounts were recorded for these options, as the conditions
under which they would vest were not met as of June 30, 1999. However, upon
consummation of an initial public offering ("IPO"), the Company would expect to
record a significant compensation related charge for the exercise of these
options.
POSITRON ENERGY CONSULTING
On November 13, 1998, the Company acquired Positron Energy Consulting
("Positron"). The Company paid $151,667 in cash for certain assets and
liabilities of Positron. The acquisition was accounted for using the purchase
method of accounting and the excess of the purchase price over the net assets
acquired was recorded as goodwill. Also in connection with the acquisition,
restricted membership interests were granted to three employees/principals of
Positron. The restrictions lapse only upon the resolution of contingencies
identified in the purchase agreement.
F-14
<PAGE> 106
CAMINUS LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 JUNE 30, 1999
----------------- -------------
<S> <C> <C>
Computer and office equipment............... $ 699,574 $ 988,587
Furniture, fixtures and leasehold
improvements.............................. 240,678 395,406
Automobile.................................. 8,580 --
--------- ----------
948,832 1,383,993
Less -- Accumulated depreciation and
amortization.............................. (168,756) (316,460)
--------- ----------
$ 780,076 $1,067,533
========= ==========
</TABLE>
Depreciation expense for the period from Inception through December 31,
1998 and for the six months ended June 30, 1999 amounted to $168,576 and
$150,375, respectively.
5. INTANGIBLE ASSETS
The intangible assets arising from the acquisition transactions discussed
in Note 3 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 JUNE 30, 1999
----------------- -------------
<S> <C> <C>
Developed technology........................ $ 2,607,457 $ 2,607,457
Goodwill.................................... 22,036,894 22,036,894
Other intangible assets..................... 2,029,845 2,029,845
----------- -----------
26,674,196 26,674,196
Less -- Accumulated amortization............ (2,414,432) (6,150,406)
----------- -----------
$24,259,764 $20,523,790
=========== ===========
</TABLE>
Amortization expense for developed technology, goodwill and other
intangible assets for the period from Inception through December 31, 1998 and
for the six months ended June 30, 1999 were $300,096, $1,874,350 and $239,986,
respectively; and $434,577, $3,013,783 and $287,614, respectively.
F-15
<PAGE> 107
CAMINUS LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 JUNE 30, 1999
----------------- -------------
<S> <C> <C>
Accrued bonuses and commissions............. $ 515,722 $ 982,261
Accrued professional fees................... 227,778 207,558
Accrued management fees..................... 100,000 213,749
Other accrued expenses...................... 185,639 630,003
---------- ----------
Total accrued liabilities.............. $1,029,139 $2,033,571
========== ==========
</TABLE>
7. DEFERRED REVENUE
Deferred revenue consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 JUNE 30, 1999
----------------- -------------
<S> <C> <C>
Deferred license revenue.................... $2,139,534 $1,187,935
Deferred maintenance revenue................ -- 912,685
---------- ----------
$2,139,534 $2,100,620
========== ==========
</TABLE>
Deferred revenue consists of cash received from customers or amounts billed
in advance of revenue recognition. During 1999, the Company changed its
maintenance billing practices for most customers from a monthly billing cycle to
a quarterly or annual billing cycle, depending upon the customer, thereby giving
rise to deferred maintenance revenue at June 30, 1999.
8. CREDIT FACILITY
On June 23, 1999, the Company entered into a credit agreement with Fleet
Bank ("the Bank"), pursuant to which the Company may borrow up to $5.0 million
under a revolving loan and a working capital loan.
The revolving loan provides the Company with borrowing capacity of up to
$2.5 million. Quarterly payments under the terms of the loan must equal or
exceed $250,000 beginning December 31, 1999. The borrowing base under the
working capital loan is equal to 85% of eligible receivables, less $500,000, and
in the aggregate, can not exceed $2.5 million. The loan expires on May 31, 2000
and may be extended for an additional year.
Credit facilities under the agreement bear interest at either the Bank's
reference rate, generally equivalent to prime rate, or LIBOR plus an applicable
margin (may vary between 2.5% and 3% depending on certain ratios of the Company
as defined in the agreement). The applicable borrowing rate at June 30, 1999 was
8%.
F-16
<PAGE> 108
CAMINUS LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Borrowing under the loans on June 30, 1999 amounted to $2.5 million and
$750,000 under the revolving loan and the working capital loan, respectively.
Under the terms of the credit agreement, the Company is required to
maintain certain financial ratios. The loans are secured by substantially all
assets of the Company. In addition, the Bank has a pledge from certain
affiliates of approximately 75% of the membership interests. The Bank has first
security in and a lien on these membership interests.
Pursuant to the agreement, the Company is required to repay the facilities
in full upon the event of a public offering.
9. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION SIX MONTHS
THROUGH ENDED
DECEMBER 31, 1998 JUNE 30, 1999
--------------------- ----------------
<S> <C> <C>
Current tax provision
Foreign taxes...................... $ -- $150,633
State and City..................... 35,735 (1,780)
------- --------
Total current tax 35,735 148,853
provision...............
Deferred tax provision
Foreign............................ -- (1,030)
State and City..................... -- (8,255)
------- --------
Total deferred tax -- (9,285)
provision...............
------- --------
Provision for income taxes........... $35,735 $139,568
======= ========
</TABLE>
F-17
<PAGE> 109
CAMINUS LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The effective income tax rate differs from the statutory U.S. Federal
income tax rate for the following reasons:
<TABLE>
<CAPTION>
FOR THE
----------------------------------
PERIOD FROM
INCEPTION SIX MONTHS
THROUGH ENDED
DECEMBER 31, 1998 JUNE 30, 1999
----------------- -------------
<S> <C> <C>
Statutory U.S. federal income tax........... $ -- $ --
Local income taxes, net of federal income
tax benefit............................... 35,735 19,241
Foreign income taxes........................ -- 149,603
Taxes receivable............................ -- (29,276)
-------- --------
Provision for income taxes, at effective
rate...................................... $ 35,735 $139,568
======== ========
</TABLE>
10. 401(K) SAVINGS PLAN
ZNLP had previously maintained a 401(k) Savings Plan (the "Plan").
Effective with the acquisition of ZNLP by Caminus LLC, the ZNLP plan was
extended to all eligible domestic employees of Caminus LLC. Employees are
eligible to participate in the Plan upon completion of six months of service
with the Company. Eligible employees may contribute up to 15% of their annual
compensation to the Plan on a pre-tax basis. Participant contributions to the
Plan are immediately vested. In addition, under the terms of the Plan, the
Company, at its discretion, may match all or a portion of a participant's
contribution to the Plan up to 10% of the participant's compensation. This
matching percentage is determined by the Company prior to the start of each Plan
year. The Company matching contribution is made at calendar year end.
Participants become vested in Company matching contributions to the Plan at the
rate of 20% per year of service with the Company. For 1998 and 1999, the Company
has elected to match 100% of participant contributions up to a maximum of $1,000
per participant. The 401(k) expense for the six months ended December 31, 1998
and the period from Inception through June 30, 1999 totaled $30,445 and $22,500,
respectively.
11. MEMBERSHIP INTEREST OPTION PLAN
In May 1998, ZNLP established its membership interest option plan (the
"ZNLP Plan"). Upon closing of the purchase of the remaining 29% of ZNLP by the
Company on December 31, 1998, Caminus converted the options outstanding under
the ZNLP Plan to options to purchase Caminus LLC membership interests and
accounted for the costs associated with the conversion as part of the ZNLP
acquisition purchase price. In February 1999, the Management Committee approved
the adoption of the ZNLP Plan for all eligible Caminus employees (the "Plan").
The Plan provides for the issuance of membership interest options to key
employees and consultants of the Company. Under the terms of the Plan, options
F-18
<PAGE> 110
CAMINUS LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
are granted to purchase membership interests in the Company at a price not less
than 100% of the fair market value of a membership interest on the date of the
grant. The options generally vest over a period of four years and are
exercisable for a period of ten years from the date of the grant. Upon adoption
of the Plan, the Company reserved interests equivalent to 9.0% of total
outstanding membership interest for the exercise of vested membership interest
options and exercisable warrants.
In April 1999, the Management Committee amended the Plan to increase the
percentage of membership interest available to 9.5%, or approximately 9,700,000
units.
The following table summarizes the Company's membership interest option
plan activity:
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION
THROUGH DECEMBER 31, 1998 SIX MONTHS ENDED JUNE 30, 1999
---------------------------- -------------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
EXERCISE PRICE EXERCISE PRICE
INTERESTS PER SHARE INTERESTS PER SHARE
--------- ---------------- ---------- -----------------
<S> <C> <C> <C> <C>
Outstanding at
beginning of
period............. -- 6,351,365 $0.26
Granted.............. 6,351,365 $0.26 2,836,234 $0.54
Exercised............ --
Canceled............. -- (38,947) $0.22
--------- ---------
Outstanding at end of
year............... 6,351,365 $0.26 9,148,652 $0.35
========= =========
Options exercisable
at period end...... -- 863,763
========= =========
</TABLE>
The following table summarizes information about stock options outstanding
at June 30, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------------------
RANGE OF NUMBER
EXERCISE PRICES OUTSTANDING WEIGHTED AVERAGE WEIGHTED
(PER MEMBERS' AT JUNE 30, REMAINING AVERAGE EXERCISE
INTEREST) 1999 CONTRACTUAL LIFE PRICE
- --------------- ----------- ---------------- ----------------
<S> <C> <C> <C>
$0.22 4,151,241 8.8 years $0.22
$0.29 - 0.44 2,176,177 9.0 years 0.34
$0.52 - 0.55 2,821,234 9.7 years 0.54
---------
9,148,652 $0.35
=========
</TABLE>
F-19
<PAGE> 111
CAMINUS LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At June 30, 1999, options to purchase approximately 551,000 membership
interests were available for grant.
The weighted-average fair value of options granted during the period from
Inception through December 31, 1998 and for the six months ended June 30, 1999
was $0.06 and $0.42, respectively.
The canceled options related to an employee who was terminated by the
Company during the six months ended June 30, 1999. Caminus repurchased the
vested options from the employee at the estimated fair value per unit of the
Company at the date of termination, and recognized compensation expense of
$14,000, which represents the difference between this amount and the exercise
price.
The Company applies APB 25 and related interpretations in accounting for
its Plan and other stock-based compensation issued to employees. During the
period from Inception through December 31, 1998 the Company did not recognize
compensation expense related to option grants. The Company recognized
compensation expense of $28,806 for options granted during the six month period
ended June 30, 1999. Compensation expense relates to the amortization of
deferred compensation associated with options granted with exercise prices below
the fair value of the underlying membership interests on the date of grant.
Had compensation cost for the Company's membership interest option plan
been determined based upon the fair value at the grant date for awards under the
plan consistent with the methodology prescribed under SFAS 123, the Company's
net loss would have been increased by approximately $67,000 and $169,000 in the
period from Inception through December 31, 1998 and the six months ended June
30, 1999, respectively. The fair values of options granted to employees during
the period from Inception through December 31, 1998 and the six months ended
June 30, 1999 has been determined on the date of the respective grant using the
Black-Scholes option pricing model incorporating the following weighted average
assumptions: (1) risk-free interest rate of 5.50% and 4.95%, respectively; (2)
dividend yield of 0.00%; (3) expected life of five years; and (4) volatility of
40% and 60%, respectively.
The pro forma effects above may not be representative of the effects on
future years because of the prospective application required by SFAS 123 and the
fact that options vest over several years and new grants generally are made each
year.
12. COMMITMENTS AND CONTINGENCIES
The Company leases office space in New York City, London and Houston under
long-term leases.
F-20
<PAGE> 112
CAMINUS LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum annual lease commitments are as follows:
<TABLE>
<S> <C>
July 1, 1999 through December 31, 1999.................... $ 359,684
2000...................................................... 714,474
2001...................................................... 707,542
2002...................................................... 549,976
2003...................................................... 256,825
Thereafter................................................ 1,047,375
----------
$3,635,876
==========
</TABLE>
Rent expense for the period from inception through December 31, 1998 and
for the six months ended June 30, 1999 was $320,800 and $412,200, respectively.
In July 1999, the Company entered into an addendum to one of the existing
lease agreements for additional office space. Additional minimum lease payments
under this lease addendum are as follows:
<TABLE>
<S> <C>
July 1, 1999 through December 31, 1999.................... $ 19,016
2000...................................................... 76,062
2001...................................................... 76,062
2002...................................................... 76,062
2003...................................................... 409,066
Thereafter................................................ 431,676
----------
$1,087,944
==========
</TABLE>
From time to time, in the ordinary course of business, the Company is
subject to legal proceedings. While it is not possible to determine the ultimate
outcome of such matters, it is management's opinion that the resolution of any
pending issues will not have a material adverse effect on the financial
position, results of operations or cash flows of the Company.
13. RELATED PARTY TRANSACTIONS
SS&C
Pursuant to the LLC Agreement, the Company granted a warrant to SS&C
Technologies ("SS&C") for 8,410,000 membership interests with an exercise price
of $.01 per membership interest. The warrant would become vested and exercisable
upon the date that is the earlier of 39 months from the date of the agreement or
the occurrence of a sale or a public offering. The number of interests
exercisable under the terms of the warrant was based on revenue levels derived
from sales of SS&C's products by Caminus. SS&C contributed to the Company an
F-21
<PAGE> 113
CAMINUS LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
exclusive distribution agreement to sell certain products developed by SS&C
having a valuation of $2,500,000.
Effective December 31, 1998, SS&C sold to the Company all of its
outstanding membership interests (including the membership interests and warrant
to acquire membership interests) in the Company. These membership interests were
reacquired for consideration which included $2.3 million in cash, an option
granted to SS&C (the "SS&C option") for the purchase of approximately 3.2% of
the outstanding membership interests at the time, for $2.2 million, and the
termination of the original distribution agreement granted to the Company by
SS&C. The SS&C option was fully vested and exercisable as of December 31, 1998
and expires on December 31, 2003. Reacquisition of the SS&C interest has been
accounted for in a manner similar to that of a treasury stock transaction.
Simultaneously with the repurchase of the SS&C membership interests, the
Company entered into a distribution agreement with SS&C (the "Distribution
Agreement"). This agreement gives the Company the exclusive right to sell
certain SS&C software products into the energy market. Total guaranteed minimum
payments under the terms of the Distribution Agreement, as amended, were
$2,750,000 of which $2,000,000 had been paid through June 30, 1999.
As of December 31, 1998, the Company had not sold any of the SS&C products
acquired under the Distribution Agreement. Further, the Company does not have an
active plan to sell the software, which was acquired pursuant to the terms of
the distribution agreement. Because the Company has not resold any SS&C
software, nor does it have a formal plan in place to resell this software, the
total guaranteed minimum payments to SS&C as stipulated in the Distribution
Agreement have been recorded as a charge in the statement of operations. The
amount of $2,750,000 has been included in "Amortization of intangible assets" in
the consolidated statement of operations for the period from Inception through
December 31, 1998.
OTHER TRANSACTIONS
On October 21, 1998, in connection with his employment with the Company,
the Chief Executive Officer ("CEO") was loaned $1,000,000 by the Company in
order to acquire membership interests. The loan bears interest at a rate of 9%,
and all accrued and unpaid interest is payable upon maturity (October 2008). The
loan is secured by the membership interests. In addition, on October 21, 1998,
the Company loaned the CEO $100,000. The loan bears interest at a rate of 9%;
all accrued and unpaid interest is payable upon maturity (October 1999).
Additionally, in connection with the CEO's employment agreement, if certain
performance criteria and other conditions are met, the CEO would receive a bonus
based on forgiveness of the entire outstanding amount of the $1.0 million loan
plus accrued interest as well as additional membership interests. Such amounts
would be expected to be earned upon an IPO and would result in a significant
compensation related charge when earned.
On September 1, 1998, in connection with his employment with the Company,
an employee was loaned $74,638 by the Company to acquire a portion of his
F-22
<PAGE> 114
CAMINUS LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
membership interests. The loan bears interest at a rate of 9%, and all accrued
and unpaid interest is payable upon maturity (September 2008). The loan is
secured by the membership interests.
In connection with the acquisition of the 29% minority interest in ZNLP,
the earnout payments to the shareholder of ZNLP were guaranteed. The remaining
amounts owed are recorded as "due to member" in the consolidated balance sheet.
As outlined in the LLC Agreement, the Company is required to pay to GFI
Energy Ventures ("GFI"), a member of the LLC, an annual management fee as
consideration for financial, tax and general and administrative services. This
fee is calculated as 1% of the members aggregate adjusted capital contribution.
Total management fees incurred for the period from Inception through December
31, 1998 and for the six months ended June 30, 1999 were approximately $160,000
and $113,749, respectively.
14. CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade accounts receivable.
The Company controls this risk through credit approvals, customer limits and
monitoring procedures. Additionally, the Company can limit the amount of support
provided to its customers in the event of non-payment. During the period from
Inception through December 31, 1998, and for the six months ended June 30, 1999,
there were no customers who represented more than 10% of consolidated revenues.
At December 31, 1998, there were no customers who represented more than 10% of
the Company's accounts receivable. At June 30, 1998, the combined balances of
two customers represented 23% of accounts receivable.
15. SEGMENT REPORTING
The Company has two reportable segments: software and strategic consulting.
Software comprises the licensing of the Company's software products and the
related implementation and maintenance services. Strategic consulting provides
energy market participants with professional advice regarding where and how to
compete in their respective markets. In evaluating financial performance,
management uses earnings before interest, taxes, depreciation and amortization,
the write-off of acquired IPR&D and non-cash compensation expense ("Adjusted
EBITDA") as the measure of a segment's profit or loss.
The accounting policies of the reportable segments are the same as those
described in Note 2. There are no inter-segment revenues or expenses between the
two reportable segments.
Geographic information for the Company, for the period from Inception
through December 31, 1998 and for the six months ended June 30, 1999, is
summarized in the table below. The Company's international revenues were derived
primarily from the United Kingdom and the Company's international long-
F-23
<PAGE> 115
CAMINUS LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
lived assets at December 31, 1998 and June 30, 1999 resided primarily in the
United Kingdom.
The following table illustrates the financial results of the two reportable
segments:
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION SIX MONTHS ENDED
THROUGH DECEMBER 31, 1998 JUNE 30, 1999
------------------------- -------------------------
STRATEGIC STRATEGIC
SOFTWARE CONSULTING SOFTWARE CONSULTING
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Operating Results:
Revenues:
Licenses............ $ 3,639,143 $ -- $ 4,295,325 $ --
Software services... 3,090,758 -- 4,006,590 --
Strategic
consulting........ -- 2,896,102 -- 2,940,062
----------- ----------- ----------- -----------
Total revenues.... $ 6,729,901 $ 2,896,102 $ 8,301,915 $ 2,940,062
=========== =========== =========== ===========
Adjusted EBITDA........ $ 364,859 $ (9,704) $ 1,111,358 $ 526,170
Non-cash compensation
expense............. -- -- (28,806) --
Acquired IPR&D......... (4,822,000) -- -- --
----------- ----------- ----------- -----------
EBITDA................. (4,457,141) (9,704) 1,082,552 526,170
Depreciation and
amortization........ (4,247,077) (1,419,444) (2,814,741) (1,071,608)
----------- ----------- ----------- -----------
Operating loss......... (8,704,218) (1,429,148) (1,732,189) (545,438)
=========== =========== =========== ===========
Other Data:
Capital expenditures... $ 379,677 $ 120,920 $ 328,271 $ 106,753
=========== =========== =========== ===========
AS OF AS OF
DECEMBER 31, 1998 JUNE 30, 1999
------------------------- -------------------------
Total assets........... $24,776,818 $ 6,591,180 $22,245,422 $ 5,616,950
=========== =========== =========== ===========
</TABLE>
The Company maintains a corporate division solely for administrative
purposes. This division does not generate revenues, and corporate expenses,
which are not significant, are primarily contained in the software segment.
Additionally, items recorded in the consolidated financial statements for
purchase accounting, such as goodwill, intangible assets and related
amortization, have been pushed down to the respective segments for segment
reporting purposes.
F-24
<PAGE> 116
CAMINUS LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION SIX MONTHS
THROUGH ENDED
DECEMBER 31, 1998 JUNE 30, 1999
--------------------- ----------------
<S> <C> <C>
Revenues:
United States...................... $ 5,743,168 $ 5,384,733
International (principally the
United Kingdom)................. $ 3,882,835 $ 5,857,244
</TABLE>
<TABLE>
<CAPTION>
AS OF
-------------------------------------
DECEMBER 31, 1998 JUNE 30, 1999
----------------- ----------------
<S> <C> <C>
Long-lived assets:
United States......................... $19,980,866 $17,506,064
International (principally the United
Kingdom)........................... $ 5,065,802 $ 4,093,003
</TABLE>
16. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION SIX MONTHS
THROUGH ENDED
DECEMBER 31, 1998 JUNE 30, 1999
--------------------- ----------------
<S> <C> <C>
Cash paid for interest............... $ -- $ 31,177
Cash paid for taxes.................. $ -- $ 40,700
Accrual of SS&C option buyback....... $ -- $250,000
Notes payable issued in connection
with the acquisition of Zai*Net
Software, L.P...................... $ 4,375,000 $ --
Membership interest issued in
connection with the acquisition of
Caminus Energy Limited............. $ 3,000,000 $ --
Membership interest issued for the
contributed distribution
agreement.......................... $ 2,500,000 $ --
Membership interest issued in
connection with the acquisition of
Zai*Net Software, L.P. minority
interest........................... $10,339,350 $ --
Issuance of note payable for the
cancellation of the distribution
agreement and the reacquisition of
SS&C ownership interest............ $ 4,416,667 $ --
Notes receivable for sale of stock... $ 1,000,000 $ --
</TABLE>
F-25
<PAGE> 117
CAMINUS LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
17. SUBSEQUENT EVENTS (UNAUDITED)
In July 1999, the Company raised an additional $12 million in equity
contributions from the members in order to fund the acquisition of DC Systems,
Inc. ("DCS") which was completed in August 1999. DCS was acquired for $10
million in cash and $3 million in membership interests. The additional $2
million in cash raised via equity contributions from the members was used to
fund transaction fees of the acquisition and working capital.
In September 1999, the Board of Directors of Caminus Corporation, a newly
formed Delaware corporation and wholly owned subsidiary of the Company (the
"Registrant"), authorized the filing of a registration statement with the
Securities and Exchange Commission that would permit the Registrant to sell
shares of the Registrant's common stock in connection with the proposed IPO.
Immediately prior to the effective date of an IPO, the Company will merge into
the Registrant, which would be the surviving entity in the merger. This
transaction would affect the legal form only of the entities under common
control, and the proportionate ownership interests of the members pre- and
post-merger would be preserved. No effect, other than the pro forma adjustments
discussed below, has been given to this transaction in these financial
statements.
In connection with the planned IPO of the Registrant, Caminus Corporation
will no longer be treated as a limited liability company for tax purposes.
Accordingly, the consolidated statements of operations include pro forma net
income for all periods assuming the Company was taxable as a C Corporation and
earnings per membership interests based on the pro forma net income divided by
the weighted average number of membership interests outstanding.
The Company has agreed to terminate its advisory arrangement with GFI
effective as of December 31, 1999. As consideration for advisory services
provided by GFI relating to strategic acquisitions and other matters, the
Company agreed to pay GFI a $1,000,000 fee from the net proceeds of the initial
public offering.
F-26
<PAGE> 118
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
ZAI*NET Software, Inc.
In our opinion, the financial statements listed in the accompanying index
on page F-1 present fairly, in all material respects, the financial position of
ZAI*NET Software, Inc. at December 31, 1996 and 1997 and April 30, 1998, and the
results of its operations and its cash flows for the years ended December 31,
1996 and 1997, and the four months ended April 30, 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 12, as of December 31, 1998, ZAI*NET Software, Inc.
sold 100% of its assets to GFI Caminus LLC.
PRICEWATERHOUSECOOPERS LLP
New York, New York
August 28, 1998
F-27
<PAGE> 119
ZAI*NET SOFTWARE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- APRIL 30,
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................ $ 242,208 $ 146,961 $1,097,742
Certificate of deposit........................... 51,664 54,355 54,355
Accounts receivable.............................. 788,107 1,704,551 1,678,491
Prepaid expenses and other current assets........ 20,440 28,934 125,487
---------- ---------- ----------
Total current assets.......................... 1,102,419 1,934,801 2,956,075
---------- ---------- ----------
Fixed assets, net.................................. 165,183 248,338 302,078
Other assets....................................... 7,190 10,240 11,950
---------- ---------- ----------
Total assets.................................. $1,274,792 $2,193,379 $3,270,103
========== ========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable................................. $ 184,210 $ 185,275 $ 188,407
Accrued expenses................................. 189,942 431,441 991,875
Deferred revenue................................. 386,716 1,339,434 1,435,084
Loan payable to stockholder...................... 154,500 -- --
Loan payable to employee......................... 6,550 -- --
Loan payable to related party.................... 100,000 -- --
Current portion of note payable for repurchase of
options....................................... 29,000 3,000 --
---------- ---------- ----------
Total current liabilities..................... 1,050,918 1,959,150 2,615,366
---------- ---------- ----------
Note payable for repurchase of options............. 3,000 -- --
---------- ---------- ----------
Total liabilities............................. 1,053,918 1,959,150 2,615,366
---------- ---------- ----------
Stockholder's equity:
Common stock, without par value; 2,000 shares
authorized; 480 shares issued and
outstanding................................... 1 1 1
Retained earnings................................ 220,873 234,228 654,736
---------- ---------- ----------
Total stockholder's equity.................... 220,874 234,229 654,737
---------- ---------- ----------
Total liabilities and stockholder's equity.... $1,274,792 $2,193,379 $3,270,103
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE> 120
ZAI*NET SOFTWARE, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED FOUR MONTHS
DECEMBER 31, ENDED
------------------------ APRIL 30,
1996 1997 1998
---------- ---------- -----------
<S> <C> <C> <C>
Revenues:
Licenses........................... $1,291,427 $1,521,447 $1,495,221
Software services.................. 1,429,860 2,667,807 1,334,473
---------- ---------- ----------
Total revenues.................. 2,721,287 4,189,254 2,829,694
---------- ---------- ----------
Cost of revenues..................... 999,142 1,331,482 734,242
---------- ---------- ----------
Gross profit.................... 1,722,145 2,857,772 2,095,452
---------- ---------- ----------
Operating expenses:
Research and development........... 628,317 1,223,715 580,031
Selling, general and
administrative.................. 990,767 1,638,293 1,079,391
---------- ---------- ----------
Total operating expenses........ 1,619,084 2,862,008 1,659,422
---------- ---------- ----------
Income (loss) from operations........ 103,061 (4,236) 436,030
---------- ---------- ----------
Interest income (expense), net....... (2,197) 17,591 8,294
---------- ---------- ----------
Income before provision for income
taxes.............................. 100,864 13,355 444,324
---------- ---------- ----------
Provision for income taxes........... -- -- 23,816
---------- ---------- ----------
Net income...................... 100,864 13,355 420,508
---------- ---------- ----------
Retained earnings, beginning of
year............................... 120,009 220,873 234,228
---------- ---------- ----------
Retained earnings, end of year....... $ 220,873 $ 234,228 $ 654,736
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-29
<PAGE> 121
ZAI*NET SOFTWARE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED FOUR MONTHS
DECEMBER 31, ENDED
---------------------- APRIL 30,
1996 1997 1998
--------- --------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................. $ 100,864 $ 13,355 $ 420,508
--------- --------- ----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization....................... 101,118 123,090 46,141
Stock option repurchases............................ 20,000 -- --
Changes in operating assets and liabilities:
Accounts receivable................................. (338,449) (916,444) 26,060
Prepaid expenses and other current assets........... (18,725) (8,494) (96,553)
Other assets........................................ 1,081 (5,741) (1,710)
Accounts payable.................................... -- 1,065 3,132
Accrued expenses.................................... 121,005 241,499 560,434
Deferred revenue.................................... 144,216 952,718 95,650
--------- --------- ----------
Net cash provided by operating activities................ 131,110 401,048 1,053,662
--------- --------- ----------
Cash flows from investing activities:
Purchase of certificate of deposit..................... (20,000) -- --
Purchases of fixed assets.............................. (80,112) (206,245) (99,881)
--------- --------- ----------
Net cash used in investing activities.................... (100,112) (206,245) (99,881)
--------- --------- ----------
Cash flows from financing activities:
(Repayment of) proceeds from loan payable to a related
party............................................... 100,000 (100,000) --
Repayment of loans payable to stockholder.............. (2,000) (154,500) --
Repayment of loans payable to employee................. (4,550) (6,550) --
Repayment of notes payable for repurchase of options... (39,000) (29,000) (3,000)
--------- --------- ----------
Net cash (used in) provided by financing activities...... 54,450 (290,050) (3,000)
--------- --------- ----------
Net (decrease) increase in cash and cash equivalents..... 85,448 (95,247) 950,781
Cash and cash equivalents, beginning of year............. 156,760 242,208 146,961
--------- --------- ----------
Cash and cash equivalents, end of year................... $ 242,208 $ 146,961 $1,097,742
========= ========= ==========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest............................................ $ 7,934 $ 6,015 $ --
Issuance of note payable for stock option
repurchase........................................ $ 20,000 $ -- $ --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE> 122
ZAI*NET SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
ZAI*NET Software, Inc. (the "Company") is a Delaware corporation
headquartered in New York, which licenses, customizes and services ZAI*NET, an
integrated real-time front, middle, and back office software trading system for
foreign exchange, commodities, energy, options and other financial products.
REVENUE RECOGNITION
The Company generates revenue from the licensing of its software products
and performing services related to the implementation, training and support of
these products. The Company has adopted the provisions of Statements of Position
(SOP) 97-2 "Software Revenue Recognition". Adoption of this accounting
pronouncement did not materially affect the Company's financial statements.
License revenue is recognized upon the execution of a license agreement,
when the licensed product has been delivered, fees are fixed and determinable,
collectibility is probable, and when all other significant obligations have been
fulfilled. For license agreements in which customer acceptance is a condition to
earning the license fees, revenue is not recognized until acceptance occurs. For
arrangements containing multiple elements, such as software license fees,
consulting services and maintenance, and where vendor-specific objective
evidence of fair value exists for all undelivered elements, the Company accounts
for the delivered elements in accordance with the SOP 97-2.
Software Services revenue includes consulting services for installation,
data conversion and training related to the use of the Company's licensed
products. Customers often enter into arrangements for these services concurrent
with execution of license agreements. The services do not require significant
modification of the licensed products, are not essential to their functionality,
are available from other vendors and payment obligations with respect to the
licensed products are not dependent upon the performance of these services.
Accordingly, the Company recognizes revenues for these services as they are
performed. Maintenance and support revenues associated with new product licenses
and renewals are deferred and recognized ratably over the contract period.
The Company recognizes software license revenue upon product delivery and
acceptance by the customer as evidenced by the settlement of the outstanding
obligations under the terms of the related contract by the customer. Maintenance
fees are recognized as revenue over the period benefited. Billings made in
advance of revenue recognition are deferred and included in deferred revenue in
the financial statements.
SOFTWARE DEVELOPMENT COSTS
All costs incurred in developing software products are expensed as research
and development expenses in the period incurred. Software development costs
incurred subsequent to the establishment of technological feasibility are not
material.
F-31
<PAGE> 123
ZAI*NET SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
CASH AND CASH EQUIVALENTS
Cash equivalents are defined as highly liquid investments with an initial
maturity of three months or less.
FIXED ASSETS
Fixed assets are stated at cost, less accumulated depreciation.
Depreciation is calculated using the straight-line method over the estimated
useful life of the related asset. Estimated useful lives generally range from
three to five years.
INCOME TAXES
The Company has elected to be treated as a Subchapter S Corporation for
federal and state income tax purposes. Accordingly, the sole stockholder of the
Company is responsible for federal and state income taxes resulting from the
Company's earnings. The Company is subject to certain other state and city
taxes, which are charged to operations as incurred.
The Company accounts for income taxes under the requirements of SFAS 109,
"Accounting for Income Taxes," which uses an asset and liability approach to
measure income tax expense. The asset and liability approach requires the
recognition of deferred tax assets and liabilities for the expected future
consequences of temporary differences between the financial statement amounts
and the tax basis of certain assets and liabilities.
For the four-month period ended April 30, 1998, $77,486 was recorded for
state and local income taxes payable by the Company. Subsequent to April 30,
1998, the tax status of the Company changed. Refer to Note 12, subsequent
events, for further details.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation." As permitted by
this Statement, the Company continues to apply Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," in accounting for
its stock-based employee compensation arrangements. No compensation expense has
been recognized for the Company's stock-based compensation plans as the exercise
price of the stock options is not less than the fair value of the underlying
common stock on the date of grant.
FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash, accounts
receivable, accounts payable and loans payable. The current carrying amount of
these instruments approximates fair market value.
F-32
<PAGE> 124
ZAI*NET SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
USE OF ESTIMATES
The financial statements were prepared in conformity with generally
accepted accounting principles, which require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, APRIL 30,
1996 1997 1998
-------- -------- ---------
<S> <C> <C> <C>
Computer and office equipment ............. $383,169 $565,973 $658,591
Furniture and fixtures..................... 42,826 66,267 73,530
Automobile................................. 21,403 21,403 21,403
-------- -------- --------
447,398 653,643 753,524
Less -- Accumulated depreciation and
amortization............................. 282,215 405,305 451,446
-------- -------- --------
$165,183 $248,338 $302,078
======== ======== ========
</TABLE>
3. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, APRIL 30,
1996 1997 1998
-------- -------- ---------
<S> <C> <C> <C>
Payroll and benefits....................... $189,942 $149,592 $397,382
Legal and professional fees................ -- -- 363,073
Litigation settlement...................... -- 175,000 175,000
Other Expenses............................. -- 106,849 56,420
-------- -------- --------
$189,942 $431,441 $991,875
======== ======== ========
</TABLE>
4. EMPLOYEE STOCK OPTIONS
In August 1996, the Company repurchased, from a former employee, options to
purchase 5 shares of the Company's common stock in exchange for a $20,000
non-interest bearing note. Payments of this note are in monthly installments of
$1,000 commencing August 1, 1996. The note was repaid in full in March 1998.
In May 1995, the Company repurchased, from a former employee, options to
purchase 17 shares of the Company's common stock in exchange for an $87,000
noninterest-bearing note, of which $36,000, $34,000, and $17,000 were paid in
1995, 1996, and 1997, respectively.
F-33
<PAGE> 125
ZAI*NET SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following tables summarizes the Company's stock option activity for the
years ended December 31, 1996 and 1997 and the four months ended April 30, 1998:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED FOUR MONTHS ENDED
DECEMBER 31, 1996 DECEMBER 31, 1997 APRIL 29, 1998
------------------------- ------------------------- -------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE
EXERCISE PRICE EXERCISE PRICE EXERCISE PRICE
SHARES PER SHARE SHARES PER SHARE SHARES PER SHARE
------ ---------------- ------ ---------------- ------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of
year............... 58 $1,431 300 $3,799 300 $3,799
Granted.............. 247 $4,400 -- -- -- --
Exercised............ -- -- -- -- -- --
Canceled............. -- -- -- -- -- --
Repurchased.......... 5 6,000 -- --
Outstanding at end of
year............... 300 $3,799 300 $3,799 300 $3,799
Options exercisable
at year end........ 300 $3,799 300 $3,799 300 $3,799
</TABLE>
The range of exercise prices for options outstanding at December 31, 1996
and 1997 and April 30, 1998 was $1,000 - $4,400.
The weighted average remaining contractional life for options with a
weighted average exercise price of $3,799 is 7.8 years.
The Company continues to apply APB 25, "Accounting for Stock Issued to
Employees," in accounting for stock options issued to employees. Accordingly, no
compensation expense has been recognized for its stock based compensation plans.
Had compensation cost for the Company's stock option plan been determined based
on the fair value at the grant date, consistent with the methodology prescribed
under Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," the impact on net income would not have been material
for any period.
5. 401(K) SAVINGS PLAN
The Company maintains a 401(k) Savings Plan (the "Plan"). Employees are
eligible to participate in the Plan upon completion of six months of service
with the Company. Eligible employees may contribute up to 15% of their annual
compensation to the Plan on a pre-tax basis. Participant contributions to the
Plan are immediately vested. In addition, under the terms of the Plan, the
Company, at its discretion, may match all or a portion of a participant's
contribution to the Plan up to 10% of the participant's compensation. This
matching percentage is determined by the Company prior to the start of each Plan
year. The Company matching contribution is made at calendar year end and
participants become vested in Company matching contributions to the plan at the
rate of 20% per year of service. The Company elected to match 100% of
participant contributions up to a maximum of $1,000 per participant for 1996,
1997 and 1998. Compensation
F-34
<PAGE> 126
ZAI*NET SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
expense for the plan was approximately $12,000, $16,000 and $7,500 for 1996,
1997 and for the four months ended April 30, 1998, respectively.
6. TRANSACTIONS WITH RELATED PARTIES
LOAN PAYABLE TO RELATED PARTY
In September 1996, the Company borrowed $100,000 from the family of a
shareholder of the Company. The loan bore interest at the rate of 8% and $2,000
and $6,000 of interest expense was paid in 1996 and 1997, respectively. This
loan was repaid in full in 1997.
7. LINE OF CREDIT
The Company maintained a $150,000 demand line of credit with a bank.
Interest on outstanding borrowings under the line of credit was based on the
prime lending rate plus two percent.
The line of credit required the Company to maintain a $50,000 interest
bearing certificate of deposit with the bank. There were no amounts outstanding
under the line of credit for any period.
8. INCOME TAXES
The provision (benefit) for income taxes for the four-month period ended
April 30, 1998 consists of the following:
<TABLE>
<S> <C>
Current provision........................................... $ 77,486
Deferred benefit............................................ (53,670)
--------
Total provision............................................. $ 23,816
========
</TABLE>
Since the Company's basis of accounting for tax purposes is the cash
receipts and disbursements method, the most significant components of the
deferred tax asset are accrued items of income and expense not recognized for
tax purposes until received or paid.
9. COMMITMENTS
The Company leases office space in New York City, London, Houston and
Singapore under long-term leases. Future minimum annual lease commitments are as
follows:
<TABLE>
<S> <C>
May 1, 1998 Through December 31, 1998....................... $ 238,933
1999........................................................ 384,842
2000........................................................ 354,202
2001........................................................ 354,177
Thereafter.................................................. 430,039
----------
$1,762,193
==========
</TABLE>
Rent expense in 1996, 1997 and for the four months ended April 30, 1998
totaled $207,297, $239,303 and $116,712, respectively.
F-35
<PAGE> 127
ZAI*NET SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
10. CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS
The Company's customer base consists primarily of companies in the
financial services and energy industry groups. Although the Company is directly
affected by the well being of these industries, management does not believe
significant credit risks exists as of April 30, 1998.
Three customers accounted for 46%, 18% and 9% of total accounts receivable
at December 31, 1996 and 22% of revenues in 1996. Two customers accounted for
13% and 10% of total accounts receivable at December 31, 1997 and 29% of
revenues for 1997. Two customers accounted for 17% and 10% of accounts
receivable at April 30, 1998 and one customer accounted for 18% of revenues for
the four months ended April 30, 1998.
11. LITIGATION
An action was commenced in 1989 against the Company in which a former
employee (the "plaintiff") alleged four causes of action and sought monetary
damages of $2,000,000. The plaintiff also alleged two additional causes of
action against the current stockholder and a former stockholder and sought
aggregate damages of $5,000,000. These actions relate to the plaintiff's claim
that the Company promised the plaintiff an ownership interest in the Company and
a share of the Company's profits derived from software the plaintiff allegedly
developed in exchange for the plaintiff's promise to work for the Company. The
case was settled for $175,000 on May 11, 1998 and all required liabilities were
accrued at December 31, 1997 and April 30, 1998.
12. SUBSEQUENT EVENTS (UNAUDITED)
On May 12, 1998, the Company transferred substantially all of its assets
and liabilities to ZAI*NET SOFTWARE, L.P. (the "Partnership"), a Partnership 99%
owned by the Company and 1% owned by the sole stockholder of the Company.
Immediately following this transfer the Partnership agreed to sell 70% of its
ownership interest and the stockholder agreed to sell his 1% ownership interest
to GFI Caminus LLC ("GFI"). The Company retained the remaining 29% ownership
interest in the newly formed Partnership. The remaining ownership interest was
sold to GFI on December 31, 1998.
F-36
<PAGE> 128
CAMINUS LIMITED
(FORMERLY CAMINUS ENERGY LIMITED)
REPORT OF INDEPENDENT AUDITORS TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
CAMINUS LIMITED
- --------------------------------------------------------------------------------
We have audited the accompanying balance sheets of Caminus Limited at 30
April 1997 and 30 April 1998 and related profit and loss account and statement
of cash flows for each of the years ended 30 April 1997 and 30 April 1998. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United Kingdom, which are substantially the same as those
followed in the United States. These 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 opinion.
In our opinion the financial statements referred to above present fairly,
in all material respects, the financial position of Caminus Limited at 30 April
1997 and 30 April 1998 and the results of its operations and cash flows for each
of the years ended 30 April 1997 and 30 April 1998 in conformity with accounting
principles generally accepted in the United Kingdom.
The financial statements were prepared in accordance with accounting
principles generally accepted in the United Kingdom, the application of which by
Caminus Limited does not differ materially from accounting principles generally
accepted in the United States, except in respect of the presentation of cash
flow information, as detailed in note 14(a) to the financial statements.
The United States Dollar equivalent data presented in these financial
statements is included for information only. It does not, and is not meant to,
reflect the financial statements had they been translated in accordance with
United States Generally Accepted Accounting Principles, as explained in note
14(b) to the financial statements.
PETERS ELWORTHY & MOORE
Chartered Accountants and
Registered Auditors
CAMBRIDGE, ENGLAND
30 September 1998
F-37
<PAGE> 129
CAMINUS LIMITED
(FORMERLY CAMINUS ENERGY LIMITED)
PROFIT AND LOSS ACCOUNTS
FOR THE YEARS ENDED 30 APRIL 1997 AND 30 APRIL 1998
- --------------------------------------------------------------------------------
In this prospectus, certain UK Sterling amounts have been translated into
United States dollars at the rate of L1 to US $1.67. Such translations should
not be construed as representations that the UK Sterling amounts represent, or
have been or could be converted into, United States Dollars at that or any other
rate.
<TABLE>
<CAPTION>
NOTES 1997 1998 1998
----- --------- --------- ---------
L L US $
<S> <C> <C> <C> <C>
TURNOVER 2 2,059,887 2,516,579 4,202,687
Cost of sales 978,614 1,147,253 1,915,913
--------- --------- ---------
Gross profit 1,081,273 1,369,326 2,286,774
Administrative expenses 638,982 742,646 1,240,219
--------- --------- ---------
OPERATING PROFIT 3 442,291 626,680 1,046,555
Interest receivable 12,411 17,446 29,135
--------- --------- ---------
PROFIT ON ORDINARY ACTIVITIES BEFORE
TAXATION 454,702 644,126 1,075,690
Tax on profit on ordinary activities 5 126,427 172,285 287,716
--------- --------- ---------
PROFIT ON ORDINARY ACTIVITIES AFTER
TAXATION 328,275 471,841 787,974
Dividend 404,991 480,118 801,797
--------- --------- ---------
RETAINED (LOSS) FOR YEAR (76,716) (8,277) (13,823)
Retained profit brought forward 311,901 235,185 392,759
--------- --------- ---------
RETAINED PROFIT CARRIED FORWARD 235,185 226,908 378,936
========= ========= =========
</TABLE>
There are no recognised gains and losses in the year other than the retained
loss for the year.
All items dealt with in arriving at turnover and operating profit for each year
relate to continuing activities.
The attached notes form part of these financial statements.
F-38
<PAGE> 130
CAMINUS LIMITED
(FORMERLY CAMINUS ENERGY LIMITED)
BALANCE SHEETS
AS AT 30 APRIL 1997 AND 30 APRIL 1998
- --------------------------------------------------------------------------------
In this prospectus, certain UK Sterling amounts have been translated into
United States dollars at the rate of L1 to US $1.67. Such translations should
not be construed as representations that the UK Sterling amounts represent, or
have been or could be converted into, United States Dollars at that or any other
rate.
<TABLE>
<CAPTION>
NOTES 1997 1998 1998
----- --------- --------- ---------
L L US $
<S> <C> <C> <C> <C>
FIXED ASSETS
Tangible assets 6 47,038 87,065 145,399
Investments 7 200 200 334
--------- ---------
47,238 87,265 145,733
CURRENT ASSETS
Work in Progress -- 9,483 15,837
Debtors 8 535,691 564,441 942,616
Cash at bank and in hand 531,223 311,871 520,825
--------- ---------
1,066,914 885,795 1,479,278
CREDITORS:
Amounts falling due within one year 9 877,817 744,185 1,242,790
--------- ---------
NET CURRENT ASSETS 189,097 141,610 236,488
--------- ---------
TOTAL ASSETS LESS CURRENT
LIABILITIES 236,335 228,875 382,221
PROVISION FOR LIABILITIES AND
CHARGES 10 -- 817 1,364
--------- ---------
NET ASSETS 236,335 228,058 380,857
========= ========= =========
CAPITAL AND RESERVES
Called up share capital 11 950 950 1,587
Other reserves 12 200 200 334
Profit and loss account 235,185 226,908 378,936
--------- ---------
EQUITY SHAREHOLDERS' FUNDS 236,335 228,058 380,857
========= ========= =========
</TABLE>
ON BEHALF OF THE BOARD
DR N L EVANS
DIRECTOR
APPROVED BY THE BOARD ON 10 SEPTEMBER 1998
The attached notes form part of these financial statements.
F-39
<PAGE> 131
CAMINUS LIMITED
(FORMERLY CAMINUS ENERGY LIMITED)
CASH FLOW STATEMENTS
FOR THE YEARS ENDED 30 APRIL 1997 AND 30 APRIL 1998
- --------------------------------------------------------------------------------
In this prospectus, certain UK Sterling amounts have been translated into
United States dollars at the rate of L1 to US $1.67. Such translations should
not be construed as representations that the UK Sterling amounts represent, or
have been or could be converted into, United States Dollars at that or any other
rate.
<TABLE>
<CAPTION>
1997 1998 1998
-------- -------- ---------
L L US $
<S> <C> <C> <C>
NET CASH INFLOW FROM CONTINUING OPERATING
ACTIVITIES 636,678 533,146 890,354
RETURNS ON INVESTMENTS AND SERVICING OF
FINANCE
Interest received 12,411 17,446 29,135
Taxation (146,836) (128,496) (214,588)
CAPITAL EXPENDITURE AND FINANCIAL
INVESTMENTS
Purchase of tangible fixed assets (20,904) (68,536) (114,455)
Equity dividends paid to shareholders (97,733) (572,912) (956,763)
-------- -------- ---------
Net (decrease)/increase in cash 383,616 (219,352) (366,317)
======== ======== =========
RECONCILIATION OF OPERATING PROFIT TO NET
CASH INFLOW FROM OPERATING ACTIVITIES:
Operating profit 442,291 626,680 1,046,555
Depreciation 19,874 28,509 47,610
(Increase) in work in progress -- (9,483) (15,837)
(Increase) in trade debtors (98,858) (9,456) (15,792)
(Increase) in other debtors (5,653) (19,294) (32,221)
Increase in trade creditors 12,287 49,378 82,461
(Decrease)/increase in other creditors 266,737 (133,188) (222,422)
-------- -------- ---------
Net cash inflow from operating activities 636,678 533,146 890,354
======== ======== =========
RECONCILIATION TO NET FUNDS
(Decrease)/increase in net cash 383,616 (219,352) (366,317)
Net funds at beginning of year 147,607 531,223 887,142
-------- -------- ---------
Net funds at end of year 531,223 311,871 520,825
======== ======== =========
</TABLE>
F-40
<PAGE> 132
CAMINUS LIMITED
(FORMERLY CAMINUS ENERGY LIMITED)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 30 APRIL 1997 AND 30 APRIL 1998
- --------------------------------------------------------------------------------
1. PRINCIPAL ACCOUNTING POLICIES
ACCOUNTING CONVENTION
The financial statements have been prepared under the historical cost
convention.
The financial statements were prepared in accordance with accounting principles
generally accepted in the United Kingdom, the application of which by Caminus
Limited does not differ materially from accounting principles generally accepted
in the United States, except in respect of the presentation of cash flow
information, as detailed in note 14 to the financial statements.
TURNOVER
Turnover represents amounts received, excluding Value Added Tax, for services
supplied during the year.
DEPRECIATION
Depreciation is calculated to write off tangible fixed assets over their
estimated useful lives by equal annual installments at the following rates:
Computers -- 33% of cost per annum
Equipment, furniture and fittings -- 20% of cost per annum
DEFERRED TAXATION
Deferred taxation is provided in respect of all material timing differences.
PENSION COSTS
The Company's pension obligations are covered by contributions to personal
pension plans for individual employees. Contributions are written off to the
profit and loss account in the year in which they are paid.
F-41
<PAGE> 133
CAMINUS LIMITED
(FORMERLY CAMINUS ENERGY LIMITED)
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED 30 APRIL 1997 AND 30 APRIL 1998
- --------------------------------------------------------------------------------
2. TURNOVER
The turnover is all attributable to the company's principal activity.
<TABLE>
<CAPTION>
1997 1998
--------- ---------
L L
<S> <C> <C>
Analysis of turnover by geographical area:
United Kingdom 1,626,384 1,945,317
Rest of Europe, USA and Japan 433,503 571,262
--------- ---------
2,059,887 2,516,579
========= =========
</TABLE>
3. OPERATING PROFIT
<TABLE>
<CAPTION>
1997 1998
--------- ---------
L L
<S> <C> <C>
Operating profit is stated after charging:
Staff costs (note 4) 1,347,017 1,468,565
Depreciation 19,874 28,509
Auditors' renumeration 1,200 1,200
</TABLE>
4. STAFF COSTS
<TABLE>
<CAPTION>
1997 1998
--------- ---------
L L
<S> <C> <C>
Staff costs comprise the following:
Wages and salaries 576,517 870,057
Bonuses 587,552 355,376
Social security costs 117,785 122,437
Other pension costs 65,163 75,695
Compensation for loss of office -- 45,000
--------- ---------
1,347,017 1,468,565
========= =========
</TABLE>
F-42
<PAGE> 134
CAMINUS LIMITED
(FORMERLY CAMINUS ENERGY LIMITED)
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED 30 APRIL 1997 AND 30 APRIL 1998
- --------------------------------------------------------------------------------
The average number of persons, including directors, employed during the year
was:
<TABLE>
<CAPTION>
1997 1998
------ ------
NUMBER NUMBER
<S> <C> <C>
Consulting 16 17
Office and management 4 5
-- --
20 22
== ==
</TABLE>
Staff costs include the following directors' emoluments:
<TABLE>
<CAPTION>
1997 1998
------- -------
L L
<S> <C> <C>
Management remuneration 718,068 615,504
Contributions to money purchase pension schemes, in
respect of three directors 33,676 32,461
Compensation for loss of office -- 45,000
------- -------
751,744 692,965
======= =======
</TABLE>
The remuneration of the highest paid director was as follows:
<TABLE>
<CAPTION>
1997 1998
------- -------
L L
<S> <C> <C>
Management remuneration 263,951 215,970
Contributions to money purchase pension scheme 10,595 7,644
------- -------
274,546 223,614
======= =======
</TABLE>
5. TAX ON PROFIT ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
1997 1998
------- -------
L L
<S> <C> <C>
Corporation Tax on the taxable profit at the rate of
27.49% (1997: 27.65%) 126,427 171,468
Deferred taxation -- 817
------- -------
126,427 172,285
======= =======
</TABLE>
F-43
<PAGE> 135
CAMINUS LIMITED
(FORMERLY CAMINUS ENERGY LIMITED)
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED 30 APRIL 1997 AND 30 APRIL 1998
- --------------------------------------------------------------------------------
6. TANGIBLE FIXED ASSETS -- YEAR ENDED 30 APRIL 1997
<TABLE>
<CAPTION>
EQUIPMENT
FURNITURE
COMPUTERS & FITTINGS TOTAL
--------- ---------- -------
L L L
<S> <C> <C> <C>
Cost at beginning of year 90,258 109,875 200,133
Additions 15,739 5,165 20,904
------- ------- -------
Cost at end of year 105,997 115,040 221,037
------- ------- -------
Accumulated depreciation at beginning of
year 61,594 92,531 154,125
Charge for year 14,077 5,797 19,874
------- ------- -------
Accumulated depreciation at end of year 75,671 98,328 173,999
------- ------- -------
Net book value at end of year 30,326 16,712 47,038
======= ======= =======
Net book value at beginning of year 28,664 17,344 46,008
======= ======= =======
</TABLE>
6. TANGIBLE FIXED ASSETS -- YEAR ENDED 30 APRIL 1998
<TABLE>
<CAPTION>
EQUIPMENT
FURNITURE
COMPUTERS & FITTINGS TOTAL
--------- ---------- -------
L L L
<S> <C> <C> <C>
Cost at beginning of year 105,997 115,040 221,037
Additions 26,357 42,179 68,536
Disposals (5,206) -- (5,206)
------- ------- -------
Cost at end of year 127,148 157,219 284,367
------- ------- -------
Accumulated depreciation at beginning of
year 75,671 98,328 173,999
Charge for year 18,952 9,557 28,509
Disposals (5,206) -- (5,206)
------- ------- -------
Accumulated depreciation at end of year 89,417 107,885 197,302
------- ------- -------
Net book value at end of year 37,731 49,334 87,065
======= ======= =======
Net book value at beginning of year 30,326 16,712 47,038
======= ======= =======
</TABLE>
F-44
<PAGE> 136
CAMINUS LIMITED
(FORMERLY CAMINUS ENERGY LIMITED)
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED 30 APRIL 1997 AND 30 APRIL 1998
- --------------------------------------------------------------------------------
7. INVESTMENTS IN SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
1997 1998
---- ----
L L
<S> <C> <C>
Wholly owned:
Caminus Consultants Limited:
100 ordinary shares of L1 each at cost 100 100
Caminus Limited:
100 ordinary shares of L1 each at cost 100 100
--- ---
200 200
=== ===
</TABLE>
The above Companies, registered in England, have not traded since their
incorporation and have not therefore been consolidated as the amount involved is
not material.
8. DEBTORS
<TABLE>
<CAPTION>
1997 1998
------- -------
L L
<S> <C> <C>
Due within one year:
Trade debtors 500,877 510,333
Prepayments and accrued income 34,814 54,108
------- -------
535,691 564,441
======= =======
</TABLE>
9. CREDITORS
<TABLE>
<CAPTION>
1997 1998
------- -------
L L
<S> <C> <C>
Amounts falling due within one year:
Trade creditors 18,976 68,354
Corporation Tax 25,179 51,437
Advance Corporation Tax payable 76,815 93,529
Other taxes and social security costs 256,861 229,984
Other creditors 206 200
Accruals and deferred income 7,522 47,150
Amounts owed to directors 492,258 253,531
------- -------
877,817 744,185
======= =======
</TABLE>
F-45
<PAGE> 137
CAMINUS LIMITED
(FORMERLY CAMINUS ENERGY LIMITED)
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED 30 APRIL 1997 AND 30 APRIL 1998
- --------------------------------------------------------------------------------
10. PROVISION FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
1997 1998
---- ----
L L
<S> <C> <C>
Provision for deferred taxation at beginning of year -- --
Charge for the year -- 817
--- ---
Provision at end of year -- 817
=== ===
The provision for deferred taxation is made up as follows:
On accelerated capital allowances -- 817
=== ===
-- 817
=== ===
</TABLE>
11. SHARE CAPITAL
<TABLE>
<CAPTION>
1997 1998
----- -----
L L
<S> <C> <C>
Authorised:
5,000 ordinary shares of L1 each 5,000 5,000
===== =====
Allotted, issued and fully paid:
950 ordinary shares of L1 each 950 950
===== =====
</TABLE>
12. OTHER RESERVES
<TABLE>
<CAPTION>
1997 1998
---- ----
L L
<S> <C> <C>
Capital redemption reserve, representing a transfer from
distributable reserves in respect of the Company's purchase
of its own shares 200 200
=== ===
</TABLE>
13. FINANCIAL COMMITMENTS
Commitments for rentals payable under operating leases in the year to 30 April
1999 are as follows:
<TABLE>
<CAPTION>
LAND AND
BUILDINGS
---------
L
<S> <C> <C>
Leases expiring after more than five years 70,000
=========
</TABLE>
F-46
<PAGE> 138
CAMINUS LIMITED
(FORMERLY CAMINUS ENERGY LIMITED)
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED 30 APRIL 1997 AND 30 APRIL 1998
- --------------------------------------------------------------------------------
14. SUMMARY OF DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES ("GAAP")
These financial statements have been prepared in accordance with accounting
principles generally accepted in the United Kingdom ("UK GAAP"). Such
principles, as applied by Caminus Limited, do not differ materially from
accounting principles generally accepted in the United States ("US GAAP").
(a) Cash flow statement
The cash flow statement has been prepared under UK GAAP in accordance with FRS 1
revised and presents substantially the same information as required under SFAS
95. There are certain differences between FRS 1 revised and SFAS 95 with regard
to the classification of items within the cash flow statement.
In accordance with FRS 1 revised, cash flows are presented separately for
operating activities, returns on investments and servicing of finance, taxation,
capital expenditure and financial investment, acquisitions and disposals, equity
dividends paid, management of liquid resources and financing. Under SFAS 95 cash
flows are classified under operating activities, investing activities and
financing activities.
A summary of the company's cash flows from operating, investing and financing
activities, classified in accordance with SFAS 95 is presented below.
<TABLE>
<CAPTION>
1997 1998 1998
-------- -------- --------
L L US $
<S> <C> <C> <C>
Net cash provided by operating activities 502,253 422,096 704,901
Net cash used in investing activities (20,904) (68,536) (114,455)
Net cash used in financing activities (97,733) (572,912) (956,763)
-------- -------- --------
Net (decrease)/increase in cash at bank and 383,616 (219,352) (366,317)
in hand
Cash at bank and in hand at beginning of 147,607 531,223 887,142
year
-------- -------- --------
Cash at bank and in hand at end of year 531,223 311,871 520,825
======== ======== ========
</TABLE>
(b) United States Dollar Equivalent Data
The United States Dollar equivalent data presented in these financial statements
is included for information only. It does not, and is not meant to, reflect the
financial statements had they been translated in accordance with United States
Generally Accepted Accounting Principles. The exchange rate used for this
presentation was L1 sterling to US $1.67. This rate was arrived at by using the
closing inter-bank rate on 30 April 1998.
15. ULTIMATE PARENT COMPANY
On 12 May 1998 the Company was acquired by, and became a wholly owned subsidiary
of, GFI Caminus LLC, trading as Caminus Energy Ventures, registered in Delaware,
USA.
F-47
<PAGE> 139
YOU MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS
PROSPECTUS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR THE SALE OF THE SHARES
OF COMMON STOCK MEANS THAT INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT
AFTER THE DATE OF THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR
SOLICITATION OF AN OFFER TO BUY THESE SHARES IN ANY CIRCUMSTANCES UNDER WHICH
THE OFFER OR SOLICITATION IS UNLAWFUL.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................... 3
Risk Factors......................... 7
Special Note Regarding Forward-
Looking Statements................. 20
Caminus Corporation.................. 21
Use of Proceeds...................... 22
Dividend Policy...................... 23
Capitalization....................... 24
Dilution............................. 26
Selected Consolidated Financial
Data............................... 28
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 31
Business............................. 47
Management........................... 65
Certain Transactions................. 74
Principal and Selling Stockholders... 80
Description of Capital Stock......... 83
Shares Eligible for Future Sale...... 85
Underwriting......................... 87
Legal Matters........................ 89
Experts.............................. 89
Where You Can Find More
Information........................ 89
Index to Financial Statements........ F-1
</TABLE>
DEALER PROSPECTUS DELIVERY OBLIGATION: UNTIL , 1999 (25 DAYS AFTER THE
DATE OF THIS PROSPECTUS), ALL DEALERS THAT BUY, SELL OR TRADE IN THESE SHARES OF
COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. DEALERS ARE ALSO OBLIGATED TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
[LOGO]
SHARES
COMMON STOCK
DEUTSCHE BANC ALEX. BROWN
BEAR, STEARNS & CO. INC.
CIBC WORLD MARKETS
PROSPECTUS
, 1999
<PAGE> 140
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses, all of which will be
borne by the Registrant, in connection with the sale and distribution of the
securities being registered, other than the underwriting discounts and
commissions. All amounts shown are estimates except for the Securities and
Exchange Commission registration fee, the NASD filing fee and the Nasdaq
National Market listing fee.
<TABLE>
<S> <C>
SEC registration fee........................................ $20,206
NASD filing fee............................................. 7,768
Nasdaq National Market listing fee.......................... *
Blue Sky fees and expenses.................................. *
Transfer Agent and Registrar fees........................... *
Accounting fees and expenses................................ *
Legal fees and expenses..................................... *
Director and Officer Liability Insurance.................... *
Printing and mailing expenses............................... *
Miscellaneous............................................... *
-------
Total.................................................. $ *
=======
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article SEVENTH of the Registrant's Certificate of Incorporation provides
that no director of the Registrant shall be personally liable for any monetary
damages for any breach of fiduciary duty as a director, except to the extent
that the Delaware General Corporation Law prohibits the elimination or
limitation of liability of directors for breach of fiduciary duty.
Article EIGHTH of the Registrant's Certificate of Incorporation provides
that a director or officer of the Registrant:
(a) shall be indemnified by the Registrant against all expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement incurred in connection with any litigation or other legal
proceeding (other than an action by or in the right of the Registrant)
brought against him by virtue of his position as a director or officer of
the Registrant if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the Registrant,
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful and
(b) shall be indemnified by the Registrant against all expenses
(including attorneys' fees) and amounts paid in settlement incurred in
connection with any action by or in the right of the Registrant brought
against him by virtue of his position as a director or officer of the
Registrant if he acted in good faith
II-1
<PAGE> 141
and in a manner he reasonably believed to be in, or not opposed to, the
best interests of the Registrant, except that no indemnification shall be
made with respect to any matter as to which such person shall have been
adjudged to be liable to the Registrant, unless a court determines that,
despite such adjudication but in view of all of the circumstances, he is
entitled to indemnification of such expenses.
Notwithstanding the foregoing, to the extent that a director or officer has been
successful, on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, he is required to be indemnified by
the Registrant against all expenses (including attorneys' fees) incurred in
connection therewith. Expenses shall be advanced to a director or officer at his
request, provided that he undertakes to repay the amount advanced if it is
ultimately determined that he is not entitled to indemnification for such
expenses.
Indemnification is required to be made unless the Registrant determines
that the applicable standard of conduct required for indemnification has not
been met. In the event of a determination by the Registrant that the director or
officer did not meet the applicable standard of conduct required for
indemnification, or if the Registrant fails to make an indemnification payment
within 60 days after such payment is claimed by such person, such person is
permitted to petition the court to make an independent determination as to
whether such person is entitled to indemnification. As a condition precedent to
the right of indemnification, the director or officer must give the Registrant
notice of the action for which indemnity is sought and the Registrant has the
right to participate in such action or assume the defense thereof.
Article EIGHTH of the Registrant's Certificate of Incorporation further
provides that the indemnification provided therein is not exclusive, and
provides that in the event that the Delaware General Corporation Law is amended
to expand the indemnification permitted to directors or officers the Registrant
must indemnify those persons to the fullest extent permitted by such law as so
amended.
Section 145 of the Delaware General Corporation Law provides that a
corporation has the power to indemnify a director, officer, employee or agent of
the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred in
connection with an action or proceeding to which he is or is threatened to be
made a party by reason of such position, if such person shall have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, in any criminal proceeding, if such person
had no reasonable cause to believe his conduct was unlawful; provided that, in
the case of actions brought by or in the right of the corporation, no
indemnification shall be made with respect to any matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the adjudicating court determines that such indemnification is
proper under the circumstances.
Under Section 8 of the Underwriting Agreement, the underwriters are
obligated, under certain circumstances, to indemnify directors and officers of
the Registrant against certain liabilities, including liabilities under the
Securities Act. Reference is made to the form of Underwriting Agreement filed as
Exhibit 1 hereto.
II-2
<PAGE> 142
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
CERTAIN SALES OF SECURITIES. Since the formation of its predecessor as a
limited liability company on April 29, 1998, the Registrant or its predecessor
has issued the following securities that were not registered under the
Securities Act, as summarized below.
(a) Issuances of membership interests/capital stock.
1. In May 1998, Caminus LLC issued an aggregate of 76,540,000 shares
of Series A membership interest to certain investors at an aggregate
purchase price of $22,750,000 ($ per share of common stock on an
as-converted basis). 10,766,066 of such shares were issued in connection
with the Registrant's acquisition of Caminus Limited. In December 1998,
Caminus LLC repurchased 18,504,176 shares from SS&C Technologies. The
remaining 58,035,824 shares will convert into an aggregate of shares
of common stock of the Registrant prior to this offering.
2. In July 1998, Caminus LLC issued an aggregate of 672,879 shares of
Series A membership interest and 1,363,156 shares of Series B membership
interest (which will convert into shares of common stock of the
Registrant prior to this offering) to an individual at an aggregate
purchase price of $200,000 ($ per share of common stock on an
as-converted basis).
3. In October 1998, Caminus LLC issued an aggregate of 3,364,396
shares of Series A membership interest (which will convert into an
aggregate of shares of common stock of the Registrant prior to
this offering) to an individual at an aggregate purchase price of
$1,000,000 ($ per share of common stock on an as-converted basis).
4. In November 1998, Caminus LLC issued an aggregate of 603,607 shares
of Series A membership interest (which will convert into an aggregate of
shares of common stock of the Registrant prior to this offering)
at an aggregate purchase price of $348,333 in connection with its
acquisition of Positron Energy Consulting. Such number of shares of
membership interest is subject to reduction on the first and second
anniversaries of the purchase of Positron by the Registrant, depending upon
performance criteria, including the successful integration of Positron's
software into the Registrant's operations.
5. In December 1998, Caminus LLC issued an aggregate of 21,579,728
shares of Series A membership interest (which will convert into an
aggregate of shares of common stock of the Registrant prior to
this offering) at an aggregate purchase price of $10,339,350 in connection
with its acquisition of Zai*Net Software, L.P.
6. In May 1999, Caminus LLC issued an aggregate of 616,287 shares of
Series A membership interest (which will convert into an aggregate of
shares of common stock of the Registrant prior to this offering)
to certain individuals at an aggregate purchase price of $338,958 ($
per share of common stock on an as-converted basis).
7. In July 1999, Caminus LLC issued an aggregate of 10,184,727 shares
of Series A membership interest (which will convert into an aggregate of
II-3
<PAGE> 143
shares of common stock of the Registrant prior to this offering) to certain
individuals in connection with a rights offering at an aggregate purchase
price of $12,000,000 ($ per share of common stock on an as-converted
basis).
8. In August 1999, Caminus LLC issued an aggregate of 2,546,181 shares
of Series A membership interest (which will convert into an aggregate of
shares of common stock of the Registrant prior to this offering)
at an aggregate purchase price of $3,000,000 in connection with its
acquisition of DC Systems, Inc.
(b) Stock option grants to employees.
1. From February 1999 through September 30, 1999, Caminus LLC issued
options under its 1998 Stock Option Plan to purchase an aggregate of
3,374,350 shares of Series B membership interest (which will convert into
options to purchase an aggregate of shares of common stock of the
Registrant prior to this offering) at a weighted average exercise price of
$0.75 per share ($ per share of common stock on an as-converted basis).
None of these options has been exercised.
2. On September 30, 1999, the Registrant granted options to purchase
an aggregate of shares of common stock, each at an exercise price
equal to the initial public offering price. None of these options has been
exercised.
(c) Issuances and grants of other securities.
1. In May 1998, Caminus LLC granted an option to an investor to
purchase that number of shares of Series C membership interest which equals
a 10% membership interest in the Registrant. On the grant date, such option
provided for the purchase of 10,000,000 shares of Series C membership
interest. Presently, the option provides for the purchase of 12,809,821
shares of Series C membership interest (which will convert into a warrant
to purchase shares of common stock of the Registrant prior to
this offering) at an aggregate exercise price of $ ($ per
share of common stock on an as-converted basis).
2. In May 1998, Caminus LLC granted options to purchase an aggregate
of 5,050,000 shares of Series B membership interest (which will convert
into options to purchase an aggregate of shares of common stock
of the Registrant prior to this offering) at an aggregate exercise price of
$1,500,000 ($ per share of common stock on an as-converted basis) to
certain individuals in connection with its acquisition of Caminus Limited.
3. In December 1998, Caminus LLC granted an option to an investor to
purchase 2,909,047 shares of Series B membership interest (which will
convert into an option to purchase shares of common stock of the
Registrant prior to this offering) at an aggregate exercise price of
$1,800,000 ($ per share of common stock on an as-converted basis).
No underwriters were involved in any of the foregoing sales of securities.
Such sales were made in reliance upon an exemption from the registration
provisions of the Securities Act set forth in Section 4(2) thereof relative to
sales by an issuer not involving any public offering or the rules and
regulations thereunder, or, in the
II-4
<PAGE> 144
case of the options to purchase common stock described in paragraph (b) above,
Rule 701 of the Securities Act. All of the foregoing securities are deemed
restricted securities for the purposes of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
1* Form of Underwriting Agreement.
2.1*+ Form of Agreement and Plan of Merger between the Registrant
and Caminus LLC to be filed and become effective prior to
the effective date of this offering.
2.2+ Purchase Agreement by and among Zai*Net Software, Inc.,
Zai*Net Software, L.P., GFI Caminus LLC and Brian J.
Scanlan, dated May 12, 1998.
2.3*+ Stock Purchase Agreement by and among GFI Caminus LLC,
Caminus Energy Limited, Dr. Nigel L. Evans, Ph.D. and Dr.
Michael B. Morrison, Ph. D., dated May 12, 1998.
2.4*+ Purchase Agreement by and between Zai*Net Software, L.P. and
Corwin Joy, an individual, doing business as Positron Energy
Consulting, dated November 13, 1998.
2.5+ Agreement of Merger by and between Caminus LLC and Zai*Net
Software, L.P., dated February 26, 1999.
2.6*+ Purchase Agreement by and among DC Systems, Inc., Caminus
LLC, Caminus/DC Acquisition Corp., and the Shareholders (as
defined in the agreement) dated July 31, 1999.
3.1 Certificate of Incorporation of the Registrant.
3.2 Bylaws of the Registrant.
4* Specimen certificate for shares of Common Stock, $0.01 par
value per share, of the Registrant.
5* Opinion of Hale and Dorr LLP.
10.1 1998 Stock Incentive Plan.
10.2* 1999 Stock Incentive Plan, including forms of stock option
agreement for incentive and nonstatutory stock options.
10.3* 1999 Employee Stock Purchase Plan.
10.4* Limited Liability Company Agreement of GFI Caminus LLC,
dated May 12, 1998.
10.5* Assignment and Assumption Agreement by and among Zai*Net
Software, Inc., Zai*Net Software, L.P. and Brian J. Scanlan,
dated May 12, 1998.
10.6* Second Assignment and Assumption Agreement by and between
Zai*Net Software, Inc. and Rooney Software, L.L.C.
10.7 Conversion Agreement and Amendment of Purchase Agreement by
and among Caminus Energy Ventures LLC, Zak Associates, Inc.,
Zai*Net Software, L.P., Brian Scanlan and Rooney Software,
L.L.C., dated December 31, 1998.
10.8 Cooperation Agreement by and between ABB Energy Information
Systems and Caminus LLC, dated July 13, 1999.
10.9* Credit Agreement by and between Caminus LLC and Fleet Bank,
N.A., dated June 23, 1999.
10.10* Security Agreement by and between Caminus LLC and Fleet
Bank, N.A., dated June 23, 1999.
</TABLE>
II-5
<PAGE> 145
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
10.11 Debenture issued by Caminus Energy Limited to Fleet Bank,
N.A., dated June 23, 1999.
10.12 Debenture issued by Caminus Limited to Fleet Bank, N.A.,
dated June 23, 1999.
10.13 Debenture issued by Zai*Net Software Limited to Fleet Bank,
N.A., dated June 23, 1999.
10.14 Guarantee by Caminus Energy Limited in favor of Fleet Bank,
N.A., dated June 23, 1999.
10.15 Guarantee by Caminus Limited in favor of Fleet Bank, N.A.,
dated June 23, 1999.
10.16 Guarantee by Zai*Net Software Limited in favor of Fleet
Bank, N.A., dated June 23, 1999.
10.17 Mortgage of Stock and Shares by Caminus Limited in favor of
Fleet Bank, N.A., dated June 23, 1999.
10.18 Mortgage of Stock and Shares by Caminus LLC in favor of
Fleet Bank, N.A., dated June 23, 1999.
10.19 Employment Agreement by and between David M. Stoner and
Caminus Energy Ventures LLC, dated May 12, 1998.
10.20 Pledge and Security Agreement by and between David M. Stoner
and Caminus Energy Ventures LLC, dated October 21, 1998.
10.21 Service Agreement by and between Dr. Nigel L. Evans and
Caminus Energy Limited, dated May 12, 1998.
10.22 Covenant Not to Compete by and among Dr. Nigel L. Evans, Dr.
Michael B. Morrison and Caminus Energy Limited, dated May
12, 1998.
10.23 Employment Agreement by and between Brian J. Scanlan and
Zai*Net Software, L.P., dated May 12, 1998.
10.24 Covenant Not to Compete by and between Brian J. Scanlan and
Zai*Net Software, L.P., dated May 12, 1998.
10.25 Employment Agreement by and between Simon Young and Zai*Net
Software, L.P., dated May 12, 1998.
10.26 Covenant Not to Compete by and between Simon Young and
Zai*Net Software, L.P., dated May 12, 1998.
10.27 Distributor Agreement by and between SS&C Technologies, Inc.
and GFI Caminus LLC, dated May 12, 1998.
10.28* Distributor Agreement by and between SS&C Technologies, Inc.
and Caminus Energy Ventures LLC, dated December 31, 1998.
10.29* Lease Agreement by and between Sage Realty Corporation and
Zai*Tech Software, Inc., as amended, dated February 15, 1991
(including Amendment Nos. 1, 2 and 3, reflecting the name
changes to Zai*Net Software, Inc. Zai*Net Software, L.P. and
Caminus LLC, respectively).
10.30* Service Agreement by and between Dr. Michael B. Morrison and
Caminus Energy Limited, dated May 12, 1998.
21.1 Subsidiaries of the Registrant.
23.1* Consent of Hale and Dorr LLP (included in Exhibit 5).
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Peters, Elworthy & Moore.
</TABLE>
II-6
<PAGE> 146
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
24 Power of Attorney (included on page II-8).
27 Financial Data Schedule.
</TABLE>
- -------------------------
* To be filed by amendment.
+ The Registrant hereby agrees to furnish supplementally a copy of any omitted
schedules to this agreement to the Securities and Exchange Commission upon its
request.
(b) Financial Statement Schedules
All schedules have been omitted because they are not required or because
the required information is given in the Registrant's consolidated financial
statements or notes to those statements.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions contained in the Certificate of
Incorporation of the Registrant and the laws of the State of Delaware, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, 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 this offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-7
<PAGE> 147
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in New York, New York, on
this 1st day of October, 1999.
CAMINUS CORPORATION
By: /s/ DAVID M. STONER
------------------------------------
David M. Stoner
President and Chief Executive
Officer
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Caminus Corporation, hereby
severally constitute and appoint David M. Stoner, Mark A. Herman and James R.
Burke, and each of them singly, our true and lawful attorneys with full power to
them, and each of them singly, to sign for us and in our names in the capacities
indicated below, the Registration Statement on Form S-1 filed herewith and any
and all pre-effective and post-effective amendments to said Registration
Statement, and any subsequent Registration Statement for the same offering which
may be filed under Rule 462(b), and generally to do all such things in our names
and on our behalf in our capacities as officers and directors to enable Caminus
Corporation to comply with the provisions of the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange Commission, hereby
ratifying and confirming our signatures as they may be signed by our said
attorneys, or any of them, to said Registration Statement and any and all
amendments thereto or to any subsequent Registration Statement for the same
offering which may be filed under Rule 462(b).
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DAVID M. STONER President and Chief Executive October 1, 1999
- --------------------------------------------------- Officer (Principal Executive
David M. Stoner Officer) and Director
/s/ MARK A. HERMAN Vice President, Chief October 1, 1999
- --------------------------------------------------- Financial Officer and
Mark A. Herman Treasurer (Principal Financial
Officer and Principal
Accounting Officer)
/s/ LAWRENCE D. GILSON Chairman of the Board of October 1, 1999
- --------------------------------------------------- Directors
Lawrence D. Gilson
/s/ NIGEL L. EVANS Director October 1, 1999
- ---------------------------------------------------
Nigel L. Evans
</TABLE>
II-8
<PAGE> 148
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ BRIAN J. SCANLAN Director October 1, 1999
- ---------------------------------------------------
Brian J. Scanlan
/s/ CHRISTOPHER S. BROTHERS Director October 1, 1999
- ---------------------------------------------------
Christopher S. Brothers
/s/ ANTHONY H. BLOOM Director October 1, 1999
- ---------------------------------------------------
Anthony H. Bloom
/s/ RICHARD K. LANDERS Director October 1, 1999
- ---------------------------------------------------
Richard K. Landers
</TABLE>
II-9
<PAGE> 149
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
1* Form of Underwriting Agreement.
2.1*+ Form of Agreement and Plan of Merger between the Registrant
and Caminus LLC to be filed and become effective prior to
the effective date of this offering.
2.2+ Purchase Agreement by and among Zai*Net Software, Inc.,
Zai*Net Software, L.P., GFI Caminus LLC and Brian J.
Scanlan, dated May 12, 1998.
2.3*+ Stock Purchase Agreement by and among GFI Caminus LLC,
Caminus Energy Limited, Dr. Nigel L. Evans, Ph.D. and Dr.
Michael B. Morrison, Ph.D., dated May 12, 1998.
2.4*+ Purchase Agreement by and between Zai*Net Software, L.P. and
Corwin Joy, an individual, doing business as Positron Energy
Consulting, dated November 13, 1998.
2.5+ Agreement of Merger by and between Caminus LLC and Zai*Net
Software, L.P., dated February 26, 1999.
2.6*+ Purchase Agreement by and among DC Systems, Inc., Caminus
LLC, Caminus/DC Acquisition Corp., and the Shareholders (as
defined in the agreement) dated July 31, 1999.
3.1 Certificate of Incorporation of the Registrant.
3.2 Bylaws of the Registrant.
4* Specimen certificate for shares of Common Stock, $0.01 par
value per share, of the Registrant.
5* Opinion of Hale and Dorr LLP.
10.1 1998 Stock Incentive Plan.
10.2* 1999 Stock Incentive Plan, including forms of stock option
agreement for incentive and nonstatutory stock options.
10.3* 1999 Employee Stock Purchase Plan.
10.4* Limited Liability Company Agreement of GFI Caminus LLC,
dated May 12, 1998.
10.5* Assignment and Assumption Agreement by and among Zai*Net
Software, Inc., Zai*Net Software, L.P. and Brian J. Scanlan,
dated May 12, 1998.
10.6* Second Assignment and Assumption Agreement by and between
Zai*Net Software, Inc. and Rooney Software, L.L.C.
10.7 Conversion Agreement and Amendment of Purchase Agreement by
and among Caminus Energy Ventures LLC, Zak Associates, Inc.,
Zai*Net Software, L.P., Brian Scanlan and Rooney Software,
L.L.C., dated December 31, 1998.
10.8 Cooperation Agreement by and between ABB Energy Information
Systems and Caminus LLC, dated July 13, 1999.
10.9* Credit Agreement by and between Caminus LLC and Fleet Bank,
N.A., dated June 23, 1999.
10.10* Security Agreement by and between Caminus LLC and Fleet
Bank, N.A., dated June 23, 1999.
10.11 Debenture issued by Caminus Energy Limited to Fleet Bank,
N.A., dated June 23, 1999.
10.12 Debenture issued by Caminus Limited to Fleet Bank, N.A.,
dated June 23, 1999.
10.13 Debenture issued by Zai*Net Software Limited to Fleet Bank,
N.A., dated June 23, 1999.
10.14 Guarantee by Caminus Energy Limited in favor of Fleet Bank,
N.A., dated June 23, 1999.
10.15 Guarantee by Caminus Limited in favor of Fleet Bank, N.A.,
dated June 23, 1999.
10.16 Guarantee by Zai*Net Software Limited in favor of Fleet
Bank, N.A., dated June 23, 1999.
10.17 Mortgage of Stock and Shares by Caminus Limited in favor of
Fleet Bank, N.A., dated June 23, 1999.
</TABLE>
II-10
<PAGE> 150
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
10.18 Mortgage of Stock and Shares by Caminus LLC in favor of
Fleet Bank, N.A., dated June 23, 1999.
10.19 Employment Agreement by and between David M. Stoner and
Caminus Energy Ventures LLC, dated May 12, 1998.
10.20 Pledge and Security Agreement by and between David M. Stoner
and Caminus Energy Ventures LLC, dated October 21, 1998.
10.21 Service Agreement by and between Dr. Nigel L. Evans and
Caminus Energy Limited, dated May 12, 1998.
10.22 Covenant Not to Compete by and among Dr. Nigel L. Evans, Dr.
Michael B. Morrison and Caminus Energy Limited, dated May
12, 1998.
10.23 Employment Agreement by and between Brian J. Scanlan and
Zai*Net Software, L.P., dated May 12, 1998.
10.24 Covenant Not to Compete by and between Brian J. Scanlan and
Zai*Net Software, L.P., dated May 12, 1998.
10.25 Employment Agreement by and between Simon Young and Zai*Net
Software, L.P., dated May 12, 1998.
10.26 Covenant Not to Compete by and between Simon Young and
Zai*Net Software, L.P., dated May 12, 1998.
10.27 Distributor Agreement by and between SS&C Technologies, Inc.
and GFI Caminus LLC, dated May 12, 1998.
10.28* Distributor Agreement by and between SS&C Technologies, Inc.
and Caminus Energy Ventures LLC, dated December 31, 1998.
10.29* Lease Agreement by and between Sage Realty Corporation and
Zai*Tech Software, Inc., as amended, dated February 15, 1991
(including Amendment Nos. 1, 2 and 3, reflecting the name
changes to Zai*Net Software, Inc. Zai*Net Software, L.P. and
Caminus LLC, respectively).
10.30* Service Agreement by and between Dr. Michael B. Morrison and
Caminus Energy Limited, dated May 12, 1998.
21.1 Subsidiaries of the Registrant.
23.1* Consent of Hale and Dorr LLP (included in Exhibit 5).
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Peters, Elworthy & Moore.
24 Power of Attorney (included on page II-8).
27 Financial Data Schedule.
</TABLE>
- -------------------------
* To be filed by amendment.
+ The Registrant hereby agrees to furnish supplementally a copy of any omitted
schedules to this agreement to the Securities and Exchange Commission upon its
request.
II-11
<PAGE> 1
Exhibit 2.2
PURCHASE AGREEMENT
BY AND AMONG
ZAI*NET SOFTWARE, INC.,
A DELAWARE CORPORATION,
ZAI*NET SOFTWARE, L.P.,
A DELAWARE LIMITED PARTNERSHIP,
GFI CAMINUS LLC
A DELAWARE LIMITED LIABILITY COMPANY,
AND
BRIAN J. SCANLAN,
AN INDIVIDUAL
MAY 12, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1 DEFINITIONS.....................................................................................................2
ARTICLE 2 PURCHASE AND SALE OF PARTNERSHIP INTEREST.......................................................................4
2.1 THE CLOSING; CLOSING DATE...............................................................................4
-------------------------
2.2 SALE OF PARTNERSHIP INTEREST............................................................................4
----------------------------
2.2.1 ZAI*NET........................................................................................4
-------
2.2.2 SCANLAN........................................................................................4
-------
2.3 PAYMENT OF CASH AMOUNT..................................................................................4
----------------------
2.4 WORKING CAPITAL ADJUSTMENT..............................................................................4
--------------------------
2.4.1 CLOSING ADJUSTMENT.............................................................................4
------------------
2.4.1.1 LOAN FOR DISTRIBUTION...............................................................4
2.4.1.2 DECREASE IN PURCHASE PRICE..........................................................5
2.4.2 POST-CLOSING ADJUSTMENT........................................................................5
-----------------------
2.5 ADDITIONAL PURCHASE PRICE...............................................................................5
-------------------------
2.5.1 FIRST ADDITIONAL PAYMENT.......................................................................5
------------------------
2.5.2 SECOND ADDITIONAL PAYMENT......................................................................6
-------------------------
2.5.3 CUMULATIVE REVENUES............................................................................6
-------------------
2.5.4 ACQUISITIONS...................................................................................6
------------
2.5.5 QUALIFIED PUBLIC OFFERING AND CHANGE IN CONTROL................................................7
-----------------------------------------------
2.5.6 DISPUTE RESOLUTION.............................................................................7
------------------
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP, ZAI*NET AND SCANLAN..........................................7
3.1 EXISTENCE AND GOOD STANDING.............................................................................8
---------------------------
3.1.1 ZAI*NET........................................................................................8
-------
3.1.2 ORGANIZATIONAL DOCUMENTS.......................................................................8
------------------------
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
3.1.3 SUBSIDIARIES...................................................................................8
------------
3.2 AUTHORITY...............................................................................................8
---------
3.3 STOCKHOLDERS' MEETING...................................................................................9
---------------------
3.4 NO CONFLICTS............................................................................................9
------------
3.5 FINANCIAL STATEMENTS....................................................................................9
--------------------
3.6 TRANSACTION EXPENSES...................................................................................10
--------------------
3.7 MATERIAL CONTRACTS.....................................................................................10
------------------
3.8 INTELLECTUAL PROPERTY..................................................................................10
---------------------
3.9 INSURANCE..............................................................................................10
---------
3.10 LABOR RELATIONS AND EMPLOYEE AGREEMENTS; ERISA MATTERS.................................................11
------------------------------------------------------
3.10.1 COMPLIANCE....................................................................................11
----------
3.10.2 EMPLOYMENT AGREEMENTS.........................................................................11
---------------------
3.10.3 ERISA.........................................................................................11
-----
3.10.4 INCLUSION OF ZAI*NET..........................................................................11
--------------------
3.11 PAYMENT OF TAXES.......................................................................................11
----------------
3.12 BOOKS OF ACCOUNT; BANK ACCOUNTS........................................................................12
-------------------------------
3.13 CONDITION OF TANGIBLE ASSETS...........................................................................12
---------------------------
3.14 OWNERSHIP OF ASSETS....................................................................................12
-------------------
3.15 BROKERS................................................................................................13
-------
3.16 LITIGATION.............................................................................................13
----------
3.17 PERSONAL PROPERTY LEASES...............................................................................13
------------------------
3.18 REAL PROPERTY LEASES...................................................................................13
--------------------
3.19 COMPLIANCE WITH LAWS; PERMITS..........................................................................13
-----------------------------
3.20 CAPITALIZATION AND TITLE TO PARTNERSHIP INTERESTS......................................................14
-------------------------------------------------
3.21 UNDISCLOSED LIABILITIES................................................................................14
-----------------------
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
3.22 SCOPE OF REPRESENTATIONS AND WARRANTIES................................................................14
---------------------------------------
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF GFI CAMINUS..................................................................14
4.1 EXISTENCE AND GOOD STANDING............................................................................14
---------------------------
4.2 AGREEMENT..............................................................................................15
---------
4.2.1 AGREEMENT AUTHORIZED..........................................................................15
--------------------
4.2.2 NO CONFLICT...................................................................................15
-----------
4.3 BROKERS................................................................................................15
-------
4.4 LITIGATION.............................................................................................15
----------
ARTICLE 5 RELATED AGREEMENTS; ACKNOWLEDGEMENTS...........................................................................16
5.1 RELIANCE...............................................................................................16
--------
5.2 ACKNOWLEDGMENTS........................................................................................16
---------------
5.3 DOCUMENT DELIVERY......................................................................................16
-----------------
5.4 NAME CHANGE............................................................................................17
-----------
5.5 JOINDER TO PARTNERSHIP AGREEMENT.......................................................................17
--------------------------------
5.6 NEWCO LLC..............................................................................................17
---------
5.7 EMPLOYMENT POLICIES....................................................................................17
-------------------
ARTICLE 6 INDEMNITY......................................................................................................17
6.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS..................................................17
-----------------------------------------------------
6.1.1 SELLERS.......................................................................................17
-------
6.1.2 GFI CAMINUS...................................................................................18
-----------
6.2 THE INDEMNITY OBLIGATION...............................................................................18
------------------------
6.3 CLAIMS.................................................................................................19
------
6.3.1 NOTICE........................................................................................19
------
6.3.2 THIRD PARTY CLAIM PROCEDURES..................................................................19
----------------------------
6.4 LIMITATION ON THE INDEMNIFYING PARTIES' INDEMNIFICATION OBLIGATIONS....................................20
-------------------------------------------------------------------
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
6.5 OPTION TO REDUCE ADDITIONAL PAYMENTS...................................................................20
------------------------------------
6.6 SOLE AND EXCLUSIVE REMEDY..............................................................................20
-------------------------
6.7 INDEMNITY LIMITATIONS..................................................................................20
---------------------
6.8 INSURANCE RECOVERIES...................................................................................21
--------------------
ARTICLE 7 MISCELLANEOUS..................................................................................................21
7.1 ENTIRE AGREEMENT.......................................................................................21
----------------
7.2 FURTHER ASSURANCES.....................................................................................21
------------------
7.3 NOTICES................................................................................................21
-------
7.4 EXPENSES...............................................................................................23
--------
7.5 GOVERNING LAW AND SUBMISSION TO JURISDICTION...........................................................23
--------------------------------------------
7.6 EXHIBITS AND SCHEDULES.................................................................................23
----------------------
7.7 CAPTIONS...............................................................................................23
--------
7.8 SEVERABILITY...........................................................................................23
------------
7.9 COUNTERPARTS...........................................................................................23
------------
7.10 SUCCESSORS AND ASSIGNS.................................................................................24
----------------------
7.11 WAIVERS STRICTLY CONSTRUED.............................................................................24
--------------------------
7.12 NUMBER AND GENDER......................................................................................24
-----------------
7.13 SCHEDULE OMISSIONS.....................................................................................24
------------------
</TABLE>
iv
<PAGE> 6
PURCHASE AGREEMENT
This PURCHASE AGREEMENT (the "AGREEMENT") is entered into as of this 12th
day of May, 1998, by and among ZAI*NET SOFTWARE, INC., a Delaware corporation
("ZAI*NET"), ZAI*NET SOFTWARE, L.P., a Delaware limited partnership (the
"PARTNERSHIP"), GFI CAMINUS LLC, a Delaware limited liability company ("GFI
CAMINUS"), and BRIAN J. SCANLAN, an individual ("SCANLAN"), with reference to
the following facts and circumstances.
RECITALS
WHEREAS, ZAI*NET has transferred substantially all of its assets,
properties, claims, contracts, operations and businesses (including goodwill but
excluding cash) existing as of the Closing to the Partnership, and the
Partnership has assumed liabilities and obligations of ZAI*NET pursuant to an
Assignment and Assumption Agreement dated as of the date hereof (the "ASSIGNMENT
AND ASSUMPTION AGREEMENT");
WHEREAS, ZAI*NET is the owner of a ninety-nine percent (99%) limited
Partnership Interest and Scanlan is the owner of the one percent (1%) general
Partnership Interest in the Partnership;
WHEREAS, ZAI*NET desires to sell, assign and transfer to GFI Caminus and
GFI Caminus desires to purchase and accept from ZAI*NET a limited Partnership
Interest constituting seventy percent (70%) of the aggregate Partnership
Interests in the Partnership;
WHEREAS, Scanlan desires to sell, assign and transfer to GFI Caminus and
GFI Caminus desires to purchase and accept from Scanlan a one percent (1%)
general Partnership Interest in the Partnership (the purchases of partnership
interests described above are collectively referred to herein as the
"PURCHASE");
WHEREAS, immediately after the closing of the Purchase, ZAI*NET intends
to assign and transfer its remaining twenty-nine percent (29%) limited
partnership interest in the Partnership to Rooney Software, L.L.C. ("NEWCO
LLC"), pursuant to an Assignment and Assumption of LP Agreement, dated the date
hereof (the "LP ASSIGNMENT") in exchange for a controlling membership interest
in Newco LLC;
NOW THEREFORE, in consideration of the premises and the respective
representations, warranties and agreements contained herein and in the Related
Agreements (as hereinafter defined), the parties hereto hereby agree as follows:
-1-
<PAGE> 7
ARTICLE 1
DEFINITIONS
"Assignment and Assumption Agreement" shall have the meaning as set forth in the
Recitals hereto.
"Basket" shall have the meaning as set forth in Section 6.4 hereof.
"Closing" shall have the meaning as set forth in Section 2.1 hereof.
"Closing Audit" shall mean an audit of ZAI*NET as of the close of business on
April 30, 1998 to be performed by ZAI*NET's independent public accountants (as
specified by GFI Caminus) not later than sixty (60) days following the Closing.
"Closing Date" shall have the meaning as set forth in Section 2.1 hereof.
"GAAP" shall mean generally accepted accounting principles applied on a
consistent basis (for purposes of determining consistency, in the case of the
Partnership, reference shall be made to the accounting principles of ZAI*NET,
its predecessor).
"Indemnifying Parties" shall have the meaning as set forth in Section 6.2.1
hereof.
"Indemnifying Party" shall have the meaning as set forth in Section 6.2.1
hereof.
"Knowledge" or "knowledge" shall mean, with respect to the Partnership, ZAI*NET
or GFI Caminus, actual knowledge or such knowledge as would have been acquired,
after due inquiry, of the officers and key employees of the Partnership, ZAI*NET
or GFI Caminus, as the case may be; provided, however, that only the following
individuals shall be deemed officers and key employees of ZAI*NET and the
Partnership for purposes of this definition: Brian Scanlan, Simon Young, David
Markowitz and Cynthia Chang.
"Lien" shall mean any claim, security interest, charge, restriction, equity or
encumbrance of any kind of any party and of any nature whatsoever.
"LP Assignment" shall have the meaning in the fifth Whereas clause hereof.
"Material Adverse Effect" means for all purposes of this Agreement any change or
effect that individually or when taken together with all other changes or
effects that have occurred during any relevant period of time prior to the date
of determination of the occurrence of the Material Adverse Effect, is or is
reasonably likely to be materially adverse to the business, assets (including
intangible assets), financial condition or results of operation or prospects of
such person or entity, or does or is reasonably likely to materially adversely
affect the ability of such person or entity to perform its obligations under
this Agreement or the Related Agreements or to consummate the transactions
contemplated hereby or thereby, or materially adversely affects the ability of
such person or entity to conduct its business after the Closing Date
substantially as such business is being conducted as of the date hereof.
"Newco LLC" shall have the meaning set forth in the fifth Whereas clause hereof.
"Newco LLC Agreement" shall mean that certain Limited Liability Company
Agreement of Newco LLC, dated the date hereof.
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"Partnership" shall have the meaning as set forth in the introductory paragraph
of this Agreement.
"Partnership Agreement" shall mean that certain Amended and Restated Limited
Partnership Agreement of the Partnership, dated the date hereof, by and between
ZAI*NET and GFI Caminus.
"Partnership Interests" shall mean the undivided partnership interests of the
Partnership.
"Permits" shall have the meaning as set forth in Section 3.19 hereof.
"Permitted Lien" shall have the meaning as set forth in Section 3.14 hereof.
"Person" shall have the meaning as set forth in Section 7.5 hereof.
"Personal Property Leases" shall have the meaning as set forth in Section 3.17
hereof.
"Purchase" shall have the meaning as set forth in the fourth Whereas clause
hereto.
"Purchase Price" means the aggregate payments by GFI Caminus to ZAI*NET pursuant
to Sections 2.3, 2.4 and 2.5 hereof (as adjusted as provided therein).
"Real Property Leases" shall have the meaning as set forth in Section 3.18
hereof.
"Related Agreements" shall mean (i) the employment agreement and associated
covenant not to compete entered into between the Partnership and Brian J.
Scanlan dated as of the date hereof, (ii) the employment agreement and
associated covenant not to compete entered into between the Partnership and
Simon Young dated as of the date hereof (a form of said employment agreements
and associated covenants not to compete is set forth at EXHIBIT A hereto), (iii)
the Assignment and Assumption Agreement, (iv) the LP Assignment, (v) the Newco
LLC Agreement and (vi) the Partnership Agreement.
"Sellers" shall mean, with respect to this Agreement and the transactions
contemplated hereby, the Partnership, ZAI*NET and Scanlan, and with respect to
the remaining Related Agreements and the transactions contemplated thereby, the
Partnership, ZAI*NET and Scanlan (to the extent each of which is a party
thereto).
"Stub Period" shall mean that period of calendar year 1998 commencing as of May
1, 1998 and continuing through December 31, 1998.
"Target Working Capital" shall mean One Million Dollars ($1,000,000).
"Tax" and "Taxes" shall have the meanings as set forth in Section 3.11 hereof.
"Tax Return" shall have the meaning as set forth in Section 3.11 hereof.
"Third Party Claims" shall have the meaning as set forth in Section 6.3.2
hereof.
"Working Capital" shall mean ZAI*NET's current assets (excluding cash in an
amount equal to Six Hundred Thousand Dollars ($600,000)) less its current
liabilities, determined in accordance with GAAP as of the close of business on
April 30, 1998 and as determined pursuant to the Closing Audit.
"ZAI*NET Cash Amount" shall mean Seven Million Three Hundred Thirty-Nine
Thousand Nine Hundred Ninety Dollars ($7,339,990.00) subject to the provisions
of Section 2.4.1.2.
"ZAI*NET Financial Statements" shall have the meaning as set forth in Section
3.5 hereof.
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ARTICLE 2
PURCHASE AND SALE OF PARTNERSHIP INTEREST
2.1 THE CLOSING; CLOSING DATE. The signing of this Agreement, the
Related Agreements, and the closing of the transactions contemplated hereby and
thereby (the "Closing") shall take place (i) at the offices of Irell & Manella
LLP, 333 South Hope Street, Suite 3300, Los Angeles, California on the date
hereof, or (ii) at such other place, time and/or date as the parties hereto may
unanimously agree in writing. The date upon which the Closing occurs is referred
to herein as the "Closing Date."
2.2 SALE OF PARTNERSHIP INTEREST.
2.2.1 ZAI*NET. Subject to the terms and conditions set forth
herein and in the Related Agreements, at the Closing ZAI*NET shall sell, assign,
transfer and deliver to GFI Caminus, and GFI Caminus shall purchase and accept
from ZAI*NET, seventy percent (70%) of the aggregate Partnership Interests of
the Partnership. At the Closing, GFI Caminus and ZAI*NET shall execute and
deliver the Partnership Agreement.
2.2.2 SCANLAN. Subject to the terms and conditions set forth
herein and in the Related Agreements, at the Closing Scanlan shall sell, assign,
transfer and deliver to GFI Caminus, and GFI Caminus shall purchase and accept
from Scanlan, the one percent (1%) general Partnership Interest of the
Partnership in consideration of Ten Dollars ($10), the receipt and sufficiency
of which is acknowledged by Scanlan.
2.3 PAYMENT OF CASH AMOUNT. Subject to the terms and conditions set
forth herein and in the Related Agreements, at the Closing GFI Caminus shall pay
to ZAI*NET the ZAI*NET Cash Amount.
2.4 WORKING CAPITAL ADJUSTMENT. The parties acknowledge that ZAI*NET
has delivered to GFI Caminus its projection of Working Capital as of the close
of business on April 30, 1998 of One Million Four Hundred Thousand Dollars
($1,400,000) (the "ESTIMATED WORKING CAPITAL"). The Estimated Working Capital
shall be used at the Closing to compute the initial Working Capital adjustment,
if any, which shall be subject to further adjustment based upon the Closing
Audit. For purposes of calculating the Estimated Working Capital and the Working
Capital reflected in the Closing Audit as provided in this Section 2.4, the
parties hereto acknowledge and agree that the method and procedures of revenue
recognition shall be in accordance with the methods and procedures implemented
by ZAI*NET's independent auditors in the financial statements for the fiscal
year ended December 31, 1997. Notwithstanding anything herein to the contrary,
any distribution, dividend or similar payment by ZAI*NET or the Partnership
which is not fully reflected in the computation of Working Capital (e.g., any
such payment on or after May 1, 1998 and prior to or on the Closing Date,
including as applicable any payment(s) in connection with the settlement of the
Tsigutkin litigation) other than as provided for in Section 2.4.1.1 below shall
be deducted in computing Working Capital.
2.4.1 CLOSING ADJUSTMENT
2.4.1.1 LOAN FOR DISTRIBUTION. In the event that Estimated
Working Capital exceeds One Million Dollars ($1,000,000.00) (the "TARGET WORKING
CAPITAL"), in addition to the payment to be made pursuant to Section 2.3 hereof,
GFI Caminus shall loan to the Partnership at the
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Closing the amount by which Estimated Working Capital exceeds Target Working
Capital (the "EXCESS WORKING CAPITAL"), and the same amount shall be paid by the
Partnership to ZAI*NET as a cash distribution. To evidence such loan, there
shall be issued to GFI Caminus at the Closing a promissory note ("NOTE") payable
by the Partnership in the initial principal amount equal to the Excess Working
Capital. The Note shall have a maturity date of one year (subject to customary
events of acceleration) and shall accrue interest at the rate of eight percent
(8%) per annum, payable at maturity. Based on the One Million Four Hundred
Thousand Dollars ($1,400,000) Estimated Working Capital figure, the Excess
Working Capital and thus the principal amount of the Note (subject to adjustment
as provided in Section 2.4.2) shall be Four Hundred Thousand Dollars ($400,000).
2.4.1.2 DECREASE IN PURCHASE PRICE. In the event that
Estimated Working Capital is less than Target Working Capital (the "WORKING
CAPITAL SHORTFALL"), at Closing the ZAI*NET Cash Amount shall be reduced by the
result of multiplying (i) the amount by which Target Working Capital exceeds
Estimated Working Capital by (ii) 0.71.
2.4.2 POST-CLOSING ADJUSTMENT. Within sixty (60) days after the
Closing, the Partnership shall cause to be conducted the Closing Audit at the
expense of the Partnership. Based upon the actual amount of Working Capital as
reflected in the Closing Audit, the provisions of Section 2.4.1 shall again be
applied, substituting actual Working Capital for Estimated Working Capital; and,
based upon such application, not later than thirty (30) days following the
completion of the Closing Audit, GFI Caminus, the Partnership and ZAI*NET, as
applicable, shall be obligated to make payment(s) to the other party(ies), as
applicable, in order to "true up" the payments and transactions effected at the
Closing pursuant to Section 2.4.1. After receipt of the Closing Audit, GFI
Caminus and ZAI*NET shall have twenty (20) days to object in writing to any or
all of the amounts presented therein and to the calculation of the "true up"
payment(s).
(i) If GFI Caminus and ZAI*NET do not so object, the Closing Audit and
the "true up" amounts, if any, shall become final and binding on the
parties and the appropriate "true up" amounts shall be payable not later
than thirty (30) days following receipt of the Closing Audit.
(ii) If either GFI Caminus or ZAI*NET do so object to any portion of
the Closing Audit or the "true up" amounts, if any, and within thirty
(30) days of notification of such dispute the parties and their
respective accounting advisers are unable to resolve such dispute, then
GFI Caminus and ZAI*NET shall jointly appoint a different accounting firm
to review the Closing Audit and the "true up" amounts and the
determination by such different accounting firm shall be final and
binding on GFI Caminus and ZAI*NET.
2.5 ADDITIONAL PURCHASE PRICE.
2.5.1 FIRST ADDITIONAL PAYMENT. As additional consideration for
the sale and transfer of the Partnership Interests pursuant hereto, in the event
that the revenues earned by the Partnership (the "FIRST AUDIT CYCLE REVENUES")
determined in accordance with GAAP (except as hereinafter provided) and as
reflected in the financial statements delivered in connection with the audit of
the Partnership for its fiscal year ending December 31, 1998 (the "FIRST AUDIT
CYCLE AUDIT") equal or exceed the result of multiplying (i) Six Million Four
Hundred Seventy Thousand Dollars ($6,470,000.00) by (ii) a fraction, the
numerator of which is the number of whole calendar days in the Stub Period and
the denominator of which is three hundred sixty-five (365) (such result being
the "FIRST
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AUDIT CYCLE TARGET REVENUES"), GFI Caminus will pay to ZAI*NET, within thirty
(30) days after the completion of the First Audit Cycle Audit, an additional
payment of Two Million One Hundred Eighty-Seven Thousand Five Hundred Dollars
($2,187,500.00). For purposes of determining the amount of the First Audit Cycle
Revenues and Second Audit Cycle Revenues (as hereinafter defined) in connection
with a determination of whether an additional payment is required pursuant to
this Section 2.5, any indemnity obligation for which GFI Caminus is reimbursed
or otherwise paid or entitled to reimbursement or payment in accordance with
Article 6 of this Agreement shall be included in such revenue calculation solely
to the extent that such indemnity obligation relates to unrealized or lost
revenues in the business of the Partnership and provides an equivalent economic
benefit for GFI Caminus's allocable share of such revenues not otherwise
included in the revenue computation, and shall otherwise be disregarded.
Notwithstanding anything to the contrary herein, for purposes of calculating the
First Audit Cycle Revenues and the Second Audit Cycle Revenues as provided in
Sections 2.5.1, 2.5.2 and 2.5.3 of this Agreement, the parties agree that the
following methods shall be employed: (i) with respect to all revenue items other
than software license revenues, revenues shall be recognized in accordance with
GAAP in a manner consistent with past practices, for work completed or services
rendered or products delivered; and (ii) with respect to software license
revenues, revenues shall be credited based upon invoice date, consistent with
ZAI*NET's past practice in its interim internal accounts, for work completed or
services rendered or products delivered; provided that, for the purposes of
calculating software license revenues, there will be excluded from a particular
revenue period any invoice that is not collected within 60 days beyond the
revenue period ending December 31, 1998 or December 31, 1999, respectively.
These methods will be employed on a consistent basis during the relevant revenue
periods. Notwithstanding the foregoing, (a) to the extent that an amount of
revenue is included in computing Working Capital, such amount of revenue shall
be excluded for purposes of computing First Audit Cycle Revenues and Second
Audit Cycle Revenues (to avoid duplication), and (b) any revenue deferred and
not included in computing Working Capital shall be credited for the period in
which it is paid.
2.5.2 SECOND ADDITIONAL PAYMENT. As additional consideration for
the sale and transfer of the Partnership Interests pursuant hereto, in the event
that the sum of (i) the revenues of the Partnership (the "SECOND AUDIT CYCLE
REVENUES") determined in accordance with GAAP (except as provided above) and as
reflected in the financial statements delivered in connection with the audit of
the Partnership for its fiscal year ending December 31, 1999 (the "SECOND AUDIT
CYCLE AUDIT") and (ii) the First Audit Cycle Revenues equals or exceeds the sum
of (i) Ten Million One Hundred Thirty-Six Thousand Dollars ($10,136,000.00) and
(ii) the First Audit Cycle Target Revenues, GFI Caminus will pay to ZAI*NET,
within thirty (30) days after the completion of the Second Audit Cycle Audit, an
additional payment of Two Million One Hundred Eighty-Seven Thousand Five Hundred
Dollars ($2,187,500.00).
2.5.3 CUMULATIVE REVENUES. As additional consideration for the
sale and transfer of the Partnership Interests pursuant hereto, in the event
that (a) an additional payment is not earned pursuant to Section 2.5.1 hereof,
but (b) an additional payment is earned pursuant to Section 2.5.2 hereof, GFI
Caminus will pay to ZAI*NET, within thirty (30) days after the completion of the
Second Audit Cycle Audit, an additional payment of Two Million One Hundred
Eighty-Seven Thousand Five Hundred Dollars ($2,187,500.00) (i.e., in addition to
the payment pursuant to Section 2.5.2).
2.5.4 ACQUISITIONS. Notwithstanding the foregoing, in the event
that, prior to
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December 31, 1999, the Partnership completes one or more acquisitions (excluding
transactions in the ordinary course of business), then, in each instance the
revenues of the Partnership shall be determined without giving effect to the
revenues (whether positive or negative) and expenses of any entity acquired
(whether pursuant to merger, equity or asset acquisition or otherwise) by the
Partnership after the Closing Date.
2.5.5 QUALIFIED PUBLIC OFFERING AND CHANGE IN CONTROL. In the
event that prior to December 31, 1999, (i) GFI Caminus or the Partnership (or
their respective successors-in-interest) successfully completes a Qualified
Public Offering, (ii) GFI Caminus or the Partnership, or at least 50% of the
equity therein, is acquired by a third party which is not (x) as of the date of
this Agreement, a direct or indirect investor in GFI Caminus or the Partnership
or (y) an affiliate thereof (whether pursuant to merger, equity or asset
acquisition or otherwise) or (iii) Scanlan or Simon Young is terminated without
Cause pursuant to the provisions set forth in their respective Employment
Agreement prior to December 31, 1999, as the case may be (provided, however,
that in the event of a termination of Simon Young, Scanlan must in good faith
disagree and object to such termination to constitute a Change in Control) ((ii)
or (iii) subject to the proviso above hereinafter referred to as a "CHANGE IN
CONTROL"), GFI Caminus will pay to ZAI*NET, within thirty (30) days after the
completion of such Qualified Public Offering or the occurrence of a Change in
Control, Four Million Three Hundred Seventy Five Thousand Dollars
($4,375,000.00) minus any additional payments previously made or to be made
pursuant to Sections 2.5.1, 2.5.2 or 2.5.3 hereof. For purposes of this Section
2.5.5, "QUALIFIED PUBLIC OFFERING" means an underwritten public offering of
equity securities, pursuant to an effective registration statement under the
Securities Act.
2.5.6 DISPUTE RESOLUTION. In the event that either GFI Caminus or
ZAI*NET object to any aspect of the First Audit Cycle Audit or the Second Audit
Cycle Audit or to any other calculation required by this Section 2.5, and the
dispute is not resolved within thirty (30) days of either party's written
objection, the parties agree to promptly subject the matter to a proceeding
conducted in the same manner as the proceeding described in Section 2.4.2 (ii)
hereof. Any party prevailing in a dispute arising under this Section 2.5.6 shall
be entitled to reasonable attorneys' fees and costs. From the Closing Date until
December 31, 1999, the parties agree that the business of the Partnership shall
continue to be conducted substantially in the same manner and with respect to
the same services and products as the business of ZAI*NET prior to the date
hereof, subject to the reasonable discretion of the Management Committee of the
Partnership to conduct Partnership affairs in the best interests of the
Partnership and its owners. The Management Committee shall conduct the affairs
of the Partnership reasonably and in good faith in view of the provisions of
this Section 2.5, consistent with the overall objective of maximizing the value
of the Partnership for the benefit of all of its owners and to maximize the
revenues of the Partnership, subject to the reasonable and good faith discretion
of the Management Committee seeking to maximize profitability and based on its
business judgment as to the management of the Partnership's business.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP,
ZAI*NET AND SCANLAN
As an inducement for GFI Caminus to enter into and consummate the
transactions contemplated by this Agreement (including the Related Agreements),
each of Scanlan, ZAI*NET and
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the Partnership, jointly and severally, represents and warrants that each of the
following statements is true, correct and complete as of the date hereof, which
representations and warranties shall survive the Closing as provided in Section
6.1 hereof. Except as the context otherwise requires, all representations and
warranties in this Article 3 with respect to ZAI*NET as of or with respect to
any period prior to the Closing shall be deemed made equally with respect to the
Partnership as of the Closing, and vice versa.
3.1 EXISTENCE AND GOOD STANDING.
3.1.1 ZAI*NET. ZAI*NET is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, having
full power and authority to own its properties and to carry on its business as
conducted. ZAI*NET is duly qualified to transact business and is in good
standing in each jurisdiction in which the operation of its business and the
ownership of its assets and properties requires it to be so qualified, except
where the failure to so qualify is not reasonably likely to have a Material
Adverse Effect. The Partnership is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Delaware. Newco LLC
is a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware.
3.1.2 ORGANIZATIONAL DOCUMENTS. Copies of the articles of
incorporation and by-laws of ZAI*NET, effective prior to the date hereof, have
been delivered to GFI Caminus and as delivered are true and complete. A copy of
the original partnership agreement of the Partnership has been delivered to GFI
Caminus and as delivered was true and complete. A copy of the Newco LLC
Agreement, effective as of the date hereof, has been delivered to GFI Caminus
and as delivered is true and complete.
3.1.3 SUBSIDIARIES. ZAI*NET does not own or have any
subsidiaries, or own any interest in a partnership, joint venture or other
business entity except for the Partnership Interests. The Partnership does not
own or have any subsidiaries, or own any interest in a partnership, joint
venture or other business entity. Newco LLC does not own or have any
subsidiaries, or own any interest in a partnership, joint venture or other
business entity, except for the Partnership Interests following consummation of
the LP Assignment.
3.2 AUTHORITY. Each of the Sellers has the requisite power and
authority to execute and deliver this Agreement and the Related Agreements, and
perform its or his obligations herein and therein, and consummate the
transactions contemplated hereby and thereby. Each of the Sellers has duly
executed and delivered this Agreement and the Related Agreements to which such
Seller is a party and has obtained the necessary authorization in accordance
with all applicable laws and its organizational documents to execute and deliver
this Agreement and the Related Agreements, and to perform its respective
obligations herein and therein and consummate the transactions contemplated
hereby and thereby, and such matters do not require notice to, or consent or
approval of, any other third party, governmental authority or regulatory agency,
except as set forth on SCHEDULE 3.2 attached hereto. Each of this Agreement and
the Related Agreements to which such Seller is a party is a valid, legal and
binding obligation of such Seller enforceable against such Seller in accordance
with its respective terms, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally and subject to general principles of
equity (regardless of whether such enforcement is considered in a proceeding at
law or at equity). The person executing this Agreement and any Related
Agreements on behalf of the Sellers has been specifically authorized to do so by
all necessary corporate or other action. No other action will be necessary by
any of the Sellers to authorize the execution and delivery of this Agreement and
the Related Agreements and
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the consummation of the transactions contemplated hereby and thereby.
3.3 STOCKHOLDERS' MEETING. ZAI*NET has duly convened a meeting of its
stockholders (unless the requirement of such meeting has been waived or
otherwise satisfied under applicable law) to approve this Agreement, the Related
Agreements (to the extent ZAI*NET is a party), and the transactions contemplated
hereby and thereby, and such agreements and transactions have been duly approved
and become effective in accordance with applicable law.
3.4 NO CONFLICTS. Except as set forth in SCHEDULE 3.4 attached hereto,
neither the execution and delivery of this Agreement or the Related Agreements,
nor the consummation of the transactions contemplated hereby or thereby, (i)
violates or conflicts with any provision of the Partnership Agreement or other
organizational documents of the Partnership or the articles of incorporation,
by-laws or other organizational documents of ZAI*NET; (ii) conflicts with or
violates any material provision of any foreign, federal, state or local law,
statute, treaty, ordinance, rule, regulation or any order, writ, judgment or
decree of any court or other governmental authority to which any of the Sellers
or any of their respective properties or assets may be bound or affected; or
(iii) breaches or constitutes grounds for a default (or an event, with notice or
lapse of time or both would become a default) under, or gives to others a right
of termination, amendment, acceleration, modification or cancellation of, or
results in the creation or imposition of (or the obligation to create or impose)
any Lien on any of the properties or assets of any of the Sellers pursuant to
any note, mortgage, indenture, bond, lease, license, permit, franchise,
agreement, contract, undertaking or other instrument to which any of the Sellers
is a party or by which any of the Sellers or any of their respective properties
or assets may be bound or affected, in each case which is reasonably likely to
have a Material Adverse Effect on any of the Sellers. The execution, delivery
and performance of this Agreement and the Related Agreements by each and all of
the Sellers does not require the notice to, filing with, consent approval or
action of, any governmental authority or any other third party whatsoever,
except as disclosed on SCHEDULE 3.4.
3.5 FINANCIAL STATEMENTS. ZAI*NET has delivered to GFI Caminus true
and complete copies of the (i) audited balance sheets of ZAI*NET, for the fiscal
year ended December 31, 1996 and (ii) unaudited balance sheets of ZAI*NET for
the fiscal year ended December 31, 1997 (provided, however, that should an
audited balance sheet have become available for fiscal year 1997 prior to
Closing, ZAI*NET will have delivered such to GFI Caminus), and the related
statements of income, cash flow and changes in stockholders' equity (the
"ZAI*NET FINANCIAL STATEMENTS"), all of which have been prepared in accordance
with GAAP. Such balance sheets, including the related notes thereto, are true
and correct as of their respective dates, and fairly present the financial
position, assets and liabilities (whether accrued, absolute, contingent or
otherwise) of ZAI*NET, at the dates indicated and such statements of income, and
cash flow and changes in stockholders' equity, are true and correct as of their
respective dates, and fairly present the results of operations, and cash flow
and changes of stockholders' equity of ZAI*NET, for the periods indicated. There
are no claims, obligations or liabilities of ZAI*NET or the Partnership accrued
and owing other than those set forth in the ZAI*NET Financial Statements or on
SCHEDULE 3.5 attached hereto. The ZAI*NET Financial Statements reflect adequate
and sufficient reserves, in accordance with GAAP, in respect of all claims,
obligations and liabilities asserted or potentially assertable relating to
warranties provided to customers or to actual or potential product returns based
upon claims of defect, infringement or otherwise, except as set forth in
SCHEDULE 3.5 attached hereto. Since the date of the most recent ZAI*NET
Financial Statements, (i) no event or circumstance has occurred or come into
existence that may reasonably be expected to have or constitute
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a Material Adverse Effect with respect to the Partnership, and (ii) ZAI*NET has
made no distributions, dividends or similar payments to its stockholders or
other third parties, except as set forth on Schedule 3.5 or other than pursuant
to Section 2.4.1.1.
3.6 TRANSACTION EXPENSES. If any of the expenses incurred by any of
the Sellers in connection with the transactions contemplated by this Agreement
and the Related Agreements are to be paid by the Partnership, all of such
expenses will be accrued on the balance sheet prepared in connection with the
Closing Audit.
3.7 MATERIAL CONTRACTS. Set forth on SCHEDULE 3.7 attached hereto is a
complete and accurate list of all material contracts and agreements, oral or
written, to which the Partnership or ZAI*NET is a party or by which any of its
assets, properties or business is bound. With respect to each of the material
contracts set forth on SCHEDULE 3.7, a true and correct copy, or if a copy is
not available, a true and correct summary of the contractual obligation, has
been provided to GFI Caminus, each is in full force and effect, without material
breach or default by the Partnership or ZAI*NET, as applicable, and to the
Knowledge of ZAI*NET and the Partnership, without material breach or default by
any other party thereto, and no written notice has been received regarding
termination, suspension, alteration, modification or amendment thereof.
3.8 INTELLECTUAL PROPERTY. Set forth on SCHEDULE 3.8 attached hereto
is a list of all trade names, trademarks, service names, service marks, logos,
patents, copyrights, licenses, formulas, trade secrets, programs, computer
software (excluding commercially available general office computer software
licensed from unrelated third-parties), technology and other intellectual
property rights (the "INTELLECTUAL PROPERTY") owned by the Partnership or used
or required by the Partnership in the operation of its businesses. Except as set
forth on SCHEDULE 3.8, the Partnership holds all of its right, title and
interest in and to the Intellectual Property, free and clear of all Liens. The
Partnership owns or has the right to use, without the making of any payment or
the granting of any rights to others, all Intellectual Property necessary to
conduct its business as presently being conducted. Except as set forth on
SCHEDULE 3.8, to the Knowledge of the Partnership the conduct of the businesses
of the Partnership as now conducted does not infringe or conflict with any
Intellectual Property rights of others. Except as set forth on SCHEDULE 3.8, the
Partnership has, as of the date hereof, satisfied all material requirements
necessary to maintain the validity of all Intellectual Property, and the right
to use such Intellectual Property. Except as set forth on SCHEDULE 3.8 attached
hereto, no infringement by others of any Intellectual Property is pending, or to
the Knowledge of ZAI*NET, threatened by any third party who has asserted a claim
of infringement of any such Intellectual Property rights. All licenses, rights
and other agreements pertaining to the Intellectual Property are in material
compliance with all applicable laws, rules and regulations in all jurisdictions
in which the Partnership conducts any business, including without limitation,
those pertaining to remittance of foreign exchange and taxation. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby will not alter or impair the rights and interests of the
Partnership in any of the Intellectual Property and the Partnership will have
the same rights and interests in such items at and after the Closing Date as it
has had immediately prior to the Closing Date.
3.9 INSURANCE. The assets, properties and operations of the
Partnership are insured under various policies of general liability and other
forms of insurance, copies of which have been provided to GFI Caminus. SCHEDULE
3.9 discloses for each policy the outstanding claims thereunder. All such
policies are in full force and effect in accordance with their terms, no notice
of cancellation has been
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received, and to the Knowledge of the Partnership there is no existing breach or
default (or event which with the giving of notice or lapse of time or both)
would constitute a breach or default thereunder. All premiums to date have been
paid in full.
3.10 LABOR RELATIONS AND EMPLOYEE AGREEMENTS; ERISA MATTERS.
3.10.1 COMPLIANCE. Except as disclosed on SCHEDULE 3.10.1 attached
hereto, ZAI*NET was, and the Partnership is, in compliance with all material
applicable federal, state and local laws, rules, regulations and ordinances
relating to the employment of labor and those other applicable laws, rules,
regulations and ordinances relating to wages, hours, occupational health and
safety, anti-discrimination, collective bargaining, equal employment opportunity
and employment of labor in general, and to the payment of social security and
similar taxes.
3.10.2 EMPLOYMENT AGREEMENTS. Except as disclosed on SCHEDULE
3.10.2 attached hereto, ZAI*NET was not, and the Partnership is not, a party to
any employment contract with any employee, collective bargaining agreement,
"employees pension plan" or retirement plan, "employees profit sharing plan",
bonus plan, severance agreement, termination agreement, or any other similar
agreement or plan. There are no material labor controversies pending between
either of ZAI*NET or the Partnership and any of its employees.
3.10.3 ERISA. SCHEDULE 3.10.3 attached hereto, contains a list of
all "employee pension benefit plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) (sometimes
referred to herein as "Pension Plans"), "employee welfare benefit plans" (as
defined in Section 3(1) of ERISA) and all other benefit plans maintained or
contributed to by ZAI*NET or the Partnership or any other person or entity that,
together with ZAI*NET or the Partnership, is treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code for the benefit of any current or
former employees, officers or directors of the Partnership or dependents of any
such person (collectively, "Benefit Plans"). ZAI*NET and the Partnership have
delivered or made available to GFI Caminus, its counsel, representatives or
advisors, true, complete and correct copies of each Benefit Plan (or, in the
case of any unwritten Benefit Plans, descriptions thereof), the most recent
annual report on Form 5500 filed with the Internal Revenue Service with respect
to each Benefit Plan (if any such report was required), the most recent summary
plan description for each Benefit Plan for which such summary plan description
is required and each trust agreement and group annuity contract relating to any
Benefit Plan. Each and every of the Partnership's Benefit Plans are in material
compliance with all federal, state and local laws, rules, regulations and
ordinances applicable thereto.
3.10.4 INCLUSION OF ZAI*NET. All representations and warranties in
this Section 3.10 with respect to the Partnership shall be deemed made equally
with respect to ZAI*NET in relation to the operation of its business prior to
giving effect to the Assignment and Assumption Agreement unless expressly stated
otherwise herein.
3.11 PAYMENT OF TAXES. ZAI*NET has timely filed all Tax Returns
required to have been filed by it and has paid or accrued all Taxes due to any
taxing authority with respect to all taxing periods ending on or prior to the
date hereof, and all such Tax Returns are true, correct and complete in all
material respects. ZAI*NET has provided copies of such Tax Returns to GFI
Caminus for its taxable years ending December 31, 1995, 1996 and 1997. The
ZAI*NET Financial Statements include an adequate reserve for all Taxes not yet
due or with respect to which Tax Returns are not required to have
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been filed, in each case to reflect the operations of ZAI*NET through the
Closing. Except as set forth in SCHEDULE 3.11 attached hereto, there is no Tax
audit, investigation or other proceeding pending or, to the Knowledge of
ZAI*NET, threatened by a governmental authority against or affecting ZAI*NET or
the Partnership. For purposes of this Agreement, "TAX" and "TAXES" shall mean
and refer to all taxes imposed of any nature including federal, state,
commonwealth, local or foreign net income tax, alternative or add-on minimum
tax, profits or excess profits tax, franchise tax, gross income, adjusted gross
income or gross receipts tax, employment related tax, real and personal property
tax or ad valorem tax, sales or use tax, excise tax, stamp tax or duty, any
withholding or back up withholding tax, value added tax, severance tax,
prohibited transaction tax, premiums tax, occupation tax, together with any
interest or any penalty, in addition to any tax or additional amount imposed by
any governmental authority (domestic or foreign) responsible for the imposition
of such tax. "TAX RETURN" means all returns, reports, forms or other information
required to be filed with respect to any Taxes.
3.12 BOOKS OF ACCOUNT; BANK ACCOUNTS. The books, records and accounts
of ZAI*NET accurately and fairly reflect, in reasonable detail, the transactions
and the assets and liabilities of ZAI*NET with respect to its businesses.
ZAI*NET has not engaged in any material transaction with respect to its
businesses, maintained any bank account for its businesses or used any of its
funds, except for transactions, bank accounts and funds which have been and are
reflected in the normally maintained books, records and accounts of ZAI*NET.
SCHEDULE 3.12 attached hereto sets forth a list of all bank accounts, bank boxes
and other depositories of ZAI*NET or the Partnership identifying bank, branch
and account number, as well as the authorized signatories thereto. ZAI*NET has
maintained a system of internal accounting control sufficient to provide
reasonable assurances that transactions are executed in accordance with
management's general or specific authorization, transactions are recorded as
necessary to permit preparation of financial statements in conformity with GAAP,
access to assets, properties, books, records and accounts is permitted only in
accordance with management's general or specific authorization, and the recorded
accounting for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
3.13 CONDITION OF TANGIBLE ASSETS. SCHEDULE 3.13 attached hereto sets
forth a complete and accurate list of all items of machinery, equipment,
furniture, motor vehicles and other tangible assets owned or held under lease
agreements by ZAI*NET immediately prior to or by the Partnership on the Closing
Date and which are capitalized by the Partnership and which have a present per
item book value of at least Twenty-Five Thousand Dollars ($25,000) or which, for
reasons other than value, are material to the Partnership. To the Knowledge of
ZAI*NET and the Partnership, such machinery, equipment, furniture, motor
vehicles and other tangible assets necessary or appropriate for the conduct of
the Partnership's business and operations are in good operating condition and
repair, subject to ordinary wear and tear.
3.14 OWNERSHIP OF ASSETS. Except as described in SCHEDULE 3.14 attached
hereto, ZAI*NET had, and the Partnership has, good and marketable title to, or
holds under valid leases, all of its assets and properties, free and clear of
all Liens except for Permitted Liens. For purposes of this Agreement, "PERMITTED
LIENS" shall mean Liens that do not materially detract from the value of, or
materially interfere with, the present use or the marketability of the property
affected thereby; mechanic's, carrier's, worker's, repairman's or other
statutory liens arising or incurred in the ordinary course of business; Liens
for taxes, assessment and other governmental charges which are not yet due and
payable or which may thereafter be paid without penalty or are being contested
in good faith pursuant to appropriate
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proceedings and fully reserved on the ZAI*NET Financial Statements; easements,
covenants, rights-of-way and other encumbrances or restrictions of record that
do not materially detract from the value of, or materially interfere with, the
present use or the marketability of the property affected thereby; and zoning,
building, restrictions and other governmental ordinances. The assets of the
Partnership as a result of completion of the Assignment and Assumption Agreement
constitute all of the assets and properties needed for the Partnership to
continue to conduct the businesses conducted by ZAI*NET immediately prior to the
date hereof.
3.15 BROKERS. No amount is payable by the Partnership, Scanlan or
ZAI*NET by way of brokerage fees, finder's commissions or otherwise to any party
on account of this Agreement or the Related Agreements or the transactions
contemplated hereby or thereby, except for a fee payable to Advest, Inc., which
shall be paid by ZAI*NET or Scanlan.
3.16 LITIGATION. Except as disclosed on SCHEDULE 3.16 attached hereto,
there is no material claim, action, suit, litigation, arbitration, investigation
or other legal proceeding which is pending before any court or governmental
authority, or arbitrator or board of arbitrators to which ZAI*NET, the
Partnership, or Scanlan to the extent such matter relates in any way to ZAI*NET
or the Partnership was or is a party, or to which any of the assets or
properties of ZAI*NET or the Partnership was or is subject. None of ZAI*NET, the
Partnership or Scanlan (to the extent such matter relates in any way to ZAI*NET
or the Partnership) is in default with respect to any order, writ, injunction,
decree or demand of any court or other governmental or regulatory authority.
3.17 PERSONAL PROPERTY LEASES. SCHEDULE 3.17 attached hereto sets forth
a list of all material personal property leases ("PERSONAL PROPERTY LEASES") to
which the Partnership is a party. Each of the Personal Property Leases is a
valid and binding obligation of the respective parties thereto and enforceable
in accordance with its respective terms. ZAI*NET was not, and the Partnership is
not, in breach or default of any of such Personal Property Leases. Except as
disclosed on SCHEDULE 3.17, no consent or approval is required for the
assignment or transfer of any of the Personal Property Leases in connection with
this Agreement or the Related Agreements or the transactions contemplated hereby
or thereby.
3.18 REAL PROPERTY LEASES. SCHEDULE 3.18 attached hereto sets forth a
list of all real property leases ("REAL PROPERTY LEASES") to which the
Partnership is a party. Each of the Real Property Leases is a valid and binding
obligation of the respective parties thereto and enforceable in accordance with
its respective terms. ZAI*NET was not, and the Partnership is not, in breach or
default of any of such Real Property Leases. Except as disclosed on SCHEDULE
3.18, no consent or approval is required for the assignment or transfer of any
of the Real Property Leases in connection with this Agreement or the Related
Agreements or the transactions contemplated hereby or thereby.
3.19 COMPLIANCE WITH LAWS; PERMITS. Each of ZAI*NET, the Partnership
and Scanlan with respect to the business of the Partnership has complied with
and is in compliance with all federal, state, local and foreign statutes, laws,
ordinances, regulations, rules, permits, judgments, orders and decrees
applicable to it or any of its properties, assets, operations and businesses,
except where the failure so to comply would not reasonably be expected to result
in a Material Adverse Effect. ZAI*NET held, and the Partnership holds, all
permits, licenses, easements, variances, exemptions, consents, certificates,
orders and approvals from governmental authorities the failure of which to hold
might reasonably be expected to result in a Material Adverse Effect
(collectively, the "PERMITS") and all such Permits are
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<PAGE> 19
listed on SCHEDULE 3.19 attached hereto. ZAI*NET was, and the Partnership is, in
compliance with the terms of the Permits applicable to it, except where the
failure so to comply would not reasonably be expected to result in a Material
Adverse Effect.
3.20 CAPITALIZATION AND TITLE TO PARTNERSHIP INTERESTS. Prior to giving
effect to the purchase and sale contemplated by this Agreement, the authorized
Partnership Interests of the Partnership and the number of such Partnership
Interests held by each holder thereof is set forth on SCHEDULE 3.20 attached
hereto. Each of ZAI*NET and Scanlan has good and marketable title to the
Partnership Interests held by it or him, and owns beneficially and of record,
free and clear of any Liens, and has full power and authority to sell, assign,
transfer, vote and convey free and clear of any Liens, the Partnership
Interests, and such Partnership Interests constitute all of the ownership
interests in the Partnership owned by each of ZAI*NET and Scanlan. Except as set
forth on SCHEDULE 3.20, there are no outstanding options, convertible
securities, warrants, agreements, rights, contracts, calls, commitments or
demands of any character that either (a) obligates the Partnership to issue,
redeem, sell, convert or purchase any of the Partnership Interests or any other
ownership interest, or restricts or relates in any way to the voting of any such
securities, or (b) restricts the transfer of, or otherwise relates to
transactions in, the ownership interests of ZAI*NET or Scanlan in the
Partnership. The Partnership Interests sold and transferred pursuant hereto are
nonassessable and are not subject to any preemptive rights.
3.21 UNDISCLOSED LIABILITIES. Except as set forth in the ZAI*NET
Financial Statements or in SCHEDULE 3.21 attached hereto, there is no claim,
liability or obligation of any nature, whether absolute, accrued, known or
unknown, contingent or otherwise, affecting the ZAI*NET, the Partnership or its
business, other than obligations incurred in the ordinary course of the business
consistent with ZAI*NET's past practice, none of which is reasonably likely to
have a Material Adverse Effect.
3.22 SCOPE OF REPRESENTATIONS AND WARRANTIES. This Agreement (including
any Exhibit or Schedule), the Related Agreements (including any Exhibit or
Schedule) and each other document and certificate prepared or delivered by or on
behalf of ZAI*NET, Scanlan and the Partnership and furnished or to be furnished
to GFI Caminus in connection herewith, as of the date hereof, do not contain any
untrue statement of a material fact, or omit to state a material fact necessary
in order to make the statements contained herein and therein not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF GFI CAMINUS
As an inducement for the Partnership, ZAI*NET and Scanlan to enter into
and consummate the transactions contemplated by this Agreement and the Related
Agreements, GFI Caminus represents and warrants that each of the following
statements is true, correct and complete as of the date hereof which
representations and warranties shall survive the Closing, as provided in Section
6.1.
4.1 EXISTENCE AND GOOD STANDING. GFI Caminus is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware, having full power and authority to own its properties and
to carry on its business as conducted. GFI Caminus is duly qualified to transact
business and is in good standing in each jurisdiction in which the operation of
its business and the ownership of its assets requires it to be so qualified.
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4.2 AGREEMENT.
4.2.1 AGREEMENT AUTHORIZED. GFI Caminus has the requisite power
and authority to execute and deliver this Agreement and the Related Agreements,
as applicable, and perform its obligations herein and therein, and consummate
the transactions contemplated hereby and thereby. GFI Caminus has duly executed
and delivered this Agreement and the Related Agreements to which it is a party,
and has obtained the necessary authorization in accordance with all applicable
laws and its organizational documents to execute and deliver this Agreement and
the Related Agreements to which it is a party, and perform its obligations
herein and therein and consummate the transactions contemplated hereby and
thereby, and such matters do not require notice to, or consent or approval of,
any other third party, governmental authority or regulatory agency, except as
set forth on SCHEDULE 4.2.1 attached hereto. Each of this Agreement and the
Related Agreements to which it is a party is a valid, legal and binding
obligation of GFI Caminus enforceable against GFI Caminus in accordance with its
terms, except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally and subject to general principles of equity (regardless of
whether such enforcement is considered in a proceeding at law or at equity). The
person executing this Agreement and the Related Agreements to which it is a
party on behalf of GFI Caminus has been specifically authorized to do so by all
necessary action. No other action will be necessary by GFI Caminus to authorize
the execution and delivery of this Agreement and the Related Agreements to which
it is a party and the consummation of the transactions contemplated hereby and
thereby.
4.2.2 NO CONFLICT. Except as set forth in SCHEDULE 4.2.2 attached
hereto, neither the execution and delivery of this Agreement or the Related
Agreements to which it is a party, nor the consummation of the transactions
contemplated hereby or thereby, (i) violates or conflicts with any provision of
the limited partnership agreement or other organizational documents of GFI
Caminus; (ii) conflicts with or violates any provision of any foreign, federal,
state or local law, statute, treaty, ordinance, rule, regulation or any order,
writ, judgment or decree of any court or other governmental authority to which
GFI Caminus or any of its properties or assets may be bound or affected; or
(iii) breaches or constitutes grounds for a default (or an event, with notice or
lapse of time or both would become a default) under, or gives to others a right
of termination, amendment, acceleration, modification or cancellation of, or
results in the creation or imposition of (or the obligation to create or impose)
any Lien on any of the properties or assets of GFI Caminus pursuant to any note,
mortgage, indenture, bond, lease, license, permit, franchise, agreement,
contract, undertaking or other instrument to which GFI Caminus is a party or by
which GFI Caminus or any of its properties or assets may be bound or affected,
in each case which is reasonably likely to have a Material Adverse Effect on GFI
Caminus. The execution, delivery and performance of this Agreement and the
Related Agreements by GFI Caminus does not require the notice to, filing with,
consent, approval or action of, any governmental authority or any other third
party whatsoever, except as disclosed on SCHEDULE 4.2.2 which is reasonably
likely to have a Material Adverse Effect.
4.3 BROKERS. No amount is payable by GFI Caminus by way of brokerage
fees, finder's commissions or otherwise to any party on account of this
Agreement or the Related Agreements or the transactions contemplated hereby or
thereby.
4.4 LITIGATION. There is no material claim, action, suit, litigation,
arbitration, investigation or other legal proceeding which is pending before
any court or governmental authority, or arbitrator or
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board of arbitrators to which GFI Caminus was or is a party, or to which any of
the assets or properties of GFI Caminus was or is subject. GFI Caminus is not
in default with respect to any order, writ, injunction, decree or demand of any
court or other governmental or regulatory authority.
ARTICLE 5
RELATED AGREEMENTS; ACKNOWLEDGEMENTS
5.1 RELIANCE. The parties acknowledge that the Related Agreements are
being executed and delivered simultaneously with this Agreement, and that GFI
Caminus would not have agreed to execute, deliver or perform this Agreement in
the absence thereof.
5.2 ACKNOWLEDGMENTS. The parties acknowledge that, as a result of the
transactions contemplated hereby, (i) GFI Caminus has become the General Partner
of the Partnership, (ii) GFI Caminus is the owner of seventy-one percent (71%)
of the Partnership Interests in the Partnership (which includes the one percent
(1%) general Partnership Interest) and (iii) ZAI*NET is the owner of a
twenty-nine percent (29%) limited Partnership Interest in the Partnership
(subject to the consummation of the LP Assignment).
5.3 DOCUMENT DELIVERY. The parties acknowledge that the following
documents are being delivered in connection with the Closing (except as provided
in clause (vii) below):
(i) the Partnership Agreement, duly executed by GFI
Caminus and ZAI*NET;
(ii) the Related Agreements, duly executed by the
respective parties thereto;
(iii) an opinion from Zukerman Gore & Brandeis, LLP,
counsel to ZAI*NET and Scanlan, in the form attached
hereto as EXHIBIT B.
(iv) an opinion from Irell & Manella LLP, counsel to GFI
Caminus, in the form attached hereto as EXHIBIT C;
(v) certificates from ZAI*NET and Scanlan, dated the
Closing Date, in form and substance reasonably
satisfactory to GFI Caminus;
(vi) such other documents, instruments, certifications
and further assurances as GFI Caminus or its counsel
may have reasonably requested; and
(vii) a schedule reflecting the parties' agreement on the
tax basis and GAAP book value of the assets and
properties of the Partnership immediately after
giving effect to the Assignment and Assumption
Agreement, this Agreement and the other transactions
contemplated hereby to occur on the Closing Date
(the "AGREED VALUATIONS"). Such schedule shall be
prepared by GFI Caminus or the Partnership (such to
the approval of ZAI*NET and Scanlan, which approval
will not be unreasonably withheld) within 30 days
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following the Closing Date, and shall thereupon be
attached to this Agreement and become a part hereof.
Each of the parties hereto agrees that it shall not at any time take any
position in any Tax filing or otherwise that is inconsistent with the Agreed
Valuations (except solely for any adjustments to the Agreed Valuations resulting
from the completion of the Closing Audit).
5.4 NAME CHANGE. ZAI*NET agrees to change its name (and any of its
subsidiary's names as required) to eliminate any use of the word "ZAINET",
"ZAI-NET" or "ZAI*NET" (including derivatives in upper or lower case spelling),
and will thereafter refrain from using any of those words or any confusingly
similar words in its and any of its subsidiary's names; provided, however, that
ZAI*NET or Scanlan shall be permitted to use the ZAI*NET.com Internet address in
the event that the Partnership ever abandons the ZAI*NET trade name.
5.5 JOINDER TO PARTNERSHIP AGREEMENT. ZAI*NET and Scanlan acknowledge
and agree to be bound by the provisions of Section 3.5.1 to the Partnership
Agreement, and agree to cause Newco LLC to execute and deliver the Partnership
Agreement, at the time that Newco LLC first owns any interest in the
Partnership. Further, ZAI*NET and Scanlan agree to cause Newco LLC and each
equityholder of ZAI*NET (other than Scanlan) or Newco LLC at any time to execute
and deliver the Joinder Agreement, attached as Appendix C to the Partnership
Agreement in order to bind such equityholder (including any successor or
assignee) to Section 3.5.1 to the Partnership Agreement.
5.6 NEWCO LLC. ZAI*NET and Scanlan acknowledge and agree that: (i)
Newco LLC shall not engage in any business operations, (ii) the only activity of
Newco LLC is to act as a holding company for the twenty-nine percent (29%)
Partnership Interest being retained by ZAI*NET and assigned to Newco LLC
immediately subsequent to the Closing, (iii) ZAI*NET and/or Scanlan shall
maintain a majority interest and voting control of Newco LLC and (iv) Newco LLC
shall not engage in any activity or fail to perform any activity that would
constitute a breach or default under this Agreement if such activity or omission
were engaged in by ZAI*NET.
5.7 EMPLOYMENT POLICIES. As of the Closing Date, the Partnership shall
honor the terms and conditions of any employment agreements set forth on
SCHEDULE 3.10.2 attached hereto and to honor the employment policies and
procedures of the Partnership in effect as of the Closing Date. The employees of
ZAI*NET as of the Closing Date shall continue their employment relationship with
the Partnership "at will" or otherwise, subject to the amendment or termination
thereof in accordance with the applicable labor and employment laws and subject
to the discretion of the Management Committee to determine the employment
policies and requirements of the Partnership.
ARTICLE 6
INDEMNITY
6.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
6.1.1 SELLERS. Except for the representations and warranties set
forth in each of Sections 3.1, 3.2 and 3.20 of this Agreement (as to which
survival shall be indefinite) and in Section 3.11 of this Agreement (as to which
survival shall extend for the applicable statute of limitations with respect to
any Tax matters that are the subject of an indemnity claim), all
representations,
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warranties and covenants of ZAI*NET and Scanlan made hereunder or in connection
with the transactions contemplated by this Agreement (including the Exhibits and
Schedules attached hereto) shall survive the Closing for a period of ninety (90)
days following the completion of the First Audit Cycle Audit, regardless of any
investigation made at any time by or on behalf of any party or of any
information any party may have, after which time they shall be null and void and
of no effect whatsoever (except as to bona fide claims asserted prior to the end
of such period, in which case the pertinent representations and warranties shall
remain in effect until such claims are fully and finally resolved).
6.1.2 GFI CAMINUS. Except for the representations and warranties
set forth in each of Sections 4.1 and 4.2.1 (as to which survival shall be
indefinite), all representations, warranties and covenants of GFI Caminus made
hereunder or in connection with the transactions contemplated by this Agreement
(including the Exhibits and Schedules attached hereto) shall survive the Closing
for a period of ninety (90) days following the completion of the First Audit
Cycle Audit, regardless of any investigation made at any time by or on behalf of
any party or of any information any party may have, after which time they shall
be null and void and of no effect whatsoever (except as to claims asserted prior
to the end of such period, in which case the pertinent representations and
warranties shall remain in effect until such claims are fully and finally
resolved).
6.2 THE INDEMNITY OBLIGATION. (a) Subject to the provisions of
Sections 6.4 and 6.7 hereof, ZAI*NET and Scanlan, jointly and severally, shall
indemnify, hold harmless and reimburse GFI Caminus for any and all losses,
liabilities, damages, costs and expenses (including, without limitation,
reasonable legal fees) (hereinafter "Losses"), actually suffered or incurred by
GFI Caminus, or any affiliate thereof or any assignee or successor thereof, and
each officer, director, and trustee of any of the foregoing (the "GFI Group"),
which is incurred as a result of any breach of any representation, warranty or
agreement made by ZAI*NET or Scanlan in this Agreement (including all Schedules
and Exhibits hereto and all instruments and undertakings delivered or made in
connection herewith) or any certificate delivered pursuant to this Agreement,
and any third party claim arising as a result thereof.
(b) Subject to the provisions of Section 6.4 hereof, GFI Caminus shall
indemnify, hold harmless and reimburse ZAI*NET and Scanlan for any and all
Losses incurred by ZAI*NET or Scanlan as a result of any breach of any
representation, warranty or agreement made by GFI Caminus in this Agreement
(including all Schedules and Exhibits hereto and all instruments and
undertakings delivered or made in connection herewith) or any certificates
delivered pursuant to this Agreement, and any third party claim arising as a
result thereof.
(c) Subject to the provisions of Section 6.4 and 6.7 hereof, ZAI*NET
and Scanlan acknowledge and agree, to jointly and severally, indemnify and hold
harmless GFI Caminus from any and all claims or Losses in connection with or
arising from the Tsigutkin litigation or any derivative thereof, arising or
incurred before or after the Closing Date (including but not limited to any fees
and costs incurred in the defense or resolution of such matter), without
duplication for purposes hereof for (i) any Losses or expenses reflected in the
historical financial statements of ZAI*NET or (ii) any settlement the costs of
which is reflected in the Closing Audit and subject to the Closing adjustments
set forth in Section 2.4 of hereof. Subject to the complete indemnification of
GFI Caminus, the parties hereto acknowledge and agree that ZAI*NET and Scanlan
shall be entitled to assume and control all aspects of the defense of the
Tsigutkin litigation, at their expense and through counsel of their choice. The
Tsigutkin litigation shall not be settled without the prior written consent of
GFI Caminus, unless such settlement thereof involves only the payment of money
to which GFI Caminus is totally indemnified and
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<PAGE> 24
the unconditional release from any and all related liability of GFI Caminus.
6.3 CLAIMS.
6.3.1 NOTICE. Subject to the provisions of this Section 6.3, any
party entitled to indemnification hereunder (the "Indemnified Party") shall
promptly give the party from which indemnification is sought (the "Indemnifying
Party") written notice of any matter which the Indemnified Party has determined
has given rise to a right of indemnification under this Agreement, stating the
details of the claim, so far as is known, the amount of the Loss, if known, and
method of computation thereof, all with reasonable particularity; provided,
however, that the failure of the Indemnified Party to give any notice required
to be given hereunder shall not affect the Indemnified Party's right to
indemnification hereunder except to the extent any of the Indemnifying Parties
from whom such indemnity is sought shall have been actually and materially
prejudiced in its ability to defend the claim or action for which such
indemnification is sought by reason of such failure.
6.3.2 THIRD PARTY CLAIM PROCEDURES. The obligations and
liabilities of any party under this Section 6.3.2 with respect to Losses arising
from claims, assertions, events or proceedings of any third party (including,
without limitation, claims by any assignee or successor of the Indemnified Party
or any governmental agency), which are subject to the indemnification provided
for in this Article 6 ("Third Party Claims") shall be governed by and be subject
to the following additional terms and conditions: If the Indemnified Party shall
receive written notice of any Third Party Claim, the Indemnified Party shall
give the Indemnifying Parties prompt written notice of such Third Party Claim
(subject to the proviso in Section 6.3.1 above) and shall permit any of such
Indemnifying Parties, at its option, to participate in the defense of such Third
Party Claim by counsel of its own choosing and at its expense. If any of the
Indemnifying Parties acknowledges in writing its obligation to indemnify the
Indemnified Party hereunder against any Loss (without limitation) that may
result from such Third Party Claim, then such Indemnifying Party shall be
entitled, at its option, to assume and control the defense against such Third
Party Claim at its expense and through counsel of its choice if it gives prompt
written notice of its intention to do so to the Indemnified Party unless, in the
reasonable opinion of counsel for the Indemnified Party, there is a conflict or
a potential conflict of interest between the Indemnified Party and such
Indemnifying Party in such action, suit or proceeding, in which event the
Indemnified Party shall be entitled to direct the defense with respect to, but
only with respect to, those issues as to which such conflict exists. In the
event any of the Indemnifying Parties exercises its right to undertake the
defense against any such Third Party Claim as provided above, the Indemnified
Party shall, and it shall cause its affiliates to, cooperate with such
Indemnifying Party in such defense and make available to such Indemnifying Party
all pertinent records, materials and information in their possession or under
their control relating thereto as is required by such Indemnifying Party. No
Third Party Claim, except the settlement thereof which involves the payment of
money only for which the Indemnified Party is totally indemnified (without
limitation) by any of the Indemnifying Parties and the unconditional release
from all related liability of the Indemnified Party, may be settled by any of
the Indemnifying Parties without the written consent of the Indemnified Party.
Any settlement of a Third Party Claim by the Indemnified Party without the
written consent of any of the Indemnifying Parties shall discharge such
Indemnifying Parties from all liability hereunder with respect to the subject
matter of such Third Party Claim. With written notice to the Indemnified Party,
an Indemnifying Person shall be entitled, at its own cost and expense, to
rectify any breach of a representation or warranty within a reasonable period of
time and to the reasonable satisfaction of the Indemnified Party.
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<PAGE> 25
6.4 LIMITATION ON THE INDEMNIFYING PARTIES' INDEMNIFICATION
OBLIGATIONS. The Indemnifying Parties shall have no obligation to provide
indemnification pursuant to Section 6.2 hereof except to the extent that the
aggregate amount of indemnification to which GFI Caminus, but for this Section
6.4, otherwise shall have become entitled hereunder shall exceed One Hundred
Thousand Dollars ($100,000.00) (the "Basket"), in which event the Indemnifying
Parties shall be obligated to provide indemnification with respect to all Losses
in excess of the Basket. Notwithstanding the foregoing provisions of this
Section 6.4, the Indemnifying Parties are obligated to provide indemnification
pursuant to Section 6.2 hereof for all Losses incurred as a result of any breach
of or any Third Party Claim arising directly or indirectly with respect to or in
connection with the matters referred to in Sections 3.1, 3.2. 3.11, 3.20 and
6.2(c) of this Agreement. Losses referred to in the immediately preceding
sentence will be neither subject to nor counted against the Basket.
6.5 OPTION TO REDUCE ADDITIONAL PAYMENTS. With respect to any
indemnification obligation for Losses determined pursuant to this Article 6 to
be owing to GFI Caminus from ZAI*NET, GFI Caminus may, at its option, deduct any
or all (if possible) of such Losses from any additional payments to be made by
GFI Caminus to ZAI*NET pursuant to Section 2.5. In the event that ZAI*NET shall
dispute the validity or amount of any such deduction, ZAI*NET shall notify GFI
Caminus in writing within ten (10) days of ZAI*NET receiving notice of such
deduction, specifying in reasonable detail the basis of such dispute. In the
event such dispute is not resolved within twenty (20) days, the parties agree to
promptly submit the matter to binding arbitration to be resolved on an expedited
basis. If the parties are unable to resolve such dispute within the twenty (20)
days, GFI Caminus agrees to place the full amount of the additional payment(s)
into a third party escrow account pending resolution of the arbitration. The
escrow account shall be subject to an escrow agreement to be entered into by the
parties hereto and an escrow agent (who shall be selected by GFI Caminus), and
the form of such escrow agreement shall be mutually agreed to by the parties.
Such arbitration shall be commenced and conducted in accordance with the then
applicable rules of commercial arbitration of the American Arbitration
Association, held before a panel of three (3) arbitrators, one selected by each
of ZAI*NET and GFI Caminus and the third arbitrator selected jointly by each of
the designated arbitrators. Notwithstanding the arbitration procedure set forth
in this Section 6.5, in the event the dispute involves an accounting issue, the
procedures set forth in Section 2.4.2(ii) shall govern. Judgment upon any award
rendered by the panel of arbitrators or accounting firm may be entered in any
court having jurisdiction thereof. The arbitration shall be held in New York,
New York. In the event that an award is entered in favor of ZAI*NET, such award
shall include an amount of interest (calculated at the rate of eight percent
(8%) on the principal amount of the award for the period from the date that the
additional payment would otherwise have been due to be paid pursuant to Section
2.5 through the date that payment of the award by GFI Caminus is actually made.
The cost of the arbitration procedure shall be borne equally by GFI Caminus and
ZAI*NET, or as otherwise determined by the arbitrators or accounting firm.
6.6 SOLE AND EXCLUSIVE REMEDY. The indemnification obligations
specified under this Article 6 shall constitute the sole and exclusive remedies
of GFI Caminus with respect to the matters described in Section 6.2 and 6.3,
respectively.
6.7 INDEMNITY LIMITATIONS. Notwithstanding anything contained in this
Agreement to the contrary, ZAI*NET and Scanlan, on a joint and several basis,
shall not be required to indemnify GFI Caminus pursuant to this Agreement for
any amounts in excess of the aggregate amount of the Purchase
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<PAGE> 26
Price theretofore received.
6.8 INSURANCE RECOVERIES. In computing the amount of any Indemnified
Party's Losses with respect to an indemnifiable claim, there shall be deducted
the amount of any insurance proceeds actually received, directly or indirectly,
by such Indemnified Party with respect to the same facts and circumstances
giving rise to the Loss.
ARTICLE 7
MISCELLANEOUS
7.1 ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules attached hereto) together with the Related Agreements and the
certificates and other instruments delivered in connection herewith constitute
the entire agreement among the parties and supersedes all prior agreements,
representations, warranties, statements and understandings, whether oral or
written, with respect to the subject matter hereof, except as specifically set
forth in any document signed by all the parties hereto which expressly amends
this Agreement.
7.2 FURTHER ASSURANCES. Each party hereto shall at any time and from
time to time following the Closing promptly execute and deliver, or cause to be
executed and delivered, to the other parties all such further instruments and
take all such further action as may be reasonably necessary or appropriate to
confirm or carry out the provisions and intent of this Agreement and the
Related Agreements.
7.3 NOTICES. Any notices or other communications required or permitted
hereunder shall be in writing and shall be delivered by personal service,
telecopy or certified mail (postage prepaid), to such address as may be
designated from time to time by the relevant party, and which initially shall
be:
If to the Partnership:
ZAI*NET Software, L.P.
c/o ZAI*NET Software, Inc.
747 Third Avenue, 18th Floor
New York, New York 10017
Telecopy No.: 212-888-0691
Attention: Brian J. Scanlan
With a copy to:
GFI Caminus LLC
c/o GFI Energy Ventures LLC
12121 Wilshire Boulevard, Suite 1375
Los Angeles, California 90025
Telecopy No.: 310-442-0540
Attention: Lawrence D. Gilson
If to ZAI*NET:
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<PAGE> 27
ZAI*NET Software, Inc.
747 Third Avenue, 18th Floor
New York, New York 10017
Telecopy No.: 212-888-0691
Attention: Brian J. Scanlan
With a copy to:
Zukerman Gore & Brandeis, LLP
900 Third Avenue
New York, New York 10022
Telecopy No.: 212-223-6433
Attention: Jeffrey D. Zukerman, Esq.
If to Scanlan:
Brian J. Scanlan
c/o ZAI*NET Software, Inc.
747 Third Avenue, 18th Floor
New York, New York 10017
Telecopy No.: 212-888-0691
With a copy to:
Zukerman Gore & Brandeis, LLP
900 Third Avenue
New York, New York 10022
Telecopy No.: 212-223-6433
Attention: Jeffrey D. Zukerman, Esq.
If to GFI Caminus:
GFI Caminus LLC
c/o GFI Energy Ventures LLC
12121 Wilshire Boulevard, Suite 1375
Los Angeles, California 90025
Telecopy No.: 310-442-0540
Attention: Lawrence D. Gilson
With a copy to:
Irell & Manella LLP
333 South Hope Street, Suite 3300
Los Angeles, California 90071
Telecopy No.: 213-229-0515
Attention: Anthony T. Iler, Esq.
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<PAGE> 28
With a copy to:
Oaktree Capital Management LLC
550 South Hope Street, 22nd Floor
Los Angeles, California 90071
Telecopy No.: 213-614-0900
Attention: Christopher S. Brothers
Any notice sent by certified mail shall be deemed to have been given
three (3) days after the date on which it is mailed. If notice is given by
telecopy, notice shall be deemed given when such notice is transmitted to the
appropriate telecopy numbers specified in this Section 7.3. Notice by personal
service shall be deemed given when received.
7.4 EXPENSES. Each of the parties to this Agreement and to any of the
Related Agreements shall bear its own expenses in connection herewith or
therewith.
7.5 GOVERNING LAW AND SUBMISSION TO JURISDICTION. This Agreement shall
be governed by the laws of New York applicable to contracts executed and wholly
performed therein, without giving effect to the conflict of laws provisions
thereof. Each of the parties hereby consents to the jurisdiction of any state or
federal court located within the New York and irrevocably agrees that all
actions or proceedings relating to this Agreement shall be instituted and heard
by the courts of such jurisdiction. Each party hereby waives any objection that
it may have based on improper venue or forum non conveniens to the conduct of
any proceeding in any such court and to personal service of any and all process
upon it, and consents to any such service of process made in the manner provided
herein for the giving of notices under this Agreement.
7.6 EXHIBITS AND SCHEDULES. All Exhibits annexed hereto, and all
Schedules referred to herein, are hereby incorporated in and made a part of this
Agreement as if set forth in full herein.
7.7 CAPTIONS. All section titles or captions contained in this
Agreement or in any Schedule or Exhibit annexed hereto or referred to herein are
for convenience only, shall not be deemed a part of this Agreement and shall not
affect the meaning or interpretation of this Agreement. All references herein to
Sections shall be deemed references to such parts of this Agreement, unless the
context shall otherwise require.
7.8 SEVERABILITY. The validity, legality or enforceability of the
remainder of this Agreement shall not be affected even if one or more of the
provisions of this Agreement shall be held to be invalid, illegal or
unenforceable in any respect; provided, however, that if such invalidity,
illegality or unenforceability shall have material adverse effect on the
transactions contemplated by this Agreement such that the intent of this
Agreement will not be achieved, the aggrieved party which shall be materially
and adversely affected thereby may terminate this Agreement and abandon the
transactions contemplated hereby by giving notice to the other parties at any
time prior to the Closing Date.
7.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts which together shall be one and the same instrument.
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<PAGE> 29
7.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties, their respective successors and permitted
assigns.
7.11 WAIVERS STRICTLY CONSTRUED. With regard to any power, remedy or
right provided herein or otherwise available to any party hereunder no waiver or
extension of time shall be effective unless expressly contained in a writing
signed by the waiving party; and no alteration, modification or impairment shall
be implied by reason of any previous waiver, extension of time, delay or
omission in exercise, or other indulgence.
7.12 NUMBER AND GENDER. Throughout this Agreement, as the context may
require, the masculine gender includes the feminine and the neuter gender
includes the masculine and the feminine; the singular tense and number includes
the plural, and the plural tense and number includes the singular; the past
tense includes the present, and the present tense includes the past; references
to parties, sections, paragraphs and exhibits mean the parties, sections,
paragraphs and exhibits of and to this Agreement; and periods of days, weeks or
month mean calendar days, weeks or months.
7.13 SCHEDULE OMISSIONS. The omission of an item from any Schedule
annexed hereto shall not constitute a breach of any other representation and
warranty in this Agreement if such item is disclosed in another Schedule annexed
hereto, provided such disclosure reasonably identifies the item and its
relevance to such other representation and warranty.
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<PAGE> 30
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
ZAI*NET Software, L.P.
By: /s/ Brian J. Scanlan
--------------------------------------------
Name: Brian J. Scanlan
--------------------------------------------
Its: General Partner
--------------------------------------------
ZAI*NET Software, Inc.
By: /s/ Brian J. Scanlan
--------------------------------------------
Name: Brian J. Scanlan
--------------------------------------------
Its: President
--------------------------------------------
Brian J. Scanlan
/s/ Brian J. Scanlan
----------------------------------------------------
GFI Caminus LLC
By: /s/ Lawrence D. Gilson
--------------------------------------------
Name: Lawrence D. Gilson
--------------------------------------------
Its: President
--------------------------------------------
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<PAGE> 1
Exhibit 2.5
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (the "Agreement") dated as of February 26, 1999
is made and entered into between CAMINUS LLC, a Delaware limited liability
company ("Caminus"), and ZAI*NET Software, L.P., a Delaware limited partnership
("ZN LP"), with reference to the following:
A. Pursuant to a Conversion Agreement and Amendment of Purchase Agreement
between the parties dated as of December 31, 1998 (the "Conversion Agreement"),
Caminus is the owner of 100% of the general partnership interests and 100% of
the limited partnership interests in ZN LP; and
B. Caminus, as the sole remaining general partner and holder of all of
the partnership interests in ZN LP, has approved the merger of ZN LP with and
into Caminus, with Caminus as the surviving business entity.
NOW, THEREFORE, the parties agree as follows:
1. Merger. ZN LP shall be merged with and into Caminus (the "Merger"),
and Caminus shall be the surviving business entity (hereinafter sometimes
referred to as the "Surviving Company"). Appropriate documents necessary to
effectuate the Merger shall be filed with the Secretary of State of the State of
Delaware as soon as practicable. The date of filing with the Secretary of State
of the State of Delaware shall be the "Effective Date" of the Merger.
2. Succession. The separate existence of ZN LP shall cease and ZN LP
shall be merged with and into Caminus as of the Effective Date. The Surviving
Company shall thereupon have all of the rights, privileges, immunities and
powers and shall be subject to all of the duties and liabilities granted or
imposed by the Delaware Revised Uniform Limited Partnership Act, including,
without limitation, Section 17-211(h) thereof.
3. Effect on Outstanding Interests. On the Effective Date, by virtue of
the Merger, all outstanding partnership interests in ZN LP shall be
automatically cancelled, without consideration.
4. Further Assurances. From time to time, as and when required by the
Surviving Company or by its successors or assigns, there shall be executed and
delivered on behalf of ZN LP such deeds and other instruments, and there shall
be taken or caused to be taken by it all such further and other action, as shall
be appropriate, advisable or necessary in order to vest, perfect or confirm, of
record or otherwise, in the Surviving Company the title to and possession of all
property, interests, assets, rights, privileges, immunities, powers, franchises
and authority of ZN LP, and otherwise to carry out the purposes of this
Agreement, and the officers and managers of the Surviving Company are fully
authorized in the name and on behalf of ZN LP or otherwise, to take any and all
such action and to execute and deliver any and all such deeds and other
instruments.
<PAGE> 2
5. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
6. Counterparts. This Agreement may be executed in one or more
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute one agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
first date written above.
CAMINUS LLC,
a Delaware limited liability company
By: /s/ Lawrence Gilson
------------------------------
Its: Chair
------------------------------
ZAI*NET SOFTWARE, L.P.
By: CAMINUS LLC,
its General Partner
By: /s/ Lawrence Gilson
------------------------------
Its: Chair
------------------------------
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<PAGE> 1
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
CAMINUS CORPORATION
Caminus Corporation, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify as follows:
FIRST. The name of the Corporation is:
Caminus Corporation
SECOND. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or promoted
by the Corporation is as follows:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 50,000,000 shares of Common Stock, $0.01 par value
per share ("Common Stock").
The following is a statement of the designations and the powers,
privileges and rights, and the qualifications, limitations or restrictions
thereof in respect of the Common Stock of the Corporation.
1. Voting. The holders of the Common Stock are entitled to one vote
for each share held at all meetings of stockholders (and written actions in lieu
of meetings). There shall be no cumulative voting.
The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, irrespective of the provisions of Section 242(b)(2) of the
General Corporation Law of the State of Delaware.
<PAGE> 2
2. Dividends. Dividends may be declared and paid on the Common Stock
from funds lawfully available therefor as and when determined by the Board of
Directors.
3. Liquidation. Upon the dissolution or liquidation of the
Corporation, whether voluntary or involuntary, holders of Common Stock will be
entitled to receive all assets of the Corporation available for distribution to
its stockholders.
FIFTH. The name and mailing address of the sole incorporator are as
follows:
Name Mailing Address
David M. Stoner c/o Caminus LLC
747 Third Avenue
New York, New York 10017
SIXTH. The Corporation shall have a perpetual existence. In furtherance
of and not in limitation of powers conferred by statute, it is further provided
that the Board of Directors is expressly authorized to adopt, amend or repeal
the by-laws of the Corporation.
SEVENTH. Except to the extent that the General Corporation Law of the
State of Delaware prohibits the elimination or limitation of liability of
directors for breaches of fiduciary duty, no director of the Corporation shall
be personally liable to the Corporation or its stockholders for monetary damages
for any breach of fiduciary duty as a director, notwithstanding any provision of
law imposing such liability. No amendment to or repeal of this provision shall
apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment.
EIGHTH. 1. Actions, Suits and Proceedings Other than by or in the Right
of the Corporation. The Corporation shall indemnify each person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) (all such persons being
referred to hereafter as an "Indemnitee"), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, and, with respect to
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<PAGE> 3
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in, or not
opposed to, the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful. Notwithstanding anything to the contrary in this Article, except
as set forth in Section 7 below, the Corporation shall not indemnify an
Indemnitee seeking indemnification in connection with a proceeding (or part
thereof) initiated by the Indemnitee unless the initiation thereof was approved
by the Board of Directors of the Corporation. Notwithstanding anything to the
contrary in this Article, the Corporation shall not indemnify an Indemnitee to
the extent such Indemnitee is reimbursed from the proceeds of insurance, and in
the event the Corporation makes any indemnification payments to an Indemnitee
and such Indemnitee is subsequently reimbursed from the proceeds of insurance,
such Indemnitee shall promptly refund such indemnification payments to the
Corporation to the extent of such insurance reimbursement.
2. Actions or Suits by or in the Right of the Corporation. The
Corporation shall indemnify any Indemnitee who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan), or by reason of any
action alleged to have been taken or omitted in such capacity, against all
expenses (including attorneys' fees) and, to the extent permitted by law,
amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such action, suit or proceeding and any appeal
therefrom, if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of Delaware shall
determine upon application that, despite the adjudication of such liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses (including attorneys' fees)
which the Court of Chancery of Delaware shall deem proper.
3. Indemnification for Expenses of Successful Party. Notwithstanding
the other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of any
claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without
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<PAGE> 4
limiting the foregoing, if any action, suit or proceeding is disposed of, on the
merits or otherwise (including a disposition without prejudice), without (i) the
disposition being adverse to the Indemnitee, (ii) an adjudication that the
Indemnitee was liable to the Corporation, (iii) a plea of guilty or nolo
contendere by the Indemnitee, (iv) an adjudication that the Indemnitee did not
act in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Corporation, and (v) with respect to any criminal
proceeding, an adjudication that the Indemnitee had reasonable cause to believe
his conduct was unlawful, the Indemnitee shall be considered for the purposes
hereof to have been wholly successful with respect thereto.
4. Notification and Defense of Claim. As a condition precedent to his
right to be indemnified, the Indemnitee must notify the Corporation in writing
as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee. After notice from the
Corporation to the Indemnitee of its election so to assume such defense, the
Corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such claim,
other than as provided below in this Section 4. The Indemnitee shall have the
right to employ his own counsel in connection with such claim, but the fees and
expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
between the Corporation and the Indemnitee in the conduct of the defense of such
action or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of counsel for the Indemnitee shall be at the expense of the Corporation, except
as otherwise expressly provided by this Article. The Corporation shall not be
entitled, without the consent of the Indemnitee, to assume the defense of any
claim brought by or in the right of the Corporation or as to which counsel for
the Indemnitee shall have reasonably made the conclusion provided for in clause
(ii) above.
5. Advance of Expenses. Subject to the provisions of Section 6 below,
in the event that the Corporation does not assume the defense pursuant to
Section 4 of this Article of any action, suit, proceeding or investigation of
which the Corporation receives notice under this Article, any expenses
(including attorneys' fees) incurred by an Indemnitee in defending a civil or
criminal action, suit, proceeding or investigation or any appeal therefrom shall
be paid by the Corporation in advance of the final disposition of such matter;
provided, however, that the payment of such expenses incurred by an Indemnitee
in advance of the final disposition of such matter shall be made only upon
receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts
so advanced in the event that it shall ultimately be
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<PAGE> 5
determined that the Indemnitee is not entitled to be indemnified by the
Corporation as authorized in this Article. Such undertaking shall be accepted
without reference to the financial ability of the Indemnitee to make such
repayment.
6. Procedure for Indemnification. In order to obtain indemnification
or advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article, the
Indemnitee shall submit to the Corporation a written request, including in such
request such documentation and information as is reasonably available to the
Indemnitee and is reasonably necessary to determine whether and to what extent
the Indemnitee is entitled to indemnification or advancement of expenses. Any
such indemnification or advancement of expenses shall be made promptly, and in
any event within 60 days after receipt by the Corporation of the written request
of the Indemnitee, unless with respect to requests under Section 1, 2 or 5 the
Corporation determines within such 60-day period that the Indemnitee did not
meet the applicable standard of conduct set forth in Section 1 or 2, as the case
may be. Such determination shall be made in each instance by (a) a majority vote
of the directors of the Corporation consisting of persons who are not at that
time parties to the action, suit or proceeding in question ("disinterested
directors"), whether or not a quorum, (b) a majority vote of a committee of
disinterested directors designated by majority vote of disinterested directors,
whether or not a quorum, (c) a majority vote of a quorum of the outstanding
shares of stock of all classes entitled to vote for directors, voting as a
single class, which quorum shall consist of stockholders who are not at that
time parties to the action, suit or proceeding in question, (d) if there are no
disinterested directors, or if such disinterested directors so direct,
independent legal counsel (who may, to the extent permitted by law, be regular
legal counsel to the Corporation), or (e) a court of competent jurisdiction.
7. Remedies. The right to indemnification or advances as granted by
this Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 6. Unless otherwise required by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advancement of expenses under
this Article shall be on the Corporation. Neither the failure of the Corporation
to have made a determination prior to the commencement of such action that
indemnification is proper in the circumstances because the Indemnitee has met
the applicable standard of conduct, nor an actual determination by the
Corporation pursuant to Section 6 that the Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the Indemnitee has not met the applicable standard of conduct.
The Indemnitee's expenses (including attorneys' fees) incurred in connection
with successfully establishing his right to indemnification, in whole or in
part, in any such proceeding shall also be indemnified by the Corporation.
8. Subsequent Amendment. No amendment, termination or repeal of this
Article or of the relevant provisions of the General Corporation Law of the
State of Delaware or any
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<PAGE> 6
other applicable laws shall affect or diminish in any way the rights of any
Indemnitee to indemnification under the provisions hereof with respect to any
action, suit, proceeding or investigation arising out of or relating to any
actions, transactions or facts occurring prior to the final adoption of such
amendment, termination or repeal.
9. Other Rights. The indemnification and advancement of expenses
provided by this Article shall not be deemed exclusive of any other rights to
which an Indemnitee seeking indemnification or advancement of expenses may be
entitled under any law (common or statutory), agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in his official
capacity and as to action in any other capacity while holding office for the
Corporation, and shall continue as to an Indemnitee who has ceased to be a
director or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of the Indemnitee. Nothing contained in this
Article shall be deemed to prohibit, and the Corporation is specifically
authorized to enter into, agreements with officers and directors providing
indemnification rights and procedures different from those set forth in this
Article. In addition, the Corporation may, to the extent authorized from time to
time by its Board of Directors, grant indemnification rights to other employees
or agents of the Corporation or other persons serving the Corporation and such
rights may be equivalent to, or greater or less than, those set forth in this
Article.
10. Partial Indemnification. If an Indemnitee is entitled under any
provision of this Article to indemnification by the Corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal
therefrom but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
11. Insurance. The Corporation may purchase and maintain insurance, at
its expense, to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) against any expense,
liability or loss 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
such person against such expense, liability or loss under the General
Corporation Law of the State of Delaware.
12. Merger or Consolidation. If the Corporation is merged into or
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
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<PAGE> 7
13. Savings Clause. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the fullest extent permitted by any applicable portion of this
Article that shall not have been invalidated and to the fullest extent permitted
by applicable law.
14. Definitions. Terms used herein and defined in Section 145(h) and
Section 145(i) of the General Corporation Law of the State of Delaware shall
have the respective meanings assigned to such terms in such Section 145(h) and
Section 145(i).
15. Subsequent Legislation. If the General Corporation Law of the
State of Delaware is amended after adoption of this Article to expand further
the indemnification permitted to Indemnitees, then the Corporation shall
indemnify such persons to the fullest extent permitted by the General
Corporation Law of the State of Delaware, as so amended.
NINTH. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute and this Certificate of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.
TENTH. This Article is inserted for the management of the business and
for the conduct of the affairs of the Corporation.
1. Number of Directors. The number of directors of the Corporation
shall not be less than three. The exact number of directors within the
limitations specified in the preceding sentence shall be fixed from time to time
by, or in the manner provided in, the Corporation's by-laws.
2. Classes of Directors. The Board of Directors shall be and is
divided into three classes: Class I, Class II and Class III. No one class shall
have more than one director more than any other class. If a fraction is
contained in the quotient arrived at by dividing the designated number of
directors by three, then, if such fraction is one-third, the extra director
shall be a member of Class I, and if such fraction is two-thirds, one of the
extra directors shall be a member of Class I and one of the extra directors
shall be a member of Class II, unless otherwise provided from time to time by
resolution adopted by the Board of Directors.
3. Election of Directors. Elections of directors need not be by
written ballot except as and to the extent provided in the by-laws of the
Corporation.
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<PAGE> 8
4. Terms of Office. Each director shall serve for a term ending on
the date of the third annual meeting following the annual meeting at which such
director was elected; provided, that each initial director in Class I shall
serve for a term ending on the date of the annual meeting in 2000; each initial
director in Class II shall serve for a term ending on the date of the annual
meeting in 2001; and each initial director in Class III shall serve for a term
ending on the date of the annual meeting in 2002; and provided further, that the
term of each director shall be subject to the election and qualification of his
successor and to his earlier death, resignation or removal.
5. Allocation of Directors Among Classes in the Event of Increases or
Decreases in the Number of Directors. In the event of any increase or decrease
in the authorized number of directors, (i) each director then serving as such
shall nevertheless continue as a director of the class of which he is a member
and (ii) the newly created or eliminated directorships resulting from such
increase or decrease shall be apportioned by the Board of Directors among the
three classes of directors so as to ensure that no one class has more than one
director more than any other class. To the extent possible, consistent with the
foregoing rule, any newly created directorships shall be added to those classes
whose terms of office are to expire at the latest dates following such
allocation, and any newly eliminated directorships shall be subtracted from
those classes whose terms of offices are to expire at the earliest dates
following such allocation, unless otherwise provided from time to time by
resolution adopted by the Board of Directors.
6. Quorum; Action at Meeting. A majority of the directors at any time
in office shall constitute a quorum for the transaction of business. In the
event one or more of the directors shall be disqualified to vote at any meeting,
then the required quorum shall be reduced by one for each director so
disqualified, provided that in no case shall less than one-third of the number
of directors fixed pursuant to Section 1 above constitute a quorum. If at any
meeting of the Board of Directors there shall be less than such a quorum, a
majority of those present may adjourn the meeting from time to time. Every act
or decision done or made by a majority of the directors present at a meeting
duly held at which a quorum is present shall be regarded as the act of the Board
of Directors unless a greater number is required by law, by the by-laws of the
Corporation or by this Certificate of Incorporation.
7. Vacancies. Any vacancy in the Board of Directors, however
occurring, including a vacancy resulting from an enlargement of the size of the
Board of Directors, shall be filled only by a vote of a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. A director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office, and a director chosen to fill a
position resulting from an increase in the number of directors shall hold office
until the next election of the class for which such director shall have been
chosen, subject to the election and qualification of his successor and to his
earlier death, resignation or removal.
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<PAGE> 9
8. Stockholder Nominations and Introduction of Business, Etc. Advance
notice of stockholder nominations for election of directors and other business
to be brought by stockholders before a meeting of stockholders shall be given in
the manner provided by the by-laws of the Corporation.
9. Amendments to Article. Notwithstanding any other provisions of
law, this Certificate of Incorporation or the by-laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least seventy-five percent (75%) of the
shares of capital stock of the Corporation issued and outstanding and entitled
to vote shall be required to amend or repeal, or to adopt any provision
inconsistent with, this Article TENTH.
ELEVENTH. From and after the date that the Corporation first has a class
of securities registered under the Securities Exchange Act of 1934, as amended,
stockholders of the Corporation may not take any action by written consent in
lieu of a meeting. Notwithstanding any other provisions of law, this Certificate
of Incorporation or the by-laws of the Corporation, and notwithstanding the fact
that a lesser percentage may be specified by law, the affirmative vote of the
holders of at least seventy-five percent (75%) of the shares of capital stock of
the Corporation issued and outstanding and entitled to vote shall be required to
amend or repeal, or to adopt any provision inconsistent with, this Article
ELEVENTH.
TWELFTH. Special meetings of stockholders may be called at any time by
only the Chairman of the Board of Directors, the President or the Board of
Directors. Business transacted at any special meeting of stockholders shall be
limited to matters relating to the purpose or purposes stated in the notice of
meeting. Notwithstanding any other provision of law, this Certificate of
Incorporation or the by-laws of the Corporation, and notwithstanding the fact
that a lesser percentage may be specified by law, the affirmative vote of the
holders of at least seventy-five percent (75%) of the shares of capital stock of
the Corporation issued and outstanding and entitled to vote shall be required to
amend or repeal, or to adopt any provision inconsistent with, this Article
TWELFTH.
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EXECUTED by the undersigned on this 30th day of September, 1999.
By: /s/ David M. Stoner
---------------------------
David M. Stoner
Sole Incorporator
<PAGE> 1
Exhibit 3.2
BY-LAWS
OF
CAMINUS CORPORATION
<PAGE> 2
BY-LAWS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 - Stockholders....................................................................1
1.1 Place of Meetings...................................................1
1.2 Annual Meeting......................................................1
1.3 Special Meetings....................................................1
1.4 Notice of Meetings..................................................1
1.5 Voting List.........................................................2
1.6 Quorum..............................................................2
1.7 Adjournments........................................................2
1.8 Voting and Proxies..................................................2
1.9 Action at Meeting...................................................2
1.10 Nomination of Directors.............................................3
1.11 Notice of Business at Annual Meetings...............................4
1.12 Action without Meeting..............................................5
1.13 Organization........................................................5
ARTICLE 2 - Directors.......................................................................5
2.1 General Powers......................................................5
2.2 Number; Election and Qualification..................................5
2.3 Classes of Directors................................................5
2.4 Terms of Office.....................................................5
2.5 Allocation of Directors Among Classes in the Event of
Increases or Decreases in the Number of Directors...................6
2.6 Vacancies...........................................................6
2.7 Resignation.........................................................6
2.8 Regular Meetings....................................................6
2.9 Special Meetings....................................................6
2.10 Notice of Special Meetings..........................................7
2.11 Meetings by Telephone Conference Calls..............................7
2.12 Quorum..............................................................7
2.13 Action at Meeting...................................................7
2.14 Action by Consent...................................................7
2.15 Committees..........................................................7
2.16 Compensation of Directors...........................................8
ARTICLE 3 - Officers........................................................................8
3.1 Enumeration.........................................................8
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
3.2 Election............................................................8
3.3 Qualification.......................................................8
3.4 Tenure..............................................................8
3.5 Resignation and Removal.............................................9
3.6 Vacancies...........................................................9
3.7 Chairman of the Board and Vice Chairman of the Board................9
3.8 President...........................................................9
3.9 Vice Presidents.....................................................9
3.10 Secretary and Assistant Secretaries................................10
3.11 Treasurer and Assistant Treasurers.................................10
3.12 Salaries...........................................................10
ARTICLE 4 - Capital Stock..................................................................11
4.1 Issuance of Stock..................................................11
4.2 Certificates of Stock..............................................11
4.3 Transfers..........................................................11
4.4 Lost, Stolen or Destroyed Certificates.............................11
4.5 Record Date........................................................12
ARTICLE 5 - General Provisions.............................................................12
5.1 Fiscal Year........................................................12
5.2 Corporate Seal.....................................................12
5.3 Waiver of Notice...................................................12
5.4 Voting of Securities...............................................12
5.5 Evidence of Authority..............................................13
5.6 Certificate of Incorporation.......................................13
5.7 Transactions with Interested Parties...............................14
5.8 Severability.......................................................14
5.9 Pronouns...........................................................14
ARTICLE 6 - Amendments.....................................................................14
6.1 By the Board of Directors..........................................14
6.2 By the Stockholders................................................14
6.3 Certain Provisions.................................................14
</TABLE>
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<PAGE> 4
BY-LAWS
OF
CAMINUS CORPORATION
ARTICLE 1 - Stockholders
1.1 Place of Meetings. All meetings of stockholders shall be held at
such place within or without the State of Delaware as may be designated from
time to time by the Board of Directors, the Chairman of the Board or the
President or, if not so designated, at the registered office of the corporation.
1.2 Annual Meeting. The annual meeting of stockholders for the
election of directors and for the transaction of such other business as may
properly be brought before the meeting shall be held on a date to be fixed by
the Board of Directors, the Chairman of the Board or the President (which date
shall not be a legal holiday in the place where the meeting is to be held) at
the time and place to be fixed by the Board of Directors, the Chairman of the
Board or the President and stated in the notice of the meeting. If no annual
meeting is held in accordance with the foregoing provisions, the Board of
Directors shall cause the meeting to be held as soon thereafter as convenient.
If no annual meeting is held in accordance with the foregoing provisions, a
special meeting may be held in lieu of the annual meeting, and any action taken
at that special meeting shall have the same effect as if it had been taken at
the annual meeting, and in such case all references in these By-laws to the
annual meeting of the stockholders shall be deemed to refer to such special
meeting.
1.3 Special Meetings. Special meetings of stockholders may be called
at any time only by the Chairman of the Board of Directors, the President or the
Board of Directors. Business transacted at any special meeting of stockholders
shall be limited to matters relating to the purpose or purposes stated in the
notice of meeting.
1.4 Notice of Meetings. Except as otherwise provided by law, written
notice of each meeting of stockholders, whether annual or special, shall be
given not less than ten nor more than 60 days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notices of all meetings
shall state the place, date and hour of the meeting. The notice of a special
meeting shall state, in addition, the purpose or purposes for which the meeting
is called. If mailed, notice is given when deposited in the United States mail,
postage prepaid, directed to the stockholder at the stockholder's address as it
appears on the records of the corporation.
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<PAGE> 5
1.5 Voting List. The officer who has charge of the stock ledger of the
corporation shall prepare, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, at a place within the city 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 of the meeting, and may be inspected by any
stockholder who is present.
1.6 Quorum. Except as otherwise provided by law, the Certificate of
Incorporation or these By-laws, the holders of a majority of the shares of the
capital stock of the corporation issued and outstanding and entitled to vote at
the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business.
1.7 Adjournments. Any meeting of stockholders may be adjourned to any
other time and to any other place at which a meeting of stockholders may be held
under these By-laws by the stockholders present or represented at the meeting
and entitled to vote, although less than a quorum, or, if no stockholder is
present, by any officer entitled to preside at or to act as Secretary of such
meeting. It shall not be necessary to notify any stockholder of any adjournment
of less than 30 days if the time and place of the adjourned meeting are
announced at the meeting at which adjournment is taken, unless after the
adjournment a new record date is fixed for the adjourned meeting. At the
adjourned meeting, the corporation may transact any business which might have
been transacted at the original meeting.
1.8 Voting and Proxies. Each stockholder shall have one vote for each
share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise provided
by law, the Certificate of Incorporation or these By-laws. Each stockholder of
record entitled to vote at a meeting of stockholders, or to express consent or
dissent to corporate action in writing without a meeting, may vote or express
such consent or dissent in person or may authorize another person or persons to
vote or act for him by proxy executed in writing (or in such other manner
permitted by the General Corporation Law of the State of Delaware) by the
stockholder or his authorized agent and delivered to the Secretary of the
corporation. No such proxy shall be voted or acted upon after three years from
the date of its execution, unless the proxy expressly provides for a longer
period.
1.9 Action at Meeting. When a quorum is present at any meeting, the
holders of a majority of the stock present or represented and voting on a matter
(or if there are two or more classes of stock entitled to vote as separate
classes, then in the case of each such class, the holders of a majority of the
stock of that class present or represented and voting on a matter) shall decide
any matter to be voted upon by the stockholders at such meeting, except when a
different vote is required by express provision of law, the Certificate of
Incorporation or these By-laws. Any
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<PAGE> 6
election by stockholders shall be determined by a plurality of the votes cast by
the stockholders entitled to vote at the election.
1.10 Nomination of Directors. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors. Nomination for election to the Board of Directors of the corporation
at a meeting of stockholders may be made by the Board of Directors or by any
stockholder of the corporation entitled to vote for the election of directors at
such meeting who complies with the notice procedures set forth in this Section
1.10. Such nominations, other than those made by or on behalf of the Board of
Directors, shall be made by timely notice in writing to the Secretary of the
corporation. To be timely, a stockholder's notice must be delivered to, or
mailed and received by, the Secretary at the principal executive offices of the
corporation not less than 70 days nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting; provided, however, that (i)
in the event that the date of the annual meeting is advanced by more than 20
days, or delayed by more than 70 days, from such anniversary date, notice by the
stockholder to be timely must be so delivered or received not earlier than the
ninetieth day prior to such annual meeting and not later than the close of
business on the later of the seventieth day prior to such annual meeting or the
tenth day following the day on which notice of the date of such annual meeting
was mailed or public disclosure of the date of such annual meeting was made,
whichever first occurs, and (ii) with respect to the annual meeting of
stockholders of the corporation to be held in the year 2000, to be timely, a
stockholder's notice must be so received not earlier than the ninetieth day
prior to such annual meeting and not later than the close of business on the
later of (A) the sixtieth day prior to such annual meeting and (B) the tenth day
following the day on which notice of the date of such annual meeting was mailed
or public disclosure of the date of such annual meeting was made, whichever
first occurs. A stockholder's notice to the Secretary shall set forth (a) as to
each proposed nominee (i) the name, age, business address and, if known,
residence address of each such nominee, (ii) the principal occupation or
employment of each such nominee, (iii) the number of shares of stock of the
corporation which are beneficially owned by each such nominee, and (iv) any
other information concerning the nominee that must be disclosed as to nominees
in proxy solicitations pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (including such person's written consent to be named as
a nominee and to serve as a director if elected); and (b) as to the stockholder
giving 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. In addition, to be
effective, the stockholder's notice must be accompanied by the written consent
of the proposed nominee to serve as a director if elected. The corporation may
require any proposed nominee to furnish such other information as may reasonably
be required by the corporation to determine the eligibility of such proposed
nominee to serve as a director of the corporation.
The chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
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<PAGE> 7
1.11 Notice of Business at Annual Meetings. At an annual meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting,
business must be (a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors, (b) otherwise
brought before the meeting by or at the direction of the Board of Directors, or
(c) otherwise properly brought before an annual meeting by a stockholder. For
business to be properly brought before an annual meeting by a stockholder, if
such business relates to the election of directors of the corporation, the
procedures in Section 1.10 must be complied with. If such business relates to
any other matter, the stockholder must have given timely notice thereof in
writing to the Secretary. To be timely, a stockholder's notice must be delivered
to, or mailed and received by, the Secretary at the principal executive offices
of the corporation not less than 70 days nor more than 90 days prior to the
first anniversary of the preceding year's annual meeting; provided, however,
that (i) in the event that the date of the annual meeting is advanced by more
than 20 days, or delayed by more than 70 days, from such anniversary date,
notice by the stockholder to be timely must be so delivered or received not
earlier than the ninetieth day prior to such annual meeting and not later than
the close of business on the later of the seventieth day prior to such annual
meeting or the tenth day following the day on which notice of the date of such
annual meeting was mailed or public disclosure of the date of such annual
meeting was made, whichever first occurs, and (ii) with respect to the annual
meeting of stockholders of the corporation to be held in the year 2000, to be
timely, a stockholder's notice must be so received not earlier than the
ninetieth day prior to such annual meeting and not later than the close of
business on the later of (A) the sixtieth day prior to such annual meeting and
(B) the tenth day following the day on which notice of the date of such annual
meeting was mailed or public disclosure of the date of such annual meeting was
made, whichever first occurs. 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 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 these By-laws to the contrary, no business shall be conducted at any annual
meeting except in accordance with the procedures set forth in this Section 1.11
and except that any stockholder proposal which complies with Rule 14a-8 of the
proxy rules (or any successor provision) promulgated under the Securities
Exchange Act of 1934, as amended, and is to be included in the corporation's
proxy statement for an annual meeting of stockholders shall be deemed to comply
with the requirements of this Section 1.11.
The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 1.11, and if he should so
determine, the chairman shall so declare to the meeting that any such business
not properly brought before the meeting shall not be transacted.
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<PAGE> 8
1.12 Action without Meeting. From and after the date that the
corporation first has a class of securities registered under the Securities
Exchange Act of 1934, as amended, stockholders of the corporation may not take
any action by written consent in lieu of a meeting.
1.13 Organization. The Chairman of the Board, or in his absence the
Vice Chairman of the Board designated by the Chairman of the Board, or the
President, in the order named, shall call meetings of the stockholders to order,
and shall act as chairman of such meeting; provided, however, that the Board of
Directors may appoint any stockholder to act as chairman of any meeting in the
absence of the Chairman of the Board. The Secretary of the corporation shall act
as secretary at all meetings of the stockholders; but in the absence of the
Secretary at any meeting of the stockholders, the presiding officer may appoint
any person to act as secretary of the meeting.
ARTICLE 2 - Directors
2.1 General Powers. The business and affairs of the corporation shall
be managed by or under the direction of a Board of Directors, who may exercise
all of the powers of the corporation except as otherwise provided by law, the
Certificate of Incorporation or these By-laws. In the event of a vacancy in the
Board of Directors, the remaining directors, except as otherwise provided by
law, may exercise the powers of the full Board until the vacancy is filled.
2.2 Number; Election and Qualification. The number of directors which
shall constitute the whole Board of Directors shall be determined by resolution
of the Board of Directors, but in no event shall be less than three. The number
of directors may be decreased at any time and from time to time by a majority of
the directors then in office, but only to eliminate vacancies existing by reason
of the death, resignation, removal or expiration of the term of one or more
directors. The directors shall be elected at the annual meeting of stockholders
by such stockholders as have the right to vote on such election. Directors need
not be stockholders of the corporation.
2.3 Classes of Directors. The Board of Directors shall be and is
divided into three classes: Class I, Class II and Class III. No one class shall
have more than one director more than any other class. If a fraction is
contained in the quotient arrived at by dividing the designated number of
directors by three, then, if such fraction is one-third, the extra director
shall be a member of Class I, and if such fraction is two-thirds, one of the
extra directors shall be a member of Class I and one of the extra directors
shall be a member of Class II, unless otherwise provided from time to time by
resolution adopted by the Board of Directors.
2.4 Terms of Office. Each director shall serve for a term ending on
the date of the third annual meeting following the annual meeting at which such
director was elected; provided,
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<PAGE> 9
that each initial director in Class I shall serve for a term ending on the date
of the annual meeting of stockholders in 2000; each initial director in Class II
shall serve for a term ending on the date of the annual meeting of stockholders
in 2001; and each initial director in Class III shall serve for a term ending on
the date of the annual meeting of stockholders in 2002; and provided further,
that the term of each director shall be subject to the election and
qualification of his successor and to his earlier death, resignation or removal.
2.5 Allocation of Directors Among Classes in the Event of Increases or
Decreases in the Number of Directors. In the event of any increase or decrease
in the authorized number of directors, (i) each director then serving as such
shall nevertheless continue as a director of the class of which he or she is a
member and (ii) the newly created or eliminated directorships resulting from
such increase or decrease shall be apportioned by the Board of Directors among
the three classes of directors so as to ensure that no one class has more than
one director more than any other class. To the extent possible, consistent with
the foregoing rule, any newly created directorships shall be added to those
classes whose terms of office are to expire at the latest dates following such
allocation, and any newly eliminated directorships shall be subtracted from
those classes whose terms of offices are to expire at the earliest dates
following such allocation, unless otherwise provided from time to time by
resolution adopted by the Board of Directors.
2.6 Vacancies. Any vacancy in the Board of Directors, however
occurring, including a vacancy resulting from an enlargement of the size of the
Board, shall be filled only by vote of a majority of the directors then in
office, although less than a quorum, or by a sole remaining director. A director
elected to fill a vacancy shall be elected for the unexpired term of his
predecessor in office, and a director chosen to fill a position resulting from
an increase in the number of directors shall hold office until the next election
of the class for which such director shall have been chosen, subject to the
election and qualification of his successor and to his earlier death,
resignation or removal.
2.7 Resignation. Any director may resign by delivering his written
resignation to the corporation at its principal office or to the President or
Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
2.8 Regular Meetings. Regular meetings of the Board of Directors may
be held without notice at such time and place, either within or without the
State of Delaware, as shall be determined from time to time by the Board of
Directors; provided that any director who is absent when such a determination is
made shall be given notice of the determination. A regular meeting of the Board
of Directors may be held without notice immediately after and at the same place
as the annual meeting of stockholders.
2.9 Special Meetings. Special meetings of the Board of Directors may
be held at any time and place, within or without the State of Delaware,
designated in a call by the Chairman of
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the Board, President, two or more directors, or by one director in the event
that there is only a single director in office.
2.10 Notice of Special Meetings. Notice of any special meeting of
directors shall be given to each director by the Secretary or by the officer or
one of the directors calling the meeting. Notice shall be duly given to each
director (i) by giving notice to such director in person or by telephone at
least 24 hours in advance of the meeting, (ii) by sending a telegram, telecopy,
telex or electronic mail message, or delivering written notice by hand, to his
last known business or home address at least 24 hours in advance of the meeting,
(iii) by depositing written notice with a nationally-recognized courier for
overnight delivery to his last known business or home address at least 48 hours
in advance of the meeting or (iv) by mailing written notice to his last known
business or home address at least 72 hours in advance of the meeting. A notice
or waiver of notice of a meeting of the Board of Directors need not specify the
purposes of the meeting.
2.11 Meetings by Telephone Conference Calls. Directors or any members
of any committee designated by the directors may participate in a meeting of the
Board of Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation by such means shall constitute
presence in person at such meeting.
2.12 Quorum. A majority of the total number of the whole Board of
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; provided, however, that in no case shall less than one-third
(1/3) of the number so fixed constitute a quorum. In the absence of a quorum at
any such meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice other than announcement at the meeting,
until a quorum shall be present.
2.13 Action at Meeting. At any meeting of the Board of Directors at
which a quorum is present, the vote of a majority of those present shall be
sufficient to take any action, unless a different vote is specified by law, the
Certificate of Incorporation or these By-laws.
2.14 Action by Consent. Any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee of the Board of
Directors may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent to the action in writing, and the written
consents are filed with the minutes of proceedings of the Board or committee.
2.15 Committees. The Board of Directors may designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a
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member of a committee, the member or members of the committee present at any
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors
and subject to the provisions of the General Corporation Law of the State of
Delaware, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the corporation
and may authorize the seal of the corporation to be affixed to all papers which
may require it. Each such committee shall keep minutes and make such reports as
the Board of Directors may from time to time request. Except as the Board of
Directors may otherwise determine, any committee may make rules for the conduct
of its business, but unless otherwise provided by the directors or in such
rules, its business shall be conducted as nearly as possible in the same manner
as is provided in these By-laws for the Board of Directors.
2.16 Compensation of Directors. Directors may be paid such compensation
for their services and such reimbursement for expenses of attendance at meetings
as the Board of Directors may from time to time determine. No such payment shall
preclude any director from serving the corporation or any of its parent or
subsidiary corporations in any other capacity and receiving compensation for
such service.
ARTICLE 3 - Officers
3.1 Enumeration. The officers of the corporation shall consist of a
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including a Chairman of the
Board, a Vice Chairman of the Board, and one or more Vice Presidents, Assistant
Treasurers and Assistant Secretaries. The Board of Directors may appoint such
other officers as it may deem appropriate.
3.2 Election. The President, Treasurer and Secretary shall be elected
annually by the Board of Directors at its first meeting following the annual
meeting of stockholders. Other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.
3.3 Qualification. No officer need be a stockholder. Any two or more
offices may be held by the same person.
3.4 Tenure. Except as otherwise provided by law, by the Certificate of
Incorporation or by these By-laws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote choosing or appointing him, or until his earlier death, resignation or
removal.
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3.5 Resignation and Removal. Any officer may resign by delivering his
or her written resignation to the corporation at its principal office or to the
President or Secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event.
Any officer may be removed at any time, with or without cause, by vote of
a majority of the entire number of directors then in office.
Except as the Board of Directors may otherwise determine, no officer who
resigns or is removed shall have any right to any compensation as an officer for
any period following his resignation or removal, or any right to damages on
account of such removal, whether his compensation be by the month or by the year
or otherwise, unless such compensation is expressly provided in a duly
authorized written agreement with the corporation.
3.6 Vacancies. The Board of Directors may fill any vacancy occurring
in any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of President, Treasurer
and Secretary. Each such successor shall hold office for the unexpired term of
his predecessor and until his successor is elected and qualified, or until his
earlier death, resignation or removal.
3.7 Chairman of the Board and Vice Chairman of the Board. The Board of
Directors may appoint a Chairman of the Board. If the Board of Directors
appoints a Chairman of the Board, he shall perform such duties and possess such
powers as are assigned to him by the Board of Directors. Unless otherwise
provided by the Board of Directors, he shall preside at all meetings of the
stockholders and at all meetings of the Board of Directors. If the Board of
Directors appoints a Vice Chairman of the Board, he shall, in the absence or
disability of the Chairman of the Board, perform the duties and exercise the
powers of the Chairman of the Board and shall perform such other duties and
possess such other powers as may from time to time be vested in him by the Board
of Directors.
3.8 President. The President shall, subject to the direction of the
Board of Directors, have general charge and supervision of the business of the
corporation. Unless the Board of Directors has designated the Chairman of the
Board or another officer as Chief Executive Officer, the President shall be the
Chief Executive Officer of the corporation. The President shall perform such
other duties and shall have such other powers as the Board of Directors may from
time to time prescribe.
3.9 Vice Presidents. Any Vice President shall perform such duties and
possess such powers as the Board of Directors or the President may from time to
time prescribe. In the event of the absence, inability or refusal to act of the
President, the Vice President (or if there shall be more than one, the Vice
Presidents in the order determined by the Board of Directors) shall perform the
duties of the President and when so performing shall have all the powers of and
be
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subject to all the restrictions upon the President. The Board of Directors may
assign to any Vice President the title of Executive Vice President, Senior Vice
President or any other title selected by the Board of Directors.
3.10 Secretary and Assistant Secretaries. The Secretary shall perform
such duties and shall have such powers as the Board of Directors or the
President may from time to time prescribe. In addition, the Secretary shall
perform such duties and have such powers as are incident to the office of the
secretary, including without limitation the duty and power to give notices of
all meetings of stockholders and special meetings of the Board of Directors, to
attend all meetings of stockholders and the Board of Directors and keep a record
of the proceedings, to maintain a stock ledger and prepare lists of stockholders
and their addresses as required, to be custodian of corporate records and the
corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess such powers
as the Board of Directors, the President or the Secretary may from time to time
prescribe. In the event of the absence, inability or refusal to act of the
Secretary, the Assistant Secretary (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any meeting
of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
3.11 Treasurer and Assistant Treasurers. The Treasurer shall perform
such duties and shall have such powers as may from time to time be assigned to
him or her by the Board of Directors or the President. In addition, the
Treasurer shall perform such duties and have such powers as are incident to the
office of treasurer, including without limitation the duty and power to keep and
be responsible for all funds and securities of the corporation, to deposit funds
of the corporation in depositories selected in accordance with these By-laws, to
disburse such funds as ordered by the Board of Directors, to make proper
accounts of such funds, and to render as required by the Board of Directors
statements of all such transactions and of the financial condition of the
corporation.
The Assistant Treasurers shall perform such duties and possess such
powers as the Board of Directors, the President or the Treasurer may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Treasurer, the Assistant Treasurer (or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Treasurer.
3.12 Salaries. Officers of the corporation shall be entitled to such
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.
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ARTICLE 4 - Capital Stock
4.1 Issuance of Stock. Unless otherwise voted by the stockholders and
subject to the provisions of the Certificate of Incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the corporation
or the whole or any part of any unissued balance of the authorized capital stock
of the corporation held in its treasury may be issued, sold, transferred or
otherwise disposed of by vote of the Board of Directors in such manner, for such
consideration and on such terms as the Board of Directors may determine.
4.2 Certificates of Stock. Every holder of stock of the corporation
shall be entitled to have a certificate, in such form as may be prescribed by
law and by the Board of Directors, certifying the number and class of shares
owned by him or her in the corporation. Each such certificate shall be signed
by, or in the name of the corporation by, the Chairman or Vice Chairman, if any,
of the Board of Directors, or the President or a Vice President, and the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary
of the corporation. Any or all of the signatures on the certificate may be a
facsimile.
Each certificate for shares of stock which are subject to any restriction
on transfer pursuant to the Certificate of Incorporation, the By-laws,
applicable securities laws or any agreement among any number of stockholders or
among such holders and the corporation shall have conspicuously noted on the
face or back of the certificate either the full text of the restriction or a
statement of the existence of such restriction.
4.3 Transfers. Except as otherwise established by rules and
regulations adopted by the Board of Directors, and subject to applicable law,
shares of stock may be transferred on the books of the corporation by the
surrender to the corporation or its transfer agent of the certificate
representing such shares properly endorsed or accompanied by a written
assignment or power of attorney properly executed, and with such proof of
authority or the authenticity of signature as the corporation or its transfer
agent may reasonably require. Except as may be otherwise required by law, by the
Certificate of Incorporation or by these By-laws, the corporation shall be
entitled to treat the record holder of stock as shown on its books as the owner
of such stock for all purposes, including the payment of dividends and the right
to vote with respect to such stock, regardless of any transfer, pledge or other
disposition of such stock until the shares have been transferred on the books of
the corporation in accordance with the requirements of these By-laws.
4.4 Lost, Stolen or Destroyed Certificates. The corporation may issue
a new certificate of stock in place of any previously issued certificate alleged
to have been lost, stolen or destroyed, upon such terms and conditions as the
Board of Directors may prescribe, including the presentation of reasonable
evidence of such loss, theft or destruction and the giving of such
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indemnity as the Board of Directors may require for the protection of the
corporation or any transfer agent or registrar.
4.5 Record Date. The Board of Directors may fix in advance a date as a
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders, or entitled to receive payment of any
dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than 60 nor less than ten days before
the date of such meeting, nor more than 60 days prior to any other action to
which such record date relates.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held. The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating to such purpose.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
ARTICLE 5 - General Provisions
5.1 Fiscal Year. Except as from time to time otherwise designated by
the Board of Directors, the fiscal year of the corporation shall begin on the
first day of January in each year and end on the last day of December in each
year.
5.2 Corporate Seal. The corporate seal shall be in such form as shall
be approved by the Board of Directors.
5.3 Waiver of Notice. Whenever any notice whatsoever is required to be
given by law, by the Certificate of Incorporation or by these By-laws, a waiver
of such notice either in writing signed by the person entitled to such notice or
such person's duly authorized attorney, or by telegraph, cable or any other
available method, whether before, at or after the time stated in such waiver, or
the appearance of such person or persons at such meeting in person or by proxy,
shall be deemed equivalent to such notice.
5.4 Voting of Securities. Except as the directors may otherwise
designate, the President or Treasurer may waive notice of, and act as, or
appoint any person or persons to act as, proxy
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or attorney-in-fact for this corporation (with or without power of substitution)
at any meeting of stockholders or shareholders of any other corporation or
organization, the securities of which may be held by this corporation.
5.5 Evidence of Authority. A certificate by the Secretary, or an
Assistant Secretary, or a temporary Secretary, as to any action taken by the
stockholders, directors, a committee or any officer or representative of the
corporation shall as to all persons who rely on the certificate in good faith be
conclusive evidence of such action.
5.6 Certificate of Incorporation. All references in these By-laws to
the Certificate of Incorporation shall be deemed to refer to the Certificate of
Incorporation of the corporation, as amended and in effect from time to time.
5.7 Transactions with Interested Parties. No contract or transaction
between the corporation and one or more of the directors or officers, or between
the corporation and any other corporation, partnership, association or other
organization in which one or more of the directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or a committee of the
Board of Directors which authorizes the contract or transaction or solely
because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the Board
of Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum;
(2) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
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5.8 Severability. Any determination that any provision of these
By-laws is for any reason inapplicable, illegal or ineffective shall not affect
or invalidate any other provision of these By-laws.
5.9 Pronouns. All pronouns used in these By-laws shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person or persons may require.
ARTICLE 6 - Amendments
6.1 By the Board of Directors. These By-laws may be altered, amended
or repealed or new By-laws may be adopted by the affirmative vote of a majority
of the directors present at any regular or special meeting of the Board of
Directors at which a quorum is present.
6.2 By the Stockholders. Except as otherwise provided in Section 6.3,
these By-laws may be altered, amended or repealed or new By-laws may be adopted
by the affirmative vote of the holders of a majority of the shares of the
capital stock of the corporation issued and outstanding and entitled to vote at
any regular or special meeting of stockholders, provided notice of such
alteration, amendment, repeal or adoption of new By-laws shall have been stated
in the notice of such regular or special meeting.
6.3 Certain Provisions. Notwithstanding any other provision of law,
the Certificate of Incorporation or these By-laws, and notwithstanding the fact
that a lesser percentage may be specified by law, the affirmative vote of the
holders of at least seventy-five percent (75%) of the shares of the capital
stock of the corporation issued and outstanding and entitled to vote shall be
required to amend or repeal, or to adopt any provision inconsistent with Section
1.3, Section 1.10, Section 1.11, Section 1.12, Section 1.13, Article 2 or
Article 6 of these By-laws.
Approved and adopted by the
Board of Directors on September 30, 1999
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Exhibit 10.1
CAMINUS LLC
1998 STOCK INCENTIVE PLAN
I. INTRODUCTION
1.1 PURPOSES. The purposes of the 1998 Stock Incentive Plan (the
"Plan") of Caminus LLC, a Delaware limited liability company (the "Company"),
are to align the interests of the Company's members and the recipients of
options under this Plan by increasing the proprietary interest of such
recipients in the Company's growth and success and to advance the interests of
the Company by attracting and retaining officers and other key employees.
Capitalized terms not otherwise defined herein shall have the meaning set forth
in Article VIII hereof.
1.2 ADMINISTRATION. This Plan shall be administered by the Management
Committee of the Company (the "Management Committee") or a committee designated
by the Management Committee (the "Committee").
The Committee shall, subject to the terms of this Plan, select eligible
officers, and other key employees or consultants of the Company for
participation in this Plan and, with respect to each such participant, shall
determine the number of Shares subject to each option granted hereunder, the
exercise price of such option, the time and conditions of exercise of such
option and all other terms and conditions of such option, including, without
limitation, the form of the option agreement. The Committee shall, subject to
the terms of this Plan, have the authority to interpret this Plan, establish
rules and regulations for the administration of this Plan and may impose,
incidental to the grant of an option, conditions with respect to the grant,
competitive employment or other activities. All such interpretations, rules and
regulations shall be conclusive and binding on all parties. Each option
hereunder shall be evidenced by a written agreement (an "Agreement") between the
Company and the optionee setting forth the terms and conditions applicable to
such option.
The Committee may delegate some or all of its power and authority
hereunder to the Chief Executive Officer or other executive officer of the
Company as the Committee deems appropriate.
A majority of the Committee shall constitute a quorum, and the acts of
a majority of the members of the Committee present at any meeting at which a
quorum is present, or acts approved in writing by a majority of the Committee
without a meeting, shall be the acts of the Committee.
1.3 ELIGIBILITY. Participants in this Plan shall consist of such
officers and other key employees and consultants of the Company as the Committee
in its sole discretion may select from time to time. The Committee's selection
of a person to participate in this Plan in any year shall not require the
Committee to select such person to participate in this Plan in any other year.
<PAGE> 2
1.4 SHARES AVAILABLE. Subject to adjustment as provided in Article IV
of this Plan, 7,342,068 shares ("Shares") shall be available for grants of
options under this Plan. To the extent an outstanding option expires or
terminates unexercised or is cancelled or forfeited, the Shares subject to the
expired, unexercised, cancelled or forfeited portion of such option shall again
be available for grants of options under this Plan. Shares shall represent a
Membership Interest in the Company, subject to all of the terms and conditions
of the Limited Liability Company Agreement of the Company (including the
Appendices thereto) as then in effect and as subsequently modified or amended
(the "Company Agreement"). For the purpose of determining the percentage
interest of a participant in the Company at any time following exercise of an
option, such percentage interest shall be equal to: (i) the number of Shares
purchased upon exercise of the option, divided by (ii) the total number of
outstanding Class A, Class B and Class C "shares" in the Company at that time.
As of December 31, 1998, there were 84,256,434 issued and outstanding "shares"
representing Class A Membership Interests, and no issued and outstanding
"shares" representing Class B or Class C Membership Interests.
II. SHARE OPTIONS
2.1 GRANTS OF SHARE OPTIONS. The Committee may from time-to-time prior
to the termination of this Plan, in its discretion, grant options to purchase
Shares to such eligible persons as may be selected by the Committee. Any option,
or portion thereof, that is not an incentive option shall be a non-qualified
option. An incentive option shall mean an option to purchase Shares that meets
the requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), or any successor provision, and that is intended by the Committee
to constitute an incentive option. Each incentive option shall be granted within
ten (10) years of the effective date of this Plan.
2.2 TERMS OF SHARE OPTIONS. Options granted pursuant to this Plan shall
be subject to the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms of this Plan,
as the Committee shall deem advisable:
(a) NUMBER OF SHARES AND PURCHASE PRICE. The number of Shares
subject to an option and the purchase price for the Shares purchasable upon
exercise of the option shall be determined by the Committee; provided, however,
that the purchase price per Share purchasable upon exercise of an option granted
pursuant to this Plan shall not be less than one hundred percent (100%) of the
Fair Market Value of a Share on the date of grant of such option.
(b) OPTION PERIOD AND EXERCISABILITY. Each option will be
exercisable only to the extent that it is vested. Each option will vest in
accordance with the terms of its Agreement. No option shall be exercisable
following its expiration. Each option, whether vested or otherwise, shall expire
on the earliest of: (i) ten years following the date the option is granted; (ii)
thirty days following the termination of the optionee's employment or consulting
relationship with the Company (other than a termination by the Company for
Cause); (iii) immediately upon termination if optionee's employment or
consulting relationship is terminated for Cause; or (iv) six months following
the death or Disability of
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the optionee; provided, further, in the event of termination (other than for
Cause) or death or Disability of the optionee, the option shall only be
exercisable to the extent vested on the date of termination, death or
Disability.
(c) METHOD OF EXERCISE. An option may be exercised (i) by
giving written notice to the Company specifying the number of whole Shares to be
purchased and accompanied by payment therefor in full (or arrangement made for
such payment to the Committee's satisfaction) in cash and (ii) by executing the
Company Agreement (or other governing agreement) and such other documents as the
Company may reasonably request. No Shares shall be delivered until the full
purchase price therefor has been paid.
III. RESTRICTIONS ON SHARES
3.1 INVESTMENT REPRESENTATION. If requested by the Company, as a
condition to purchasing any Shares pursuant to an option, an optionee shall
submit a written statement, in form satisfactory to counsel for the Company, in
which the optionee shall represent, warrant and covenant to the Company that (a)
any Shares purchased upon exercise of an option granted pursuant to this Plan
will be purchased for investment and not with a view to the distribution thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), unless such purchase has been registered under the Securities Act and
applicable state securities law; and (b) any subsequent sale of any such Shares
shall be made either pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws, or pursuant to an
exemption from registration under the Securities Act and such state securities
laws. As a further condition precedent to any exercise of options granted
pursuant to this Plan, the optionees shall comply with all regulations and
requirements of any regulatory authority having control of or supervision over
the issuance of the Shares and, in connection therewith, shall execute any
documents which the Committee shall in its sole discretion deem necessary or
advisable.
3.2 RESTRICTED SECURITIES. The Shares acquired pursuant to the exercise
of any option granted pursuant to this Plan will not be registered under the
Securities Act and are "restricted securities" within the meaning of Rule 144
under the Securities Act; (ii) such Shares cannot be sold, transferred or
otherwise disposed of unless they are subsequently registered under the
Securities Act or an exemption from registration is then available; and (iii)
there is now no registration statement on file with the Securities and Exchange
Commission with respect to any stock of the Company and the Company has no
obligation or current intention to register any Shares acquired pursuant to the
exercise of any option granted pursuant to this Plan under the Securities Act.
3.3 NON-TRANSFERABILITY. No option hereunder shall be transferable
other than by will or the laws of descent and distribution and shall be
exercisable during the optionee's lifetime only by the optionee or the
optionee's guardian, legal representative or similar person. Except as permitted
by the preceding sentence, no option hereunder shall be sold, transferred,
assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by
operation of law or otherwise) or be subject to execution, attachment or similar
process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate,
encumber or otherwise dispose of any option hereunder, such option and all
rights thereunder shall immediately become null and void.
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3.4 OPTIONS SUBJECT TO REGISTRATION, ETC. Each option hereunder shall
be subject to the requirement that if at any time the Company determines that
the listing, registration or qualification of the Shares subject to such option
upon any securities exchange or under any law, the consent or approval of any
governmental body, or the taking of any other action is necessary or desirable
as a condition of, or in connection with, the delivery of Shares thereunder,
such Shares shall not be delivered unless such listing, registration,
qualification, consent, approval or other action shall have been effected or
obtained, free of any conditions not acceptable to the Company.
3.5 LIMITS ON TRANSFERABILITY OF SHARES. In addition to the
restrictions on transferability on interests in the Company imposed above and by
the Company Agreement, the restrictions on transferability set forth in this
Section 3.5 shall apply. Except for Permitted Transfers (as defined below), no
Disposition of any Shares may be made without the consent of the Committee.
"Permitted Transfer" shall mean any Disposition described in clauses (ii) and
(iv) of the definition of "Permitted Transfer" contained in Appendix B to the
Company Agreement.
IV. SALE OF THE COMPANY; CONVERSION OF
SHARES INTO MEMBERSHIP INTERESTS IN
4.1 SALE OF THE COMPANY. In the event that Members in the Company
holding, in the aggregate, 66% of the profits interests and 66% of the capital
interests in the Company ("Super-Majority Holders") elect to sell or in any
other manner convey the Securities held by them to a Person who is not a
Securityholder, at the option of the Super-Majority Holders, any holder of
Option Securities shall be required to sell or convey all of the Option
Securities owned by such holder on and under the same terms and conditions as
the Securities held by the Super-Majority Holders are sold or conveyed. The
holders of Option Securities shall be given not less than 10 days prior written
notice of such proposed transaction, which notice shall provide the terms and
conditions and anticipated closing date for the transaction. On such closing
date the holders of the Option Securities shall deliver the certificates (if
any) evidencing the Option Securities, duly endorsed for transfer, to the
purchaser or transferee in exchange for the receipt of the purchase price. The
restrictions set forth in Sections 4.1 and 4.2 shall expire immediately
following the consummation of a Qualified Public Offering.
4.2 MERGER, CONSOLIDATION, OR SALE. In the event that the
Super-Majority Holders approve of a merger, consolidation, sale of all or
substantially all of the assets of the Company or any subsidiary thereof, or
approve of the sale of all of the capital stock of a subsidiary of the Company
in an arms-length transaction (each case an "Approved Sale"), the holders of the
Option Securities shall consent to and raise no objection to such Approved Sale
and (i) if the Approved Sale is structured as a merger or consolidation, each
holder of Option Securities will vote in favor thereof and will not exercise any
dissenter's rights of appraisal such holder may have under applicable law, and
(ii) if the Approved Sale is structured as a sale of all or substantially all of
the assets of the Company with a subsequent dissolution and liquidation of the
Company, each holder of the Option Securities will vote in favor thereof and
will vote in favor of the subsequent dissolution and liquidation of the
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Company. Each holder of Option Securities will take all actions in connection
with the consummation of an Approved Sale as are reasonably requested by the
Super-Majority Holders.
4.3 ADJUSTMENTS TO OPTIONS AS A RESULT OF CERTAIN TRANSACTIONS. If the
outstanding Membership Interests in the Company are increased, decreased,
changed into, or exchanged for a different number or kind of shares or
securities through merger, consolidation, combination, exchange of shares,
contribution transaction, other reorganization, recapitalization,
reclassification, share dividend, split or reverse split, an appropriate and
proportionate adjustment shall be made in the number and kind of Shares
allocated to the unexercised option as determined in good faith by the
Management Committee, whose determination in that respect shall be final,
binding and conclusive. Any such adjustment shall be made without change in the
aggregate purchase price applicable to the unexercised option, but with a
corresponding adjustment in the price for each share or other unit of any
security covered by the option.
4.4 EFFECT OF MERGER OR ASSET SALE ON OPTIONS. In the event of a merger
of the Company with or into another Entity, or the sale of substantially all of
the assets of the Company, the Committee, upon 30 days prior written notice to
the optionees, may, in its discretion, do one or more of the following: (i)
shorten the period during which options are exercisable (provided they remain
exercisable for at least 30 days after the date the notice is given); (ii)
accelerate any vesting schedule to which an option is subject; (iii) arrange to
have the surviving or successor entity grant replacement options with
appropriate adjustments in the number and kind of securities and option prices;
or (iv) cancel options upon payment to the optionees in cash, with respect to
each option to the extent then exercisable (including any options as to which
the exercise has been accelerated as contemplated in clause (ii) above), of an
amount equal to the excess of the Fair Market Value of the number of Shares as
to which the option is then exercisable (at the effective time of the merger,
reorganization, sale of other event) over the aggregate exercise price with
respect to such Shares.
V. COMPANY'S RIGHT TO REPURCHASE OPTION SECURITIES
5.1 COMPANY'S RIGHT TO REPURCHASE FOLLOWING DEATH, DISABILITY OR
TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP. Upon the death, Disability
or termination of the employment or consulting relationship of any optionee
(upon such event the optionee is referred to herein individually, as the context
indicates, as a "Former Employee/Consultant"), then the Company shall have, in
addition to and not in lieu of any other rights or options hereunder, an option
to purchase any or all of the Option Securities owned by the Former Employee and
any persons or entities who received Option Securities as a result of a
Permitted Transfer from such Former Employee (such persons or entities,
"Permitted Transferees"). The restrictions set forth in this Section 5.1 shall
expire immediately following the consummation of a Qualified Public Offering.
5.2 MANNER OF EXERCISE. The Company shall exercise the option under
Section 5.1 by written notice stating the number of the Option Securities owned
by the Former Employee/Consultant and his or her Permitted Transferees that are
being purchased, which
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notice may be delivered to such Former Employee/Consultant at any time following
such event.
5.3 PURCHASE PRICE. In the case of any purchase pursuant to Section 5.1
the purchase price shall be equal to the Fair Market Value of the Option
Securities repurchased as of the date of the termination; provided, however, in
the event of a termination of employment for Cause, the purchase price shall be
equal to the lesser of (i) the Fair Market Value of the Option Securities
repurchased as of the date of the termination and (ii) the price paid by the
Former Employee/Consultant for such Option Securities.
5.4 RIGHT TO SETTLE OPTION. If the optionee (or his beneficiary)
exercises this option in accordance with the Plan at any time following
optionee's death, Disability or other termination of optionee's employment
(other than a termination for Cause, in which case the option shall be
immediately cancelled), the Company shall have the right, in lieu of delivering
the Shares as to which this option is exercised, to return to the optionee any
exercise price delivered for the attempted exercise and pay to optionee an
amount in cash equal to the excess (if any) of the Fair Market Value of that
portion of the option as to which exercise is sought over the exercise price of
such portion of the option.
5.5 CLOSING. The closing of any purchase pursuant to Article V shall be
held at a time specified by the Company within forty-five (45) days following
the exercise of any right or option thereunder (or such longer time as may be
necessary to determine the purchase price pursuant to the applicable section) at
the then principal offices of the Company, or such other place as is agreed upon
by the parties thereto.
VI. NON-COMPETITION
6.1 NONCOMPETITION. As a condition to the issuance of options and
Shares pursuant to the Plan, and as a means reasonably designed to protect the
intellectual property, confidential and proprietary information of the Company,
as long as the optionee or his Permitted Transferees own options or Option
Securities, the optionee will not, without the prior written consent of the
Company based upon approval from the Management Committee of the Company (or any
similar successor management body of the Company or any successor entity of the
Company), anywhere in the world, directly or indirectly, engage in, assist
(financially or otherwise), associate with, or perform services (other than on
behalf of the Company or any of its Affiliates) in the Company Business,
including, without limitation, whether such engagement, assistance, association
or performance is as an individual, principal, officer, director, proprietor,
employee, partner, stockholder or other investor (other than as a holder of less
than five percent (5%) of the outstanding capital stock of a publicly traded
corporation), creditor, guarantor, consultant, advisor, agent, sales
representative or other participant, or otherwise permit his name to be used or
employed with any such business.
6.2 NON-INTERFERENCE. As long as optionee or his Permitted Transferees
own options or Option Securities, no optionee shall, without the prior written
consent of the Company, directly, indirectly or as an agent on behalf of or in
conjunction with any person, firm, partnership, corporation or other entity, (a)
hire, solicit, encourage the resignation of, or in any other manner seek to
engage or employ any person who is then, or within the prior
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<PAGE> 7
twelve (12) months had been, an employee of the Company or its Affiliates,
whether or not for compensation and whether as an officer, covenantor,
consultant, adviser, independent sales representative, independent contractor or
participant, or (b) except as may be appropriate to perform such optionee's
employment duties for the Company, contact, solicit, service or otherwise have
any dealings related to Company Business with any person or entity with whom the
Company or its Affiliates has a former, current or prospective business
relationship or who is or was at any time during his employment with the Company
(including any predecessor or successor entity) a customer or client of the
Company or its Affiliates, or a prospective customer or client to which the
Company or its Affiliates has made a written or oral business proposal.
6.3 EFFECT OF VIOLATION. In the event of a violation by an optionee of
the provisions of this Article VI, then all options held by such optionee (and
any beneficiaries thereof) shall be immediately null and void and
non-exercisable, and the Company shall have the right, at any time after such
event, to repurchase any Option Securities owned by such optionee and his or her
Permitted Transferees for an amount equal to the lesser of (i) the Fair Market
Value of the Option Securities repurchased as of the date of such violation, and
(ii) the price paid by the optionee for such Option Securities.
VII. GENERAL
7.1 EFFECTIVE DATE AND TERM OF PLAN. This Plan became effective on June
1, 1998. This Plan shall terminate ten (10) years after its effective date
unless terminated earlier by the Management Committee. Termination of this Plan
shall not affect the terms or conditions of any option granted prior to
termination.
7.2 AMENDMENTS. The Management Committee may amend this Plan as it
shall deem advisable, subject to any requirement of Member approval required by
applicable law. No amendment may materially impair the rights of a holder of an
outstanding option without the consent of such holder.
7.3 AGREEMENT. No option shall be effective until an Agreement has been
executed by the Company and the optionee and, upon execution by the Company and
the optionee and delivery of the Agreement to the Company, such option shall be
effective as of the effective date set forth in the Agreement.
7.4 TAX WITHHOLDING. The Company shall have the right to require, prior
to the issuance or delivery of any Shares, payment by the optionee of any
federal, state, local or other taxes which may be required to be withheld or
paid in connection with an option hereunder.
7.5 UNFUNDED PLAN. This Plan shall be unfunded. Neither the Company nor
the Committee shall be required to segregate any assets that may at any time be
represented by options granted hereunder. Neither the Company nor the Committee
shall be deemed to be a trustee of any amounts to be distributed or paid
hereunder. Any liability or obligation of the Company to any person with respect
to an option shall be based solely upon this Plan and the related Agreement. No
such liability or obligation shall be deemed to be secured by any
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<PAGE> 8
pledge of, or encumbrance on, any property of the Company or any affiliate of
the Company.
7.6 NO RIGHT OF PARTICIPATION OR EMPLOYMENT. No person shall have any
right to participate in this Plan. Neither this Plan nor any option granted
hereunder shall confer upon any person any right to continued employment by the
Company or any affiliate of the Company or affect in any manner the right of the
Company or any affiliate of the Company to terminate the employment of any
person at any time without liability hereunder.
7.7 NO RIGHTS AS MEMBER. No person shall have any right as a Member in
the Company with respect to any Shares which are subject to an option hereunder
until such person becomes a Member of record with respect to such Shares.
7.8 DESIGNATION OF BENEFICIARY. Each optionee may file with the
Committee a written designation of one or more persons as such optionee's
beneficiary or beneficiaries (both primary and contingent) in the event of the
optionee's death. To the extent an outstanding option granted pursuant to this
Plan is exercisable, such beneficiary or beneficiaries shall be entitled to
exercise such option.
Each beneficiary designation shall become effective only when filed in
writing with the Committee during the optionee's lifetime on a form prescribed
by the Committee. The spouse of a married optionee domiciled in a community
property jurisdiction shall join in any designation of a beneficiary other than
such spouse. The filing with the Committee of a new beneficiary designation
shall cancel all previously filed beneficiary designations.
If an optionee fails to designate a beneficiary, or if all designated
beneficiaries of an optionee predecease the optionee, then each outstanding
option hereunder held by such optionee, to the extent exercisable, may be
exercised by such optionee's executor, administrator, legal representative or
similar person.
7.9 GOVERNING LAW. This Plan, each option hereunder and the related
Agreement, and all determinations made and actions taken pursuant thereto, to
the extent not governed by the Code or the laws of the United States, shall be
governed by the laws of the State of Delaware and construed in accordance
therewith without giving effect to principles of conflicts of laws.
VIII. DEFINED TERMS
Unless otherwise defined in this Article VIII, capitalized terms used
herein shall have meanings set forth in Company Agreement.
"Cause" shall mean, with respect to any optionee who has entered into
an employment or consulting agreement with the Company, a material breach of
such agreement by optionee, or if such agreement provides for termination for
cause, the definition of "cause" set forth in such agreement. With respect to
any other optionee, "Cause" shall mean (i) conviction or pleading guilty
(including a plea of nolo contendre) with respect to the commission of a felony,
(ii) acts of dishonesty or moral turpitude which are materially detrimental to
the Company and/or its Affiliates as determined in good faith by the Management
Committee, (iii) failure of the optionee to obey the reasonable and
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<PAGE> 9
lawful orders of the Management Committee or the Chief Executive Officer of the
Company after written demand that the optionee do so, (iv) gross negligence by
the optionee in the performance of, or wilful disregard by the optionee of, the
optionee's obligations to the Company, or (v) the breach by the optionee of any
of the optionee's obligations of confidentiality with respect to the Company.
"Company Business" shall mean the business of the Company, including,
without limitation, the business of developing, licensing, installing and
maintaining commodities trading and risk management software and providing
consulting and support services substantially related to such software
activities to the foreign exchange, natural gas, crude oil, refined products and
electric power industries.
"Disability" shall mean the optionee's inability to perform the
optionee's duties on account of physical or mental disability for a period of
ninety (90) or more calendar days, whether or not consecutive, occurring within
any period of twelve (12) consecutive months.
"Fair Market Value" means, as of any date, with respect to a Security,
the value of such Security determined as follows:
(i) If the Security is listed on any established stock exchange or a
national market system, including without limitation, the National Market System
of the National Association of Securities Dealers, Inc. Automated Quotation
("NASDAQ") System, the Fair Market Value of a Security shall be the closing
sales price for such Security (or the closing bid, if no sales are reported) as
quoted on such system or exchange (or the exchange with the greatest volume of
trading in Securities) on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Committee deems reliable;
(ii) If the Security is quoted on the NASDAQ System (but not on the
National Market System thereof) or is regularly quoted by recognized securities
dealers but selling prices are not reported, the Fair Market Value of such
Security shall be the mean between the high bid and low asked prices for the
Security on the last market trading day prior to the day of determination, as
reported in the Wall Street journal or such other source as the Committee deems
reliable;
(iii) In the absence of any established market for a Security, the Fair
Market Value of the Security shall be determined by the Management Committee in
its reasonable discretion (the "Management Committee Determination"); provided,
however, if the holder of a Security disagrees with the Management Committee
Determination for purposes of Articles V and VI of this Plan, the holder shall
notify the Company in writing of such disagreement within ten (10) days
following the delivery of the Management Committee Determination to the holder.
If the holder fails to object in writing within such time period, the Management
Committee Determination shall be final and binding for all purposes. If the
holder does object in writing within such period, then the Management Committee
shall select an independent appraiser to determine the Fair Market Value, whose
determination shall be final and binding for all purposes. If the Fair Market
Value as determined by the appraiser is greater than 105% of the Management
Committee Determination, then the Company shall bear all of the fees and
expenses of the independent appraiser ("Appraisal
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<PAGE> 10
Fees"). If the Fair Market Value as determined by the appraiser is less than 95%
of the Management Committee Determination, then the holder shall bear all of the
Appraisal Fees. Otherwise, the Appraisal Fees shall be split and borne equally
by the Company and the holder. Any amounts owed by the holder under this
paragraph (iii) may be recovered by the Company through the offset of any
amounts owed to the holder.
"Option Securities" means Securities in the Company which were issued
as a result of the exercise of an option pursuant to this Plan. Any such
Securities shall remain "Option Securities" in the hands of subsequent holders
thereof, irrespective of how many times such Securities have been transferred.
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Exhibit 10.7
CONVERSION AGREEMENT AND
AMENDMENT OF PURCHASE AGREEMENT
THIS CONVERSION AGREEMENT AND AMENDMENT OF PURCHASE AGREEMENT (the
"Agreement"), dated as of December 31, 1998, is made by and among CAMINUS ENERGY
VENTURES LLC, a Delaware limited liability company ("CEV"), ZAK ASSOCIATES,
INC., a Delaware corporation ("ZN Corp"), ZAI*NET SOFTWARE, L.P., a Delaware
limited partnership ("ZN LP"), BRIAN SCANLAN, an individual ("Scanlan"), and
ROONEY SOFTWARE, L.L.C., a Delaware limited liability company ("Rooney")
(collectively, ZN Corp, Scanlan and Rooney are referred to as the "Scanlan
Parties").
R E C I T A L S
WHEREAS, the parties (other than Rooney) are parties to a Purchase
Agreement (the "Purchase Agreement") dated as of May 12, 1998 pursuant to which,
among other things, CEV purchased the one percent (1%) general partnership
interest and seventy percent (70%) of the limited partnership interests in ZN LP
from ZN Corp, with ZN Corp retaining the remaining twenty-nine percent (29%)
limited partnership interest therein;
WHEREAS, ZN Corp subsequently transferred its entire remaining limited
partnership interest in ZN LP to Rooney, and Rooney currently holds all right,
title and interest therein;
WHEREAS, the Scanlan Parties and CEV desire that Rooney exchange such
remaining limited partnership interest in ZN LP for a newly issued Series A
Membership Interest in CEV, for consideration and on the terms set forth in
Section 1(a) below and as reflected on Appendix A attached hereto (which
appendix reflects all of the Membership Interests in CEV issued and outstanding
and subject to outstanding options as of the date hereof, after giving effect to
the exchange contemplated by this Agreement);
WHEREAS, the parties also wish to amend, and confirm their agreement with
respect to, certain provisions of the Purchase Agreement;
NOW, THEREFORE, in order to implement the foregoing and in consideration
of the mutual representations, warranties, covenants and agreements contained
herein and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
1. Exchange of Securities.
(a) Securities Held by Rooney. Upon the terms and subject to
the conditions of this Agreement, the parties agree that Rooney shall surrender
and exchange its entire remaining partnership interest in ZN LP, free and clear
of any and all liens, claims and
<PAGE> 2
encumbrances (other than those created by the Amended and Restated Limited
Partnership Agreement of ZN LP dated as of May 12, 1998, as further amended to
the date hereof (the "ZN LP Partnership Agreement")), to CEV in consideration of
the issuance by CEV to Rooney of 21,579,728 notional shares of the Series A
Membership Interests in CEV, as indicated on the attached Appendix A. The
parties agree that the foregoing exchange shall be deemed to occur for all
purposes on the date of this Agreement, and that the capital contribution that
Rooney shall be deemed to have made to CEV in respect of such exchange is equal
to $10,339,350 (i.e., 21% times $49,235,000). For purposes of determining the
exercise price of the GFI Option to purchase 10% of CEV, pursuant to Section 5.3
of Appendix B to the Limited Liability Company Agreement of CEV, the parties
agree that the exercise price with respect to the GFI Option shall be increased
by an amount equal to $1,033,935 (i.e., 10% of $10,339,350). CEV acknowledges
that Rooney intends to divide the foregoing Series A Membership Interest among
Rooney's existing equity holders (including option holders, as applicable) as
set forth on the attached Appendix B; CEV agrees to issue notional shares of its
Series A Membership Interest to such persons (in an aggregate amount equal to
21,579,728 notional shares of Series A Membership Interest) in exchange for the
Series A Membership Interest being issued to Rooney pursuant to this Agreement,
subject to such persons executing a copy of the LLC Agreement or a joinder
thereto. At such time, such persons shall be admitted as Members of CEV. The
parties also acknowledge that subsequent to the issuance to Rooney of the Series
A Membership Interest contemplated by this Agreement, CEV expects to purchase
from SS&C Technologies, Inc. ("SS&C") SS&C's ownership interest in CEV.
(b) Conversion of ZN LP Options. The parties acknowledge that
ZN LP previously adopted a 1998 Stock Incentive Plan (the "ZN Option Plan"),
which provides for the issuance of options to acquire partnership interests in
ZN LP (the "Options"). Pursuant to Section 4.3 of the ZN Option Plan, as a
result of the exchange described in paragraph (a) above, all previously issued
Options automatically convert into options to acquire Membership Interests of
CEV. Consequently, the parties acknowledge that, as a result of the transactions
contemplated by this Agreement, (i) the ZN Option Plan shall become a plan to
acquire up to 4,960,857 notional shares of the Series B Membership Interests of
CEV and that (ii) all previously issued Options shall be deemed converted into
options to acquire notional shares of the Series B Membership Interests of CEV,
on the same basis that the Rooney interest in ZN LP is being converted into a
Series A Membership Interest in CEV. Except for such conversion, the parties
agree that the terms governing the ZN Option Plan and the option agreements
evidencing option grants thereunder shall remain in full force and effect in
accordance with their terms. Further, the parties agree to cause the ZN Option
Plan, promptly following the date hereof, to be expanded by increasing the
aggregate equity available thereunder to a total of 7,342,068 notional shares of
the Series B Membership Interests of CEV subject to issuance upon exercise of
options granted pursuant to the terms and conditions set forth in the ZN Option
Plan.
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<PAGE> 3
2. Representations and Warranties of the Company. CEV hereby
represents and warrants to the Scanlan Parties as follows:
(a) Organization. CEV is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware, having full power and authority to own its properties and to carry on
its business as conducted.
(b) Authority. CEV has the requisite power and authority to
deliver this Agreement, perform its obligations herein, and consummate the
transactions contemplated hereby. CEV has duly executed and delivered this
Agreement and has obtained the necessary authorization to execute and deliver
this Agreement and to perform its obligations herein and consummate the
transactions contemplated hereby. This Agreement is a valid, legal and binding
obligation of CEV enforceable against CEV in accordance with its terms, except
to the extent that enforceability may be limited by applicable bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally and subject to general principles of equity (regardless of whether
such enforcement is considered in a proceeding at law or in equity).
(c) Membership Interests Duly Authorized. The Series A
Membership Interest to be issued to Rooney pursuant to this Agreement, when
issued and delivered in accordance with the terms of this Agreement, will be
duly authorized, validly issued, fully paid and non-assessable. The Series B
Membership Interests to be issued upon exercise of options granted under the ZN
Option Plan (converted as provided in Section 1(b) above), when issued and
delivered in accordance with the terms of such plan and the applicable option
agreements, will be duly authorized, validly issued, fully paid and
non-assessable.
(d) Capitalization. Immediately after the consummation of the
transactions contemplated by this Agreement, the Membership Interests of CEV
will be owned as set forth on Appendix A hereto.
3. Representations and Warranties of The Scanlan Parties. The Scanlan
Parties, jointly and severally, hereby represent and warrant to CEV as follows:
(a) Ownership of ZN LP Interest; Due Authority. Rooney owns all
of the right, title and interest in and to the remaining twenty-nine percent
(29%) limited partnership interest in ZN LP referred to in the recitals to this
Agreement, free and clear of any and all liens, claims and encumbrances
whatsoever (other than those created by the ZN LP Partnership Agreement). Except
for that interest, none of the Scanlan Parties has any interest in the equity or
capital of ZN LP. None of the Scanlan Parties has granted any option or other
right or interest in the limited partnership interest in ZN LP held by Rooney.
ZN Corp is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, having full power and authority to own
its properties and to carry on its business as conducted. Rooney is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware, having full power and authority to own its
properties and to carry on its business as conducted. The Scanlan Parties have
the requisite power and authority to deliver this Agreement, perform their
obligations herein, and consummate the transactions contemplated hereby. The
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<PAGE> 4
Scanlan Parties have duly executed and delivered this Agreement and have
obtained the necessary authorization to execute and deliver this Agreement and
to perform their obligations herein and consummate the transactions contemplated
hereby. This Agreement is a valid, legal and binding obligation of the Scanlan
Parties enforceable against them in accordance with its terms, except to the
extent that enforceability may be limited by applicable bankruptcy, insolvency
or similar laws affecting the enforcement of creditors' rights generally and
subject to general principles of equity (regardless of whether such enforcement
is considered in a proceeding at law or in equity).
(b) No Registration. The Scanlan Parties understand that the
Membership Interest being acquired by Rooney has not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), in reliance on an
exemption therefrom for transactions not involving any public offering, that
such Membership Interest has not been approved or disapproved by the Securities
and Exchange Commission ("SEC") or by any other federal or state agency, and
that no such agency has passed on the accuracy or adequacy of disclosures made
to the Scanlan Parties by CEV.
(c) Other Information. The Scanlan Parties have had an
opportunity to ask questions of and receive answers from CEV, or a person or
persons acting on its behalf, concerning the terms and conditions of the
investment in CEV, which questions have been answered to the full satisfaction
of the Scanlan Parties, and have also had an opportunity to obtain any
additional information which CEV possesses or can reasonably acquire without
undue expense that is necessary to verify the accuracy of the information
furnished to the Scanlan Parties.
(d) Limitations on Disposition and Resale. The Scanlan Parties
understand that the Membership Interest being acquired by Rooney hereunder
cannot be (i) disposed of unless such disposition is in accordance with the
Limited Liability Company Agreement of CEV dated as of May 12, 1998 (including
Appendix B attached thereto), as amended to the date hereof (the "LLC
Agreement"), or (ii) resold unless registered by the Company pursuant to the
Securities Act and any applicable state securities laws, unless an exemption
therefrom is available, and, accordingly, it may not be possible for the Scanlan
Parties to liquidate their investment in CEV; and the Scanlan Parties agree not
to dispose of such Membership Interest unless such disposition is in accordance
with the LLC Agreement and the Membership Interest has been so registered or an
exemption from the requirement of registration is available under the Securities
Act. Further, by their execution and delivery of this Agreement, the Scanlan
Parties agree that Rooney shall be deemed a Member and to have executed and
delivered the LLC Agreement, and shall thereby be a party thereto and subject
thereto for all purposes.
4. Amendments/Confirmations Relating to Purchase Agreement.
(a) Earn-Out Payments. The parties agree that the minimum First
Audit Cycle Revenues and the minimum Second Audit Cycle Revenues specified in
Section 2.5 of the Purchase Agreement are each deemed satisfied, so that the
full amount of the additional payments referred to in Section 2.5 shall be
payable. The obligation to make those payments is irrevocable and not subject to
further audit or review. The additional payments
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called for by Sections 2.5.1 and 2.5.2 shall be payable on April 15, 1999 and
April 15, 2000, respectively. Further, the parties hereby waive the application
of the offset provision included in Section 6.5 of the Purchase Agreement to the
additional payments due under Section 2.5; however, the balance of Section 6.5
(arbitration of disputes with respect to indemnification claims) shall remain in
full force and effect.
(b) Working Capital Adjustment. The parties agree that, in full
settlement of the Working Capital adjustment contemplated by Section 2.4.2 of
the Purchase Agreement, the Scanlan Parties shall pay to CEV the amount of
$121,492 (representing 29% of the $400,000 note issued to CEV by ZN LP plus
interest thereon to the date hereof, such note having been issued in order to
fund a portion of the estimated Working Capital adjustment as of the closing of
the Purchase Agreement). Such payment shall be made promptly following the date
of this Agreement (but in no event later than February 12, 1999). The foregoing
note shall be cancelled at the time that the exchange contemplated by Section
1(a) is completed.
(c) Attorney's Fees. In the event of any litigation or other
legal proceeding involving the interpretation of this Agreement or enforcement
of the rights or obligations of the parties hereto, the prevailing party or
parties shall be entitled to recover reasonable attorney's fees and costs as
determined by the court or other adjudicator.
5. Additional Documents. Each party agrees to execute and deliver any
and all further documents and writings, and to perform such other actions, as
may be or become reasonably necessary or expedient to effect and carry out the
terms of this Agreement.
6. Governing Law. This Agreement is governed by and shall be
construed in accordance with the law of the State of New York, excluding any
conflict-of-laws rule or principle that might refer the governance or
construction of this Agreement to the law of another jurisdiction. If any
provision of this Agreement or the application thereof to any person or
circumstance is held invalid or unenforceable to any extent, the remainder of
this Agreement and the application of that provision to other persons or
circumstances is not affected thereby, and that provision shall be enforced to
the greater extent permitted by law.
7. Number, Gender and Connection of Persons. Throughout this
Agreement, as the context may require, the masculine gender includes the
feminine and the neuter gender includes the masculine and the feminine; the
singular tense and number includes the plural, and the plural tense and number
includes the singular; the past tense includes the present, and the present
tense includes the past; references to parties, sections, paragraphs and
exhibits mean the parties, sections, paragraphs and exhibits of and to this
Agreement; and periods of days, weeks or month mean calendar days, weeks or
months.
8. Assignment. The Scanlan Parties shall not have either the right or
the power to assign or delegate any provision of this Agreement except with the
prior written consent of the Management Committee of CEV. Except as provided in
the preceding sentence, this Agreement shall be binding upon and shall inure to
the benefit of the parties' respective successors, assigns, executors and
administrators.
- 5 -
<PAGE> 6
9. Counterparts. This Agreement may be executed in separate
counterparts, each of which shall be deemed an original and both of which shall
constitute one and the same document.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first set above.
CEV
CAMINUS ENERGY VENTURES LLC
By: /s/ Larry Gilson
------------------------
Name: Larry Gilson
Its: Chair
THE SCANLAN PARTIES
ZAK ASSOCIATES, INC.
By: /s/ Brian Scanlan
------------------------
Name: Brian Scanlan
Its: President
ROONEY SOFTWARE, L.L.C.
By: /s/ Brian Scanlan
------------------------
Name: Brian Scanlan
Its: President
/s/ Brian Scanlan
----------------------------
Brian Scanlan
- 6 -
<PAGE> 7
ZN LP
ZAI*NET SOFTWARE, L.P.
By: /s/ Larry Gilson
------------------------
Name: Larry Gilson
Its: Chair
- 7 -
<PAGE> 8
APPENDIX A
Ownership of CEV
<TABLE>
<CAPTION>
Series A Percentage Series B Percentage
"Shares" Of Series A "Shares" Of Series B
<S> <C> <C> <C> <C>
GFI Energy Ventures 1,682,198 1.64%
Rooney Software, LLC 21,579,728 21.00%
OCM Caminus Investment 37,176,571 36.18%
RIT Capital Partners PLC 6,728,791 6.55%
Durham Cam Inc. 1,682,198 1.64%
Nigel Evans 6,055,912 5.89% 3,030,000 20.44%
Michael Morrison 4,037,275 3.93% 2,020,000 13.63%
SS&C Technologies, Inc. 18,504,176 18.01% 8,410,000 56.74%
Serena Hesmondhalgh 672,879 0.65%
Nick Perry 672,879 0.65% 1,363,156 9.20%
Dave Stoner 3,364,396 3.27%
Corwin Joy 525,629 0.51%
Paul LaMar 60,650 0.06%
Arthur Langham 17,328 0.02%
Total 102,760,610 100.00% 14,823,156 100.00%
</TABLE>
<TABLE>
<CAPTION>
Series C Percentage Fully Diluted Fully Diluted
"Shares" Of Series C "Shares" Percentage
<S> <C> <C> <C> <C>
GFI Energy Ventures 13,064,863 100.00% 14,747,061 11.29%
Rooney Software, LLC 21,579,728 16.52%
OCM Caminus Investment 37,176,571 28.46%
RIT Capital Partners PLC 6,728,791 5.15%
Durham Cam Inc. 1,682,198 1.29%
Nigel Evans 9,085,912 6.95%
Michael Morrison 6,057,275 4.64%
SS&C Technologies, Inc. 26,914,176 20.60%
Serena Hesmondhalgh 672,879 0.52%
Nick Perry 2,036,035 1.56%
Dave Stoner 3,364,396 2.58%
Corwin Joy 525,629 0.40%
Paul LaMar 60,650 0.05%
Arthur Langham 17,328 0.01%
Total 13,064,863 100.00% 130,648,629 100.00%
</TABLE>
<PAGE> 9
APPENDIX B
Allocation of Rooney Shares
<TABLE>
<CAPTION>
Name Number of Shares Percentage of Shares
- ---- ---------------- --------------------
<S> <C> <C>
ZAK Associates, Inc. 12,555,478 58.1818%
Simon Young 6,277,739 29.0909%
Pai-Lu Huang 1,046,290 4.8485%
Shreedevi Thacker 313,887 1.4545%
Lavanya Doddamani 313,887 1.4545%
David Markowitz 313,887 1.4545%
Mark Moessinger 78,472 0.3636%
Gloria Kong 209,258 0.9697%
Stephen Shiu 130,786 0.6061%
Minex Patel 130,786 0.6061%
Aarzoo Shah 78,472 0.3636%
Farooq Alam 130,786 0.6061%
------- -------
TOTAL 21,579,728 100.0000%
</TABLE>
<PAGE> 1
Exhibit 10.8
Cooperation Agreement: Wholesale Risk Management
ABB Energy Information Systems, a division of ABB Power T&D Company Inc., a
Delaware corporation ("ABB") and Caminus LLC, a Delaware limited liability
company ("Caminus") have entered into this Cooperation Agreement as of the 13th
day of July 1999:
I. Background of the Agreement
Caminus is a supplier of trading and risk management software for electric
energy at the wholesale level with its Zai*Net product line. ABB is a supplier
of solutions for generation asset optimization (unit commitment and related
functions) with its GIMS/Couger product lines. (The two product lines are
hereinafter referred to collectively as the "Products.")
ABB and Caminus believe that there will be a need for vertically integrated
trading/retail supply firms to manage the risks in their businesses across their
retail and wholesale activities and that a "loose integration" of the Products
can fill this need. By "loose integration" is meant the separate modification of
each of the Products to facilitate the ability of each of the Products to
exchange appropriate data with the other and to make use of that data in its
calculations. "Loose integration" does not mean that the Products will be
integrated to create a common application or that they will be packaged and sold
as a single product. (As used hereafter in this Agreement, "integration" shall
mean "loose integration" as defined in this paragraph.)
ABB and Caminus also believe it is likely that each of the Products can be
enhanced by adding functionality to exploit the additional information available
from integration. Examples of such enhancements include changed Monte Carlo
simulation parameters utilizing specific plant data from unit commitment.
II. Basis of Cooperation
During the term of this agreement, the parties shall work together as they may
mutually agree from time to time to further the purposes of this Agreement as
described above in Section I.
It is the present intent of the parties to proceed under the following schedule:
- - By July 22, 1999, the parties will develop: (1) a concept for the
integration of the Products, (2) a plan to implement the integration
concept (including development of data models and interfaces and plans by
each party to make use of the integration data); and (3) a marketing
strategy.
- - By July 30, 1999, the parties will issue a joint press release announcing
their plans and the expected availability of enhanced products.
<PAGE> 2
- - During the month of July 1999 (but not necessarily complete by the end of
July) the parties will exchange sufficient sales information and material
to enable each party to use the integration concept to market their
respective Products.
- - During a trial market period, from approximately the end of July 1999
through the remainder of the term of this Agreement, the parties will
include the integration concept in their respective sales presentations
to new customers, when appropriate, and will inform their respective
current customers about the concept. The parties will gather and exchange
customer feedback and other information during this trial market period
in order to evaluate the market impact of the concept.
- - From time to time throughout the term of this Agreement, the parties will
exchange technical information about the Products in order to facilitate
the integration and product enhancement contemplated in this Agreement.
If there is mutual agreement to engage in joint marketing efforts, following the
integration work and trial market period, the terms of any such agreement will
be set forth in an amendment to this Agreement.
III. Non-Exclusivity/Non-Competition
The obligations of the parties under this Agreement are not exclusive. By way of
example (but without limitation) ABB is free to engage in product integration
activities involving GIMS/Couger with other suppliers of risk management and
trading software, and Caminus is free to engage in product integration
activities involving Zai*Net with other suppliers of solutions for generation
asset optimization (unit commitment and related functions). Nevertheless, each
party shall inform the other, in writing, on or before the date it enters into
any agreement with any third party for the integration of any of the Products
with products of a third party that are competitive with any of the Products.
During the term of this Agreement, ABB shall not acquire or develop financial
wholesale risk management software that may be offered in competition with
Zai*Net, and ABB shall not enter into any agreement to acquire an entity that
offers such a product without first providing thirty days' written notice to
Caminus of its intentions and offering Caminus in that notice the opportunity to
terminate this agreement.
During the term of this Agreement, Caminus shall not acquire or develop specific
unit commitment software that may be offered in competition with Couger, and
Caminus shall not enter into any agreement to acquire an entity that offers such
a product, without first providing thirty days' written notice to ABB of its
intentions and offering ABB in that notice the opportunity to terminate this
agreement.
-2-
<PAGE> 3
IV. Confidentiality
Caminus recognizes that ABB is currently offering a trading software product,
TransAct, and an integrated solution, TraderStation. ABB agrees not to have
employees directly involved in the technical development of those products
participate simultaneously in the integration work contemplated in this
Agreement. Caminus agrees that it is responsible for not sharing with ABB
information pertaining to Zai*Net trading and risk management capabilities or
other proprietary information relating to Zai*Net that it would not share with a
competitor, and that ABB is not responsible for protecting from disclosure or
use any information that Caminus provides to ABB under this Agreement.
ABB recognizes that Caminus is considering the development of products for
generation asset optimization. Caminus agrees not to have employees directly in
the technical development of such products simultaneously in the integration
work contemplated in this Agreement. ABB agrees that it is responsible for not
sharing with Caminus information relating to GIMS/Couger capabilities or other
proprietary information relating to GIMS/Couger that it would not share with a
competitor, and that Caminus is not responsible for protecting from disclosure
or use any information that ABB provides to Caminus under this Agreement.
Both parties have identified the need for electricity trading to more explicitly
and rigorously model and analyze significant physical risks (such as plant and
transmission outages or curtailments). Both parties are currently conducting
independent R&D programs in this area. The parties agree that these developments
are outside the scope of the integration work. Each party acknowledges that it
is responsible for protecting its own work and plans, and for avoiding
disclosure to the other party of any information that it considers proprietary.
V. Ownership
No transfer of intellectual property rights is intended or implied by this
Agreement and neither party shall have any ownership rights in the Products of
the other party, including any modifications of such Products resulting from the
integration or product enhancement efforts conducted under this Agreement. No
joint ownership rights in any intellectual property shall be inferred from any
activities of the parties under this Agreement.
VI. Relationship of the Parties
Each party is an independent contractor and neither shall be deemed an employee,
agent, partner or joint venturer of the other. Neither party shall take any
action purporting to bind the other party or represent that it has any authority
to do so.
Each party shall be solely responsible for its own costs in carrying out this
Agreement, and each party shall be solely responsible for claims of third
parties arising from the party's
-3-
<PAGE> 4
negligent act or omission. Each party shall defend, indemnify and hold harmless
the other party from and against any claims of third parties for property damage
or bodily injury, including death, arising from the party's negligence except to
the extent such claims arise from the negligent act or omission of the other
party.
ALL INFORMATION FURNISHED BY ONE PARTY TO THE OTHER UNDER THIS AGREEMENT SHALL
BE FURNISHED "AS IS" AND WITHOUT WARRANTY OF ANY KIND, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE BEING SPECIFICALLY
DISCLAIMED. Neither party shall be liable to the other party for any loss of
use, interruption of business, lost profits, or any other indirect, special,
incidental, or consequential damages whether claimed to arise in contract, tort
(including negligence and strict product liability) or under any other legal
theory or cause of action.
VII. Term of Agreement
The term of this Agreement shall begin on the date shown above and shall end on
December 31, 1999 or on such earlier date as the parties may mutually agree.
Either party may terminate this agreement immediately following the material
breach of this Agreement by the other party which the other party fails to
remedy within fourteen (14) days following receipt of written notice of the
breach.
If there is a change of control (as defined herein below) in any Party (the
"Affected Party") during the term of this Agreement, this Agreement shall be
deemed to have terminated as of the date such change of control occurs, save
that such termination shall not be effective if the remaining Parties have
agreed in writing to the particular change of control and such change of control
takes place as proposed.
"Change of Control" as used in this Section means: (i) any consolidation or
merger of the Affected Party with or into any other corporation or other entity
or person, or any other reorganization of ownership interests, in which the
shareholders or other owners of the Affected Party immediately prior to such
consolidation, merger or reorganization, own, directly or indirectly, less than
fifty percent (50%) of the surviving corporation's or entity's voting power
immediately after such consolidation, merger or reorganization, or any
transaction or series of related transactions in which the shareholders or other
owners of the Affected Party immediately prior to such transaction or series of
related transactions, own, directly or indirectly, less than fifty percent (50%)
of the surviving corporation's or entity's voting power immediately after such
transaction or series of transactions; or (ii) a sale, lease or other
disposition of all or substantially all of the assets of the Affected Party
relating to the business which is the subject of this Agreement in which the
shareholders or other owners of the Affected Party immediately prior to such
disposition, own, directly or indirectly, less than
-4-
<PAGE> 5
fifty percent (50%) of the acquiring corporation's or entity's voting power
immediately after such disposition.
The provisions of this Agreement which expressly or by implication are intended
to survive a termination of this Agreement (including, without limitation, those
provisions relating to confidentiality) will survive and continue to bind the
parties following the termination of this Agreement for any reason.
VIII. Employees
During the term of this Agreement and for a period of one year following the
termination of this Agreement, neither party shall employ or otherwise contract
for the performance of services by any person who was an employee of the other
party during the term of this Agreement and who also participated in the
integration efforts that are the subject of this Agreement.
IX. Governing Law
The interpretation and enforcement of this Agreement shall be governed by the
law of the State of New York, without regard to the choice of law or conflict of
laws rules of any jurisdiction.
ABB ENERGY INFORMATION SYSTEMS
a division of ABB Power T&D Company Inc. CAMINUS LLC
By: /s/ Ralph Masull
------------------------------- By: /s/ David M. Stoner
-------------------------------
-5-
<PAGE> 1
Exhibit 10.11
DATED 23RD JUNE 1999
CAMINUS ENERGY LIMITED
- AND -
FLEET BANK, N.A.
=========================================
DEBENTURE
=========================================
PINSENT--CURTIS
GPT
<PAGE> 2
CONTENTS
1 Interpretation 1
2 Company's Obligations 4
3 Charges 4
4 Protection of Chargeholder's Rights 5
5 Covenants Etc 8
6 Demand and Enforcement 11
7 Receivers 12
8 Power of Attorney 14
9 Payment of Moneys 14
10 Consolidation 15
11 Protection of Third Parties 16
12 Protection of the Bank and the Receiver 16
13 Miscellaneous Provisions 17
14 Upstream Payments 20
SCHEDULES
1 Registered Land/Unregistered Land
2 The Account
<PAGE> 3
THIS DEED is made on 19
This Debenture is given by CAMINUS ENERGY LIMITED (No 2128860) whose registered
office is at Caminus House, Castle Rock, Cambridge CB3 0RA (the "COMPANY") in
favour of FLEET BANK N.A. (the"BANK")
1 INTERPRETATION
1.1 In this Debenture unless the context otherwise requires:-
"ACCOUNT" means the account referred to in Schedule 2, or
such further or other account as the Bank may at
any time stipulate
"ASSETS" means all the undertaking, property and assets of
the Company whatsoever and wheresoever, present
or future
"ASSET CONTRACTS" means all the rights of the Company, now or in
the future, arising out of or in connection with
any agreement:-
(I) for the acquisition of any property (real
or personal) by the Company (except to the
extent that such rights amount to an
interest in land effectively charged by
way of legal mortgage or fixed charge by
Clause 4.1 or 4.2) including without
limitation any option to acquire property;
(ii) for the hire, hire purchase, lease or loan
of any property (real or personal), to the
Company (except as aforesaid)
<PAGE> 4
"BANK" includes persons deriving title under the Bank
"CREDIT AGREEMENT" means the agreement dated on or about even date
herewith between the Bank and Caminus LLC
providing for the extension of credit b the Bank
to Caminus LLC in the aggregate principal sum of
US Dollars five million and includes all
amendments and supplements thereto from time to
time
"DEBTS" means all book and other debts now or in the
future becoming due to the Company (whether alone
or jointly with any other person), whenever
payable and whether liquidated or unliquidated,
certain or contingent, including without
limitation credit balances on any account at any
bank or financial institution, other than the
Account, and together with all cheques, bills of
exchange, negotiable instruments, credits and
securities at any time given in relation to, or
to secure payment of, any such debt, but "Debts"
does not include any asset or right effectively
charged by way of fixed charge under any other
heading of Clause 3
"ENCUMBRANCE" means any mortgage, charge, pledge, lien,
hypothecation or other security interest of any
kind, and any right of set-off, assignment,
trust, flawed asset or other agreement or
arrangement whatsoever for the purpose of
providing security or having a similar effect to
the provision of security, other than liens
arising by operation of law in the ordinary
course of the Company's business
"ENVIRONMENTAL LAW" means all laws, including without limitation
common law, statutes, delegated legislation,
legislation of the
<PAGE> 5
European Union or any of its institutions, and
codes of practice and guidance issued by any
relevant authority or agency, in relation to any
matter affecting the environment, human health or
the storage handling or disposal of any waste or
other substance
"FIXED PLANT AND EQUIPMENT" means all plant machinery or equipment of any
kind (including without limitation all cables,
pipes, switchgear, heating, lighting, electrical,
water and gas apparatus) which does not for any
reason constitute a fixture, but is now or at any
time directly or indirectly attached by any means
and for any purpose to any land or building,
whether or not it is removable or intended to
form part of the land or building
"FIXTURES" means all things of any kind now or at any time
affixed to land for any purpose, including
without limitation trade and tenants fixtures
"GROUP COMPANY" means any company which is at any relevant time a
subsidiary company or a holding company of the
Company, or a subsidiary of any such holding
company, or a company which is controlled by
persons who control the Company
"INSURANCES" means all the right title and interest of the
Company, now or in the future, in or under any
policy of insurance or assurance or to the
proceeds thereof
"INTELLECTUAL PROPERTY" means all the right title and interest of the
Company (now or in the future) in or to any of
the following:-
<PAGE> 6
(I) any registered intellectual property
right in any territory, including without
limitation patents, trade marks, service
marks, registered designs, and any
similar right in any territory and any
applications or right to apply for any of
the above;
(ii) any invention, copyright, design right of
performance right; and
(iii) any trade secrets, know-how and
confidential information
"LAND" means any estate, right or interest in or over
land, whether legal or equitable, and wherever
the land is situated, including any buildings and
Fixtures on land, and the benefit of any
covenants or rights owed to any person or
enforceable by him by virtue of the ownership
possession or occupation of Land, but for these
purposes "land" excludes heritable property
situated in Scotland
"LOOSE PLANT AND EQUIPMENT" means all plant, machinery, equipment and motor
vehicles now or at any time owned by the Company
as a capital asset which is not Fixed Plant and
Equipment, (including without limitation any
moulds, patterns, tools (other than hand tools
and consumable tooling) dies and jigs)
"OTHER CLAIMS" means all rights claims or obligations of any
kind whatsoever now or at any time owed to the
Company capable of being satisfied by the payment
of money, which are not effectively charged by
way of fixed charge by any other provision of
this Debenture
<PAGE> 7
"RECEIVER" means any receiver appointed under this
Debenture, and, where more than one receiver has
been appointed, each of them
"RENTS" means any sum payable to the Company (and any
right to recover any such a sum):-
(I) by way of rent, service charge or
otherwise under any lease of Land, or as
mesne profits, licence fee, or otherwise
howsoever for the use or occupation of or
trespass upon Land, or other income
arising from any Land;
(ii) by way of rent or otherwise for or in
connection with the possession or use of,
or in respect of any trespass to or
conversion of, any chattel
except insofar as the same is effectively charged
by way of fixed charge by Clause 3.1 or 3.2
"SECURED LIABILITIES" means all money liabilities and obligations now
or in the future owed or incurred by the Company
to the Bank, of any kind, however arising and in
any currency, whether or not immediately payable,
whether certain or contingent, whether sole or
joint, whether as principal or as surety,
whether or not the Bank was the original creditor
in respect thereof, and including (without
limitation) interest commission costs charges and
expenses charged by the Bank at rates agreed
between it and the Company or, in the absence of
express agreement, in accordance with the Bank's
normal practice for the time being
<PAGE> 8
"SECURITIES" means all the right title and interest of the
Company, now or in the future, in any stocks,
shares, instruments creating or acknowledging any
debt, or other securities issued by any person
1.2 In this Debenture unless the context otherwise requires:-
1.2.1 the singular includes the plural and vice versa, and reference to
any gender includes the other genders;
1.2.2 references to persons include bodies corporate, associations,
partnerships, organisations, states, state agencies and any other
entity, whether or not having separate legal personality;
1.2.3 words and phrases defined in the Companies Act 1985 have the same
meanings in this Agreement but the word "COMPANY" includes any
body corporate;
1.2.4 references to Clauses are to clauses or sub-clauses of this
Debenture, references to a Schedule are to a schedule to this
Debenture and references within a Schedule to paragraphs are to
paragraphs or sub-paragraphs of that Schedule;
1.2.5 references to any rate of interest shall be construed as meaning
that rate as from time to time in force, calculated from day to
day, and compounded on the Bank's usual days for charging interest
in each year, both before and after judgment; and references to a
base lending rate shall, if there is no such published or
determinable rate at the appropriate time, be construed as meaning
such reasonably equivalent rate as the Bank shall select;
1.2.6 unless the defined herein capitalised terms have the meaning
assigned thereto in the Credit Agreement.
<PAGE> 9
1.3 In this Debenture:-
1.3.1 any reference to any statute or statutory instrument or any
section or part thereof includes any enactment (present or future)
replacing or amending it or any instrument, order or regulation
made under it and also includes any past statutory provisions (as
from time to time modified or re-enacted) which such provision has
directly or indirectly replaced;
1.3.2 headings are for reference purposes only and shall not affect the
construction of anything in this Agreement;
2 COMPANY'S OBLIGATIONS
The Company covenants :-
2.1 to pay or discharge to the Bank on demand made at any time at
which the Bank is entitled to do so any or all of the Secured
Liabilities; and
2.2 to pay interest to the Bank upon any sum so demanded until payment
(both before and after any judgment) at the rate applicable to
that sum immediately before demand (or, if there was no such
applicable rate, at four per cent above the Bank's Base Rate.)
3 CHARGES
As security for payment of the Secured Liabilities the Company (with full
title guarantee) hereby charges to the Bank:-
3.1 by way of first legal mortgage all Land now owned by the Company
including (without limitation) the land which is described in the
Schedule hereto,
<PAGE> 10
3.2 by way of first fixed equitable charge all Land which the Company
acquires in the future;
3.3 by way of separate first fixed charges:-
3.3.1 all the goodwill and uncalled capital of the Company,
present or future
3.3.2 the Securities
3.3.3 the Insurances
3.3.4 the Intellectual Property
3.3.5 the Debts
3.3.6 the Rents
3.3.7 the Asset Contracts
3.3.8 the Other Claims
3.3.9 the Fixed Plant and Equipment
3.3.10 the Loose Plant and Equipment
3.4 by way of first floating charge all those Assets which are not for
any reason effectively charged by this Debenture by way of fixed
charge, including (without limitation) any heritable property of
the Company situated in Scotland.
4 PROTECTION OF CHARGEHOLDER'S RIGHTS
<PAGE> 11
4.1 The Company shall pay into the Account all moneys which it receives in
respect of any Debts and Rents and until such payment hold all moneys so
received upon trust for the Bank and shall not without the prior written
consent of the Bank charge factor discount or assign any of them in
favour of any other person, or otherwise deal with them except for the
purpose of collecting them in and paying them as required by this Clause.
4.2 The Company shall deal with any money standing to the credit of the
Account, subject to the rights of the bank at which the Account is
maintained, in accordance with any directions given in writing by the
Bank from time to time.
4.3 Any monies received by the Company in respect of Debts or Rents and paid
into the Account in accordance with Clause 4.1 at any time prior to this
Debenture becoming enforceable shall, in the absence of any prior
direction to the contrary given by the Bank, upon such payment in be
deemed released from the fixed charges created by Clause 3.3, but shall
be subject to the floating charge created by Clause 3.4. Any such release
shall not affect the continuance of the fixed charges over all other
Debts and Rents for the time being outstanding.
4.4 The Company covenants not, without the prior written consent of the
Bank:-
4.4.1 to create (otherwise than in favour of the Bank) any Encumbrance,
or to allow any Encumbrance to arise or continue, on or over any
of the Assets ; or
4.4.2 to part with or dispose of all or any of the Assets charged by way
of floating charge except in the ordinary course of carrying on
its business as a going concern.
Unless permitted by the Credit Agreement.
<PAGE> 12
4.5 The Bank may from time to time by notice in writing to the Company
convert any floating charge created by this Debenture into a fixed
charge, in respect of any Assets which are specified in any such notice.
Any such floating charge shall automatically be converted into a fixed
charge:-
4.5.1 in respect of any Assets, immediately prior to the Company
agreeing or resolving (unless the Bank has first consented to it)
to create any Encumbrance over those Assets in favour of any other
person, or to part with or dispose of them otherwise than in the
ordinary course of carrying on the Company's business as a going
concern; and
4.5.2 in respect of all the Assets if the Company ceases to carry on
business or to be a going concern or if any voluntary arrangement
or other moratorium or compromise with the Company's creditors, or
any class of them, is proposed or put into effect;
but so that this sub-Clause 4.5 shall not apply to any Assets situated in
Scotland.
4.6 The Company hereby applies to the Chief Land Registrar for a restriction
to be entered on the register of title of all registered land now or in
the future owned by the Company in the following terms:-
"Except under an order of the Registrar no disposition by the proprietor
of the land is to be registered without the consent of the proprietor for
the time being of [the charge created by this Debenture]".
4.7 The Company shall subject to the rights of any prior mortgagee deposit
with the Bank and the Bank during the continuance of this security shall
be entitled to hold all deeds and documents of title relating to the
Company's Land, the Securities (including warrants and coupons) and the
Insurances.
4.8 The Company shall, at is own expense, at any time when required by the
Bank:-
<PAGE> 13
4.8.1 execute and deliver to the Bank a valid legal mortgage of any Land
now or in the future owned by the Company;
4.8.2 execute and deliver to the Bank a legal assignment of any Debts,
Rents, or Other Claims which the Bank shall require, and give
notice of any such assignment to any person when required by the
Bank; and
4.8.3 execute and deliver all deeds and documents and do and concur in
all other acts and things which the Bank may deem necessary or
desirable to vest in the Bank the security intended to be created
by this Debenture over all or any of the Assets
4.8.4 do and concur in all such other acts or things as the Bank may
deem necessary or desirable to vest in the Bank the security
intended to be created by this Debenture over all of any of the
Assets or to facilitate the enforcement of that security, or the
exercise of any powers or discretions intended to be vested in the
Bank or the Receiver by this Debenture
in each case, in the Bank's standard form or such other form as the Bank
may require. In the case of Assets situated outside England and Wales,
references to any form of security shall be taken to refer to any form of
security available under the relevant local law which the Bank may
select.
4.9 This security shall be a continuing security to the Bank and shall remain
in force until expressly discharged in writing by the Bank
notwithstanding any intermediate settlement of account or other matter or
thing whatsoever, and shall be without prejudice and in addition to any
other right remedy or security of any kind which the Bank may have now or
at any time in the future for or in respect of any of the Secured
Liabilities.
<PAGE> 14
5 COVENANTS ETC
5.1 While this Debenture continues in force the Company shall:-
5.1.1 provide to the Bank all information, and copies of all documents
which the Bank may require relating to the financial affairs of
and its interest in the Company and any Group Company, including,
without limitation, providing not later than 21 days after the end
of each month, (or such other period as the Bank may at any time
specify in writing) copies of management accounts and financial
information in such form as the Bank may require, in respect of
the Company and each Group Company;
5.1.2 forthwith notify the Bank of the acquisition of any Land;
5.1.3 ensure that the aggregate value of the Company's good book debts
(excluding debts payable by any other Group Company, and any other
person from time to time specified by the Bank), after deducting
any provision which is (or ought to have been) made in respect of
doubtful debts in the Company's most recent management or audited
accounts ("the Debtor Value"), at all times exceeds such amount as
the Bank may from time to time specify;
5.1.4 provide to the Bank, within three days after a request by the
Bank, a certificate signed by a director of the Company of the
aggregate Debtor Value as at a stated date not more than seven
days before the date of the certificate, and such other
information in relation to the Debts as the Bank may require;
5.1.5 put and keep all its buildings in good and substantial repair and
all fixtures and fittings plant machinery and other effects in
good working order and condition;
<PAGE> 15
5.1.6 maintain all such insurances as are normally maintained by prudent
companies carrying on similar businesses and in particular
(without limitation) will insure and keep insured such of the
Assets as are insurable with an insurance office or underwriters
to be approved by the Bank in writing from time to time, (and, if
at any time so requested by the Bank) either in the name of the
Company with the interest of the Bank noted or, at the option of
the Bank, in the joint names of the Company and the Bank, against
loss or damage by fire and such other risks (on terms that the
insurer shall not avoid cancel or fail to renew any such policy
for non payment of premium without first giving not less than 21
days prior notice to the Bank, and on such other terms as the Bank
may from time to time require, in their full replacement value for
the time being);
5.1.7 pay all premiums and other moneys necessary to effect and keep up
such insurances within one week of the same becoming due, on
demand produce to the Bank the policy or policies of such
insurance and the receipt for every such payment, comply at all
times with all the requirements of any such insurance policy, and
not do or omit to do anything, or allow any thing to occur or
continue which will or may in the sole opinion of the Bank cause
any such insurance policy to become void or voidable, or allow the
insurer to refuse any indemnity under it;
5.1.8 in relation to all Land owned or occupied by the Company
(a) at all times observe and perform (and ensure that any other
person at any time occupying any such Land also observes
and performs) all restrictive and other covenants to which
the Land or any part of it may from time to time be
subject, all obligations on the part of the Company or any
such occupier in any lease or tenancy agreement and all
building regulations and all restrictions conditions and
stipulations for the time being affecting the Land or any
part of it or the use or enjoyment of the Land
<PAGE> 16
(b) within seven days deliver to the Bank any notice or
proceedings served on the Company and relating to any
alleged breach of any of the above; and
(c) at all times keep the Land in a safe condition for all
persons forseeably likely to be present on any part of it,
and where necessary or desirable for such purposes, erect
and maintain fencing, barriers, covers and other security
measures
(d) pay all rents rates taxes and outgoings payable by virtue
of its ownership or occupation, and
(e) permit the Bank at any reasonable time to enter on the
land, inspect it and any assets on it, and take copies of
any documents there.
5.1.9 at all times comply with all applicable Environmental Law, and
obtain and comply with the terms of any licence or permit under
any Environmental Law which is necessary or desirable to carry on
any of the Company's businesses or activities.
5.1.10 take all action necessary to maintain any registered rights to
Intellectual Property in full force and effect, and to make and
pursue all applications which it is entitled to make for any such
rights.
5.2 If the Company is in default under any of the covenants set out in Clause
5.1 above (or any of its other obligations under this Debenture), the
Bank may at its sole discretion (but will not be obliged to) take any
steps which it considers necessary or desirable to remedy the default or
make good its effects in whole or in part, and in particular, without
limitation, may pay any amount which the Company ought to pay and may
authorise any person to enter, by force if necessary, on any Land or into
any building owned or occupied by the Company and perform works and may
put in place or renew any insurance. Neither the Bank, nor any person
authorised by it, shall be
<PAGE> 17
deemed to have taken possession of any Land by virtue of exercising any
power given by this Clause, irrespective of the degree of control
exercised over the Land or access to it, unless and until the Bank (or
any such person) serves notice in writing on the Company expressly
stipulating its intention to take possession.
5.3 The Bank shall be entitled to be paid the proceeds of any Insurance to
which the Company is entitled (other than any indemnity against liability
to a third party) and the Company hereby irrevocably instructs any
insurer in respect of any such policy to pay such proceeds to the Bank
and undertakes to the Bank to issue such further instructions to that
effect as the Bank may require.
5.4 All moneys received on any Insurance whatsoever (other than any indemnity
against liability to a third party) shall as the Bank in its sole
discretion requires be applied either in making good the loss or damage
in respect of which the money is received or in or towards discharge of
the Secured Liabilities.
6 DEMAND AND ENFORCEMENT
6.1 This Debenture shall become enforceable:-
6.1.1 upon any demand being made by the Bank for payment of any of the
Secured Liabilities;
6.1.2 upon any request being made by the Company to the Bank for the
appointment of a receiver or for the Bank to exercise any other
power or right available to it;
6.1.3 upon the occurrence of any event referred to in Clause 4.5.2, or
any event causing the floating charge created by this Debenture to
become fixed in relation to any Assets;
<PAGE> 18
6.1.4 upon the passing of any resolution, or the presentation of a
petition for winding up, or for an administration order in
relation to the Company
6.2 Any demand for payment, and any other notice to be given by the Bank
under this Debenture, shall be in writing and may be signed by any
official of the Bank, and may be made or given at any place of business
of the Company, or at its registered office:-
6.2.1 by delivering it to any such place, or
6.2.2 by sending it by first class post to any such place (in which case
it shall be deemed received at 10am on the next business day after
posting, and proof of posting shall be proof of delivery), or
6.2.3 by sending it by fax to any of the Company's fax numbers (in which
case it shall be deemed received when sent, and proof of sending
shall be proof of receipt).
6.3 At any time after this Debenture shall have become enforceable, the Bank
may exercise, in respect of any Asset, the power of sale given to
mortgagees by the Law of Property Act 1925. The restrictions imposed by
section 103 of that Act shall not apply, and the Bank may delegate the
exercise of its power of sale to any Receiver or other person.
7 RECEIVERS
7.1 At any time after this Debenture has become enforceable the Bank may
appoint any person or persons to be a receiver or receivers of all or any
part of the Assets hereby charged. An appointment over part only of the
Assets shall not preclude the Bank from making any subsequent appointment
over any other part of the Assets.
<PAGE> 19
7.2 The appointment of a Receiver shall be in writing, and may be signed by
any officer of the Bank. Where more than one person is acting at any time
as Receiver, they shall have power to act severally as well as jointly.
7.3 The Bank may from time to time determine the remuneration of the Receiver
(which shall not be subject to the limit in section 109(6) of the Law of
Property Act 1925) and may (subject to the application of Section 45 of
the Insolvency Act 1986) remove any person from office in relation to all
or any part of the Assets of which he is the Receiver and at any time
(before or after any person shall have vacated office or ceased to act as
Receiver in respect of any of the Assets) appoint a further or other
receiver or receivers over all or any part of the Assets.
7.4 The Receiver shall be the agent of the Company (which shall be solely
liable for his acts defaults and remuneration) unless and until the
Company goes into liquidation whereafter he shall act as principal and
shall not become the agent of the Bank, and the Receiver shall have and
be entitled to exercise in relation to the Company all the powers set out
in Schedule 1 to the Insolvency Act 1986 (whether or not he is an
administrative receiver) and in applying that Schedule:-
7.4.1 the words "he" and "him" refer to the Receiver; and
7.4.2 references to the property of the company are to the Assets over
which the Receiver is appointed
and in particular by way of addition to but without hereby limiting such
powers (and without prejudice to the Bank's powers) the Receiver shall
have power to do the following things namely:-
7.4.3 power to carry on or join with any person in carrying on any
business (whether or not carried on by the Company prior to his
appointment) and;
<PAGE> 20
7.4.4 power to maintain, repair, make safe, improve and develop any Land
or other Asset and to do all such other things as may in his
opinion be necessary or desirable for maintaining or enhancing the
value or marketability of any Asset.
8 POWER OF ATTORNEY
The Company hereby irrevocably appoints the Bank (whether or not a
Receiver has been appointed) and also (as a separate appointment) each
Receiver severally as the attorney and attorneys of the Company with
power to do any act, and execute and deliver any deed or other document,
on behalf of and in the name of the Company, which the Company could be
required to do or execute under any provision of this Debenture, or which
the Bank in its sole opinion may consider necessary or desirable for
perfecting the Bank's title to any of the Assets or enabling the Bank or
the Borrower to exercise any of its or his rights or powers under this
Debenture
9 PAYMENT OF MONEYS
9.1 Any moneys received by the Receiver shall, subject to the repayment as
far as necessary of any claims having priority to this Debenture, be paid
or applied in the following order of priority:-
9.1.1 in satisfaction of all costs charges and expenses properly
incurred and payments properly made by the Receiver and of the
remuneration of the Receiver;
9.1.2 in or towards satisfaction of the Secured Liabilities in such
order as the Bank may at its discretion require;
9.1.3 as to the surplus (if any) to the person or persons entitled
thereto.
<PAGE> 21
9.2 The Bank may, without prejudice to any other rights it may have, at any
time and from time to time place (and keep for such time as it may think
prudent) any moneys received recovered or realised under or by virtue of
this Debenture on a separate or suspense account to the credit either of
the Company or of the Bank as the Bank shall think fit without any
intermediate obligation on the Bank's part to apply the same or any part
thereof in or towards the discharge of the Secured Liabilities.
10 CONSOLIDATION
10.1 In addition to any general lien, right to combine accounts, right to set
off or other right which it may at any time have, the Bank shall have the
right at any time or times, without notice to the Company, to combine or
consolidate all or any accounts which it then has in relation to the
Company (in whatever name) and any liabilities owed by the Company to the
Bank, and/or to set off or transfer any amounts standing to the credit of
one or more accounts of the Company in or towards satisfaction of any
amount owed to the Bank on any other account or otherwise
10.2 The Bank's rights under Clause 10.1 apply:-
10.2.1 whether or not any demand has been made hereunder, or any
liability concerned has fallen due for payment
10.2.2 whether or not any credit balance is immediately available or
subject to any restriction
10.2.3 irrespective of the currencies in which any balance or liability
is denominated, and the Bank may for the purpose of exercising its
rights elect to convert any sum or liability in one currency into
any other of its spot rate applying at or about 11am on the date
of conversion
<PAGE> 22
10.2.4 in respect of any liabilities owed to the Bank by the Company,
whether owed solely or jointly, certainly or contingently,
presently or in the future, as principal or surety, and howsoever
arising.
11 PROTECTION OF THIRD PARTIES
11.1 In favour of any purchaser, the statutory powers of sale and of
appointing a receiver which are conferred upon the Bank, as varied and
extended by this Debenture, and all other powers of the Bank, shall be
deemed to arise and be exercisable immediately after the execution of
this Debenture
11.2 No purchaser from or other person dealing with the Bank, any person to
whom it has delegated any of its powers, or the Receiver shall be
concerned to enquire whether any of the powers which they have exercised
has arisen or become exercisable, or whether the Secured Liabilities
remain outstanding or whether any event has happened to authorise the
Receiver to act or as to the propriety or validity of the exercise of any
such power; and the title and position of a purchaser or such person
shall not be impeachable by reference to any of those matters
11.3 The receipt of the Bank or the Receiver shall be an absolute and
conclusive discharge to a purchaser or such person and shall relieve him
of any obligation to see to the application of any moneys paid to or by
the direction of the Bank or the Receiver.
12 PROTECTION OF THE BANK AND THE RECEIVER
12.1 Neither the Bank nor any Receiver shall be liable in respect of any loss
or damage which arises out of the exercise, or attempted or purported
exercise of, or the failure to exercise any of their respective powers
under this Debenture
12.2 Without prejudice to any other provision of this Debenture, entry into
possession of any Asset shall not render the Bank or the Receiver liable
to account as mortgagee in possession or to be liable for any loss on
realisation or for any default or omission for
<PAGE> 23
which a mortgagee in possession might be liable and if and whenever the
Bank or the Receiver enters into possession of any Asset it shall be
entitled at any time it or he thinks fit to go out of such possession
12.3 The Company shall indemnify and keep indemnified the Bank, every
Receiver, and any person who acts as the servant, agent, delegate or
attorney of any of them, against all claims costs expenses and
liabilities which they may suffer or incur arising in any way out of the
taking or holding of this Debenture, the exercise or purported exercise
of any right power authority or discretion given by it, or any other act
or omission in relation to this Debenture or the Assets. The provisions
of this Clause 12 shall continue in full force and effect notwithstanding
any release or discharge of this Debenture, or the discharge of any
Receiver from office.
13 MISCELLANEOUS PROVISIONS
13.1 While this Debenture continues in force:-
13.1.1 no statutory or other power of granting or agreeing to grant or of
accepting or agreeing to accept surrenders of leases or tenancies
of the Land hereby charged or any part of it shall be capable of
being exercised by the Company;
13.1.2 the Company shall not be entitled to part with possession
(otherwise than on the termination of any lease tenancy or licence
to it) of any Land, or to share occupation of any Land with any
other person or persons, or to surrender any lease of Land or
permit such a lease to be assigned or forfeited;
without the prior written consent of the Bank;
13.2 Section 93 of the Law of Property Act 1925 dealing with the consolidation
of mortgages shall not apply to this security.
<PAGE> 24
13.3 The statutory powers of sale, leasing and accepting surrenders
exercisable by the Bank are hereby extended so that the Bank may, either
in its own name or in that of the Company,
13.3.1 grant a lease or leases (whether or not at a premium) of the whole
or any part or parts of any Land owned by the Company, with such
rights relating to other Land and containing such covenants on the
part of the Company and generally on such terms and conditions as
the Bank shall think fit (including the payment of money to a
lessee or tenant on a surrender);
13.3.2 accept a surrender of any lease on such terms as the Bank may
think fit in either case, without any of the restrictions on such
powers contained in section 99 and 100 of the Law of Property Act
1925.
13.4 The rights powers and discretions given to the Bank in this Debenture:-
13.4.1 may be exercised as often as and in such manner as, the Bank
thinks fit;
13.4.2 are cumulative, and are not exclusive of any of its rights under
the general law;
13.4.3 may only be waived in writing and specifically, and any delay in
exercising, or non-exercise of, any right, is not a waiver of it.
13.5 If any provision of this Debenture is illegal invalid or unenforceable in
any jurisdiction, that shall not affect:-
13.5.1 the validity or enforceability of any other provision, in any
jurisdiction, or
13.5.2 the validity or enforceability of that particular provision, in
any other jurisdiction.
<PAGE> 25
13.6 All costs charges and expenses incurred or paid by the Bank or by the
Receiver in the exercise of any power or right given by this Debenture or
in relation to any consent requested by the Company, or in perfecting or
otherwise in connection with this Debenture or the Assets, including
(without limitation) all moneys expended by the Bank under Clause 5.2,
all sums recoverable under Clause 12.3 and all costs of the Bank (on an
indemnity basis) of all proceedings for the enforcement of this Debenture
or for obtaining payment of moneys hereby secured, shall be recoverable
from the Company as debts, may be debited by the Bank at any time to any
account of the Company and shall bear interest until payment at the rate
or rates applicable to the account to which they are debited, or, if
there is no such rate, at 4% over the Bank's base rate.
13.7 If the Bank receives notice of any subsequent charge or other security
interest affecting any of the Assets the Bank shall be entitled to close
the Company's then current account or accounts and to open a new account
or accounts for the Company; if the Bank does not open a new account or
accounts immediately on receipt of such notice it shall nevertheless be
treated as if it had done so at the time when it received such notice,
and as from that time all payments made for the credit of the Company to
the Bank shall be credited or be treated as having been credited to such
new account or accounts and shall not operate to reduce the amount due
from the Company to the Bank at the time when it received such notice.
13.8 The Bank may from time to time seek from any other person having dealings
with the Company such information about the Company and its affairs as
the Bank may think fit and the Company hereby authorises and requests any
such person to provide any such information to the Bank and agrees to
provide such further authority in this regard as the Bank may from time
to time require. The Company shall at its own cost at any time if so
requested by the Bank appoint an accountant or firm of accountants
nominated by the Bank to investigate the financial affairs of the Company
and/or any subsidiary of the Company and report to the Bank, and
authorises the Bank itself at any time to make such appointment on behalf
of the Company or on its own account as it shall think fit, and in every
such case the fees and expenses of such accountant or
<PAGE> 26
firm shall be payable by the Company and may be paid by the Bank on
behalf of the Company.
13.9 The Bank may assign this Debenture to any successor in title to any of
the Secured Liabilities, and may disclose any information in its
possession relating to the Company, its affairs or the Secured
Liabilities to any actual or prospective assignee.
14 UPSTREAM PAYMENTS
Nothing in this Debenture shall prohibit the payment by the Company of
dividends or distributors or the making of other payments or transfers to
its parent company which dividend distribution payments or transfers are
not prohibited by the Credit Agreement
EXECUTED AND DELIVERED AS A DEED by the Company, and executed by the Bank, on
the date hereof
<PAGE> 27
SCHEDULE 1
REGISTERED LAND
TITLE NUMBER DESCRIPTION
UNREGISTERED LAND
<PAGE> 28
SCHEDULE 2
THE ACCOUNT
The Company's current account detailed below:
Bank: [ ]
Branch: [ ]
Sort Code: [ ]
Account Number: [ ]
<PAGE> 29
EXECUTED (but not delivered until ) Director /s/ Nigel L. Evans
the date hereof) AS A DEED by ) Dr. N. L. Evans
CAMINUS ENERGY LIMITED ) Secretary /s/ CM Wilcockson
Mrs. C. M. Wilcockson
SIGNED by a duly authorised officer )
for and on behalf of FLEET BANK N.A. ) /s/ Patrick Twist
in the presence of:- ) ------------------------------
Signature of Witness: /s/ Paula J. Hughes
Name of Witness: Paula J. Hughes
Address:
<PAGE> 1
Exhibit 10.12
DATED 23 JUNE 1999
CAMINUS LIMITED
- AND -
FLEET BANK, N.A.
================================================================================
DEBENTURE
================================================================================
PINSET--CURTIS
GPT
<PAGE> 2
CONTENTS
CLAUSE PAGE
1 Interpretation 1
2 Company's Obligations 7
3 Charges 7
4 Protection of Chargeholder's Rights 8
5 Covenants Etc 11
6 Demand and Enforcement 14
7 Receivers 15
8 Power of Attorney 17
9 Payment of Moneys 17
10 Consolidation 17
11 Protection of Third Parties 18
12 Protection of the Bank and the Receiver 19
13 Miscellaneous Provisions 19
14 Upstream Payments 22
SCHEDULES
1 Registered Land/Unregistered Land 23
2 The Account 24
<PAGE> 3
THIS DEED is made on 19
This Debenture is given by CAMINUS LIMITED (No 01889028) whose registered
office is at Caminus House, Castle Rock, Cambridge CB3 0RA (the "COMPANY") in
favour of FLEET BANK N.A. (the "BANK")
1 INTERPRETATION
1.1 In this Debenture unless the context otherwise requires:-
"ACCOUNT" means the account referred to in Schedule
2, or such further or other account as the
Bank may at any time stipulate
"ASSETS" means all the undertaking, property and
assets of the Company whatsoever and
wheresoever, present or future
"ASSET CONTRACTS" means all the rights of the Company, now or
in the future, arising out of or in
connection with any agreement:-
(I) for the acquisition of any property
(real or personal) by the Company
(except to the extent that such rights
amount to an interest in land
effectively charged by way of legal
mortgage or fixed charge by Clause 4.1
or 4.2) including without limitation
any option to acquire property;
(ii) for the hire, hire purchase, lease or
loan of any property (real or
personal), to the Company (except as
aforesaid)
1
<PAGE> 4
"BANK" includes persons deriving title under the
Bank
"CREDIT AGREEMENT" means the agreement dated on or about of
even date herewith between the Bank and
Caminus LLC providing for the extension of
credit by the Bank to Caminus LLC in the
aggregate principal sum of US dollars five
million and includes all amendments and
supplements thereto
"DEBTS" means all book and other debts now or in
the future becoming due to the Company
(whether alone or jointly with any other
person), whenever payable and whether
liquidated or unliquidated, certain or
contingent, including without limitation
credit balances on any account at any bank
or financial institution, other than the
Account, and together with all cheques,
bills of exchange, negotiable instruments,
credits and securities at any time given in
relation to, or to secure payment of, any
such debt, but "DEBTS" does not include any
asset or right effectively charged by way
of fixed charge under any other heading of
Clause 3
"ENCUMBRANCE" means any mortgage, charge, pledge, lien,
hypothecation or other security interest of
any kind, and any right of set-off,
assignment, trust, flawed asset or other
agreement or arrangement whatsoever for the
purpose of providing security or having a
similar effect to the provision of
security, other than liens arising by
operation of law in the ordinary course of
the Company's business
"ENVIRONMENTAL LAW" means all laws, including without
limitation common
2
<PAGE> 5
law, statutes, delegated legislation,
legislation of the European Union or any of
its institutions, and codes of practice and
guidance issued by any relevant authority
or agency, in relation to any matter
affecting the environment, human health or
the storage handling or disposal of any
waste or other substance
"FIXED PLANT AND EQUIPMENT" means all plant machinery or equipment of
any kind (including without limitation all
cables, pipes, switchgear, heating,
lighting, electrical, water and gas
apparatus) which does not for any reason
constitute a fixture, but is now or at any
time directly or indirectly attached by any
means and for any purpose to any land or
building, whether or not it is removable or
intended to form part of the land or
building
"FIXTURES" means all things of any kind now or at any
time affixed to land for any purpose,
including without limitation trade and
tenants fixtures
"GROUP COMPANY" means any company which is at any relevant
time a subsidiary company or a holding
company of the Company, or a subsidiary of
any such holding company, or a company
which is controlled by persons who control
the Company
"INSURANCES" means all the right title and interest of
the Company, now or in the future, in or
under any policy of insurance or assurance
or to the proceeds thereof
"INTELLECTUAL PROPERTY" means all the right title and interest of
the Company (now or in the future) in or to
any of the following:-
3
<PAGE> 6
(I) any registered intellectual property
right in any territory, including
without limitation patents, trademarks,
service marks, registered designs, and
any similar right in any territory and
any applications or right to apply for
any of the above;
(ii) any invention, copyright, design right
of performance right; and
(iii) any trade secrets, know-how and
confidential information
"LAND" means any estate, right or interest in
or over land, whether legal or
equitable, and wherever the land is
situated, including any buildings and
Fixtures on land, and the benefit of
any covenants or rights owed to any
person or enforceable by him by virtue
of the ownership possession or
occupation of Land, but for these
purposes "land" excludes heritable
property situated in Scotland
"LOOSE PLANT AND EQUIPMENT" means all plant, machinery, equipment
and motor vehicles now or at any time
owned by the Company as a capital asset
which is not Fixed Plant and Equipment,
(including without limitation any
moulds, patterns, tools (other than
hand tools and consumable tooling) dies
and jigs)
"OTHER CLAIMS" means all rights claims or obligations
of any kind whatsoever now or at any
time owed to the Company capable of
being satisfied by the payment of
money, which are not effectively
charged by way of fixed charge by any
other provision of this Debenture
4
<PAGE> 7
"RECEIVER" means any receiver appointed under this
Debenture, and, where more than one
receiver has been appointed, each of
them
"RENTS" means any sum payable to the Company
(and any right to recover any such a
sum):-
(I) by way of rent, service charge or
otherwise under any lease of Land,
or as mesne profits, licence fee,
or otherwise howsoever for the use
or occupation of or trespass upon
Land, or other income arising from
any Land;
(ii) by way of rent or otherwise for or
in connection with the possession
or use of, or in respect of any
trespass to or conversion of, any
chattel
except insofar as the same is
effectively charged by way of fixed
charge by Clause 3.1 or 3.2
"SECURED LIABILITIES" means all money liabilities and
obligations now or in the future owed
or incurred by the Company to the Bank,
of any kind, however arising and in
any currency, whether or not
immediately payable, whether certain or
contingent, whether sole or joint,
whether as principal or as surety,
whether or not the Bank was the
original creditor in respect thereof,
and including (without limitation)
interest commission costs charges and
expenses charged by the Bank at rates
agreed between it and the Company or,
in the absence of express agreement, in
accordance with the Bank's normal
practice for the time being
5
<PAGE> 8
"SECURITIES" means all the right title and interest
of the Company, now or in the future,
in any stocks, shares, instruments
creating or acknowledging any debt, or
other securities issued by any person
1.2 In this Debenture unless the context otherwise requires:-
1.2.1 the singular includes the plural and vice versa, and
reference to any gender includes the other genders;
1.2.2 references to persons include bodies corporate,
associations, partnerships, organisations, states, state
agencies and any other entity, whether or not having
separate legal personality;
1.2.3 words and phrases defined in the Companies Act 1985 have
the same meanings in this Agreement but the word "COMPANY"
includes any body corporate;
1.2.4 references to Clauses are to clauses or sub-clauses of this
Debenture, references to a Schedule are to a schedule to
this Debenture and references within a Schedule to
paragraphs are to paragraphs or sub-paragraphs of that
Schedule;
1.2.5 references to any rate of interest shall be construed as
meaning that rate as from time to time in force, calculated
from day to day, and compounded on the Bank's usual days
for charging interest in each year, both before and after
judgment; and references to a base lending rate shall, if
there is no such published or determinable rate at the
appropriate time, be construed as meaning such reasonably
equivalent rate as the Bank shall select;
1.2.6 unless defined herein capitalised terms have the meaning
assigned thereto in the Credit Agreement.
1.3 In this Debenture:-
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<PAGE> 9
1.3.1 any reference to any statute or statutory instrument or any
section or part thereof includes any enactment (present or
future) replacing or amending it or any instrument, order
or regulation made under it and also includes any past
statutory provisions (as from time to time modified or
re-enacted) which such provision has directly or indirectly
replaced;
1.3.2 headings are for reference purposes only and shall not
affect the construction of anything in this Agreement;
2 COMPANY'S OBLIGATIONS
The Company covenants :-
2.1 to pay or discharge to the Bank on demand made at any time
at which the Bank is entitled to do so any or all of the
Secured Liabilities; and
2.2 to pay interest to the Bank upon any sum so demanded until
payment (both before and after any judgment) at the rate
applicable to that sum immediately before demand (or, if
there was no such applicable rate, at four per cent above
the Bank's Base Rate.)
3 CHARGES
As security for payment of the Secured Liabilities the Company (with full
title guarantee) hereby charges to the Bank:-
3.1 by way of first legal mortgage all Land now owned by the
Company including (without limitation) the land which is
described in the Schedule hereto,
3.2 by way of first fixed equitable charge all Land which the
Company acquires in the future;
3.3 by way of separate first fixed charges:-
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3.3.1 all the goodwill and uncalled capital of the
Company, present or future
3.3.2 the Securities
3.3.3 the Insurances
3.3.4 the Intellectual Property
3.3.5 the Debts
3.3.6 the Rents
3.3.7 the Asset Contracts
3.3.8 the Other Claims
3.3.9 the Fixed Plant and Equipment
3.3.10 the Loose Plant and Equipment
3.4 by way of first floating charge all those Assets which are
not for any reason effectively charged by this Debenture by
way of fixed charge, including (without limitation) any
heritable property of the Company situated in Scotland.
4 PROTECTION OF CHARGEHOLDER'S RIGHTS
4.1 The Company shall pay into the Account all moneys which it receives in
respect of any Debts and Rents and until such payment hold all moneys so
received upon trust for the Bank and shall not without the prior written
consent of the Bank charge factor discount or assign any of them in
favour of any other person, or otherwise deal with them except for the
purpose of collecting them in and paying them as required by this Clause.
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4.2 The Company shall deal with any money standing to the credit of the
Account, subject to the rights of the bank at which the Account is
maintained, in accordance with any directions given in writing by the
Bank from time to time.
4.3 Any monies received by the Company in respect of Debts or Rents and paid
into the Account in accordance with Clause 4.1 at any time prior to this
Debenture becoming enforceable shall, in the absence of any prior
direction to the contrary given by the Bank, upon such payment in be
deemed released from the fixed charges created by Clause 3.3, but shall
be subject to the floating charge created by Clause 3.4. Any such release
shall not affect the continuance of the fixed charges over all other
Debts and Rents for the time being outstanding.
4.4 The Company covenants not, without the prior written consent of the
Bank:-
4.4.1 to create (otherwise than in favour of the Bank) any
Encumbrance, or to allow any Encumbrance to arise or
continue, on or over any of the Assets; or
4.4.2 to part with or dispose of all or any of the Assets charged
by way of floating charge except in the ordinary course of
carrying on its business as a going concern.
Unless permitted by the Credit Agreement.
4.5 The Bank may from time to time by notice in writing to the Company
convert any floating charge created by this Debenture into a fixed
charge, in respect of any Assets which are specified in any such notice.
Any such floating charge shall automatically be converted into a fixed
charge:-
4.5.1 in respect of any Assets, immediately prior to the Company
agreeing or resolving (unless the Bank has first consented
to it) to create any Encumbrance over those Assets in
favour of any other person, or to part with or dispose of
them otherwise than in the ordinary course of carrying on
the Company's business as a going concern; and
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4.5.2 in respect of all the Assets if the Company ceases to carry
on business or to be a going concern or if any voluntary
arrangement or other moratorium or compromise with the
Company's creditors, or any class of them, is proposed or
put into effect;
but so that this sub-Clause 4.5 shall not apply to any Assets situated in
Scotland.
4.6 The Company hereby applies to the Chief Land Registrar for a restriction
to be entered on the register of title of all registered land now or in
the future owned by the Company in the following terms:-
"Except under an order of the Registrar no disposition by the proprietor
of the land is to be registered without the consent of the proprietor for
the time being of [the charge created by this Debenture]".
4.7 The Company shall subject to the rights of any prior mortgagee deposit
with the Bank and the Bank during the continuance of this security shall
be entitled to hold all deeds and documents of title relating to the
Company's Land, the Securities (including warrants and coupons) and the
Insurances.
4.8 The Company shall, at is own expense, at any time when required by the
Bank:-
4.8.1 execute and deliver to the Bank a valid legal mortgage of
any Land now or in the future owned by the Company;
4.8.2 execute and deliver to the Bank a legal assignment of any
Debts, Rents, or Other Claims which the Bank shall require,
and give notice of any such assignment to any person when
required by the Bank; and
4.8.3 execute and deliver all deeds and documents and do and
concur in all other acts and things which the Bank may deem
necessary or desirable to vest in the Bank the security
intended to be created by this Debenture over all or any of
the Assets
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<PAGE> 13
4.8.4 do and concur in all such other acts or things as the Bank
may deem necessary or desirable to vest in the Bank the
security intended to be created by this Debenture over all
of any of the Assets or to facilitate the enforcement of
that security, or the exercise of any powers or discretions
intended to be vested in the Bank or the Receiver by this
Debenture
in each case, in the Bank's standard form or such other form as the Bank
may require. In the case of Assets situated outside England and Wales,
references to any form of security shall be taken to refer to any form of
security available under the relevant local law which the Bank may
select.
4.9 This security shall be a continuing security to the Bank and shall remain
in force until expressly discharged in writing by the Bank
notwithstanding any intermediate settlement of account or other matter or
thing whatsoever, and shall be without prejudice and in addition to any
other right remedy or security of any kind which the Bank may have now or
at any time in the future for or in respect of any of the Secured
Liabilities.
5 COVENANTS ETC
5.1 While this Debenture continues in force the Company shall:-
5.1.1 provide to the Bank all information, and copies of all
documents which the Bank may require relating to the
financial affairs of and its interest in the Company and
any Group Company, including, without limitation, providing
not later than 21 days after the end of each month, (or
such other period as the Bank may at any time specify in
writing) copies of management accounts and financial
information in such form as the Bank may require, in
respect of the Company and each Group Company;
5.1.2 forthwith notify the Bank of the acquisition of any Land;
5.1.3 ensure that the aggregate value of the Company's good book
debts (excluding debts payable by any other Group Company,
and any other person from time to time
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<PAGE> 14
specified by the Bank), after deducting any provision which
is (or ought to have been) made in respect of doubtful
debts in the Company's most recent management or audited
accounts ("the Debtor Value"), at all times exceeds such
amount as the Bank may from time to time specify;
5.1.4 provide to the Bank, within three days after a request by
the Bank, a certificate signed by a director of the Company
of the aggregate Debtor Value as at a stated date not more
than seven days before the date of the certificate, and
such other information in relation to the Debts as the Bank
may require;
5.1.5 put and keep all its buildings in good and substantial
repair and all fixtures and fittings plant machinery and
other effects in good working order and condition;
5.1.6 maintain all such insurances as are normally maintained by
prudent companies carrying on similar businesses and in
particular (without limitation) will insure and keep
insured such of the Assets as are insurable with an
insurance office or underwriters to be approved by the Bank
in writing from time to time, (and, if at any time so
requested by the Bank) either in the name of the Company
with the interest of the Bank noted or, at the option of
the Bank, in the joint names of the Company and the Bank,
against loss or damage by fire and such other risks (on
terms that the insurer shall not avoid cancel or fail to
renew any such policy for non payment of premium without
first giving not less than 21 days prior notice to the
Bank, and on such other terms as the Bank may from time to
time require, in their full replacement value for the time
being);
5.1.7 pay all premiums and other moneys necessary to effect and
keep up such insurances within one week of the same
becoming due, on demand produce to the Bank the policy or
policies of such insurance and the receipt for every such
payment, comply at all times with all the requirements of
any such insurance policy, and not do or omit to do
anything, or allow any thing to occur or continue which
will or may in the sole opinion of the Bank cause any such
insurance policy to become void or voidable, or allow the
insurer to refuse any indemnity under it;
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<PAGE> 15
5.1.8 in relation to all Land owned or occupied by the Company
(a) at all times observe and perform (and ensure that
any other person at any time occupying any such
Land also observes and performs) all restrictive
and other covenants to which the Land or any part
of it may from time to time be subject, all
obligations on the part of the Company or any such
occupier in any lease or tenancy agreement and all
building regulations and all restrictions
conditions and stipulations for the time being
affecting the Land or any part of it or the use or
enjoyment of the Land
(b) within seven days deliver to the Bank any notice
or proceedings served on the Company and relating
to any alleged breach of any of the above; and
(c) at all times keep the Land in a safe condition for
all persons forseeably likely to be present on any
part of it, and where necessary or desirable for
such purposes, erect and maintain fencing,
barriers, covers and other security measures
(d) pay all rents rates taxes and outgoings payable by
virtue of its ownership or occupation, and
(e) permit the Bank at any reasonable time to enter on
the land, inspect it and any assets on it, and
take copies of any documents there.
5.1.9 at all times comply with all applicable Environmental Law,
and obtain and comply with the terms of any licence or
permit under any Environmental Law which is necessary or
desirable to carry on any of the Company's businesses or
activities.
5.1.10 take all action necessary to maintain any registered rights
to Intellectual Property in full force and effect, and to
make and pursue all applications which it is entitled to
make for any such rights.
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5.2 If the Company is in default under any of the covenants set out in Clause
5.1 above (or any of its other obligations under this Debenture), the
Bank may at its sole discretion (but will not be obliged to) take any
steps which it considers necessary or desirable to remedy the default or
make good its effects in whole or in part, and in particular, without
limitation, may pay any amount which the Company ought to pay and may
authorise any person to enter, by force if necessary, on any Land or into
any building owned or occupied by the Company and perform works and may
put in place or renew any insurance. Neither the Bank, nor any person
authorised by it, shall be deemed to have taken possession of any Land by
virtue of exercising any power given by this Clause, irrespective of the
degree of control exercised over the Land or access to it, unless and
until the Bank (or any such person) serves notice in writing on the
Company expressly stipulating its intention to take possession.
5.3 The Bank shall be entitled to be paid the proceeds of any Insurance to
which the Company is entitled (other than any indemnity against liability
to a third party) and the Company hereby irrevocably instructs any
insurer in respect of any such policy to pay such proceeds to the Bank
and undertakes to the Bank to issue such further instructions to that
effect as the Bank may require.
5.4 All moneys received on any Insurance whatsoever (other than any indemnity
against liability to a third party) shall as the Bank in its sole
discretion requires be applied either in making good the loss or damage
in respect of which the money is received or in or towards discharge of
the Secured Liabilities.
6 DEMAND AND ENFORCEMENT
6.1 This Debenture shall become enforceable:-
6.1.1 upon any demand being made by the Bank for payment of any
of the Secured Liabilities;
6.1.2 upon any request being made by the Company to the Bank for
the appointment of a receiver or for the Bank to exercise
any other power or right available to it;
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<PAGE> 17
6.1.3 upon the occurrence of any event referred to in Clause
4.5.2, or any event causing the floating charge created by
this Debenture to become fixed in relation to any Assets;
6.1.4 upon the passing of any resolution, or the presentation of
a petition for winding up, or for an administration order
in relation to the Company
6.2 Any demand for payment, and any other notice to be given by the Bank
under this Debenture, shall be in writing and may be signed by any
official of the Bank, and may be made or given at any place of business
of the Company, or at its registered office:-
6.2.1 by delivering it to any such place, or
6.2.2 by sending it by first class post to any such place (in
which case it shall be deemed received at 10am on the next
business day after posting, and proof of posting shall be
proof of delivery), or
6.2.3 by sending it by fax to any of the Company's fax numbers
(in which case it shall be deemed received when sent, and
proof of sending shall be proof of receipt).
6.3 At any time after this Debenture shall have become enforceable, the Bank
may exercise, in respect of any Asset, the power of sale given to
mortgagees by the Law of Property Act 1925. The restrictions imposed by
section 103 of that Act shall not apply, and the Bank may delegate the
exercise of its power of sale to any Receiver or other person.
7 RECEIVERS
7.1 At any time after this Debenture has become enforceable the Bank may
appoint any person or persons to be a receiver or receivers of all or any
part of the Assets hereby charged. An appointment over part only of the
Assets shall not preclude the Bank from making any subsequent appointment
over any other part of the Assets.
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7.2 The appointment of a Receiver shall be in writing, and may be signed by
any officer of the Bank. Where more than one person is acting at any time
as Receiver, they shall have power to act severally as well as jointly.
7.3 The Bank may from time to time determine the remuneration of the Receiver
(which shall not be subject to the limit in section 109(6) of the Law of
Property Act 1925) and may (subject to the application of Section 45 of
the Insolvency Act 1986) remove any person from office in relation to all
or any part of the Assets of which he is the Receiver and at any time
(before or after any person shall have vacated office or ceased to act as
Receiver in respect of any of the Assets) appoint a further or other
receiver or receivers over all or any part of the Assets.
7.4 The Receiver shall be the agent of the Company (which shall be solely
liable for his acts defaults and remuneration) unless and until the
Company goes into liquidation whereafter he shall act as principal and
shall not become the agent of the Bank, and the Receiver shall have and
be entitled to exercise in relation to the Company all the powers set out
in Schedule 1 to the Insolvency Act 1986 (whether or not he is an
administrative receiver) and in applying that Schedule:-
7.4.1 the words "he" and "him" refer to the Receiver; and
7.4.2 references to the property of the company are to the Assets
over which the Receiver is appointed
and in particular by way of addition to but without hereby limiting such
powers (and without prejudice to the Bank's powers) the Receiver shall
have power to do the following things namely:-
7.4.3 power to carry on or join with any person in carrying on
any business (whether or not carried on by the Company
prior to his appointment) and;
7.4.4 power to maintain, repair, make safe, improve and develop
any Land or other Asset and to do all such other things as
may in his opinion be necessary or desirable for
maintaining or enhancing the value or marketability of any
Asset.
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8 POWER OF ATTORNEY
The Company hereby irrevocably appoints the Bank (whether or not a
Receiver has been appointed) and also (as a separate appointment) each
Receiver severally as the attorney and attorneys of the Company with
power to do any act, and execute and deliver any deed or other document,
on behalf of and in the name of the Company, which the Company could be
required to do or execute under any provision of this Debenture, or which
the Bank in its sole opinion may consider necessary or desirable for
perfecting the Bank's title to any of the Assets or enabling the Bank or
the Borrower to exercise any of its or his rights or powers under this
Debenture
9 PAYMENT OF MONEYS
9.1 Any moneys received by the Receiver shall, subject to the repayment as
far as necessary of any claims having priority to this Debenture, be paid
or applied in the following order of priority:-
9.1.1 in satisfaction of all costs charges and expenses properly
incurred and payments properly made by the Receiver and of
the remuneration of the Receiver;
9.1.2 in or towards satisfaction of the Secured Liabilities in
such order as the Bank may at its discretion require;
9.1.3 as to the surplus (if any) to the person or persons
entitled thereto.
9.2 The Bank may, without prejudice to any other rights it may have, at any
time and from time to time place (and keep for such time as it may think
prudent) any moneys received recovered or realised under or by virtue of
this Debenture on a separate or suspense account to the credit either of
the Company or of the Bank as the Bank shall think fit without any
intermediate obligation on the Bank's part to apply the same or any part
thereof in or towards the discharge of the Secured Liabilities.
10 CONSOLIDATION
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10.1 In addition to any general lien, right to combine accounts, right to set
off or other right which it may at any time have, the Bank shall have the
right at any time or times, without notice to the Company, to combine or
consolidate all or any accounts which it then has in relation to the
Company (in whatever name) and any liabilities owed by the Company to the
Bank, and/or to set off or transfer any amounts standing to the credit of
one or more accounts of the Company in or towards satisfaction of any
amount owed to the Bank on any other account or otherwise
10.2 The Bank's rights under Clause 10.1 apply:-
10.2.1 whether or not any demand has been made hereunder, or any
liability concerned has fallen due for payment
10.2.2 whether or not any credit balance is immediately available
or subject to any restriction
10.2.3 irrespective of the currencies in which any balance or
liability is denominated, and the Bank may for the purpose
of exercising its rights elect to convert any sum or
liability in one currency into any other of its spot rate
applying at or about 11am on the date of conversion
10.2.4 in respect of any liabilities owed to the Bank by the
Company, whether owed solely or jointly, certainly or
contingently, presently or in the future, as principal or
surety, and howsoever arising.
11 PROTECTION OF THIRD PARTIES
11.1 In favour of any purchaser, the statutory powers of sale and of
appointing a receiver which are conferred upon the Bank, as varied
and extended by this Debenture, and all other powers of the Bank,
shall be deemed to arise and be exercisable immediately after the
execution of this Debenture
11.2 No purchaser from or other person dealing with the Bank, any person to
whom it has delegated any of its powers, or the Receiver shall be
concerned to enquire whether any of the powers
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<PAGE> 21
which they have exercised has arisen or become exercisable, or whether
the Secured Liabilities remain outstanding or whether any event has
happened to authorise the Receiver to act or as to the propriety or
validity of the exercise of any such power; and the title and position of
a purchaser or such person shall not be impeachable by reference to any
of those matters
11.3 The receipt of the Bank or the Receiver shall be an absolute and
conclusive discharge to a purchaser or such person and shall relieve him
of any obligation to see to the application of any moneys paid to or by
the direction of the Bank or the Receiver.
12 PROTECTION OF THE BANK AND THE RECEIVER
12.1 Neither the Bank nor any Receiver shall be liable in respect of any loss
or damage which arises out of the exercise, or attempted or purported
exercise of, or the failure to exercise any of their respective powers
under this Debenture
12.2 Without prejudice to any other provision of this Debenture, entry into
possession of any Asset shall not render the Bank or the Receiver liable
to account as mortgagee in possession or to be liable for any loss on
realisation or for any default or omission for which a mortgagee in
possession might be liable and if and whenever the Bank or the Receiver
enters into possession of any Asset it shall be entitled at any time it
or he thinks fit to go out of such possession
12.3 The Company shall indemnify and keep indemnified the Bank, every
Receiver, and any person who acts as the servant, agent, delegate or
attorney of any of them, against all claims costs expenses and
liabilities which they may suffer or incur arising in any way out of the
taking or holding of this Debenture, the exercise or purported exercise
of any right power authority or discretion given by it, or any other act
or omission in relation to this Debenture or the Assets. The provisions
of this Clause 12 shall continue in full force and effect notwithstanding
any release or discharge of this Debenture, or the discharge of any
Receiver from office.
13 MISCELLANEOUS PROVISIONS
13.1 While this Debenture continues in force:-
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<PAGE> 22
13.1.1 no statutory or other power of granting or agreeing to
grant or of accepting or agreeing to accept surrenders of
leases or tenancies of the Land hereby charged or any part
of it shall be capable of being exercised by the Company;
13.1.2 the Company shall not be entitled to part with possession
(otherwise than on the termination of any lease tenancy or
licence to it) of any Land, or to share occupation of any
Land with any other person or persons, or to surrender any
lease of Land or permit such a lease to be assigned or
forfeited;
without the prior written consent of the Bank;
13.2 Section 93 of the Law of Property Act 1925 dealing with the consolidation
of mortgages shall not apply to this security.
13.3 The statutory powers of sale, leasing and accepting surrenders
exercisable by the Bank are hereby extended so that the Bank may, either
in its own name or in that of the Company,
13.3.1 grant a lease or leases (whether or not at a premium) of
the whole or any part or parts of any Land owned by the
Company, with such rights relating to other Land and
containing such covenants on the part of the Company and
generally on such terms and conditions as the Bank shall
think fit (including the payment of money to a lessee or
tenant on a surrender);
13.3.2 accept a surrender of any lease on such terms as the Bank
may think fit in either case, without any of the
restrictions on such powers contained in section 99 and 100
of the Law of Property Act 1925.
13.4 The rights powers and discretions given to the Bank in this Debenture:-
13.4.1 may be exercised as often as and in such manner as, the
Bank thinks fit;
13.4.2 are cumulative, and are not exclusive of any of its rights
under the general law;
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<PAGE> 23
13.4.3 may only be waived in writing and specifically, and any
delay in exercising, or non-exercise of, any right, is not
a waiver of it.
13.5 If any provision of this Debenture is illegal invalid or unenforceable in
any jurisdiction, that shall not affect:-
13.5.1 the validity or enforceability of any other provision, in
any jurisdiction, or
13.5.2 the validity or enforceability of that particular
provision, in any other jurisdiction.
13.6 All costs charges and expenses incurred or paid by the Bank or by the
Receiver in the exercise of any power or right given by this Debenture or
in relation to any consent requested by the Company, or in perfecting or
otherwise in connection with this Debenture or the Assets, including
(without limitation) all moneys expended by the Bank under Clause 5.2,
all sums recoverable under Clause 12.3 and all costs of the Bank (on an
indemnity basis) of all proceedings for the enforcement of this Debenture
or for obtaining payment of moneys hereby secured, shall be recoverable
from the Company as debts, may be debited by the Bank at any time to any
account of the Company and shall bear interest until payment at the rate
or rates applicable to the account to which they are debited, or, if
there is no such rate, at 4% over the Bank's base rate.
13.7 If the Bank receives notice of any subsequent charge or other security
interest affecting any of the Assets the Bank shall be entitled to close
the Company's then current account or accounts and to open a new account
or accounts for the Company; if the Bank does not open a new account or
accounts immediately on receipt of such notice it shall nevertheless be
treated as if it had done so at the time when it received such notice,
and as from that time all payments made for the credit of the Company to
the Bank shall be credited or be treated as having been credited to such
new account or accounts and shall not operate to reduce the amount due
from the Company to the Bank at the time when it received such notice.
13.8 The Bank may from time to time seek from any other person having dealings
with the Company such information about the Company and its affairs as
the Bank may think fit and the Company hereby authorises and requests any
such person to provide any such information to the Bank and
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<PAGE> 24
agrees to provide such further authority in this regard as the Bank may
from time to time require. The Company shall at its own cost at any time
if so requested by the Bank appoint an accountant or firm of accountants
nominated by the Bank to investigate the financial affairs of the Company
and/or any subsidiary of the Company and report to the Bank, and
authorises the Bank itself at any time to make such appointment on behalf
of the Company or on its own account as it shall think fit, and in every
such case the fees and expenses of such accountant or firm shall be
payable by the Company and may be paid by the Bank on behalf of the
Company.
13.9 The Bank may assign this Debenture to any successor in title to any of
the Secured Liabilities, and may disclose any information in its
possession relating to the Company, its affairs or the Secured
Liabilities to any actual or prospective assignee.
14 UPSTREAM PAYMENTS
Nothing in this Debenture shall prohibit the payment by the Company of
dividends or distributors or the making of other payments or transfers to
its parent company which dividend distribution payments or transfers are
not prohibited by the Credit Agreement.
EXECUTED AND DELIVERED AS A DEED by the Company, and executed by the Bank, on
the date hereof
22
<PAGE> 25
SCHEDULE 1
REGISTERED LAND
TITLE NUMBER DESCRIPTION
UNREGISTERED LAND
23
<PAGE> 26
SCHEDULE 2
THE ACCOUNT
The Company's current account detailed below:
Bank: Lloyds
Branch: Cambridge
Sort Code: 30-41-56
Account Number: 0708185
24
<PAGE> 27
EXECUTED (but not delivered until ) Director /s/ N L Evans
the date hereof) AS A DEED by ) Dr. N. L. Evans
CAMINUS LIMITED ) Secretary
/s/ C M Wilcockson
Mrs. C. M. Wilcockson
SIGNED by a duly authorised officer )
for and on behalf of FLEET BANK N.A. ) /s/ Patrick Twist
in the presence of:- ) -----------------------------------
Signature of Witness: /s/ Paula J. Hughes
Name of Witness: Paula J. Hughes
Address:
25
<PAGE> 1
Exhibit 10.13
DATED 23 JUNE 1999
ZAI NET SOFTWARE LIMITED
- AND -
FLEET BANK, N.A.
================================================================================
DEBENTURE
================================================================================
PINSENT--CURTIS
GPT
<PAGE> 2
CONTENTS
1 Interpretation 1
2 Company's Obligations 5
3 Charges 6
4 Protection of Chargeholder's Rights 7
5 Covenants Etc 9
6 Demand and Enforcement 11
7 Receivers 12
8 Power of Attorney 13
9 Payment of Moneys 13
10 Consolidation 14
11 Protection of Third Parties 15
12 Protection of the Bank and the Receiver 15
13 Miscellaneous Provisions 16
14 Upstream Payments 17
SCHEDULES
1 Registered Land/Unregistered Land 19
2 The Account 20
<PAGE> 3
THIS DEED is made on 19
This Debenture is given by ZAI NET SOFTWARE LIMITED (No 03636211) whose
registered office is at Caminus House, Castle Rock, Cambridge CB3 0RA (the
"COMPANY") in favour of FLEET BANK N.A. (the"BANK")
1 INTERPRETATION
1.1 In this Debenture unless the context otherwise requires:-
"ACCOUNT" means the account referred to in Schedule
2, or such further or other account as the
Bank may at any time stipulate
"ASSETS" means all the undertaking, property and
assets of the Company whatsoever and
wheresoever, present or future
"ASSET CONTRACTS" means all the rights of the Company, now or
in the future, arising out of or in
connection with any agreement:-
(i) for the acquisition of any property
(real or personal) by the Company
(except to the extent that such rights
amount to an interest in land
effectively charged by way of legal
mortgage or fixed charge by Clause 4.1
or 4.2) including without limitation
any option to acquire property;
(ii) for the hire, hire purchase, lease or
loan of any property (real or
personal), to the Company (except as
aforesaid)
"BANK" includes persons deriving title under the
Bank
"CREDIT AGREEMENT" means the agreement dated on or about even
date herewith between the Bank and Caminus
LLC providing for the extension of credit b
the Bank to Caminus LLC in the aggregate
principal sum of US Dollars five million
and includes all amendments and supplements
thereto from time to time
"DEBTS" means all book and other debts now or in
the future becoming due to the Company
(whether alone or jointly with any other
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person), whenever payable and whether
liquidated or unliquidated, certain or
contingent, including without limitation
credit balances on any account at any bank
or financial institution, other than the
Account, and together with all cheques,
bills of exchange, negotiable instruments,
credits and securities at any time given in
relation to, or to secure payment of, any
such debt, but "DEBTS" does not include any
asset or right effectively charged by way
of fixed charge under any other heading of
Clause 3
"ENCUMBRANCE" means any mortgage, charge, pledge, lien,
hypothecation or other security interest of
any kind, and any right of set-off,
assignment, trust, flawed asset or other
agreement or arrangement whatsoever for the
purpose of providing security or having a
similar effect to the provision of
security, other than liens arising by
operation of law in the ordinary course of
the Company's business
"ENVIRONMENTAL LAW" means all laws, including without
limitation common law, statutes, delegated
legislation, legislation of the European
Union or any of its institutions, and codes
of practice and guidance issued by any
relevant authority or agency, in relation
to any matter affecting the environment,
human health or the storage handling or
disposal of any waste or other substance
"FIXED PLANT AND EQUIPMENT" means all plant machinery or equipment of
any kind (including without limitation all
cables, pipes, switchgear, heating,
lighting, electrical, water and gas
apparatus) which does not for any reason
constitute a fixture, but is now or at any
time directly or indirectly attached by any
means and for any purpose to any land or
building, whether or not it is removable or
intended to form part of the land or
building
"FIXTURES" means all things of any kind now or at any
time affixed to land for any purpose,
including without limitation trade and
tenants fixtures
"GROUP COMPANY" means any company which is at any relevant
time a subsidiary
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company or a holding company of the
Company, or a subsidiary of any such
holding company, or a company which is
controlled by persons who control the
Company
"INSURANCES" means all the right title and interest of
the Company, now or in the future, in or
under any policy of insurance or assurance
or to the proceeds thereof
"INTELLECTUAL PROPERTY" means all the right title and interest of
the Company (now or in the future) in or to
any of the following:-
(I) any registered intellectual property
right in any territory, including
without limitation patents, trade
marks, service marks, registered
designs, and any similar right in any
territory and any applications or right
to apply for any of the above;
(ii) any invention, copyright, design right
of performance right; and
(iii) any trade secrets, know-how and
confidential information
"LAND" means any estate, right or interest in or
over land, whether legal or equitable, and
wherever the land is situated, including
any buildings and Fixtures on land, and the
benefit of any covenants or rights owed to
any person or enforceable by him by virtue
of the ownership possession or occupation
of Land, but for these purposes "land"
excludes heritable property situated in
Scotland
"LOOSE PLANT AND EQUIPMENT" means all plant, machinery, equipment and
motor vehicles now or at any time owned by
the Company as a capital asset which is not
Fixed Plant and Equipment, (including
without limitation any moulds, patterns,
tools (other than hand tools and consumable
tooling) dies and jigs)
"OTHER CLAIMS" means all rights claims or obligations of
any kind whatsoever now or at any time
owed to the Company capable of being
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satisfied by the payment of money, which
are not effectively charged by way of fixed
charge by any other provision of this
Debenture
"RECEIVER" means any receiver appointed under this
Debenture, and, where more than one
receiver has been appointed, each of them
"RENTS" means any sum payable to the Company (and
any right to recover any such a sum):-
(I) by way of rent, service charge or
otherwise under any lease of Land, or
as mesne profits, licence fee, or
otherwise howsoever for the use or
occupation of or trespass upon Land, or
other income arising from any Land;
(ii) by way of rent or otherwise for or in
connection with the possession or use
of, or in respect of any trespass to or
conversion of, any chattel
except insofar as the same is effectively
charged by way of fixed charge by Clause
3.1 or 3.2
"SECURED LIABILITIES" means all money liabilities and obligations
now or in the future owed or incurred by
the Company to the Bank, of any kind,
however arising and in any currency,
whether or not immediately payable, whether
certain or contingent, whether sole or
joint, whether as principal or as surety,
whether or not the Bank was the original
creditor in respect thereof, and including
(without limitation) interest commission
costs charges and expenses charged by the
Bank at rates agreed between it and the
Company or, in the absence of express
agreement, in accordance with the Bank's
normal practice for the time being
"SECURITIES" means all the right title and interest of
the Company, now or in the future, in any
stocks, shares, instruments creating or
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acknowledging any debt, or other securities
issued by any person
1.2 In this Debenture unless the context otherwise requires:-
1.2.1 the singular includes the plural and vice versa, and
reference to any gender includes the other genders;
1.2.2 references to persons include bodies corporate,
associations, partnerships, organisations, states, state
agencies and any other entity, whether or not having
separate legal personality;
1.2.3 words and phrases defined in the Companies Act 1985 have
the same meanings in this Agreement but the word "COMPANY"
includes any body corporate;
1.2.4 references to Clauses are to clauses or sub-clauses of this
Debenture, references to a Schedule are to a schedule to
this Debenture and references within a Schedule to
paragraphs are to paragraphs or sub-paragraphs of that
Schedule;
1.2.5 references to any rate of interest shall be construed as
meaning that rate as from time to time in force, calculated
from day to day, and compounded on the Bank's usual days
for charging interest in each year, both before and after
judgment; and references to a base lending rate shall, if
there is no such published or determinable rate at the
appropriate time, be construed as meaning such reasonably
equivalent rate as the Bank shall select;
1.2.6 unless the defined herein capitalised terms have the
meaning assigned thereto in the Credit Agreement.
1.3 In this Debenture:-
1.3.1 any reference to any statute or statutory instrument or any
section or part thereof includes any enactment (present or
future) replacing or amending it or any instrument, order
or regulation made under it and also includes any past
statutory provisions (as from time to time modified or
re-enacted) which such provision has directly or indirectly
replaced;
1.3.2 headings are for reference purposes only and shall not
affect the construction of anything in this Agreement;
2 COMPANY'S OBLIGATIONS
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The Company covenants:-
2.1 to pay or discharge to the Bank on demand made at any time
at which the Bank is entitled to do so any or all of the
Secured Liabilities; and
2.2 to pay interest to the Bank upon any sum so demanded until
payment (both before and after any judgment) at the rate
applicable to that sum immediately before demand (or, if
there was no such applicable rate, at four per cent above
the Bank's Base Rate.)
3 CHARGES
As security for payment of the Secured Liabilities the Company (with full
title guarantee) hereby charges to the Bank:-
3.1 by way of first legal mortgage all Land now owned by the
Company including (without limitation) the land which is
described in the Schedule hereto,
3.2 by way of first fixed equitable charge all Land which the
Company acquires in the future;
3.3 by way of separate first fixed charges:-
3.3.1 all the goodwill and uncalled capital of the
Company, present or future
3.3.2 the Securities
3.3.3 the Insurances
3.3.4 the Intellectual Property
3.3.5 the Debts
3.3.6 the Rents
3.3.7 the Asset Contracts
3.3.8 the Other Claims
3.3.9 the Fixed Plant and Equipment
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3.3.10 the Loose Plant and Equipment
3.4 by way of first floating charge all those Assets which are
not for any reason effectively charged by this Debenture by
way of fixed charge, including (without limitation) any
heritable property of the Company situated in Scotland.
4 PROTECTION OF CHARGEHOLDER'S RIGHTS
4.1 The Company shall pay into the Account all moneys which it receives in
respect of any Debts and Rents and until such payment hold all moneys so
received upon trust for the Bank and shall not without the prior written
consent of the Bank charge factor discount or assign any of them in
favour of any other person, or otherwise deal with them except for the
purpose of collecting them in and paying them as required by this Clause.
4.2 The Company shall deal with any money standing to the credit of the
Account, subject to the rights of the bank at which the Account is
maintained, in accordance with any directions given in writing by the
Bank from time to time.
4.3 Any monies received by the Company in respect of Debts or Rents and paid
into the Account in accordance with Clause 4.1 at any time prior to this
Debenture becoming enforceable shall, in the absence of any prior
direction to the contrary given by the Bank, upon such payment in be
deemed released from the fixed charges created by Clause 3.3, but shall
be subject to the floating charge created by Clause 3.4. Any such release
shall not affect the continuance of the fixed charges over all other
Debts and Rents for the time being outstanding.
4.4 The Company covenants not, without the prior written consent of the
Bank:-
4.4.1 to create (otherwise than in favour of the Bank) any
Encumbrance, or to allow any Encumbrance to arise or
continue, on or over any of the Assets ; or
4.4.2 to part with or dispose of all or any of the Assets charged
by way of floating charge except in the ordinary course of
carrying on its business as a going concern.
Unless permitted by the Credit Agreement.
4.5 The Bank may from time to time by notice in writing to the Company
convert any floating charge created by this Debenture into a fixed
charge, in respect of any Assets which are specified in any such notice.
Any such floating charge shall automatically be converted into a fixed
charge:-
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<PAGE> 10
4.5.1 in respect of any Assets, immediately prior to the Company
agreeing or resolving (unless the Bank has first consented
to it) to create any Encumbrance over those Assets in
favour of any other person, or to part with or dispose of
them otherwise than in the ordinary course of carrying on
the Company's business as a going concern; and
4.5.2 in respect of all the Assets if the Company ceases to carry
on business or to be a going concern or if any voluntary
arrangement or other moratorium or compromise with the
Company's creditors, or any class of them, is proposed or
put into effect;
but so that this sub-Clause 4.5 shall not apply to any Assets situated in
Scotland.
4.6 The Company hereby applies to the Chief Land Registrar for a restriction
to be entered on the register of title of all registered land now or in
the future owned by the Company in the following terms:-
"Except under an order of the Registrar no disposition by the proprietor
of the land is to be registered without the consent of the proprietor for
the time being of [the charge created by this Debenture]".
4.7 The Company shall subject to the rights of any prior mortgagee deposit
with the Bank and the Bank during the continuance of this security shall
be entitled to hold all deeds and documents of title relating to the
Company's Land, the Securities (including warrants and coupons) and the
Insurances.
4.8 The Company shall, at is own expense, at any time when required by the
Bank:-
4.8.1 execute and deliver to the Bank a valid legal mortgage of
any Land now or in the future owned by the Company;
4.8.2 execute and deliver to the Bank a legal assignment of any
Debts, Rents, or Other Claims which the Bank shall require,
and give notice of any such assignment to any person when
required by the Bank; and
4.8.3 execute and deliver all deeds and documents and do and
concur in all other acts and things which the Bank may deem
necessary or desirable to vest in the Bank the security
intended to be created by this Debenture over all or any of
the Assets
4.8.4 do and concur in all such other acts or things as the Bank
may deem necessary or desirable to vest in the Bank the
security intended to be created by this Debenture over all
of any of the Assets or to facilitate the enforcement of
that security, or the exercise of any powers or discretions
intended to be vested in the Bank or the Receiver by this
Debenture
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<PAGE> 11
in each case, in the Bank's standard form or such other form as the Bank
may require. In the case of Assets situated outside England and Wales,
references to any form of security shall be taken to refer to any form of
security available under the relevant local law which the Bank may
select.
4.9 This security shall be a continuing security to the Bank and shall remain
in force until expressly discharged in writing by the Bank
notwithstanding any intermediate settlement of account or other matter or
thing whatsoever, and shall be without prejudice and in addition to any
other right remedy or security of any kind which the Bank may have now or
at any time in the future for or in respect of any of the Secured
Liabilities.
5 COVENANTS ETC
5.1 While this Debenture continues in force the Company shall:-
5.1.1 provide to the Bank all information, and copies of all
documents which the Bank may require relating to the
financial affairs of and its interest in the Company and
any Group Company, including, without limitation, providing
not later than 21 days after the end of each month, (or
such other period as the Bank may at any time specify in
writing) copies of management accounts and financial
information in such form as the Bank may require, in
respect of the Company and each Group Company;
5.1.2 forthwith notify the Bank of the acquisition of any Land;
5.1.3 ensure that the aggregate value of the Company's good book
debts (excluding debts payable by any other Group Company,
and any other person from time to time specified by the
Bank), after deducting any provision which is (or ought to
have been) made in respect of doubtful debts in the
Company's most recent management or audited accounts ("the
Debtor Value"), at all times exceeds such amount as the
Bank may from time to time specify;
5.1.4 provide to the Bank, within three days after a request by
the Bank, a certificate signed by a director of the Company
of the aggregate Debtor Value as at a stated date not more
than seven days before the date of the certificate, and
such other information in relation to the Debts as the Bank
may require;
5.1.5 put and keep all its buildings in good and substantial
repair and all fixtures and fittings plant machinery and
other effects in good working order and condition;
5.1.6 maintain all such insurances as are normally maintained by
prudent companies carrying on similar businesses and in
particular (without limitation) will insure and keep
insured such of the
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Assets as are insurable with an insurance office or
underwriters to be approved by the Bank in writing from
time to time, (and, if at any time so requested by the
Bank) either in the name of the Company with the interest
of the Bank noted or, at the option of the Bank, in the
joint names of the Company and the Bank, against loss or
damage by fire and such other risks (on terms that the
insurer shall not avoid cancel or fail to renew any such
policy for non payment of premium without first giving not
less than 21 days prior notice to the Bank, and on such
other terms as the Bank may from time to time require, in
their full replacement value for the time being);
5.1.7 pay all premiums and other moneys necessary to effect and
keep up such insurances within one week of the same
becoming due, on demand produce to the Bank the policy or
policies of such insurance and the receipt for every such
payment, comply at all times with all the requirements of
any such insurance policy, and not do or omit to do
anything, or allow any thing to occur or continue which
will or may in the sole opinion of the Bank cause any such
insurance policy to become void or voidable, or allow the
insurer to refuse any indemnity under it;
5.1.8 in relation to all Land owned or occupied by the Company
(a) at all times observe and perform (and ensure that
any other person at any time occupying any such
Land also observes and performs) all restrictive
and other covenants to which the Land or any part
of it may from time to time be subject, all
obligations on the part of the Company or any such
occupier in any lease or tenancy agreement and all
building regulations and all restrictions
conditions and stipulations for the time being
affecting the Land or any part of it or the use or
enjoyment of the Land
(b) within seven days deliver to the Bank any notice
or proceedings served on the Company and relating
to any alleged breach of any of the above; and
(c) at all times keep the Land in a safe condition for
all persons forseeably likely to be present on any
part of it, and where necessary or desirable for
such purposes, erect and maintain fencing,
barriers, covers and other security measures
(d) pay all rents rates taxes and outgoings payable by
virtue of its ownership or occupation, and
(e) permit the Bank at any reasonable time to enter on
the land, inspect it and any assets on it, and
take copies of any documents there.
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5.1.9 at all times comply with all applicable Environmental Law,
and obtain and comply with the terms of any licence or
permit under any Environmental Law which is necessary or
desirable to carry on any of the Company's businesses or
activities.
5.1.10 take all action necessary to maintain any registered rights
to Intellectual Property in full force and effect, and to
make and pursue all applications which it is entitled to
make for any such rights.
5.2 If the Company is in default under any of the covenants set out in Clause
5.1 above (or any of its other obligations under this Debenture), the
Bank may at its sole discretion (but will not be obliged to) take any
steps which it considers necessary or desirable to remedy the default or
make good its effects in whole or in part, and in particular, without
limitation, may pay any amount which the Company ought to pay and may
authorise any person to enter, by force if necessary, on any Land or into
any building owned or occupied by the Company and perform works and may
put in place or renew any insurance. Neither the Bank, nor any person
authorised by it, shall be deemed to have taken possession of any Land by
virtue of exercising any power given by this Clause, irrespective of the
degree of control exercised over the Land or access to it, unless and
until the Bank (or any such person) serves notice in writing on the
Company expressly stipulating its intention to take possession.
5.3 The Bank shall be entitled to be paid the proceeds of any Insurance to
which the Company is entitled (other than any indemnity against liability
to a third party) and the Company hereby irrevocably instructs any
insurer in respect of any such policy to pay such proceeds to the Bank
and undertakes to the Bank to issue such further instructions to that
effect as the Bank may require.
5.4 All moneys received on any Insurance whatsoever (other than any indemnity
against liability to a third party) shall as the Bank in its sole
discretion requires be applied either in making good the loss or damage
in respect of which the money is received or in or towards discharge of
the Secured Liabilities.
6 DEMAND AND ENFORCEMENT
6.1 This Debenture shall become enforceable:-
6.1.1 upon any demand being made by the Bank for payment of any
of the Secured Liabilities;
6.1.2 upon any request being made by the Company to the Bank for
the appointment of a receiver or for the Bank to exercise
any other power or right available to it;
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6.1.3 upon the occurrence of any event referred to in Clause
4.5.2, or any event causing the floating charge created by
this Debenture to become fixed in relation to any Assets;
6.1.4 upon the passing of any resolution, or the presentation of
a petition for winding up, or for an administration order
in relation to the Company
6.2 Any demand for payment, and any other notice to be given by the Bank
under this Debenture, shall be in writing and may be signed by any
official of the Bank, and may be made or given at any place of business
of the Company, or at its registered office:-
6.2.1 by delivering it to any such place, or
6.2.2 by sending it by first class post to any such place (in
which case it shall be deemed received at 10am on the next
business day after posting, and proof of posting shall be
proof of delivery), or
6.2.3 by sending it by fax to any of the Company's fax numbers
(in which case it shall be deemed received when sent, and
proof of sending shall be proof of receipt).
6.3 At any time after this Debenture shall have become enforceable, the Bank
may exercise, in respect of any Asset, the power of sale given to
mortgagees by the Law of Property Act 1925. The restrictions imposed by
section 103 of that Act shall not apply, and the Bank may delegate the
exercise of its power of sale to any Receiver or other person.
7 RECEIVERS
7.1 At any time after this Debenture has become enforceable the Bank may
appoint any person or persons to be a receiver or receivers of all or any
part of the Assets hereby charged. An appointment over part only of the
Assets shall not preclude the Bank from making any subsequent appointment
over any other part of the Assets.
7.2 The appointment of a Receiver shall be in writing, and may be signed by
any officer of the Bank. Where more than one person is acting at any time
as Receiver, they shall have power to act severally as well as jointly.
7.3 The Bank may from time to time determine the remuneration of the Receiver
(which shall not be subject to the limit in section 109(6) of the Law of
Property Act 1925) and may (subject to the application of Section 45 of
the Insolvency Act 1986) remove any person from office in relation to all
or any part of the Assets of which he is the Receiver and at any time
(before or after any person shall have vacated office or ceased to act as
Receiver in respect of any of the Assets) appoint a further or other
receiver or receivers over all or any part of the Assets.
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7.4 The Receiver shall be the agent of the Company (which shall be solely
liable for his acts defaults and remuneration) unless and until the
Company goes into liquidation whereafter he shall act as principal and
shall not become the agent of the Bank, and the Receiver shall have and
be entitled to exercise in relation to the Company all the powers set out
in Schedule 1 to the Insolvency Act 1986 (whether or not he is an
administrative receiver) and in applying that Schedule:-
7.4.1 the words "he" and "him" refer to the Receiver; and
7.4.2 references to the property of the company are to the Assets
over which the Receiver is appointed
and in particular by way of addition to but without hereby limiting such
powers (and without prejudice to the Bank's powers) the Receiver shall
have power to do the following things namely:-
7.4.3 power to carry on or join with any person in carrying on
any business (whether or not carried on by the Company
prior to his appointment) and;
7.4.4 power to maintain, repair, make safe, improve and develop
any Land or other Asset and to do all such other things as
may in his opinion be necessary or desirable for
maintaining or enhancing the value or marketability of any
Asset.
8 POWER OF ATTORNEY
The Company hereby irrevocably appoints the Bank (whether or not a
Receiver has been appointed) and also (as a separate appointment) each
Receiver severally as the attorney and attorneys of the Company with
power to do any act, and execute and deliver any deed or other document,
on behalf of and in the name of the Company, which the Company could be
required to do or execute under any provision of this Debenture, or which
the Bank in its sole opinion may consider necessary or desirable for
perfecting the Bank's title to any of the Assets or enabling the Bank or
the Borrower to exercise any of its or his rights or powers under this
Debenture
9 PAYMENT OF MONEYS
9.1 Any moneys received by the Receiver shall, subject to the repayment as
far as necessary of any claims having priority to this Debenture, be paid
or applied in the following order of priority:-
9.1.1 in satisfaction of all costs charges and expenses properly
incurred and payments properly made by the Receiver and of
the remuneration of the Receiver;
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9.1.2 in or towards satisfaction of the Secured Liabilities in
such order as the Bank may at its discretion require;
9.1.3 as to the surplus (if any) to the person or persons
entitled thereto.
9.2 The Bank may, without prejudice to any other rights it may have, at any
time and from time to time place (and keep for such time as it may think
prudent) any moneys received recovered or realised under or by virtue of
this Debenture on a separate or suspense account to the credit either of
the Company or of the Bank as the Bank shall think fit without any
intermediate obligation on the Bank's part to apply the same or any part
thereof in or towards the discharge of the Secured Liabilities.
10 CONSOLIDATION
10.1 In addition to any general lien, right to combine accounts, right to set
off or other right which it may at any time have, the Bank shall have the
right at any time or times, without notice to the Company, to combine or
consolidate all or any accounts which it then has in relation to the
Company (in whatever name) and any liabilities owed by the Company to the
Bank, and/or to set off or transfer any amounts standing to the credit of
one or more accounts of the Company in or towards satisfaction of any
amount owed to the Bank on any other account or otherwise
10.2 The Bank's rights under Clause 10.1 apply:-
10.2.1 whether or not any demand has been made hereunder, or any
liability concerned has fallen due for payment
10.2.2 whether or not any credit balance is immediately available
or subject to any restriction
10.2.3 irrespective of the currencies in which any balance or
liability is denominated, and the Bank may for the purpose
of exercising its rights elect to convert any sum or
liability in one currency into any other of its spot rate
applying at or about 11am on the date of conversion
10.2.4 in respect of any liabilities owed to the Bank by the
Company, whether owed solely or jointly, certainly or
contingently, presently or in the future, as principal or
surety, and howsoever arising.
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11 PROTECTION OF THIRD PARTIES
11.1 In favour of any purchaser, the statutory powers of sale and of
appointing a receiver which are conferred upon the Bank, as varied and
extended by this Debenture, and all other powers of the Bank, shall be
deemed to arise and be exercisable immediately after the execution of
this Debenture
11.2 No purchaser from or other person dealing with the Bank, any person to
whom it has delegated any of its powers, or the Receiver shall be
concerned to enquire whether any of the powers which they have exercised
has arisen or become exercisable, or whether the Secured Liabilities
remain outstanding or whether any event has happened to authorise the
Receiver to act or as to the propriety or validity of the exercise of any
such power; and the title and position of a purchaser or such person
shall not be impeachable by reference to any of those matters
11.3 The receipt of the Bank or the Receiver shall be an absolute and
conclusive discharge to a purchaser or such person and shall relieve him
of any obligation to see to the application of any moneys paid to or by
the direction of the Bank or the Receiver.
12 PROTECTION OF THE BANK AND THE RECEIVER
12.1 Neither the Bank nor any Receiver shall be liable in respect of any loss
or damage which arises out of the exercise, or attempted or purported
exercise of, or the failure to exercise any of their respective powers
under this Debenture
12.2 Without prejudice to any other provision of this Debenture, entry into
possession of any Asset shall not render the Bank or the Receiver liable
to account as mortgagee in possession or to be liable for any loss on
realisation or for any default or omission for which a mortgagee in
possession might be liable and if and whenever the Bank or the Receiver
enters into possession of any Asset it shall be entitled at any time it
or he thinks fit to go out of such possession
12.3 The Company shall indemnify and keep indemnified the Bank, every
Receiver, and any person who acts as the servant, agent, delegate or
attorney of any of them, against all claims costs expenses and
liabilities which they may suffer or incur arising in any way out of the
taking or holding of this Debenture, the exercise or purported exercise
of any right power authority or discretion given by it, or any other act
or omission in relation to this Debenture or the Assets. The provisions
of this Clause 12 shall continue in full force and effect notwithstanding
any release or discharge of this Debenture, or the discharge of any
Receiver from office.
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13 MISCELLANEOUS PROVISIONS
13.1 While this Debenture continues in force:-
13.1.1 no statutory or other power of granting or agreeing to
grant or of accepting or agreeing to accept surrenders of
leases or tenancies of the Land hereby charged or any part
of it shall be capable of being exercised by the Company;
13.1.2 the Company shall not be entitled to part with possession
(otherwise than on the termination of any lease tenancy or
licence to it) of any Land, or to share occupation of any
Land with any other person or persons, or to surrender any
lease of Land or permit such a lease to be assigned or
forfeited;
without the prior written consent of the Bank;
13.2 Section 93 of the Law of Property Act 1925 dealing with the consolidation
of mortgages shall not apply to this security.
13.3 The statutory powers of sale, leasing and accepting surrenders
exercisable by the Bank are hereby extended so that the Bank may, either
in its own name or in that of the Company,
13.3.1 grant a lease or leases (whether or not at a premium) of
the whole or any part or parts of any Land owned by the
Company, with such rights relating to other Land and
containing such covenants on the part of the Company and
generally on such terms and conditions as the Bank shall
think fit (including the payment of money to a lessee or
tenant on a surrender);
13.3.2 accept a surrender of any lease on such terms as the Bank
may think fit in either case, without any of the
restrictions on such powers contained in section 99 and 100
of the Law of Property Act 1925.
13.4 The rights powers and discretions given to the Bank in this Debenture:-
13.4.1 may be exercised as often as and in such manner as, the
Bank thinks fit;
13.4.2 are cumulative, and are not exclusive of any of its rights
under the general law;
13.4.3 may only be waived in writing and specifically, and any
delay in exercising, or non-exercise of, any right, is not
a waiver of it.
16
<PAGE> 19
13.5 If any provision of this Debenture is illegal invalid or unenforceable in
any jurisdiction, that shall not affect:-
13.5.1 the validity or enforceability of any other provision, in
any jurisdiction, or
13.5.2 the validity or enforceability of that particular
provision, in any other jurisdiction.
13.6 All costs charges and expenses incurred or paid by the Bank or by the
Receiver in the exercise of any power or right given by this Debenture or
in relation to any consent requested by the Company, or in perfecting or
otherwise in connection with this Debenture or the Assets, including
(without limitation) all moneys expended by the Bank under Clause 5.2,
all sums recoverable under Clause 12.3 and all costs of the Bank (on an
indemnity basis) of all proceedings for the enforcement of this Debenture
or for obtaining payment of moneys hereby secured, shall be recoverable
from the Company as debts, may be debited by the Bank at any time to any
account of the Company and shall bear interest until payment at the rate
or rates applicable to the account to which they are debited, or, if
there is no such rate, at 4% over the Bank's base rate.
13.7 If the Bank receives notice of any subsequent charge or other security
interest affecting any of the Assets the Bank shall be entitled to close
the Company's then current account or accounts and to open a new account
or accounts for the Company; if the Bank does not open a new account or
accounts immediately on receipt of such notice it shall nevertheless be
treated as if it had done so at the time when it received such notice,
and as from that time all payments made for the credit of the Company to
the Bank shall be credited or be treated as having been credited to such
new account or accounts and shall not operate to reduce the amount due
from the Company to the Bank at the time when it received such notice.
13.8 The Bank may from time to time seek from any other person having dealings
with the Company such information about the Company and its affairs as
the Bank may think fit and the Company hereby authorises and requests any
such person to provide any such information to the Bank and agrees to
provide such further authority in this regard as the Bank may from time
to time require. The Company shall at its own cost at any time if so
requested by the Bank appoint an accountant or firm of accountants
nominated by the Bank to investigate the financial affairs of the Company
and/or any subsidiary of the Company and report to the Bank, and
authorises the Bank itself at any time to make such appointment on behalf
of the Company or on its own account as it shall think fit, and in every
such case the fees and expenses of such accountant or firm shall be
payable by the Company and may be paid by the Bank on behalf of the
Company.
13.9 The Bank may assign this Debenture to any successor in title to any of
the Secured Liabilities, and may disclose any information in its
possession relating to the Company, its affairs or the Secured
Liabilities to any actual or prospective assignee.
14 UPSTREAM PAYMENTS
17
<PAGE> 20
Nothing in this Debenture shall prohibit the payment by the Company of
dividends or distributors or the making of other payments or transfers to
its parent company which dividend distribution payments or transfers are
not prohibited by the Credit Agreement
EXECUTED AND DELIVERED AS A DEED by the Company, and executed by the Bank, on
the date hereof
18
<PAGE> 21
SCHEDULE 1
REGISTERED LAND
TITLE NUMBER DESCRIPTION
UNREGISTERED LAND
19
<PAGE> 22
SCHEDULE 2
THE ACCOUNT
The Company's current account detailed below:
Bank: [ ]
Branch: [ ]
Sort Code: [ ]
Account Number: [ ]
20
<PAGE> 23
<TABLE>
<S> <C> <C>
EXECUTED (but not delivered until ) Director /s/ N. L. Evans
the date hereof) AS A DEED by ) N. L. Evans
ZAI NET SOFTWARE LIMITED ) Secretary /s/ CM Wilcockson
C. M. Wilcockson
SIGNED by a duly authorised officer )
for and on behalf of FLEET BANK N.A. ) /s/ Patrick Twist
in the presence of:- -----------------------------------------------
)
Signature of Witness: /s/ Paula J. Hughes
Name of Witness: Paula J. Hughes
Address:
</TABLE>
21
<PAGE> 1
EXHIBIT 10.14
DATED 23 JUNE 1999
------------------
CAMINUS ENERGY LIMITED
- AND -
FLEET BANK, N.A.
==============================================
GUARANTEE
BY CAMINUS ENERGY LIMITED IN FAVOUR OF
FLEET BANK, N.A. ON ACCOUNT OF
CAMINUS LLC
==============================================
PINSENT--CURTIS
GPT
<PAGE> 2
CORPORATE GUARANTEE
To: Fleet Bank, N.A. ("the Bank")
1 In consideration of the Bank entering into the Credit Agreement (as
hereinafter defined), the Guarantor (as hereinafter defined) hereby
guarantees the payment or discharge of and will on demand in writing pay or
discharge to the Bank all moneys and liabilities which shall for the time
being be due or incurred by the Principal to the Bank in any manner
whatsoever whether or not arising out of or in connection with the Notes,
the Credit Agreement, or the other Loan Documents and whether actually or
contingently and whether solely or jointly with any other person and
whether as principal or surety and including interest, discount, commission
and other lawful charges or expenses which the Bank may in the course of
its business charge in respect of any of the matters aforesaid or for
keeping the Principal's account, together also with:-
1.1 such further sum for interest (whether or not the same shall have been
compounded), commission and banking charges accruing due to the Bank
from the Principal before or after the date of demand and not debited
to the Principal's account at such date, and
1.2 all costs and expenses recoverable by the Bank from the Principal.
2 The Guarantor shall pay to the Bank all costs and expenses (on a full
indemnity basis) incurred by the Bank in or about the recovery of the
moneys due to the Bank under this Guarantee.
3 This Guarantee shall be a continuing security to the Bank, notwithstanding
any intermediate payment to the Bank, settlement of account or other matter
whatsoever, until
(i) payment in full of all monies owing actually or contingently by the
Principal and
(ii) the Bank being under no obligation to make any loan to the Principal
under the Credit Agreement and
(iii) the payment of all expenses to be paid by the Guarantor pursuant
hereto.
1
<PAGE> 3
4 Any security now or hereafter held by the Guarantor from the Principal in
respect of the liabilities of the Principal shall be held in trust for the
Bank and as security for the liability of the Guarantor hereunder.
5 In the event of the insolvency of the Principal all moneys and liabilities
hereby secured shall be deemed to continue due and outstanding until
actually paid or satisfied in full and the Bank will be entitled to prove
or claim in the Principal's insolvency for the full amount of the Bank's
claim and to retain the whole of the dividends to the exclusion of any
rights of the Guarantor as guarantor in competition with the Bank until its
claim is satisfied in full.
6 This Guarantee shall be in addition to, and shall not prejudice or be
prejudiced by, any other securities or guarantees from any person (whether
or not the Principal or the Guarantor) which the Bank may now or hereafter
hold on account of the Principal and shall be binding on the Guarantor
notwithstanding any disability or incapacity affecting the Guarantor or the
Principal, any lack of or limitation on the borrowing or other powers of
the Principal, the absence of authority of any person purporting to
represent or act on behalf of the Principal in respect of the moneys and
liabilities hereby secured, the invalidity or unenforceability of any such
security or guarantee, or any other thing whatsoever as a result of which
any such moneys or liabilities are precluded from being recovered from or
enforced against the Principal. Until repayment in full of the moneys
hereby secured, the Guarantor shall have no right to participate in any
such security or guarantee.
7.1 The Bank shall be entitled at all times in its absolute discretion, and
without affecting the liability of the Guarantor hereunder, to (a) refuse,
grant, continue, vary, renew, determine or increase any credit or
facilities to the Principal, (b) grant any indulgence to, release, compound
with or enter into any other arrangement whatsoever with, the Principal,
the Guarantor or any other person against whom the Bank has any rights, and
(c) deal with, renew, vary, release, abstain from perfecting or enforcing,
enforce or realise in such manner and on such terms as the Bank thinks fit
any securities or guarantees or other rights held by the Bank from or for
the account of the Principal.
7.2 The Guarantor hereby waives presentment, notice of dishonour and demand for
payment of any promissory note, all other rules of suretyship law, notices,
presentment of any
2
<PAGE> 4
instrument, demands and protests, and all other formalities of every kind
in connection with the enforcement of the obligations of the Principal or
of the obligations of the Guarantor hereunder, which, but for the
provisions of this clause might constitute grounds for relieving the
Guarantor of its obligations hereunder.
8 In the event of this Guarantee being determined for any reason whatsoever,
the Bank may open any fresh account and may continue any existing account
with the Principal and no moneys paid into any such fresh or existing
account shall be appropriated towards or have the effect of payment of any
part of the sums due from the Principal at the time such determination
takes effect unless the person (other than the Guarantor) paying in such
moneys shall at the time direct the Bank in writing specially to
appropriate the same for that purpose.
9 The Bank may at any time or times place and keep for such period as it
thinks fit to the credit of a separate or suspense account any moneys
received under or by virtue of this Guarantee without any intermediate
obligation to apply the same or any part thereof in or towards discharge of
the moneys and liabilities due or incurred to the Bank by the Principal.
10 Any transaction which may be avoided under any enactment relating to
administration, winding up or liquidation, under the Federal Bankruptcy
Code of the United States or under any law relating to insolvency shall not
in any way affect the Bank's right to recover from the Guarantor to the
full extent of this Guarantee in all respects as if any release,
settlement, discharge or arrangement made or given on the faith of such
transaction had never been made or given. Where any security is held by the
Bank for the liability of the Guarantor hereunder, the Bank will be
entitled to retain such security for such period as the Bank in its
absolute discretion shall determine after the repayment in full of all
moneys secured by this Guarantee notwithstanding any release, settlement,
discharge or arrangement made or given on or as a consequence of such
repayment, and if within such period a petition shall be presented against
the Principal for winding up or for an administration order or a resolution
shall be passed for the winding up of the Principal the Bank may retain
such security for such further period as it may think fit in support of the
Guarantor's liability under this Guarantee.
3
<PAGE> 5
11.1 A demand for payment or any other demand or notice by the Bank under this
Guarantee may be made or given by any manager or officer of the Bank or of
any branch of the Bank by letter addressed to the Guarantor and sent by
post to or left at the registered office of the Guarantor or its existing
or last known place of business (or if more than one any one of such
places) and if sent by post shall be deemed to have been made or given at
noon on the day following the day the letter was posted and notwithstanding
that it is returned by the Post Office.
11.2 A certificate by an officer of the Bank as to the moneys and liabilities
for the time being due or incurred by the Principal to the Bank shall be
conclusive and binding on the Guarantor.
12 As a separate and independent stipulation all sums of money which may not
be recoverable from the Guarantor on the footing of a guarantee whether by
reason of any legal limitation, disability or incapacity on or of the
Principal or any other fact or circumstance and whether known to the Bank
or not shall nevertheless be recoverable from the Guarantor as sole or
principal debtor in respect thereof and shall be paid by the Guarantor on
demand in writing by the Bank.
13 All payments falling to be made by the Guarantor hereunder shall be made
without any set-off or counterclaim and free from any deduction or
withholding for or on account of any taxes or other charges in the nature
of taxes imposed by any competent authority, but so that if any such
deduction or withholding shall be required by law the Guarantor shall pay
to the Bank such additional amount as may be necessary to ensure that the
Bank receives the full amount of the relevant payment as if such deduction
or withholding had not been made.
14 This Guarantee shall continue to bind the Guarantor notwithstanding any
amalgamation which may be effected by the Bank with any other company or
person.
15 For the purposes hereof:-
15.1 the "BANK" included its successors and assigns,
15.2 the "CREDIT AGREEMENT" means the agreement dated on or about of even
date herewith between the Bank and the Principal providing for the
extension of credit by
4
<PAGE> 6
the Bank to the Principal in the aggregate sum of US Dollars five
million and includes all amendments and supplements thereto from time
to time;
15.3 "PRINCIPAL" means Caminus LLC, a Delaware limited liability company;
15.4 "GUARANTOR" means Caminus Energy Limited incorporated under the
Companies Act 1985 with number 2128860 and having its registered
office at Caminus House, Castle Rock, Cambridge CB3 0RA;
15.5 "THIS GUARANTEE" includes and extends to any separate or independent
stipulation or agreement herein contained;
15.6 "LOANS" mean the loans to be made under the Credit Agreement;
15.7 "NOTES" means the promissory notes evidencing the Loans, as exchanged
replaced amended supplemented or modified from time to time;
15.8 references to the singular include references to the plural and vice
versa;
15.9 To the extent capitalised terms are not defined herein, such terms
shall have the meaning assigned to them in the Credit Agreement.
16 The paper on which this Guarantee is printed shall remain the Bank's
property.
17 This Guarantee is governed by, and shall be construed in accordance with,
the laws of England and the parties submit to the non-exclusive
jurisdiction of the Courts of England.
EXECUTED AS A DEED by the parties on the date which first appears in this Deed.
EXECUTED (but not delivered until ) Director /s/ NL Evans
the date hereof) AS A DEED by ) Dr. N. L. Evans
CAMINUS ENERGY LIMITED ) Secretary
in the presence of:- ) /s/ CM Wilcockson
C. M. Wilcockson
5
<PAGE> 7
<PAGE> 1
EXHIBIT 10.15
DATED 23 JUNE 1999
------------------
CAMINUS LIMITED
- AND -
FLEET BANK, N.A.
======================================
GUARANTEE
BY CAMINUS LIMITED IN FAVOUR OF
FLEET BANK, N.A. ON ACCOUNT OF
CAMINUS LLC
======================================
PINSENT--CURTIS
GPT
<PAGE> 2
CORPORATE GUARANTEE
To: Fleet Bank, N.A. ("the Bank")
1 In consideration of the Bank entering into the Credit Agreement (as
hereinafter defined), the Guarantor (as hereinafter defined) hereby
guarantees the payment or discharge of and will on demand in writing pay or
discharge to the Bank all moneys and liabilities which shall for the time
being be due or incurred by the Principal to the Bank in any manner
whatsoever whether or not arising out of or in connection with the Notes,
the Credit Agreement, or the other Loan Documents and whether actually or
contingently and whether solely or jointly with any other person and
whether as principal or surety and including interest, discount, commission
and other lawful charges or expenses which the Bank may in the course of
its business charge in respect of any of the matters aforesaid or for
keeping the Principal's account, together also with:-
1.1 such further sum for interest (whether or not the same shall have been
compounded), commission and banking charges accruing due to the Bank
from the Principal before or after the date of demand and not debited
to the Principal's account at such date, and
1.2 all costs and expenses recoverable by the Bank from the Principal.
2 The Guarantor shall pay to the Bank all costs and expenses (on a full
indemnity basis) incurred by the Bank in or about the recovery of the
moneys due to the Bank under this Guarantee.
3 This Guarantee shall be a continuing security to the Bank, notwithstanding
any intermediate payment to the Bank, settlement of account or other matter
whatsoever, until
(i) payment in full of all monies owing actually or contingently by the
Principal and
(ii) the Bank being under no obligation to make any loan to the Principal
under the Credit Agreement and
(iii) the payment of all expenses to be paid by the Guarantor pursuant
hereto.
1
<PAGE> 3
4 Any security now or hereafter held by the Guarantor from the Principal in
respect of the liabilities of the Principal shall be held in trust for the
Bank and as security for the liability of the Guarantor hereunder.
5 In the event of the insolvency of the Principal all moneys and liabilities
hereby secured shall be deemed to continue due and outstanding until
actually paid or satisfied in full and the Bank will be entitled to prove
or claim in the Principal's insolvency for the full amount of the Bank's
claim and to retain the whole of the dividends to the exclusion of any
rights of the Guarantor as guarantor in competition with the Bank until its
claim is satisfied in full.
6 This Guarantee shall be in addition to, and shall not prejudice or be
prejudiced by, any other securities or guarantees from any person (whether
or not the Principal or the Guarantor) which the Bank may now or hereafter
hold on account of the Principal and shall be binding on the Guarantor
notwithstanding any disability or incapacity affecting the Guarantor or the
Principal, any lack of or limitation on the borrowing or other powers of
the Principal, the absence of authority of any person purporting to
represent or act on behalf of the Principal in respect of the moneys and
liabilities hereby secured, the invalidity or unenforceability of any such
security or guarantee, or any other thing whatsoever as a result of which
any such moneys or liabilities are precluded from being recovered from or
enforced against the Principal. Until repayment in full of the moneys
hereby secured, the Guarantor shall have no right to participate in any
such security or guarantee.
7.1 The Bank shall be entitled at all times in its absolute discretion, and
without affecting the liability of the Guarantor hereunder, to (a) refuse,
grant, continue, vary, renew, determine or increase any credit or
facilities to the Principal, (b) grant any indulgence to, release, compound
with or enter into any other arrangement whatsoever with, the Principal,
the Guarantor or any other person against whom the Bank has any rights, and
(c) deal with, renew, vary, release, abstain from perfecting or enforcing,
enforce or realise in such manner and on such terms as the Bank thinks fit
any securities or guarantees or other rights held by the Bank from or for
the account of the Principal.
7.2 The Guarantor hereby waives presentment, notice of dishonour and demand for
payment of any promissory note, all other rules of suretyship law, notices,
presentment of any
2
<PAGE> 4
instrument, demands and protests, and all other formalities of every kind
in connection with the enforcement of the obligations of the Principal or
of the obligations of the Guarantor hereunder, which, but for the
provisions of this clause might constitute grounds for relieving the
Guarantor of its obligations hereunder.
8 In the event of this Guarantee being determined for any reason whatsoever,
the Bank may open any fresh account and may continue any existing account
with the Principal and no moneys paid into any such fresh or existing
account shall be appropriated towards or have the effect of payment of any
part of the sums due from the Principal at the time such determination
takes effect unless the person (other than the Guarantor) paying in such
moneys shall at the time direct the Bank in writing specially to
appropriate the same for that purpose.
9 The Bank may at any time or times place and keep for such period as it
thinks fit to the credit of a separate or suspense account any moneys
received under or by virtue of this Guarantee without any intermediate
obligation to apply the same or any part thereof in or towards discharge of
the moneys and liabilities due or incurred to the Bank by the Principal.
10 Any transaction which may be avoided under any enactment relating to
administration, winding up or liquidation, under the Federal Bankruptcy
Code of the United States or under any law relating to insolvency shall not
in any way affect the Bank's right to recover from the Guarantor to the
full extent of this Guarantee in all respects as if any release,
settlement, discharge or arrangement made or given on the faith of such
transaction had never been made or given. Where any security is held by the
Bank for the liability of the Guarantor hereunder, the Bank will be
entitled to retain such security for such period as the Bank in its
absolute discretion shall determine after the repayment in full of all
moneys secured by this Guarantee notwithstanding any release, settlement,
discharge or arrangement made or given on or as a consequence of such
repayment, and if within such period a petition shall be presented against
the Principal for winding up or for an administration order or a resolution
shall be passed for the winding up of the Principal the Bank may retain
such security for such further period as it may think fit in support of the
Guarantor's liability under this Guarantee.
3
<PAGE> 5
11.1 A demand for payment or any other demand or notice by the Bank under this
Guarantee may be made or given by any manager or officer of the Bank or of
any branch of the Bank by letter addressed to the Guarantor and sent by
post to or left at the registered office of the Guarantor or its existing
or last known place of business (or if more than one any one of such
places) and if sent by post shall be deemed to have been made or given at
noon on the day following the day the letter was posted and notwithstanding
that it is returned by the Post Office.
11.2 A certificate by an officer of the Bank as to the moneys and liabilities
for the time being due or incurred by the Principal to the Bank shall be
conclusive and binding on the Guarantor.
12 As a separate and independent stipulation all sums of money which may not
be recoverable from the Guarantor on the footing of a guarantee whether by
reason of any legal limitation, disability or incapacity on or of the
Principal or any other fact or circumstance and whether known to the Bank
or not shall nevertheless be recoverable from the Guarantor as sole or
principal debtor in respect thereof and shall be paid by the Guarantor on
demand in writing by the Bank.
13 All payments falling to be made by the Guarantor hereunder shall be made
without any set-off or counterclaim and free from any deduction or
withholding for or on account of any taxes or other charges in the nature
of taxes imposed by any competent authority, but so that if any such
deduction or withholding shall be required by law the Guarantor shall pay
to the Bank such additional amount as may be necessary to ensure that the
Bank receives the full amount of the relevant payment as if such deduction
or withholding had not been made.
14 This Guarantee shall continue to bind the Guarantor notwithstanding any
amalgamation which may be effected by the Bank with any other company or
person.
15 For the purposes hereof:-
15.1 the "BANK" included its successors and assigns,
15.2 the "CREDIT AGREEMENT" means the agreement dated on or about of even
date herewith between the Bank and the Principal providing for the
extension of credit by
4
<PAGE> 6
the Bank to the Principal in the aggregate sum of US Dollars five
million and includes all amendments and supplements thereto from time
to time;
15.3 "PRINCIPAL" means Caminus LLC, a Delaware limited liability company,
15.4 "GUARANTOR" means Caminus Limited incorporated under the Companies Act
1985 with number 01889028 and having its registered office at Caminus
House, Castle Rock, Cambridge CB3 0RA;
15.5 "THIS GUARANTEE" includes and extends to any separate or independent
stipulation or agreement herein contained;
15.6 "LOANS" mean the loans to be made under the Credit Agreement;
15.7 "NOTES" means the promissory notes evidencing the Loans, as exchanged
replaced amended supplemented or modified from time to time;
15.8 references to the singular include references to the plural and vice
versa;
15.9 To the extent capitalised terms are not defined herein, such terms
shall have the meaning assigned to them in the Credit Agreement.
16 The paper on which this Guarantee is printed shall remain the Bank's
property.
17 This Guarantee is governed by, and shall be construed in accordance with,
the laws of England and the parties submit to the non-exclusive
jurisdiction of the Courts of England.
EXECUTED AS A DEED by the parties on the date which first appears in this Deed.
EXECUTED (but not delivered until ) Director /s/ N.L. Evans
the date hereof) AS A DEED by ) Dr. N. L. Evans
CAMINUS LIMITED ) Director
in the presence of:- ) /s/ Michael B. Morrison
Dr. Michael B. Morrison
5
<PAGE> 1
EXHIBIT 10.16
DATED 23RD JUNE 1999
--------------------
ZAI NET SOFTWARE LIMITED
- AND -
FLEET BANK, N.A.
=============================================
GUARANTEE
BY ZAI NET SOFTWARE LIMITED IN FAVOUR OF
FLEET BANK, N.A. ON ACCOUNT OF
CAMINUS LLC
=============================================
PINSENT--CURTIS
GPT
<PAGE> 2
CORPORATE GUARANTEE
To: Fleet Bank, N.A. ("the Bank")
1 In consideration of the Bank entering into the Credit Agreement (as
hereinafter defined), the Guarantor (as hereinafter defined) hereby
guarantees the payment or discharge of and will on demand in writing pay or
discharge to the Bank all moneys and liabilities which shall for the time
being be due or incurred by the Principal to the Bank in any manner
whatsoever whether or not arising out of or in connection with the Notes,
the Credit Agreement, or the other Loan Documents and whether actually or
contingently and whether solely or jointly with any other person and
whether as principal or surety and including interest, discount, commission
and other lawful charges or expenses which the Bank may in the course of
its business charge in respect of any of the matters aforesaid or for
keeping the Principal's account, together also with:-
1.1 such further sum for interest (whether or not the same shall have been
compounded), commission and banking charges accruing due to the Bank
from the Principal before or after the date of demand and not debited
to the Principal's account at such date, and
1.2 all costs and expenses recoverable by the Bank from the Principal.
2 The Guarantor shall pay to the Bank all costs and expenses (on a full
indemnity basis) incurred by the Bank in or about the recovery of the
moneys due to the Bank under this Guarantee.
3 This Guarantee shall be a continuing security to the Bank, notwithstanding
any intermediate payment to the Bank, settlement of account or other matter
whatsoever, until
(i) payment in full of all monies owing actually or contingently by the
Principal and
(ii) the Bank being under no obligation to make any loan to the Principal
under the Credit Agreement and
(iii) the payment of all expenses to be paid by the Guarantor pursuant
hereto.
1
<PAGE> 3
4 Any security now or hereafter held by the Guarantor from the Principal in
respect of the liabilities of the Principal shall be held in trust for the
Bank and as security for the liability of the Guarantor hereunder.
5 In the event of the insolvency of the Principal all moneys and liabilities
hereby secured shall be deemed to continue due and outstanding until
actually paid or satisfied in full and the Bank will be entitled to prove
or claim in the Principal's insolvency for the full amount of the Bank's
claim and to retain the whole of the dividends to the exclusion of any
rights of the Guarantor as guarantor in competition with the Bank until its
claim is satisfied in full.
6 This Guarantee shall be in addition to, and shall not prejudice or be
prejudiced by, any other securities or guarantees from any person (whether
or not the Principal or the Guarantor) which the Bank may now or hereafter
hold on account of the Principal and shall be binding on the Guarantor
notwithstanding any disability or incapacity affecting the Guarantor or the
Principal, any lack of or limitation on the borrowing or other powers of
the Principal, the absence of authority of any person purporting to
represent or act on behalf of the Principal in respect of the moneys and
liabilities hereby secured, the invalidity or unenforceability of any such
security or guarantee, or any other thing whatsoever as a result of which
any such moneys or liabilities are precluded from being recovered from or
enforced against the Principal. Until repayment in full of the moneys
hereby secured, the Guarantor shall have no right to participate in any
such security or guarantee.
7.1 The Bank shall be entitled at all times in its absolute discretion, and
without affecting the liability of the Guarantor hereunder, to (a) refuse,
grant, continue, vary, renew, determine or increase any credit or
facilities to the Principal, (b) grant any indulgence to, release, compound
with or enter into any other arrangement whatsoever with, the Principal,
(c) the Guarantor or any other person against whom the Bank has any rights,
and deal with, renew, vary, release, abstain from perfecting or enforcing,
enforce or realise in such manner and on such terms as the Bank thinks fit
any securities or guarantees or other rights held by the Bank from or for
the account of the Principal.
7.2 The Guarantor hereby waives presentment, notice of dishonour and demand for
payment of any promissory note, all other rules of suretyship law, notices,
presentment of any
2
<PAGE> 4
instrument, demands and protests, and all other formalities of every kind
in connection with the enforcement of the obligations of the Principal or
of the obligations of the Guarantor hereunder, which, but for the
provisions of this clause might constitute grounds for relieving the
Guarantor of its obligations hereunder.
8 In the event of this Guarantee being determined for any reason whatsoever,
the Bank may open any fresh account and may continue any existing account
with the Principal and no moneys paid into any such fresh or existing
account shall be appropriated towards or have the effect of payment of any
part of the sums due from the Principal at the time such determination
takes effect unless the person (other than the Guarantor) paying in such
moneys shall at the time direct the Bank in writing specially to
appropriate the same for that purpose.
9 The Bank may at any time or times place and keep for such period as it
thinks fit to the credit of a separate or suspense account any moneys
received under or by virtue of this Guarantee without any intermediate
obligation to apply the same or any part thereof in or towards discharge of
the moneys and liabilities due or incurred to the Bank by the Principal.
10 Any transaction which may be avoided under any enactment relating to
administration, winding up or liquidation, under the Federal Bankruptcy
Code of the United States or under any law relating to insolvency shall not
in any way affect the Bank's right to recover from the Guarantor to the
full extent of this Guarantee in all respects as if any release,
settlement, discharge or arrangement made or given on the faith of such
transaction had never been made or given. Where any security is held by the
Bank for the liability of the Guarantor hereunder, the Bank will be
entitled to retain such security for such period as the Bank in its
absolute discretion shall determine after the repayment in full of all
moneys secured by this Guarantee notwithstanding any release, settlement,
discharge or arrangement made or given on or as a consequence of such
repayment, and if within such period a petition shall be presented against
the Principal for winding up or for an administration order or a resolution
shall be passed for the winding up of the Principal the Bank may retain
such security for such further period as it may think fit in support of the
Guarantor's liability under this Guarantee.
3
<PAGE> 5
11.1 A demand for payment or any other demand or notice by the Bank under this
Guarantee may be made or given by any manager or officer of the Bank or of
any branch of the Bank by letter addressed to the Guarantor and sent by
post to or left at the registered office of the Guarantor or its existing
or last known place of business (or if more than one any one of such
places) and if sent by post shall be deemed to have been made or given at
noon on the day following the day the letter was posted and notwithstanding
that it is returned by the Post Office.
11.2 A certificate by an officer of the Bank as to the moneys and liabilities
for the time being due or incurred by the Principal to the Bank shall be
conclusive and binding on the Guarantor.
12 As a separate and independent stipulation all sums of money which may not
be recoverable from the Guarantor on the footing of a guarantee whether by
reason of any legal limitation, disability or incapacity on or of the
Principal or any other fact or circumstance and whether known to the Bank
or not shall nevertheless be recoverable from the Guarantor as sole or
principal debtor in respect thereof and shall be paid by the Guarantor on
demand in writing by the Bank.
13 All payments falling to be made by the Guarantor hereunder shall be made
without any set-off or counterclaim and free from any deduction or
withholding for or on account of any taxes or other charges in the nature
of taxes imposed by any competent authority, but so that if any such
deduction or withholding shall be required by law the Guarantor shall pay
to the Bank such additional amount as may be necessary to ensure that the
Bank receives the full amount of the relevant payment as if such deduction
or withholding had not been made.
14 This Guarantee shall continue to bind the Guarantor notwithstanding any
amalgamation which may be effected by the Bank with any other company or
person.
15 For the purposes hereof:-
15.1 the "BANK" included its successors and assigns,
15.2 the "CREDIT AGREEMENT" means the agreement dated on or about of even
date herewith between the Bank and the Principal providing for the
extension of credit by
4
<PAGE> 6
the Bank to the Principal in the aggregate sum of US Dollars five
million and includes all amendments and supplements thereto from time
to time;
15.3 "PRINCIPAL" means Caminus LLC, a Delaware limited liability company,
15.4 "GUARANTOR" means Zai Net Software Limited incorporated under the
Companies Act 1985 with number 03636211 and having its registered
office at Caminus House, Castle Rock, Cambridge CB3 0RA;
15.5 "THIS GUARANTEE" includes and extends to any separate or independent
stipulation or agreement herein contained;
15.6 "LOANS" mean the loans to be made under the Credit Agreement;
15.7 "NOTES" means the promissory notes evidencing the Loans, as exchanged
replaced amended supplemented or modified from time to time;
15.8 references to the singular include references to the plural and vice
versa;
15.9 To the extent capitalised terms are not defined herein, such terms
shall have the meaning assigned to them in the Credit Agreement.
16 The paper on which this Guarantee is printed shall remain the Bank's
property.
17 This Guarantee is governed by, and shall be construed in accordance with,
the laws of England and the parties submit to the non-exclusive
jurisdiction of the Courts of England.
EXECUTED AS A DEED by the parties on the date which first appears in this Deed.
EXECUTED (but not delivered until ) Director /s/ Nigel L. Evans
the date hereof) AS A DEED by ) N.L. Evans
ZAI NET SOFTWARE LIMITED ) Secretary
in the presence of:- ) /s/ CM Wilcockson
C. M. Wilcockson
5
<PAGE> 7
6
<PAGE> 1
EXHIBIT 10.17
------------------------------------------
MORTGAGE OF STOCKS AND SHARES etc
AS SCHEDULED TO SECURE OWN
LIABILITIES
------------------------------------------
by
CAMINUS LIMITED
in favour of
FLEET BANK, N.A.
PINSET--CURTIS
GPT
<PAGE> 2
This Mortgage is made on the 23rd day of June 1999
To: FLEET BANK, N.A. ("the Bank")
1. CAMINUS LIMITED of Caminus House, Castle Park, Cambridge, CB3 0RA ("the
Company") has deposited or will deposit with the Bank the securities
mentioned in the Schedule hereto and as beneficial owner(s) hereby charges
them to the Bank together with any substituted securities as a continuing
security for the payment on demand (made at any time after the same shall
have become due or otherwise payable on demand) of the Secured Liabilities
(as hereinafter defined).
This mortgage shall affect and the securities subject hereto shall include
in addition to the securities mentioned in the Schedule hereto any
securities substituted thereof and all dividends or interest paid or
payable after the date hereof on any such securities and all stocks shares
(and the dividends or interest thereon) rights moneys or property accruing
or offered at any time by way of redemption bonus preference option
consolidation sub-division or otherwise to or in respect of any securities
subject hereto.
2. If the Company makes default in paying to the Bank on demand any money or
liability hereby secured the Bank may without further notice sell or
dispose of any securities subject to this mortgage or any part thereof or
any substituted securities in such manner and for such consideration
(whether payable or deliverable immediately or by instalments) as the Bank
may think fit and the Bank may apply the proceeds of sale in or towards
discharge of the costs incurred therein and of the Secured Liabilities and
the residue, if any, shall be paid to the Company or to its order.
3. Any dividends interest or other payments which are now or at any time
hereafter may be received or receivable by the Bank in respect of any
securities for the time being subject hereto may be applied by the Bank as
though they were proceeds of sale hereunder notwithstanding that the power
of sale may not have arisen.
<PAGE> 3
4. The Company undertakes from time to time to execute and sign all transfers
withdrawals powers of attorney and other documents which the Bank may
require for perfecting its title to any securities for the time being
subject hereto or for vesting and enabling the Bank to vest the same in its
name or in the name of its nominees or in any Purchaser and not to do or
suffer anything whereby any entitlement of the Bank under any of the
provisions hereof may be impeded or its exercise delayed.
5. The Company hereby irrevocably appoints the Bank and any person nominated
by the Bank for the purpose of its attorney in its name and on its behalf
at any time after the Bank shall have demanded payment of any money or
liability hereby secured to demand sue for receive and give an effectual
discharge for or in connection with any securities for the time being
subject hereto and to sign seal and deliver and otherwise perfect any
transfer withdrawal deed assurance notice request or act which may be
required or may be deemed proper on or in connection with any sale
disposition, withdrawal, realisation or getting in by the Bank of any
securities for the time being subject hereto under any power applicable
thereto and the Company irrevocably acknowledges and agrees that the said
power of attorney is given to the Bank to secure the Company's obligations
hereunder.
6. The Company declares that the Bank shall not be under any obligation to
take any steps in connection with or incidental to any claim or right which
the Company may for the time being have in relation to any securities for
the time being subject hereto and that the Bank shall be under no liability
by reason of its having abstained from taking any such steps.
7. The Company will during the continuance of this mortgage pay all calls and
other payments due in respect of any securities for the time being subject
hereto and in the event of default the Bank may if the Bank think fit make
such payments on its behalf. Any sums so paid by the Bank shall be
repayable by the Company on demand together with interest at the rate of
four per cent above the Bank's Base Rate for the time being in force or at
the rate payable by the Company (whichever is the higher) compounded with
rests on such days in each year as the Bank shall from time to time fix
from the date of payment by the Bank and pending such repayment shall be a
charge on the securities for the time being subject hereto.
<PAGE> 4
8. The Company will not cause or permit Caminus Energy Limited to (i) increase
its authorised share capital or (ii) issue any additional shares or capital
stock subject hereto without the Bank's prior consent in writing and that
any such consent or consents shall not be deemed to be a waiver of this
mortgage or of any provision hereof.
9. The restriction on the right of consolidating mortgage securities contained
in Section 93 of the Law of Property Act 1925 shall not apply to this
mortgage.
10. The Company hereby acknowledges that so long as this mortgage is subsisting
we are not at liberty to make any transfer withdrawal nomination or other
disposition of any securities for the time being subject hereto without the
Bank's prior consent in writing and that any such consent or consents shall
not be deemed to be a waiver of this mortgage or of any of the provisions
hereof as regards the balance of any securities for the time being subject
hereto following such transfer, withdrawal, nomination or other
disposition.
11. The Bank or its nominees may exercise at its or their discretion (in the
Company's name or otherwise at any time whether before or after any demand
for payment hereunder and without any further consent or authority on the
Company's part) in respect of any securities subject hereto any voting
rights and all powers given to trustees by section 10(3) and (4) of the
Trustee Act 1925 (as amended by the Trustee Investments Act 1961) in
respect of securities or property subject to a trust and any powers or
rights which may be exercised by the person or persons in whose name(s) the
securities are registered under the terms thereof or otherwise.
12. Without prejudice to the rights and obligations hereby created, any
securities, dividends interest or other money hereby charged which may be
received by the Company after the power of sale hereunder has arisen shall
be held in trust for the Bank and transferred or paid to it on demand.
13. This mortgage is in addition to any guarantee or other security now or
hereafter held by the Bank.
14. Any notice or demand by the Bank hereunder shall be deemed to have been
sufficiently given if sent by prepaid first class letter post to the
address stated herein or to the Company's registered office and shall be
deemed to have been served upon the addressee at 10.00 a.m. the next
succeeding day (or if the next succeeding day be a Sunday or any other day
upon which no
<PAGE> 5
delivery of letters is made at 10.00 a.m. on the next succeeding day on
which a delivery of post is made) and in any other case shall be deemed to
have been served on the addressee upon expiry of forty-eight hours from the
time of posting of the same and the aforesaid shall in the service of legal
proceedings be deemed to constitute good service.
15. Each of the provisions of this mortgage shall be severable and distinct
from one another and if at any time any more of such provisions is or
becomes invalid illegal or unenforceable the validity legality and
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
16. In this mortgage:
(a) where the context admits the expression "the Bank" shall include its
successors in title and/or assigns.
(b) unless the context requires otherwise:
(i) the singular shall include the plural and vice versa and
(ii) the expression "this mortgage" shall mean and extend to every
separate and independent stipulation contained herein and
(iii) the expression "Secured Liabilities" shall mean all or any
monies and liabilities which will for the time being (and
whether on or at any time after demand) be due, owing or
incurred in whatsoever manner to the Bank by the Company,
whether actually or contingently, solely or jointly and
whether as principal or surety and whether or not the Bank
shall have been an original party to the relevant
transaction, and including interest discount, commission and
other lawful charges or expenses which the Bank may in the
course of its business charge or incur in respect of any of
those matters or for keeping the account of the Company, and
so that interest shall be computed and compounded according
to the usual rates and practice as well after as before any
demand made or judgment obtained under this mortgage and
<PAGE> 6
(iv) any liberty or power which may be exercised or any determination
which may be made hereunder by the Bank may be exercised or made
in the absolute and unfettered discretion of the Bank which
shall not be under any obligation to give reasons therefor and
(v) references to any statutory provision shall be deemed to mean
and to include a reference to any modification or re-enactment
thereof for the time being in force and any analogous provision
or rule under any applicable law.
17. This Mortgage will be governed and construed according to English Law and
the parties hereto submit to the non-exclusive jurisdiction of the English
Courts.
IN WITNESS whereof this mortgage consisting of this and the two preceding pages
are executed in the manner underwritten
<PAGE> 7
THE SCHEDULE
<TABLE>
<CAPTION>
Company Name Class of Shares Nominal Value Numbers of shares mortgaged
- ------------ --------------- ------------- ---------------------------
<S> <C> <C> <C>
Caminus Energy Limited Ordinary Pound Sterling 1 65
Caminus Consultants Limited Ordinary Pound Sterling 1 65
ZAI NET Software Limited Ordinary Pound Sterling 1 1
</TABLE>
<TABLE>
<CAPTION>
EXECUTED as a deed by )
CAMINUS LIMITED acting by :- )
<S> <C> <C> <C>
Dr. N. L. Evans Director /s/ NL Evans
Mrs. C. M. Wilcockson Secretary /s/ CM Wilcockson
</TABLE>
Accepted by FLEET BANK, N.A. by:
Name:
Title
Dated:
<PAGE> 1
EXHIBIT 10.18
------------------------------------------------
MORTGAGE OF STOCKS AND SHARES etc
AS SCHEDULED TO SECURE OWN
LIABILITIES
------------------------------------------------
by
CAMINUS LLC
in favour of
FLEET BANK, N.A.
PINSET--CURTIS
GPT
<PAGE> 2
This Mortgage is made on the day of 1999
To: FLEET BANK, N.A. ("the Bank")
1. CAMINUS LLC, a Delaware Corporation having a principal place of business at
747 Third Avenue New York, New York 10017 ("the Company") has deposited or
will deposit with the Bank the securities mentioned in the Schedule hereto
and as beneficial owner(s) hereby charges them to the Bank together with
any substituted securities as a continuing security for the payment on
demand (made at any time after the same shall have become due or otherwise
payable on demand) of the Secured Liabilities (as hereinafter defined).
This mortgage shall affect and the securities subject hereto shall include
in addition to the securities mentioned in the Schedule hereto any
securities substituted thereof and all dividends or interest paid or
payable after the date hereof on any such securities and all stocks shares
(and the dividends or interest thereon) rights moneys or property accruing
or offered at any time by way of redemption bonus preference option
consolidation sub-division or otherwise to or in respect of any securities
subject hereto.
2. If the Company makes default in paying to the Bank on demand any money or
liability hereby secured the Bank may without further notice sell or
dispose of any securities subject to this mortgage or any part thereof or
any substituted securities in such manner and for such consideration
(whether payable or deliverable immediately or by instalments) as the Bank
may think fit and the Bank may apply the proceeds of sale in or towards
discharge of the costs incurred therein and of the Secured Liabilities and
the residue, if any, shall be paid to the Company or to its order.
3. Any dividends interest or other payments which are now or at any time
hereafter may be received or receivable by the Bank in respect of any
securities for the time being subject hereto may be applied by the Bank as
though they were proceeds of sale hereunder notwithstanding that the power
of sale may not have arisen.
4. The Company undertakes from time to time to execute and sign all transfers
withdrawals powers of attorney and other documents which the Bank may
require for perfecting its title to
<PAGE> 3
any securities for the time being subject hereto or for vesting and
enabling the Bank to vest the same in its name or in the name of its
nominees or in any Purchaser and not to do or suffer anything whereby any
entitlement of the Bank under any of the provisions hereof may be impeded
or its exercise delayed.
5. The Company hereby irrevocably appoints the Bank and any person nominated
by the Bank for the purpose of its attorney in its name and on its behalf
at any time after the Bank shall have demanded payment of any money or
liability hereby secured to demand sue for receive and give an effectual
discharge for or in connection with any securities for the time being
subject hereto and to sign seal and deliver and otherwise perfect any
transfer withdrawal deed assurance notice request or act which may be
required or may be deemed proper on or in connection with any sale
disposition, withdrawal, realisation or getting in by the Bank of any
securities for the time being subject hereto under any power applicable
thereto and the Company irrevocably acknowledges and agrees that the said
power of attorney is given to the Bank to secure the Company's obligations
hereunder.
6. The Company declares that the Bank shall not be under any obligation to
take any steps in connection with or incidental to any claim or right which
the Company may for the time being have in relation to any securities for
the time being subject hereto and that the Bank shall be under no liability
by reason of its having abstained from taking any such steps.
7. The Company will during the continuance of this mortgage pay all calls and
other payments due in respect of any securities for the time being subject
hereto and in the event of default the Bank may if the Bank think fit make
such payments on its behalf. Any sums so paid by the Bank shall be
repayable by the Company on demand together with interest at the rate of
four per cent above the Bank's Base Rate for the time being in force or at
the rate payable by the Company (whichever is the higher) compounded with
rests on such days in each year as the Bank shall from time to time fix
from the date of payment by the Bank and pending such repayment shall be a
charge on the securities for the time being subject hereto.
8. The Company will not cause or permit Caminus Limited to (i) increase its
authorised share capital or (ii) issue any additional shares or capital
stock subject hereto without the Bank's prior consent in writing and that
any such consent or consents shall not be deemed to be a waiver of this
mortgage or of any provision hereof.
<PAGE> 4
9. The restriction on the right of consolidating mortgage securities contained
in Section 93 of the Law of Property Act 1925 shall not apply to this
mortgage.
10. The Company hereby acknowledges that so long as this mortgage is subsisting
we are not at liberty to make any transfer withdrawal nomination or other
disposition of any securities for the time being subject hereto without the
Bank's prior consent in writing and that any such consent or consents shall
not be deemed to be a waiver of this mortgage or of any of the provisions
hereof as regards the balance of any securities for the time being subject
hereto following such transfer, withdrawal, nomination or other
disposition.
11. The Bank or its nominees may exercise at its or their discretion (in the
Company's name or otherwise at any time whether before or after any demand
for payment hereunder and without any further consent or authority on the
Company's part) in respect of any securities subject hereto any voting
rights and all powers given to trustees by section 10(3) and (4) of the
Trustee Act 1925 (as amended by the Trustee Investments Act 1961) in
respect of securities or property subject to a trust and any powers or
rights which may be exercised by the person or persons in whose name(s) the
securities are registered under the terms thereof or otherwise.
12. Without prejudice to the rights and obligations hereby created, any
securities, dividends interest or other money hereby charged which may be
received by the Company after the power of sale hereunder has arisen shall
be held in trust for the Bank and transferred or paid to it on demand.
13. This mortgage is in addition to any guarantee or other security now or
hereafter held by the Bank.
14. Any notice or demand by the Bank hereunder shall be deemed to have been
sufficiently given if sent by prepaid first class letter post to the
address stated herein or to the Company's registered office and shall be
deemed to have been served upon the addressee at 10.00 a.m. the next
succeeding day (or if the next succeeding day be a Sunday or any other day
upon which no delivery of letters is made at 10.00 a.m. on the next
succeeding day on which a delivery of post is made) and in any other case
shall be deemed to have been served on the addressee upon expiry of
forty-eight hours from the time of posting of the same and the aforesaid
shall in the service of legal proceedings be deemed to constitute good
service.
<PAGE> 5
15. Each of the provisions of this mortgage shall be severable and distinct
from one another and if at any time any more of such provisions is or
becomes invalid illegal or unenforceable the validity legality and
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
16. In this mortgage:
(a) where the context admits the expression "the Bank" shall include its
successors in title and/or assigns.
(b) unless the context requires otherwise:
(i) the singular shall include the plural and vice versa and
(ii) the expression "this mortgage" shall mean and extend to every
separate and independent stipulation contained herein and
(iii) the expression "Secured Liabilities" shall mean all or any
monies and liabilities which will for the time being (and
whether on or at any time after demand) be due, owing or
incurred in whatsoever manner to the Bank by the Company,
whether actually or contingently, solely or jointly and
whether as principal or surety and whether or not the Bank
shall have been an original party to the relevant
transaction, and including interest discount, commission and
other lawful charges or expenses which the Bank may in the
course of its business charge or incur in respect of any of
those matters or for keeping the account of the Company, and
so that interest shall be computed and compounded according
to the usual rates and practice as well after as before any
demand made or judgment obtained under this mortgage and
(iv) any liberty or power which may be exercised or any determination
which may be made hereunder by the Bank may be exercised or made
in the absolute and unfettered discretion of the Bank which
shall not be under any obligation to give reasons therefor and
<PAGE> 6
(v) references to any statutory provision shall be deemed to mean
and to include a reference to any modification or re-enactment
thereof for the time being in force and any analogous provision
or rule under any applicable law.
17. This Mortgage will be governed and construed according to English Law and
the parties hereto submit to the non exclusive jurisdiction of the English
Courts.
IN WITNESS whereof this mortgage consisting of this and the two preceding pages
are executed in the manner underwritten
<PAGE> 7
THE SCHEDULE
<TABLE>
<CAPTION>
Company Name Class of Shares Nominal Value Numbers of shares mortgaged
- ------------ --------------- ------------- ---------------------------
<S> <C> <C> <C>
Caminus Limited Ordinary Pound Sterling 1 617
</TABLE>
SUBSCRIBED for and on behalf of )
CAMINUS LLC )
(pursuant to a resolution of its Board )
of Directors) by )
Name: /s/ Mark A. Herman
Title: Chief Financial Officer
Dated: June 23, 1999
Accepted by FLEET BANK, N.A. by:
Name: /s/ Kathleen McEntee
Title: Vice President
Dated: June 23, 1999
<PAGE> 1
EXHIBIT 10.19
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of October 21, 1998, by
and between David Stoner (the "Employee") and Caminus Energy Ventures LLC, a
Delaware limited liability company (the "Company") with reference to the
following facts. Any capitalized terms not otherwise defined herein shall have
the respective definitions set forth in the Company's Limited Liability Company
Agreement, dated as of May 12, 1998, as amended (the "Company Agreement").
WHEREAS, the Company desires to employ Employee as the President and Chief
Executive Officer and Employee desires to be so employed on the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter contained the parties hereby agree as follows:
1. Employment.
1.1 Position and Duties. Employee shall be employed as the President
and Chief Executive Officer of the Company upon the terms and provisions set
forth in this Agreement. Employee hereby accepts such employment on the terms
and conditions set forth herein. Employee agrees to devote his full time and
best efforts, skills and abilities to the business and affairs of the Company.
Employee shall perform all duties and have all responsibilities consistent with
the officer position indicated above as specified by the Management Committee of
the Company, provided that such duties and responsibilities are commensurate
with Employee's title, function and position. Employee shall perform his duties
principally at the Company's headquarters, where Employee shall be based;
provided, however, Employee acknowledges that he will be required to travel in
the ordinary course of the Company's business as the reasonable needs of the
Company shall require.
1.2 Reporting. Employee shall report to the Management Committee of
the Company.
2. Term. The term of this Agreement ("Term") shall commence as of the date
hereof and continue in full force and effect until three (3) years from the date
hereof, unless sooner terminated pursuant to the provisions of this Agreement.
3. Compensation and Benefits.
3.1 Base Salary. As compensation for the services to be performed by
Employee during the Term, the Company shall pay Employee a base salary of Two
Hundred Fifty Thousand Dollars ($250,000) per annum, payable in accordance with
the Company's payroll practices in effect from time to time, but not less often
than monthly (the "Base Salary"). Base Salary shall be payable in substantially
equal installments and reduced on a pro-rata basis for any fraction of a year or
month during which Employee is not so employed.
<PAGE> 2
3.2 Bonus. As compensation for the services performed during the first
twelve months of the Term, Employee shall be eligible to receive bonuses, which
shall not be less than $25,000 for Employee's service during 1998 (which shall
be payable, subject to Section 5, on April 30, 1999), and $125,000 for such
service during 1999 (which shall be payable subject to Section 5, on October 30,
1999). The bonus payments described in the preceding sentence may be offset
against any amounts owing to the Company pursuant to the note described in
Section 3.5. With respect to calendar years after 1999, Employee's eligibility
for bonuses shall be determined by the Management Committee of the Company.
3.3 Deductions and Withholding of Taxes. There shall be deducted or
withheld from any amounts payable to Employee all federal, state, city or other
taxes required by applicable law to be so withheld or deducted, standard
Employee deductions (e.g., social security and state disability insurance) and
any other amounts authorized for deduction by Employee or required by law.
3.4 Purchase of Membership Interest in the Company. The parties acknowledge
that Employee and the Company are entering into a Subscription Agreement, in the
form attached hereto as Annex B, providing for the purchase by Employee of a
Series A Membership Interest in the Company, as further provided therein. The
parties acknowledge that the entire purchase price is being loaned to Employee
by CEV. Such loan (the "Investment Loan") is being evidenced by a Secured
Recourse Promissory Note in the form attached hereto as Annex C, and the
obligations under such Note are being secured pursuant to a Pledge and Security
Agreement being delivered by Employee in the form attached hereto as Annex D.
3.5 Short Term Loan. The parties acknowledge that the Company is loaning to
Employee the sum of $100,000, which loan is being evidenced by a Demand Recourse
Promissory Note in the form attached hereto as Annex E.
3.6 Bonus In Connection With Certain Liquidity Events. If (i) a Sale or
Qualified Public Offering occurs with respect to the Company, (ii) the Employee
is employed by the Company on the date of such transaction, and (iii) the
Company has determined, in its reasonable discretion, that all initial cash
investors in the Company have received an internal rate of return through the
date of such transaction of at least 30% on a fully diluted basis in connection
with their initial cash investment in the Company during 1998, then the Company
shall provide a bonus to the Employee consisting of the following: (a) a payment
equal to the outstanding principal balance of the Investment Loan as of the date
of such transaction, which payment may be made, in the discretion of the Company
through forgiveness of all or part of the outstanding principal balance and
accrued interest on the Investment Note and the remainder (if any) in cash; and
(b) the issuance to the Employee of a Membership Interest in the Company equal
to one-half of the Membership Interest purchased by the Employee pursuant to
Section 3.4. The internal rate of return shall be calculated taking into account
the effect of the payment of the benefits described in this Section 3.6
(including, without limitation, the effects of any resulting dilution and
diminution in value).
4. Employee Put Right.
-2-
<PAGE> 3
4.1 Put Option. On the third anniversary following the date hereof, and on
each subsequent anniversary thereof (each such date, an "Anniversary"), Employee
shall have the following option ("Put Option"). If the Employee is employed by
the Company on any such Anniversary, and no Sale or Public Offering has occurred
with respect to the Company, Employee shall have the right to require the
Company to repurchase a number of his Securities in the Company not to exceed
the lesser of (i) 10% of the Securities held by Employee attributable to the
Membership Interest purchased pursuant to Section 3.4 hereof, and (ii) a number
of Securities with a Fair Market Value as of such Anniversary equal to $250,000.
4.2 Limit on Total Number of Securities Sold Pursuant to Put Option. The
Put Option shall be subject to the following limitations. The aggregate number
of Securities sold to the Company pursuant to all exercises of the Put Option
shall not exceed 40% of the Securities held by Employee attributable to the
Membership Interest purchased pursuant to Section 3.4 hereof. In addition, in no
event shall the aggregate purchase price paid by the Company to Employee
pursuant to all exercises of the Put Option exceed $1 million.
4.3 Manner of Exercise. The exercise of the Put Option shall be by means of
a written notice of exercise (the "Put Notice") delivered by the Employee to the
Company within 30 days following the relevant Anniversary, which shall designate
the number of Securities that the Employee wishes to tender to the Company. If
no Put Notice is delivered within 30 days following an Anniversary, Employee
shall have forfeited his Put Option rights with respect to such Anniversary.
Following timely delivery of the Put Notice, Employee shall be required to sell
to the Company, and the Company shall be required to purchase from Employee, the
number of Securities designated in the Put Notice (but not to exceed the limits
imposed by Sections 4.1 and 4.2).
4.4 Purchase Price; Closing. The purchase price to be paid by the Company
pursuant to exercises of the Put Option shall be equal to the Fair Market Value
of the Securities as of the relevant Anniversary. Payment for any Securities
purchased pursuant to the Put Option shall be made in cash payable on closing
date of the exercise of the Purchase Option, which date shall be no later than
thirty (30) days following the date the Put Notice is received by the Company or
such longer period as may be reasonably necessary to determine the Fair Market
Value however, further, if the Company is prohibited by law from repurchasing
the Securities, the Company's obligation to purchase the Securities shall be
deferred until the Company is permitted to do so. The Management Committee shall
have the option to transfer and assign its obligation to repurchase Securities
pursuant to the Put Option (in full or in part) to any designee as long as such
designee satisfies the payment obligations of the Company with respect to the
Securities purchased by the designee.
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<PAGE> 4
5. Termination of Employment. Except as otherwise provided herein,
Employee's employment and all rights of Employee hereunder shall terminate upon
the termination of this Agreement, and neither Employee nor his successors will
have any rights hereunder, except as expressly provided herein. This Agreement
and the employment of Employee shall terminate only upon the occurrence of any
of the following events effective upon the satisfaction of the specified
conditions and the expiration of any notice periods after the delivery of any
required notices.
5.1 Mutual Agreement. The Company and Employee may mutually agree in
writing to the termination of this Agreement, including the extent of the
continuation of rights and obligations of the Company and Employee.
5.2 Termination for Cause. The Company may terminate this Agreement for
"Cause", as defined below, at any time such Cause exists, by written notice to
the Employee. In the event the Company elects to terminate Employee for Cause,
the Management Committee of the Company shall send written notice to Employee
terminating such employment, indicating the basis for such termination and
specifying the termination date. "Cause" for termination of this Agreement by
the Company shall mean any of the following acts or circumstances of Employee:
(i) willful destruction of Company property having a material value to the
Company; (ii) fraud, embezzlement, theft, or comparable dishonest activity
(excluding acts involving a de minimis dollar value and not related to the
Company); (iii) conviction of or entering a plea of guilty or nolo contendere to
any crime constituting a felony or any misdemeanor involving fraud, dishonesty
or moral turpitude; (iv) breach, neglect, refusal, or failure to materially
discharge the duties under this Agreement commensurate with Employee's title and
function; (v) material breach of Section 6 of this Agreement, or (vi) material
misrepresentation to the Company, the Management Committee or any officer(s) to
whom the Employee reports. Notwithstanding the foregoing to the contrary, prior
to discharging Employee pursuant to clause (iv) of the immediately preceding
sentence, the Company shall give Employee at least fifteen (15) days' prior
written notice of any breach or failure and an opportunity to cure any such
breach or failure. In connection with a termination by the Company for Cause,
the Company shall pay to Employee all accrued compensation and benefits
(excluding any bonus amounts pursuant to Section 3.2) earned by and payable to
Employee hereunder prior to the effective date of such termination
(collectively, the "Earned and Vested Benefits"). Except as set forth in this
Section 5.2 and Section 5.6, the Company shall have no further obligations under
this Agreement in connection with a termination of the Employee for Cause.
5.3 Termination Without Cause. Notwithstanding any other provision of this
Section 5, in the event that Employee's employment is terminated by the Company
without Cause or if Employee resigns for Good Reason (hereinafter defined),
Employee shall receive all unpaid Earned and Vested Benefits, [any unpaid
minimum bonus provided with respect to the first twelve months of the Term
pursuant to Section 3.2], and as a severance benefit, the Employee shall receive
the Base Salary provided for in Section 3.1 hereof until the earlier of the end
of the Term of this Agreement or twelve months following the date of
termination, in accordance with the Company's normal payroll practices and
schedule. For purposes of this Agreement, "Good Reason" shall mean (i) a failure
to maintain Employee in a management position substantially equivalent to that
provided for in
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<PAGE> 5
Section 1.1 hereof, or (ii) a material diminution by the Company of Employee's
responsibilities which change would cause Employee's position at the Company to
become one of less responsibility, importance or scope. Except as set forth in
this Section 5.3 and Section 5.6, the Company shall have no further obligations
under this Agreement in connection with a termination of Employee without Cause
or a resignation of Employee for Good Reason.
5.4 Death/Disability. This Agreement shall terminate automatically upon the
death of Employee. For the purposes of this Agreement, "Disability" shall mean
that (i) for any period of sixty (60) consecutive days, or for sixty (60) days
in any period of one hundred and fifty (150) consecutive days, Employee is
absent or unable to perform Employee's duties with the Company on a full time
basis as a result of incapacity due to mental or physical illness. In the event
of the death or Disability of the Employee, the Company shall pay Employee (or
any estate, beneficiary or legal representative of Employee) all Earned and
Vested Benefits. Except as set forth in this Section 5.4 and Section 5.6, the
Company shall have no further obligations under this Agreement in connection
with a death or Disability of Employee.
5.5 Termination by Employee. Except as provided in Section 5.6 below, in
the event that Employee unilaterally elects to terminate his employment, the
Company shall have no further obligations to make any payments under this
Agreement and Employee shall forfeit any right to such payments, except for
Earned and Vested Benefits.
5.6 Company's Purchase Option. Upon the occurrence of any of the events set
forth in Sections 5.1, 5.2, 5.3, 5.4 and 5.5 (collectively the "Option Events"),
the Company shall have the right and option, in the discretion of the Management
Committee of the Company, to purchase (the "Purchase Option"), at any time
during the ninety (90) days following the occurrence of an Option Event, all of
the Securities (as defined in Appendix B to the Company Agreement) then owned,
directly or indirectly, by Employee, including all such Securities acquired by
any other Person pursuant to a Permitted Transfer and including any interests
therein of any holding company, legal representative, estate, beneficiary,
executor, administrator or trustee of the Employee (the "Representative"). If
the Option Event results from a termination of the Employee by the Company for
Cause or a termination by the Employee without Good Reason, then the price to
exercise the Purchase Option shall be equal to the lesser of the cost paid by
the Employee for such Securities and the Fair Market Value of such Securities as
of the date of the Option Event. If the case of any other Option Event, the
price to exercise the Purchase Option shall be equal to the Fair Market Value of
such Securities as of the date of the Option Event. The exercise of the Purchase
Option shall be by means of a written notice of exercise (the "Notice")
delivered by the Company to the Employee and/or Representative. Payment for such
Securities shall be made in cash payable on the closing date of the exercise of
the Purchase Option, which date shall be no later than thirty (30) days
following the Notice date or such longer period as may be reasonably necessary
to determine the Fair Market Value; provided, however, any amounts owed to
Employee pursuant to this Section may be offset against any amounts owing by the
Employee to the Company; provided, further, if the Company is prohibited by law
from repurchasing the Securities, the Company's obligation to purchase the
Securities shall be deferred until the Company is permitted to do so. The
Management Committee
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<PAGE> 6
shall have the option to transfer and assign the Purchase Option (in full or in
part) to any designee as long as such designee satisfies the payment obligations
of the Company with respect to the Securities purchased by the designee.
6. Proprietary Rights; Confidentiality; No Competition.
6.1 Employee agrees that all intellectual property rights, developments,
designs, computer software, inventions, applications and improvements, including
but not limited to trade names, assumed names, service names, service marks,
trademarks, logos, patents, copyrights, licenses, formulas, trade secrets and
technology, whether in design, methods, processes, formulae, machines or devices
and all other applications (collectively, "Employee Inventions"), whether made,
created, invented, devised or developed prior to the date of this Agreement for
the Company or hereafter by Employee during the rendition of his services
hereunder, other than Employee Inventions made, created, invented, devised or
developed by Employee (i) on his own personal time, (ii) without the use of the
Company's facilities and resources and (iii) which are not related to the
Company Business and do not otherwise relate to a matter governed or restricted
by the Covenant Not to Compete (collectively, "Unrelated Inventions"), are works
made for hire and shall be the exclusive property of the Company without
separate compensation to the Employee. Employee will, at the request and expense
of the Company made at any time, execute and deliver to the Company or its
nominee such applications and instruments as may be desirable and appropriate
for obtaining for the Company or its nominee, patents, copyrights, trademarks,
know-how and other intellectual property protection of the United States and all
other countries for vesting in the Company or its nominee, all of Employee's
claim, right, title and interest in said intellectual property rights,
developments, designs, computer software, inventions, improvements, applications
and improvements and for maintaining, enforcing and defending the same, and to
otherwise vest in or evidence the Company's exclusive ownership of all of the
rights referred to herein. In the event that for whatever reason the results of
Employee's past or future work for the Company should not be deemed to be works
made for hire, Employee agrees to assign, and hereby does assign, to the Company
all claim, right, title and interest, in any country, to each and every patent,
copyright, trademark, computer software, know-how or other intellectual property
of any sort, other than Unrelated Inventions, that is the result of work done in
the course of the Employee's past or future employment by the Company, or that
the Employee creates or develops, in whole or in part by, using the Company's
equipment, supplies or facilities. Each and every such assignment is and shall
be in consideration of this Agreement with the Company, and no further
consideration therefor is or shall be provided to Employee by the Company.
Employee hereby waives enforcement of any moral or legal rights which might
limit the Company's rights to exploit any of the foregoing materials in any
manner. For all purposes of this Section 6, references to the "Company" shall be
deemed to include all predecessors entities and businesses. Notwithstanding
anything in the foregoing to the contrary, an Employee Invention which is a
software product shall not constitute an "Unrelated Invention" unless Employee
gives written notice to the Management Committee of the Company of his intention
to treat such Employee Invention as an "Unrelated Invention", and the Management
Committee of the Company, in its reasonable, good faith determination, gives
written notice to Employee of its concurrence in such characterization.
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<PAGE> 7
6.2 Confidentiality. Employee agrees not to disclose, use, transfer or sell
any intellectual property, confidential or proprietary information of the
Company, whether Employee has such information in his memory or embodied in
writing or other physical form, unless such activities are on behalf of and
expressly authorized by the Company. For purposes of this Agreement, the phrase
"intellectual property, confidential or proprietary information of the Company"
means all information which is known or intended to be known only to employees
of the Company or others in a confidential relationship with any of them,
including, without limitation, that which relates to marketing or brand
recognition matters, such as logos, tradenames, service names, and trademarks,
or to technical matters, such as patents, programs, components, devices,
formulae, testing procedures, processes, computer software and graphics products
of the Company or any Affiliate, or to business matters such as the identity of
clients, customers or business partners or terms of business relationships with
clients, customers or business partners. Notwithstanding the foregoing, the term
"intellectual property, confidential or proprietary information" of the Company
shall not include information which (i) is, at the time of the disclosure, a
part of the public domain through no act or omission by Employee, (ii) known to
the Employee prior to the time of disclosure by the Employee, provided that the
information was not obtained by the Employee in the course of rendering services
to the Company or any predecessor entity or (iii) is hereafter disclosed to
Employee by a third party who or which did not acquire the information under an
obligation of confidentiality to or through the Company or any predecessor
entity. Employee agrees not to remove from the premises of the Company, any
intellectual property, confidential or proprietary information of the Company,
except as permitted by the Company and except for Employee's personal rolodex
and other personal belongings and files that do not contain intellectual
property, confidential or proprietary information related to the Company
Business. Employee recognizes that all such intellectual property, confidential
or proprietary information of the Company, are the exclusive property of the
Company. Employee agrees to return to the Company all materials (whether in
written, electronic or other form) in his possession containing or reflecting
intellectual property, confidential or proprietary information of the Company
promptly following the cessation of any service relationship with the Company,
except for Employee's personal address directory and other personal belongings
and files that do not contain intellectual property, confidential or proprietary
information related to the Company Business. Employee agrees that the
restrictions contained in this Section 6 shall continue to apply without time or
geographic restrictions, so long as any information remains intellectual
property, confidential or proprietary information of the Company.
6.3 Non-Competition.
6.3.1 As a means reasonably designed to protect the intellectual
property, confidential and proprietary information of the Company, for a period
beginning on the date hereof and ending one (1) year from the conclusion of
Employee's employment with the Company (such period the "Noncompete Term"),
Employee will not, without the prior written consent of the Company based upon
approval from the Management Committee of the Company (or any similar successor
management body of the Company or any successor entity of the Company), anywhere
in the world, directly or indirectly, engage in, assist (financially or
otherwise), associate with, or perform services (other than on behalf of the
Company or any of its Affiliates) in any Competing Business (as defined in Annex
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<PAGE> 8
A), including, without limitation, whether such engagement, assistance,
association or performance is as an individual, principal, officer, director,
proprietor, employee, partner, stockholder or other investor (other than as a
holder of less than five percent (5%) of the outstanding capital stock of a
publicly traded corporation), creditor, guarantor, consultant, advisor, agent,
sales representative or other participant, or otherwise permit his name to be
used or employed with any such Competing Business. For purposes of this
Agreement, "Affiliate" shall mean any person, partnership, limited liability
company, joint venture, trust, corporation or other entity, directly or
indirectly, controlling, controlled by or under common control with such person,
partnership, limited liability company, joint venture, trust, corporation or
other entity.
6.3.2 Reasonable Restrictions. Employee hereby represents and
acknowledges that: the restrictions stated herein on the activities in which
Employee may engage upon termination of his employment with the Company are
reasonable and that, despite such restrictions, Employee will be able to earn
his livelihood and engage in his profession following said termination; the
worldwide restriction is reasonable because the Company presently does business,
or has a bona fide plan of doing business during the Noncompete Term, throughout
the world; and the period of time designated above is reasonable in relation to
the nature of the Company Business (as defined in Annex A).
6.4 Non-Interference. During the Noncompete Term, Employee will not,
without the prior written consent of the Company, directly, indirectly or as an
agent on behalf of or in conjunction with any person, firm, partnership,
corporation or other entity, (a) hire, solicit, encourage the resignation of, or
in any other manner seek to engage or employ any person who is then, or within
the prior twelve (12) months had been, an employee of the Company or its
Affiliates, whether or not for compensation and whether as an officer, employee,
consultant, adviser, independent sales representative, independent contractor or
participant, or (b) except as may be appropriate to perform Employee's duties
hereunder, contact, solicit, service or otherwise have any dealings related to
Company Business with any person or entity with whom the Company or its
Affiliates has a former, current or prospective business relationship or who is
or was at any time during his employment with the Company (including any
predecessor or successor entity) a customer or client of the Company or its
Affiliates, or a prospective customer or client to which the Company or its
Affiliates has made a written or oral business proposal.
6.5 Equitable Relief. Employee acknowledges that the provisions contained
in Section 6 hereof are reasonable and necessary to protect the legitimate
interests of the Company, that any breach or threatened breach of such
provisions will result in irreparable injury to the Company and that the remedy
at law for such breach or threatened breach would be inadequate. Accordingly, in
the event of the breach by Employee of any of the provisions of Section 6
hereof, the Company, in addition and as a supplement to such other rights and
remedies as may exist in its favor, may apply to any court of law or equity
having jurisdiction to enforce this Agreement, and/or may apply for injunctive
relief against any act that would violate any of the provisions of this
Agreement (without being required to post a bond). Employee further understands
that monetary damages will not be sufficient to avoid or compensate for a breach
of the provisions contained in Section 6 hereof and that injunctive relief would
be appropriate to prevent any such breach or threatened breach.
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<PAGE> 9
Such right to obtain injunctive relief may be exercised, at the option of the
Company, concurrently with, prior to, after, or in lieu of, the exercise of any
other rights or remedies that the Company may have as a result of any such
breach or threatened breach.
7. Miscellaneous.
7.1 Entire Agreement; Amendments. This Agreement constitutes the
entire agreement between the parties with respect to the employment of Employee
by the Company and supersedes any prior understandings, agreements or
representations between the parties, written or oral, to the extent they have
related in any way to the subject matter hereof. No amendment of any provision
of this Agreement shall be valid unless the same shall be in writing and signed
by the Company and Employee. No waiver by any party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
7.2 Arbitration. Subject to Section 7.3 hereof, and except as
otherwise required by law, the Employee and the Company agree that any and all
legal disputes, controversies or claims arising out of or relating to this
Agreement shall be resolved by binding arbitration at the local Los Angeles
County, California offices of the Judicial Arbitration & Mediation Services,
Inc. ("J.A.M.S."). The parties may agree on a jurist from the J.A.M.S. panel. If
they are unable to agree, J.A.M.S. will provide a list of three available panel
members and the aggrieved party shall first strike one panel member, and the
other party shall then strike one panel member. The remaining panel member will
serve as the arbitrator. The aggrieved party may initiate arbitration by: (i)
sending thirty (30) days written notice of an intention to arbitrate by
registered or certified mail to all parties and to J.A.M.S.; and (ii) depositing
with J.A.M.S. the advanced fees required by J.A.M.S. to initiate the arbitration
process for the parties. The notice must contain a description of the dispute,
the amount involved and the remedies sought. Upon notice of demand for
arbitration, the parties agree to execute a submission agreement, provided by
J.A.M.S., which agreement shall provide for discovery in accordance with the
Federal Rules of Civil Procedure and for the Commercial Arbitration rules and
procedures established by the American Arbitration Association. The prevailing
party in any such arbitration proceeding shall be entitled to recover from the
other party reasonable attorneys' fees, costs and expenses in connection with
such arbitration proceeding.
7.3 Notices. All notices under this Agreement will be in writing and
will be delivered by personal service or telegram, telecopy or certified mail
(if such service is not available, then by first class mail), postage prepaid,
or Federal Express (or other reputable overnight courier) to such address as may
be designated from time to time by the relevant party, and which will initially
be as set forth below. Any notice sent by certified mail will be deemed to have
been given three (3) days after the date on which it was mailed. Notices sent by
personal delivery shall be deemed effective on the date delivered, notices sent
by Federal Express (or other reputable overnight courier) shall be deemed
effective on the third business day following the sending thereof and notices
sent by telecopy shall be deemed effective on the date delivered. No objection
may be made to the manner of delivery of any
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<PAGE> 10
notice actually received in writing by an authorized agent of a party. Notices
will be addressed as follows or to such other address as the party to whom the
same is directed will have specified in conformity with the foregoing:
If to Company:
Caminus Energy Ventures LLC
12121 Wilshire Boulevard, Suite 1375
Los Angeles, California 90025
Attn: Chairman
Telephone: (310) 442-0542
Facsimile: (310) 442-0540
with a copy to:
GFI Energy Ventures LLC
12121 Wilshire Boulevard, Suite 1375
Los Angeles, California 90025
Attn: Ian Schapiro
Telephone: (310) 442-0542
Facsimile: (310) 442-0540
If to Employee:
David Stoner
183 Maple St.
Litchfield, CT 06759
Telephone: 860-567-3954
Facsimile: 860-567-4143
with a copy to:
Diane Stoner
same as above
---------------------
Attn:
----------------
Telephone:
-----------
Facsimile:
-----------
7.4 Third-Party Benefits. None of the provisions of this Agreement
will be for the benefit of, or enforceable by, any third-party beneficiary,
except that each designee selected by the Company pursuant to Section 4.4 or
Section 5.6 is intended as a third-party beneficiary of all rights of the
Company under those sections.
7.5 Successors and Assigns. This Agreement will be binding upon and
inure to the benefit of the parties, their respective successors and permitted
assigns. None of the parties hereto may assign any of their rights or
obligations under this Agreement without the prior written consent of all other
parties hereto, except that this Agreement may be
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<PAGE> 11
assigned by the Company to any corporation or other business entity that
succeeds to all or substantially all of the business of the Company through
merger, consolidation, corporate reorganization or by acquisition of all or
substantially all of the assets or equity interests of the Company.
7.6 Governing Law. All questions with respect to this Agreement and
the rights and liabilities of the parties shall be governed by the laws of the
State of New York, regardless of the choice of law provisions of that state or
any other jurisdiction.
7.7 Headings and Gender. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement. All words shall be construed to be
of such gender and number as the circumstances require.
7.8 Severability. The validity, legality or enforceability of the
remainder of this Agreement will not be affected even if one or more of the
provisions of this Agreement will be held to be invalid, illegal or
unenforceable in any respect.
7.9 Attorneys' Fees. Subject to Section 7.2 hereof, if any action or
proceeding is brought to enforce or interpret any provision of this Agreement,
the prevailing party shall be entitled to recover as an element of its costs,
and not its damages, reasonable attorneys' fees and costs incurred in connection
with such action or proceeding.
7.10 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
7.11 Survival. The provisions of Section 6 of this Agreement shall
survive any termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
CAMINUS ENERGY VENTURES, a Delaware limited EMPLOYEE
liability company
By: /s/ Richard Landers /s/ David Stoner
------------------- ----------------------
David Stoner
Its: Member, Management Committee
----------------------------
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<PAGE> 12
ANNEX A
CERTAIN DEFINED TERMS
"Competing Business" shall mean any business that competes or has competed,
directly or indirectly, with the Company Business in any country or countries in
which the Company has conducted business within the past two (2) years prior to
the Date of Termination.
"Company Business" shall mean the development and marketing of (i)
consulting advisory services and supporting models used to analyze or influence
client and industry decisions regarding energy pricing, investments, regulatory
policy and financial and strategic planning for clients in the natural gas,
crude oil, refined products, electric power and utility industries, and (ii)
software or related products or services substantially related to the matters
described in clause (i) or which otherwise facilitate transactions or other
participation in competitive energy markets
"Fair Market Value" shall mean, with respect to a Security, the Fair Market
Value of the Security as determined by the Management Committee in its
reasonable discretion (the "Management Committee Determination"). In the case of
an exercise of the Put Option, the Management Committee shall deliver to
Employee its determination of Fair Market Value within ten days following
receipt of the Put Notice pursuant to Section 4.3. In the case of the exercise
of the Purchase Option, the Management Committee shall deliver its determination
of Fair Market Value along with the Notice. If, following delivery of the
Management Committee Determination, the Employee disagrees with the Management
Committee Determination, the Employee shall provide the Company with written
notice of such disagreement within ten (10) days following the delivery of the
Management Committee Determination to the Employee. If the Employee does not
deliver written notice of objection within such time period, the Management
Committee Determination shall be final and binding for all purposes. If the
Employee does object in writing within such period, then the Management
Committee shall select an Independent Financial Expert to determine the Fair
Market Value, whose determination shall be final and binding for all purposes.
If the Fair Market Value as determined by the Independent Financial Expert is
greater than 105% of the Management Committee Determination, then the Company
shall bear all of the fees and expenses of the Independent Financial Expert
("Appraisal Fees"). If the Fair Market Value as determined by the Independent
Financial Expert is less than 95% of the Management Committee Determination,
then the Employee shall bear all of the Appraisal Fees. Otherwise, the Appraisal
Fees shall be split and borne equally by the Company and the Employee. Any
amounts owed by the Employee under this paragraph may be recovered by the
Company through the offset of any amounts owed by the Company to the Employee.
A-1-
<PAGE> 1
Exhibit 10.20
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (the "Agreement") is entered into as
of October 21, 1998, between Caminus Energy Ventures LLC, a Delaware limited
liability company ("CEV"), and David Stoner ("Pledgor") as an inducement to CEV
to accept from the Pledgor his Secured Recourse Promissory Note to CEV in the
original principal amount indicated on the signature page hereto (the "Note").
The Note is being issued by the Pledgor to obtain funds to purchase from CEV a
Series A Membership Interest in CEV pursuant to the Subscription Agreement (the
"Subscription Agreement") dated as of even date herewith between CEV and
Pledgor.
1. Pledge. As collateral security for the due payment of the
Note and the other obligations of Pledgor hereunder, Pledgor hereby pledges,
transfers and assigns to CEV and grants CEV a security interest in all
interests in the equity, profits and/or ownership of the business of CEV now or
at any time hereafter held by Pledgor (collectively, his "Equity Interest"),
including and together with any liquidating dividends and distributions in
connection with any reorganization or recapitalization of CEV, which Pledgor may
hereafter become entitled to receive with respect to his Equity Interest.
2. Voting Powers. Pledgor shall retain and be entitled to
exercise all voting powers pertaining to his Equity Interest or any part
thereof.
3. Dividends. Except for distributions identified by the
Management Committee of CEV as "tax distributions" (which distributions may be
retained by Pledgor free and clear of this Agreement), all payments of cash or
cash equivalents (by way of dividend, distribution, proceeds from sale or
otherwise, but excluding compensation for services rendered) that Pledgor
becomes entitled to receive on or with respect to the Equity Interest shall be
paid or made to, and retained by, CEV, subject to the pledge created under this
Agreement. To the extent that Pledgor receives any property subject to such
pledge, he shall immediately surrender it to CEV.
4. Rights and Remedies.
(a) In the event of occurrence of any Event of Default
(as defined in the Note) CEV may, at its sold option, within the longer of (i)
sixty (60) days after such Event of Default and (ii) thirty (30) days after the
determination of Fair Market Value (as hereinafter defined) of the Equity
Interest, upon ten (10) days' written notice to Pledgor, but without any other
demand or notice whatsoever, transfer the Equity Interest to CEV, such Equity
Interest to be so transferred at the Fair Market Value thereof to the extent
required to pay the remaining unpaid balance of principal, interest and other
obligations hereunder and under the Note, such transfer to be free and clear of
any right or equity of redemption, which right or equity is hereby expressly
waived and released. If the Fair Market Value of the Equity Interest
transferred is less than the full amount of remaining unpaid principal,
interest and other obligations hereunder and under the Note, Pledgor shall
remain liable for the remaining amount due and shall pay such amount to CEV
immediately. The right of CEV
<PAGE> 2
provided in this paragraph is in addition to, and not in lieu of, all other
rights that CEV may have as a secured party at law or otherwise.
(b) In the event shares of the Equity Interest are transferred
pursuant to paragraph (a) above in payment of liabilities of Pledgor under the
Note and hereunder for principal, interest and other obligations under the Note
and hereunder, such transfer shall be applied first to liabilities for interest,
then to other obligations under the Note and hereunder, and then to the
liability for principal.
(c) The Fair Market Value of each share of Equity Interest shall be
determined by the Management Committee of CEV, which determination shall be
promptly reported in writing to Pledgor.
5. Miscellaneous
(a) This writing (together with the agreements referred to herein)
constitutes the entire agreement of the parties with respect to the subject
matter hereof and may not be modified or amended except by a written agreement
by CEV and Pledgor.
(b) This Agreement shall be binding upon and inure to the benefit of
CEV, its successors and assigns, and Pledgor and his respective heirs, personal
representatives, successors and assigns.
(c) If any provision of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render invalid or unenforceable
any other severable provision of this Agreement, and this Agreement shall be
carried out as if any such invalid or unenforceable provision were not contained
herein.
(d) Each party hereto shall cooperate and shall take such further
action and shall execute and deliver such further documents as may be reasonably
requested by any other party in order to carry out the provisions and purposes
of this Agreement.
(e) This Agreement shall be deemed to be a contract under the laws of
the State of California and for all purposes shall be construed and enforced in
accordance with the internal laws of said state without regard to the principles
of conflicts of law.
(f) Should either party be required to commence any litigation
concerning any provision of this Agreement or the rights and duties of the
parties hereunder, the prevailing party in such proceeding shall be entitled, in
addition to such other relief as may be granted, to the attorneys' fees and
court costs incurred by reason of such litigation.
(g) The rights, powers and remedies of CEV under this Agreement shall
be in addition to all rights, powers and remedies available to CEV by virtue of
any statute or rule of law, and all other agreements between CEV and Pledgor,
all of which rights, powers and remedies shall be cumulative and may be
exercised successively or concurrently without impairing CEV's security interest
described herein.
<PAGE> 3
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
October 21, 1998.
CAMINUS ENERGY VENTURES LLC
BY /s/RICHARD LANDERS
-------------------------------
Its MEMBER, MANAGEMENT COMMITTEE
----------------------------
PLEDGOR
/s/ DAVID STONER
--------------------------------
David Stoner
Original Principal Amount of Note:
$1,000,000.00
<PAGE> 1
Exhibit 10.21
DATED May 12, 1998
CAMINUS ENERGY LIMITED.
- and -
DR. NIGEL L. EVANS
----------------------------------
SERVICE AGREEMENT
----------------------------------
<PAGE> 2
This AGREEMENT is made as of the 12th day of May, 1998 between CAMINUS
ENERGY LIMITED, a company incorporated in the United Kingdom whose registered
office is Caminus House, Castle Park, Cambridge CB3 ORA, United Kingdom (the
"COMPANY") and Dr. Nigel L. Evans, Ph.D., of The Grove, Lady Street, Lavenham,
Sudbury, Suffolk, United Kingdom (the "EMPLOYEE").
IT IS AGREED as follows:
1. APPOINTMENT AND TERM
1.1. The Employee will be employed by the Company as the Chief Executive
Officer of the Company and shall continue to be a director and
Chairman of the Board of Directors of the Company (the "BOARD").
1.2. His employment in that capacity and pursuant to this Agreement is
deemed to have begun on the date hereof and will continue, subject to
the terms of this Agreement, until May 5, 2001, unless sooner
terminated pursuant to the provisions of this Agreement; provided that
the term hereof shall be automatically renewed for successive one (1)
year periods unless notice of a desire not to renew is provided by
either party at least thirty (30) days prior to the expiry of this
Agreement.
2. DUTIES, ETC.
2.1. During the continuance of his employment the Employee agrees to devote
his full time and best efforts, skill and abilities to the business
and affairs of the Company and will:
2.1.1. perform:
(A) the day to day management duties consistent with the
position of Chief Executive Officer of the Company;
and
(B) such other duties as may from time to time be
assigned to him by the Board, whether those duties
relate to the business of the Company or to the
business of any subsidiary or associate of the
Company;
2.1.2. in all respects comply with directions given by or under the
authority of the Board;
2.1.3. use his reasonable endeavors to promote the interests of the
Company;
2.1.4. unless prevented by incapacity or disability, devote the whole
of his time and attention during usual business hours to the
performance of his duties under this Agreement; and
<PAGE> 3
2.1.5. not carry on or be interested, directly or indirectly, in a
Competing Business (as defined in Section 8.1.1 hereof)
without the prior written consent of the Board.
2.2. Provided, that the foregoing shall not limit the Employee from
performing charitable activities, managing personal passive
investments or serving on the board of directors of another entity to
the extent that such outside activities do not in any material way
detract from the Employee's performance of his duties hereunder or
conflict with the provisions of this Agreement.
2.3. The agreed hours of work of the Employee will be normal business hours
and such other hours as may be required for the proper performance of
his duties under this Agreement; and he will perform those duties in
Cambridge, United Kingdom. The Employee acknowledges that he will be
required to travel in the ordinary course of the Company's business as
the reasonable needs of the Company shall require. Notwithstanding
the foregoing, the Company shall not relocate the Employee from
Cambridge, England, without the Employee's prior written consent.
2.4. Notwithstanding the foregoing provisions of this clause, if notice is
served by either party pursuant to clause 9.1 below, for up to a
maximum of six (6) months the Company shall not be obliged to provide
any work for the Employee or to assign to or vest in the Employee any
powers, duties or functions and may in its discretion suspend the
Employee on full salary and other contractual benefits save as below
and require the Employee: not to enter any premises of the Company or
any subsidiary or associate of the Company (except GFI Caminus LLC in
accordance with the provisions of the LLC Agreement as defined in
Clause 9.4); to abstain from contacting any customers, clients or
employees of the Company or any subsidiary or associate of the
Company; and to resign from all offices in the Company, or any
subsidiary or associate of the Company (except GFI Caminus LLC in
accordance with the provisions of the LLC Agreement). The Employee
irrevocably authorises the Company in his name and on his behalf to
execute all documents and do all things necessary to effect the
resignations referred to herein, in the event of his failure to do so.
The Employee shall not be employed by or provide services to any third
party during the period for which he is suspended pursuant to this
clause. Unless such suspension is for Cause (as defined in Section
9.2 below), the Employee shall be entitled to a bonus in respect of
the period of any such suspension; provided, however, that Employee
shall have no claim in respect of the effect (if any) which any such
suspension may have on his entitlement in respect of any other period.
3. SALARY, BENEFITS AND EXPENSES
3.1. During the continuance of his employment, the Employee will be
entitled to a salary at the rate of Pound Sterling 200,000 per annum,
which shall be inclusive of any other sums receivable as director's
fees or other remuneration payable to non-employee directors of the
Company. The Employee shall be entitled to an annual bonus payment
(which is targeted at Pound Sterling 100,000) in addition to his salary
and other
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<PAGE> 4
benefits, with the actual bonus amount to be based upon a review of
performance by the Board following the conclusion of each year.
3.2. The Employee's salary will accrue from day to day during the
continuance of his employment, be payable by equal monthly
installments on the last working day of each month in accordance with
the Company's payroll practices in effect from time to time. The
Employee shall be eligible to participate in the Company's annual
profit sharing plan for key employees (which, at the discretion of the
Board, may be, in whole or in part, a profit sharing or incentive plan
based upon the performance of GFI Caminus LLC, the parent entity of
the Company ("PARENT"), and in each other benefit plan made generally
available to officers and key employees of the Company, on terms and
conditions no less favorable than those provided to officers of the
Company at similar levels as Employee.
3.3. The Employee shall be reimbursed for all reasonable and necessary
business expenses incurred by him in the performance of his duties
hereunder. The Company shall reimburse him upon presentation to the
Company of receipts and an itemized account of such expenses in
accordance with the Company's reimbursement policy. At the reasonable
discretion of Employee, Employee shall be entitled to fly business
class in accordance with the policies of the Company.
3.4. The Company shall not be liable to pay or provide any pension to or
for the benefit of the Employee, except for the contribution by the
Company into a personal pension plan in accordance with the Company's
staff handbook, as the same may be reviewed from time to time. The
Company will pay the Employee's telephone bills related to Company
business and Employee shall be entitled to participate in the
Company's permanent health insurance policy.
3.5. The Board shall review the Employee's compensation not less frequently
then every twelve (12) months. Following such review, the Board may,
in its discretion, increase the Employee's compensation (including, in
the discretion of the Board, the Employee's salary and bonus).
4. HOLIDAYS
4.1. The Employee will be entitled to five (5) weeks' holiday in each
calendar year, to be taken at such times as may be approved by the
Board, in addition to public holidays. The Employee is entitled to
carry forward up to five (5) days unused holiday entitlement to a
subsequent year. Except as provided in Clause 4.2, no payment will be
made by the Company during the continuance of this Agreement in lieu
of holidays not taken or not accrued.
4.2. Upon termination of this Agreement for whatever reason the Employee
shall be entitled to payment in lieu on a pro rata basis for any
holidays not taken (other than public holidays) which have accrued in
the calendar year in which the Date of Termination falls. The payment
will be calculated by multiplying the accrued entitlement by 1/260 of
the Employee's salary at that time.
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<PAGE> 5
4.3. In addition to his holiday entitlement, the Employee is entitled to
five (5) days paternity leave per child.
5. INTERESTS IN OTHER BUSINESSES
5.1. Save with the prior written consent of the Board (which consent shall
not be unreasonably withheld or delayed), the Employee will not during
the continuance of his employment be engaged or interested (except as
the holder for investment of up to five percent (5%) of any class of
securities quoted or dealt on a recognized stock exchange) either
directly or indirectly in any business or occupation other than the
business of the Company and its subsidiaries and associates.
6. INVENTIONS AND OTHER INDUSTRIAL OR INTELLECTUAL PROPERTY
6.1. Any invention or improvement or design made or process or information
discovered or copyright work or trade mark or trade name or get-up
created by the Employee during the continuance of the employment
hereunder (whether capable of being patented or registered or not and
made or discovered in the course of but not outside his employment
hereunder) in conjunction with or in any way affecting or relating to
the business of the Company or capable of being used or adapted for
use therein or in connection therewith shall forthwith be disclosed to
the Company and shall (subject to sections 39 to 43 Patents Act 1977)
belong to and be the absolute property of the Company.
6.2. The Employee if and whenever required to do so by the Company shall at
the Company's expense:
(A) apply or join with the Company in applying for
letters patent or other protection or registration in
the United Kingdom and in any other part of the world
for any such invention improvement design process
information work trade mark, trade name or get-up as
aforesaid which belongs to the Company; and
(B) execute and do all instruments and things necessary
for vesting the said letters patent or other
protection or registration when obtained and all
right title and interest to and in the same
absolutely and as sole beneficial owner in such
company or in such other person as the Company may
specify.
6.3. The Employee hereby irrevocably appoints the Company to be his
Attorney in his name and on his behalf to execute and do any such
instrument or thing and generally to use his name for the purpose of
giving to the Company the full benefit of this clause. In favor of
any third party a certificate in writing signed by any Director or by
the Secretary of the Company that any instrument or act falls within
the authority hereby conferred shall be conclusive evidence that such
is the case.
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<PAGE> 6
6.4. Nothing in this clause shall be construed as restricting the rights of
the Employee or the Company under sections 39 to 43 Patents Act 1977.
6.5. The Employee irrevocably and unconditionally waives all rights under
Chapter IV of Part I of the Copyright, Designs and Patents Act 1988
("MORAL RIGHTS") in connection with his authorship of any existing or
further copyright work, in whatever part of the world such rights may
be enforceable including, without limitation:
6.5.1. the right conferred by section 77 of that Act to be identified
as the author of any such work; and
6.5.2. the right conferred by section 80 of that Act not to have any
such work subjected to derogatory treatment.
6.6. For all purposes of this Clause 6, references to the "Company" shall
be deemed to include all predecessors, successors or associate
entities and businesses.
7. CONFIDENTIALITY
7.1. The Employee will not during the continuance of his employment or
afterwards (unless authorized to do so by the Board or by a court of
competent jurisdiction):
7.1.1. use for his own benefit or the benefit of any other person;
7.1.2. disclose to any person; or
7.1.3. through any failure to exercise all due care and diligence
cause or permit any unauthorized disclosure of
any confidential information of the Company (including any predecessor
or successor entity) or any of its subsidiaries or associates which he
has obtained by virtue of his employment or in respect of which the
Company is bound by an obligation of confidence to a third party.
"Confidential information" means all information which is known or
intended to be known only to employees of the Company and shall
include, without limitation, lists or details of customers' information
relating to the working of any process or invention carried on,
developed or used by the Company or any subsidiary or associate,
information relating to research projects, any intellectual property
referred to in Clause 6, prices, discounts, mark-ups, future business
strategy, marketing, tenders and any price sensitive information.
7.2. The restriction in this Clause will not prevent the Employee, after
the Date of Termination, from using, for his own or another's benefit,
any information which becomes available to the public generally other
than by reason of a breach by Employee of his obligations under this
Agreement but any such use will be subject to the restrictions
contained in Clause 8 below.
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<PAGE> 7
8. PROTECTION OF INTERESTS OF COMPANY, ETC.
8.1. In this clause:
8.1.1. "COMPETING BUSINESS" shall mean any business that competes or
has competed, directly or indirectly, with the Company
Business in any country or countries in which the Company has
conducted business within the past two (2) years prior to the
Date of Termination;
8.1.2. "COMPANY BUSINESS" shall mean the development and marketing of
consulting advisory services and supporting models used to
analyze or influence client and industry decisions regarding
energy pricing, investments, regulatory policy and financial
and strategic planning for clients in the natural gas, crude
oil, refined products, electric power and utility industries;
8.1.3. "TERM" means the period commencing on the Date of Termination
of this Agreement and expiring on the first anniversary of the
Date of Termination of Employee's employment by the Company
(less any period of "garden leave" utilized by the Company
under Clause 2.4) for any reason.
8.1.4. References to acting directly or indirectly include (without
prejudice to the generality of that expression) references to
acting alone or jointly with or by means of any other person.
8.2. Until the expiry of the Term the Employee will not directly or
indirectly:
8.2.1. carry on or be interested in a Competing Business save that he
may hold for investment up to five percent (5%) of any class
of securities quoted or dealt in on a recognized stock
exchange;
8.2.2. act as a consultant, employee or officer in any executive,
sales, marketing, research or technical support capacity in a
Competing Business.
8.3. Until the expiry of the Term the Employee will not directly or
indirectly:
8.3.1. solicit, canvass or approach or endeavour to solicit, canvass
or approach in respect of the Company Business and in
competition with the Company or, as the case may be, in
competition with the relevant subsidiary or associate any
person for the purpose of offering to that person any services
comprised in the Company Business:
(A) who, to the knowledge of the Employee, has been
provided with services by the Company or any
subsidiary or associate of the Company at any time
prior to the Date of Termination; or
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<PAGE> 8
(B) who, to the knowledge of the Employee, has been
negotiating with the Company or any subsidiary or
associate of the Company for the supply of services
at any time prior to the Date of Termination;
8.3.2. supply in competition with the Company or, as the case may be,
in competition with the relevant subsidiary or associate any
services comprised in the Company Business to any person who,
to the knowledge of the Employee, has been provided with
services by the Company or any subsidiary or associate of the
Company at any time prior to the Date of Termination;
8.3.3. solicit or entice away or endeavor to solicit or entice away
from the Company or any subsidiary or associate of the Company
in competition with the Company or, as the case may be, in
competition with the relevant subsidiary or associate any
person employed within the prior six (6) months in an
executive, managerial, technical or sales capacity by the
Company or any subsidiary or associate of the Company at the
Date of Termination with a view to inducing that person to
leave such employment and to act for another person in the
Company Business; and
8.3.4. hire, solicit or in any other manner seek to engage or employ
any person who within the prior six (6) months had been any
employee in an executive, managerial, technical or sales
capacity of the Company or any subsidiary or associate of the
Company.
8.4. Each of the restrictions in sub-clauses 8.2.1, 8.2.2, 8.3.1, 8.3.2,
8.3.3 and 8.3.4 hereof are separate and severable and in the event of
any such restriction (including the defined expressions in sub-clause
8.1) being determined as being unenforceable in whole or in part for
any reason such unenforceability shall not affect the enforceability
of the remaining restrictions or, in the case of part of a restriction
being unenforceable, the remainder of the restriction.
9. TERMINATION
9.1. Except as otherwise provided herein, either party will be entitled to
terminate the employment of the Employee by giving to the other not
less than three (3) months' written notice; provided, however, that in
any successive one (1) year renewals of this Agreement, thirty (30)
days written notice shall be required. In the event of such
termination:
9.1.1. by the Company without Cause (as defined in Clause 9.2) or by
the Employee by virtue of constructive dismissal, the Company
shall pay to the Employee the Employee's current salary, bonus
and other benefits as at the date of the notice of termination
for a period of twelve (12) months from the Date of
Termination payable in equal monthly installments. Subject to
Clauses 9.5 to 9.7, the Company shall have no
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<PAGE> 9
other liability in connection with the exercise of its right of
termination pursuant to this Clause 9.1; and
9.1.2. by the Employee (other than by constructive dismissal under
Clause 9.1.1), the Company shall pay to the Employee all
accrued salary, bonus and other benefits at the Date of
Termination, but the Company shall have no other liability in
connection with the exercise by the Employee of its right of
termination pursuant to Clause 9.1.
9.2. Notwithstanding anything in this Agreement to the contrary, the
Company will be entitled to terminate the employment of the Employee
by written notice, specifying the basis for the termination of the
Employee and specifying the Date of Termination if he commits or
suffers any of the following acts or circumstances ("CAUSE"):
9.2.1. willfully destroying Company property having a material value
to the Company and without the prior consent of the Company;
9.2.2. engaging in, committing, or aiding or abetting, directly or
indirectly, the engagement of or commission of fraud,
embezzlement, theft, or comparable dishonest activity;
9.2.3. the conviction of or entering of a plea of guilty or no
contest to any crime other than a traffic infraction;
9.2.4. the failure to materially discharge his duties under this
Agreement commensurate with Employee's title and function or a
material breach of this Agreement (not being remedied within
five (5) days of being required to do so);
9.2.5. the making of a material misrepresentation to the Company, the
Board of Directors, or to any officer(s) to whom the Employee
reports;
9.2.6. becoming of unsound mind or becoming a bankrupt or compounding
with his creditors; or
9.2.7. becoming prohibited by law from being a director of the
Company.
9.3. This Agreement shall terminate automatically upon the death of the
Employee or the Company may at any time terminate this Agreement by
written notice if the Employee is absent or unable to perform the
Employee's duties with the Company on a full time basis as a result of
incapacity due to mental or physical illness for any period of (i) one
hundred twenty (120) consecutive days or (ii) for one hundred twenty
(120) days in any period of two hundred and seventy (270) consecutive
days. In the event of death or incapacity, that results in the
termination of the employment of the Employee, the Company shall pay
the Employee (or any estate, beneficiary or legal representative of
the Employee) all accrued salary, bonus and other benefits as of the
date of death or Date of Termination due to incapacity. Except as set
forth in this Clause 9.3 or Clause
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<PAGE> 10
9.6, the Company shall have no further obligations under this
Agreement in connection with any termination of this Agreement arising
from the death or termination due to incapacity of the Employee.
9.4. If this Agreement is terminated for any reason (excluding a
termination of Employee by the Company without Cause or constructive
dismissal) prior to the completion of a Qualified Public Offering (as
defined in the Limited Liability Company Agreement of Parent (the "LLC
AGREEMENT")) (an "OPTION EVENT"), the Company or Parent shall have the
right and option, in the discretion of the Board, to purchase, at any
time during the ninety (90) days following the occurrence of an Option
Event, any or all of the securities of the Company or Parent
(collectively, the "SECURITIES") then owned by the Employee including
all such Securities acquired by any other Person pursuant to a
Permitted Transfer (as defined in the LLC Agreement) and including any
legal representative, estate, beneficiary, executor, administrator or
trustee of the Employee (the "REPRESENTATIVE") in the event of the
death or termination due to incapacity of the Employee (the "PURCHASE
OPTION"). The following provisions shall apply in relation to such
Purchase Option:
9.4.1. the price to exercise the Purchase Option shall be determined
in accordance with the provisions as set forth in Appendix B
to the LLC Agreement;
9.4.2. the exercise of the Purchase Option shall be by means of a
written notice of exercise (the "OPTION NOTICE") delivered by
the Company to the Employee and/or Representative;
9.4.3. payment for such Securities shall be made in cash in three (3)
equal installments, with the first installment payable on
closing date of the exercise of the Purchase Option , which
date shall be no later than thirty (30) days following the
date of the Option Notice or such longer period as may be
reasonably necessary to determine the purchase price, and the
two (2) subsequent installment payments payable on the first
and second anniversary dates of such closing date. Each of
the latter two payments shall include interest computed at the
rate of eight percent (8%) simple interest per annum, payable
in arrears on the unpaid amount of the purchase price; and
9.4.4. the Board of Directors shall have the option to transfer and
assign the Purchase Option to any designee.
9.5. Upon termination of the Agreement by the Company without Cause
pursuant to Clause 9.1.1 prior to a Qualified Public Offering:
9.5.1. the Employee shall have the right (the "TERMINATION PUT") to
put Securities held by the Employee (including such Securities
acquired by any other Person pursuant to a Permitted Transfer)
to the Company;
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<PAGE> 11
9.5.2. such Securities shall be valued in the same manner as
described in Clause 9.4 above, and the payment terms of Clause
9.4 shall apply equally to an exercise of the Termination Put;
9.5.3. the Termination Put shall be exercised, if at all, by written
notice from the Employee to the Company within sixty (60) days
following the Date of Termination;
9.5.4. each disposition of Securities pursuant to a Termination Put
shall be free and clear of any and all liens, claims, charges
and encumbrances; and
9.5.5. the Board shall have the option to transfer and assign its
obligations under the Termination Put to any designee.
9.6. During the term of this Agreement prior to a Qualified Public
Offering, the Company shall use commercially reasonable efforts to
maintain a key man insurance policy on the life of the Employee for
coverage equal to two million five hundred thousand dollars
($2,500,000), which policy shall be owned by, and under which policy
the beneficiary shall be, the Company or the Parent. Subject to the
Company being able to secure such insurance:
9.6.1. in the event of Employee's death prior to a Qualified Public
Offering, the Representative shall have the right (the "PUT")
to put Securities held by Employee (including such Securities
acquired by any other Person pursuant to a Permitted Transfer)
to the Company;
9.6.2. such Securities shall be valued in the same manner as
described in Clause 9.4 above and the amount thereof that may
be the subject of the Put shall not exceed the net proceeds
actually obtained by the Company pursuant to the foregoing
life insurance policy;
9.6.3. if properly exercised, the Put shall be settled in cash
promptly following receipt of insurance proceeds by the
Company. The Put shall be exercised, if at all, by written
notice from the Representative to the Company within one
hundred twenty (120) days following Employee's death;
9.6.4. each Disposition of Securities pursuant to a Put shall be free
and clear of any and all liens, claims, charges and
encumbrances; and
9.6.5. to the extent that the foregoing life insurance is not
available on commercially reasonable terms or an exclusion
from coverage is applicable, the Put shall not be available.
9.7. On or before the Date of Termination (for whatever reason and
howsoever caused) the Employee will promptly:
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<PAGE> 12
9.7.1. resign (if he has not already done so) from all offices and
directorships held by him in the Company and its subsidiaries
and associates;
9.7.2. deliver up to the Company all lists of customers,
correspondence, documents, credit cards and other property
(including but not limited to any motorcar) belonging to the
Company or any of its subsidiaries or associates which may be
in his possession or under his control; and
9.7.3. the Employee irrevocably authorizes the Company in his name
and on his behalf to execute all documents and do all things
necessary to effect the resignations referred to above, in the
event of his failure to do so.
9.8. The Employee agrees that for the purposes of the Employment Rights Act
1996 the Company may apply any sums which may be due from the Company
to the Employee (including, without limitation, accrued salary and/or
holiday pay) at the Date of Termination (for whatever reason and
howsoever caused) against any sums which may be due from the Employee
to the Company and the Employee further agrees that in the event of
his failure to give due notice of termination of this Agreement under
Clause 9.1 above, the Company may retain any such sums without
prejudice to its right to claim damages for any additional loss it may
suffer as a result of the Employee's failure to give due notice of
termination.
10. SICKNESS BENEFITS
10.1. The Company shall continue to pay the Employee's salary bonus and
other benefits during any period of absence on medical grounds up to a
maximum of sixty (60) working days in any period of twelve (12) months
provided that the Employee shall:
(A) notify the Company immediately of his absence when
such absence commences and comply with the Company's
requirements for notification and documentation of
details involved in such sickness or incapacity;
(B) supply the Company with medical certificates covering
any period of sickness or incapacity which is in
excess of seven or more consecutive days, such
medical certificates to be supplied at weekly
intervals or at such longer intervals as the Board
consider reasonable from the eighth day of absence;
and
(C) following any period of absence on medical grounds
the Employee shall at the request of the Board
provide in writing such details as the Company may
require in order to calculate any Statutory Sick Pay
entitlement.
10.2. For Statutory Sick Pay purposes the Employee's qualifying days shall
be Monday to Friday inclusive.
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10.3. Payment in respect of any other or further period of absence shall be
at the Company's discretion. Any payment to the Employee pursuant to
clauses 10.1 and 10.3 shall be subject to set off by the Company in
respect of any Statutory Sick Pay and any Social Security Sickness
Benefit or other benefits to which the Employee may be entitled.
10.4. If the Employee's absence shall be occasioned by the actionable
negligence of a third party in respect of which damages are
recoverable, then the Employee shall:
(A) notify the Company immediately of all relevant
circumstances and of any claim, compromise,
settlement or judgment made or awarded in connection
with it; and
(B) if the Company so requires, refund to the Company any
amount received by him from any such third party
provided that the refund shall be no more than the
amount which he had recovered in respect of
remuneration.
11. WAIVER OF RIGHTS
11.1. The Employee will have no claim against the Company or any subsidiary
or associate of the Company in respect of a termination if:
11.1.1. the employment of the Employee is terminated:
(A) by reason of the liquidation of the Company for the
purpose of solvent amalgamation or reconstruction; or
(B) as part of any arrangement for the amalgamation of
the undertaking of the Company not involving
liquidation or for the transfer of the whole or part
of the undertaking of the Company to any of its
subsidiaries or associates; and
11.1.2. the Employee is offered employment of a similar nature with
the amalgamated or reconstructed or transferee company for a
period of not less than the then unexpired term of his
employment under this Agreement and on terms not generally
less favourable to him than the terms of this Agreement.
12. ADDITIONAL PARTICULARS
12.1. The following additional particulars are given for the purposes of the
Employment Rights Act 1996:
12.1.1. the employment of the Employee by the Company began on
February 22, 1985;
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<PAGE> 14
12.1.2. no employment of the Employee with a previous employer counts
as part of the Employee's continuous employment with the
Company and his period of continuous employment began on
February 22, 1985;
12.1.3. except as otherwise provided by this Agreement, there are no
terms or conditions of employment relating to hours of work or
to normal working hours or to entitlement to holidays
(including public holidays) or holiday pay or to incapacity
for work due to sickness or injury or to pensions or pension
schemes or requiring the Employee to work outside the United
Kingdom for a period of more than two months;
12.1.4. there are no collective agreements which directly affect the
terms or conditions of the Employee's employment.
12.1.5. This Agreement constitutes the written statement of the terms
of employment of Employee provided in compliance with the
Employment Rights Act 1996.
13. ENTIRE AGREEMENT
13.1. This Agreement represents the entire understanding, and constitutes
the whole agreement, in relation to its subject matter and supersedes
any previous agreement between the parties with respect thereto and,
without prejudice to the generality of the foregoing, excludes any
warranty, condition or other undertaking implied at law or by custom.
13.2. Each party confirms that, except as provided in this Agreement, no
party has relied on any representation or warranty or undertaking
which is not contained in this Agreement, and, without prejudice to
any liability for fraudulent misrepresentation, no party shall be
under any liability or shall have any remedy in respect of
misrepresentation or untrue statement unless and to the extent that a
claim lies under this Agreement.
14. OBLIGATIONS TO THIRD PARTIES
14.1. The Employee warrants that by virtue of entering into this Agreement
and performing the duties set out in this Agreement he will not be in
breach of any contract of service or for the provision of services or
any partnership agreement and will, save as implied by law, be free
from all agreements, arrangements or other restrictions restricting
his right to compete with any person or to solicit clients or
employees of any person or in any way restricting him from performing
this Agreement in accordance with its terms.
14.2. None of the provisions of this Agreement will be for the benefit of,
or enforceable by, any third party beneficiary, except that each
designee selected by the Company pursuant to Clauses 9.4.4 or 9.5.5
and Parent are intended as third party beneficiaries of all rights of
the Company hereunder.
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<PAGE> 15
15. ASSIGNMENT
The Company reserves the right forthwith on written notice to the
Employee to assign its rights and obligations under this Agreement to
any subsidiary or associate of the Company and any reference to the
Company in this Agreement shall thereafter be a reference to any such
company; provided, however, any assignment of this Agreement to a
non-United Kingdom entity shall require the prior written consent of
the Employee (which consent shall not be unreasonably withheld or
delayed). Notwithstanding the foregoing to the contrary, the Company
shall be entitled to assign this Agreement to any corporation or other
business entity that succeeds to all or substantially all of the
business of the Company through merger, consolidation, corporate
reorganization or by acquisition of all or substantially all of the
assets or capital stock of the Company, provided that the successor or
surviving entity that acts as Employee's employer is a United Kingdom
entity, without the prior written consent of Employee.
16. NOTICES
16.1. A notice, approval, consent or other communication given under or in
connection with this Agreement (in this clause known as a "NOTICE"):
16.1.1. must be in writing;
16.1.2. must be left at the address of the addressee or sent by
pre-paid first class post (airmail if posted to or from a
place outside the recipient's respective country) to the
address of the addressee or sent by telex or facsimile to the
telex or facsimile number of the addressee in each case which
is specified in this clause, and marked for the attention to
the person so specified, or such other address as specified,
telex or facsimile number and/or marked for the attention of
such other person as the relevant party may from time to time
specify by Notice given in accordance with this clause.
The relevant details of each party at the date of this
Agreement are:
The Company
Address: Caminus House
Castle Park
Cambridge,
CB3 ORA
United Kingdom
Facsimile: 011 44 1223 322 736
Attention: Managing Director
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<PAGE> 16
The Employee
Address: The Grove, Lady Street
Lavenham, Sudbury,
Suffolk, United Kingdom
Attention: Dr. Nigel L. Evans
16.1.3. A copy of any notice served on the Company shall be sent to:
GFI Caminus LLC
c/o GFI Energy Ventures LLC
12121 Wilshire Boulevard, Suite 1375
Los Angeles, CA 90025
Facsimile: 001 310 442 0540
Attention: Lawrence D. Gilson
16.2. In the absence of evidence of earlier receipt, any Notice shall take
effect from the time that it is deemed to be received in accordance
with sub-clause 16.3 below.
16.3. Subject to sub-clause 16.4 below, a Notice is deemed to be received:
16.3.1. in the case of a notice left at the address of the addressee,
upon delivery at that address;
16.3.2. in the case of a posted letter, on the third day after posting
or, if posted to or from a place outside the recipient's
respective country, the tenth day after posting;
16.3.3. in the case of a facsimile, on production of a transmission
report from the machine from which the facsimile was sent
which indicates that the facsimile was sent in its entirety to
the facsimile number of the recipient provided that a
confirmatory copy of such facsimile shall have been sent by
post in accordance with sub-clause 16.1 within 24 hours of
such transmission.
16.4. A Notice received or deemed to be received in accordance with
sub-clause 16.3 above on a day which is not a business day or after 5
p.m. on any business day according to local time in the place of
receipt, shall be deemed to be received on the next following business
day.
17. GOVERNING LAW
17.1. This Agreement shall be governed by, and construed in accordance with,
English Law. All disputes shall be referred to the High Court of
Justice in England and Wales, to the extent permitted.
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<PAGE> 17
18. DEFINITIONS AND MISCELLANEOUS
18.1. "ASSOCIATE" means a body corporate which for the time being: is a
holding company of the Company or a subsidiary (other than the
Company) of such a holding company; or has not less than 20 per cent
of its equity share capital beneficially owned by such a holding
company or the Company.
18.2. "DATE OF TERMINATION" shall mean the date on which the employment of
the Employee by the Company terminates save pursuant to an assignment
by the Company pursuant to clause 14 above in which case it shall mean
the date on which his employment with such assignee shall terminate.
18.3. "SUBSIDIARY", "HOLDING COMPANY" and "EQUITY SHARE CAPITAL" have the
meaning attributed to them by sections 736, 736A and 744 of the
Companies Act 1985 provided that the term "subsidiary" shall also
include a subsidiary undertaking (as defined in section 258 of the
Companies Act 1985).
18.4. In this Agreement: unless otherwise stated and except in Clause 13
above, a reference to the employment of the Employee is to his
employment by the Company (or if appropriate any assignee pursuant to
Clause 15) under this Agreement.
18.5. Unless the context otherwise requires, words in the singular include
the plural and vice versa, and a reference to a person includes a
reference to a body corporate and to an unincorporated body of
persons.
18.6. A reference to a statute or statutory provision includes a reference
to that statute or provision as from time to time modified or
re-enacted.
18.7. Clause headings are for convenience only and have no legal effect.
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<PAGE> 18
IN WITNESS whereof the parties hereto have executed this Agreement as a Deed on
the day and year first above written.
SIGNED AS A DEED by )
in the presence of: )
/s/ Nigel L. Evans
------------------------
signature of Employee
Signature of Witness /s/ G. Stanfield
Name of Witness G. Stanfield
1R Hills Road
Cambridge, U.K.
Address of Witness
SIGNED AS A DEED by the Company )
acting by two of its directors )
/s/ Michael B. Morrison
------------------------
Director
/s/ Serena Hesmondhalgh
------------------------
Director
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<PAGE> 1
Exhibit 10.22
COVENANT NOT TO COMPETE
This Covenant Not To Compete (the "Agreement"), dated as of May 12, 1998,
by and between Caminus Energy Limited, an English corporation (the "Company"),
and each of Dr. Nigel Evans and Dr. Michael Morrison (each a "Covenantor" and
collectively the "Covenantors"), is to evidence the following agreements and
understandings. Capitalized terms used herein have the respective meanings in
the Stock Purchase Agreement (as hereinafter defined) unless otherwise specified
herein.
W I T N E S S E T H:
WHEREAS, pursuant to that certain Stock Purchase Agreement, dated as of the
date hereof (the "Stock Purchase Agreement"), among Dr. Nigel L. Evans, Dr.
Michael Morrison, and GFI Caminus LLC, a Delaware limited liability company
("GFI Caminus") and the transactions related thereto and contemplated thereby
(collectively the "Purchase"), (a) the Sellers sold, assigned, transferred and
delivered with full title guaranteed all of the issued equity interest of the
Company to GFI Caminus, and (b) GFI Caminus has purchased and accepted all of
the issued equity interest of the Company;
WHEREAS, in connection with the Purchase, the Sellers are in effect,
selling and transferring all of their right, title and interest in the assets,
properties and business, including intellectual property, goodwill and going
concern of the Company to GFI Caminus for substantial consideration and if any
of the Covenantors were able to compete with Company in any manner or engage in
any other activities that are hereinafter proscribed, then GFI Caminus would be
deprived of a substantial portion of the value sought to be obtained through the
Purchase;
WHEREAS, the Company is in the business of developing and marketing
consulting advisory services and supporting models used to analyze or influence
client and industry decisions regarding energy pricing, investments, regulatory
policy and financial and strategic planning for clients in the natural gas,
crude oil, refined products, electric power and utility industries
(collectively, the "Company Business");
WHEREAS, each of the Covenantors is and continues to serve as an executive
officer and director of the Company pursuant to the Service Agreement, dated the
date hereof, between the Company and each of the Covenantors and has substantial
knowledge of, and access and exposure to the Company Business, including but not
limited to intellectual property, confidential and proprietary information of
the Company;
NOW, THEREFORE, in consideration of the mutual promises, covenants,
agreements, representations and warranties hereinafter set forth and for other
good and valuable consideration, the receipt, adequacy and sufficiency of which
is hereby acknowledged, all subject to the completion of the closing of the
Purchase, the parties hereto agree as follows:
1. Agreement Not to Compete.
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<PAGE> 2
A. Until the expiry of the Term the Covenantor will not directly or
indirectly: (i) carry on or be interested in a Competing Business save that he
may hold for investment up to five percent (5%) of any class of securities
quoted or dealt on a recognized stock exchange; or (ii) act as a consultant,
employee or officer in any executive, sales, marketing, research or technical
support capacity in a Competing Business.
B. Until the expiry of the Term the Covenantor will not directly or
indirectly solicit, canvass or approach or endeavor to solicit, canvass or
approach in respect of the Company Business and in competition with the Company
or, as the case may be, in competition with the relevant subsidiary or associate
any person for the purpose of offering to that person any services comprised in
the Company Business: (i) who, to the knowledge of the Covenantor, has been
provided with services by the Company or any subsidiary or associate of the
Company at any time prior to the Date of Termination; (ii) who, to the knowledge
of the Covenantor, has been negotiating with the Company or any subsidiary or
associate of the Company for the supply of services at any time prior to the
Date of Termination; and (iii) supply in competition with the Company or, as the
case may be, in competition with the relevant subsidiary or associate any
services comprised in the Company Business to any person who, to the knowledge
of the Covenantor, has been provided with services by the Company or any
subsidiary or associate of the Company at any time prior to the Date of
Termination.
C. Until the expiry of the Term, the Covenantor will not directly or
indirectly: (i) solicit or entice away or endeavor to solicit or entice away
from the Company or any subsidiary or associate of the Company in competition
with the Company or, as the case may be, in competition with the relevant
subsidiary or associate any person employed within the prior six (6) months in
an executive, managerial, technical or sales capacity by the Company or any
subsidiary or associate of the Company at the Date of Termination with a view to
inducing that person to leave such employment and to act for another person in
the Company Business; or (ii) hire, solicit or in any other manner seek to
engage or employ any person who within the prior six (6) months had been any
employee in an executive, managerial, technical or sales capacity of the Company
or any subsidiary or associate of the Company.
D. Each of the restrictions in Section A, B and C above are separate and
severable and in the event of any such restriction being determined as being
unenforceable in whole or in part for any reason such enforceability shall not
affect the enforceability of the remaining restrictions or, in the case of part
of a restriction being unenforceable, the remainder of the restriction.
E. For purposes hereof, Date of Termination shall mean the date on which
the employment of each of the Covenantors by the Company terminates as set forth
in the respective Service Agreements.
F. For purposes hereof, Term shall mean:
(i) in the event Covenantor fulfills his three (3) year term of Service
Agreement with the Company and thereafter is terminated by either party for any
reason,
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<PAGE> 3
one (1) year from the Date of Termination;
(ii) in the event Covenantor's employment with the Company is terminated
by the Company without Cause (as set forth in Clause 9.2 of the Service
Agreement), or terminated by the Covenantor by virtue of constructive dismissal,
one (1) year from the Date of Termination in each case within the first three
(3) years of the Service Agreement;
(iii) in the event Covenantor voluntarily terminates his Service
Agreement (other than by constructive dismissal) with the Company within the
first three (3) years of the Service Agreement, then two (2) years from the
Date of Termination; and
(iv) in the event Covenantor's employment with the Company is terminated
with Cause by the Company within the first three (3) years of the Service
Agreement, then two (2) years from the Date of Termination.
2. Consideration. Covenantor agrees and acknowledges that the value to be
derived by him from the transactions contemplated by the Stock Purchase
Agreement and the consideration payable to him pursuant to the Service Agreement
constitute substantial value and shall serve as exclusive consideration for his
agreements set forth in this Agreement, and that no additional consideration is
payable or necessary in connection therewith.
3. Miscellaneous.
A. Entire Agreement; Amendments; Waiver. This Agreement and any document
referred to herein sets forth the entire understanding of the parties relating
to the subject matter hereof and supersedes all agreements, representations,
warranties, statements, promises and understandings, with respect to the subject
matter hereof. No amendment of any provision of this Agreement shall be valid
unless the same shall be in writing and signed by the Company and Covenantor. No
waiver by any party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior os subsequent such occurrence.
B. Notices. All notices under this Agreement will be in writing and will be
delivered by personal service or telegram, telecopy or certified mail (if such
service is not available, then by first class mail), postage prepaid, to such
address as may be designated from time to time by the relevant party, and which
will initially be as set forth below. Any notice sent by certified mail will be
deemed to have been given seven (7) days after the date on which it is mailed.
All other notices will be deemed given when received. No objection may be made
to the manner of delivery of any notice actually received in writing by an
authorized agent of a party. Notices will be addressed as follows or to such
other address as the party to whom the same is directed will have specified in
conformity with the foregoing:
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<PAGE> 4
If to Company:
Caminus Energy Limited
Caminus House, Castle Park
Cambridge, CB3 ORA
United Kingdom
Attention: Chief Executive Officer
Telephone: 011-44-1223-322-736
Facsimile: 011-44-1223-301-637
With a copy to:
GFI Caminus LLC
c/o GFI Energy Ventures LLC
12121 Wilshire Blvd., Suite 1375
Los Angeles, CA 90025
Attention: Lawrence D. Gilson
Telephone: (310) 442-0542
Facsimile: (310) 442-0540
If to Covenantor:
Dr. Nigel Evans
c/o Caminus Energy Limited
Caminus House, Castle Park
Cambridge, CB3 0RA
United Kingdom
Telephone: 011-44-1223-322-736
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<PAGE> 5
If to Covenantor:
Dr. Michael B. Morrison
c/o Caminus Energy Limited
Caminus House, Castle Park
Cambridge, CB3 0RA
United Kingdom
Telephone: 011-44-1223-322-736
C. Equitable Relief. Covenantor acknowledges that the covenants contained
in Section 1 hereof are reasonable and necessary to protect the legitimate
interests of the Company, that any breach or threatened breach of such covenants
will result in irreparable injury to the Company and that the remedy at law for
such breach or threatened breach would be inadequate. Accordingly, in the event
of the breach by Covenantor of any of the provisions of this Agreement, the
Company, in addition and as a supplement to such other rights and remedies as
may exist in their favor, may apply to any court of law or equity having
jurisdiction to enforce this Agreement, and/or may apply for injunctive relief
against any act that would violate any of the provisions of this Agreement.
D. Third-Party Benefits. None of the provisions of this Agreement will be
for the benefit of, or enforceable by, any third-party beneficiary, except that
GFI Caminus is intended as a third-party beneficiary of all rights of the
Company hereunder.
E. Successors and Assigns. This Agreement will be binding upon and inure to
the benefit of the parties, their respective successors and permitted assigns.
None of the parties hereto may assign any of their rights or obligations under
this Agreement without the prior written consent of all other parties hereto,
except that this Agreement may be assigned by the Company to any corporation or
other business entity that succeeds to all or substantially all of the business
of the Company through merger, consolidation, corporate reorganization or by
acquisition of all or substantially all of the assets or capital stock of the
Company.
F. Governing Law. This Agreement shall be governed by, and construed in
accordance with English law. All disputes shall be referred to the High Court of
Justice in England and Wales, to the extent permitted.
G. Headings and Gender. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement. All words shall be construed to be of such
gender and number as the circumstances require.
H. Severability. The validity, legality or enforceability of the remainder
of this Agreement will not be affected even if one or more of the provisions of
this Agreement are held to be invalid, illegal or unenforceable in any respect.
Further, if the period of time, the extent of the geographic area, or the scope
of the prescribed activities
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<PAGE> 6
covered by this Agreement should be deemed unenforceable, then this Agreement
shall be construed to cover the maximum period of time, geographic area and
scope of prescribed activities (not to exceed the maximum time, geographic area
or scope set forth herein) as may be valid under applicable law. The parties
specifically intend that any court determining the extent of the enforceability
of this Agreement shall, if it determines that the Agreement is not fully
enforceable in accordance with its terms, modify the period of time, geographic
area or scope of prescribed activities provided for herein to the minimum extent
necessary such that the provisions hereof as so modified are enforceable.
I. Attorneys' Fees. Any action or proceeding is brought to enforce or
interpret any provision of this Agreement, the prevailing party shall be
entitled to recover as an element of its costs, and not its damages, reasonable
attorneys' fees and costs incurred in connection with such action or proceeding.
J. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
K. Remedies Not Exclusive. No remedy conferred by any of the specific
provisions of this Agreement is intended to be exclusive of any other remedy,
and each and every remedy will be cumulative and will be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or otherwise. The election of any one or more remedies will not
constitute a waiver of the right to pursue other available remedies.
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<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the first date set forth above.
CAMINUS ENERGY LIMITED COVENANTORS
By: /s/ Serena Hesmondhalgh /s/ Nigel Evans
----------------------------- -------------------------------
Dr. Nigel Evans
Its: Director
-----------------------------
/s/ Michael B. Morrison
-------------------------------
Dr. Michael Morrison
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<PAGE> 1
Exhibit 10.23
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of May 12, 1998, by and
between BRIAN SCANLAN (the "Employee") and ZAI*NET SOFTWARE, L.P., a Delaware
limited partnership (the "Company") with reference to the following facts. Any
capitalized terms not otherwise defined herein shall have the respective
definitions as set forth in the Amended and Restated Limited Partnership
Agreement, dated as of the date hereof (the "Partnership Agreement").
WHEREAS, the Company desires to employ Employee as the President and
Employee desires to be so employed on the terms and conditions hereinafter set
forth;
NOW THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter contained the parties hereby agree as follows:
1. Employment.
1.1 Position and Duties. Employee shall be employed as the President
of the Company upon the terms and provisions set forth in this Agreement.
Employee hereby accepts such employment on the terms and conditions set forth
herein. Employee agrees to devote his full time and best efforts, skills and
abilities to the business and affairs of the Company; provided, however, that
the foregoing shall not limit Employee from performing charitable activities,
managing personal passive investments or serving on the board of directors of
another entity to the extent that such outside activities do not in any material
way detract from Employee's performance of his duties hereunder and are in
compliance with Employee's Covenant Not to Compete dated as of even date
herewith. Employee shall perform all duties and have all responsibilities
consistent with the officer position indicated above as specified by the
Management Committee of the Company, provided that such duties and
responsibilities are commensurate with Employee's title, function and position.
Employee shall perform his duties principally at the Company's headquarters
located in New York City (where Employee shall be based); provided, however,
Employee acknowledges that he will be required to travel in the ordinary course
of the Company's business as the reasonable needs of the Company shall require.
Notwithstanding the foregoing, the Company shall not relocate Employee from New
York City without Employee's consent.
1.2 Reporting. Employee shall report to the Management Committee of
the Company.
2. Term. The term of this Agreement ("Term") shall commence as of the
date hereof and continue in full force and effect until three (3) years from the
date hereof, unless sooner terminated pursuant to the provisions of this
Agreement.
<PAGE> 2
3. Compensation and Benefits.
3.1 Base Salary. As compensation for the services to be performed by
Employee during the Term, the Company shall pay Employee a base salary of One
Hundred Fifty Thousand Dollars ($150,000), per annum, payable in accordance with
the Company's payroll practices in effect from time to time, but not less often
than monthly (as such amount may be increased by the Management Committee
pursuant to periodic reviews in accordance with Section 3.3 below, the "Base
Salary"). Base Salary shall be payable in substantially equal installments and
reduced on a pro-rata basis for any fraction of a year or month during which
Employee is not so employed.
3.2 Bonus. During the Term, Employee shall be eligible to participate
in the Company's annual profit sharing plan for its key employees (the "Annual
Plan"), in accordance with the terms thereof as in effect from time to time. Any
such bonus earned by Employee shall be paid annually not later than thirty (30)
days after completion of the Company's annual fiscal year audit or, upon mutual
agreement of the parties, in another fashion, subject to Employee being employed
by the Company upon the date of payment of any such bonus.
3.3 Periodic Review. The Management Committee shall review Employee's
compensation not less frequently then every twelve (12) months. Following such
review, the Management Committee may, in its discretion, increase (but not
decrease) Employee's compensation (including, in the discretion of the
Management Committee, Employee's Base Salary) for the unexpired portion of the
Term.
3.4 Reimbursements. Employee shall be reimbursed for all reasonable
travel, entertainment and other reasonable business expenses incurred by
Employee in the performance of his duties hereunder, including expenses incurred
in connection with Employee's use of a cellular phone, a pager and a dedicated
home telephone line used for Company business. The Company shall reimburse
Employee upon presentation to the Company of receipts and an itemized accounting
of such expenses in accordance with the Company's reimbursement policy which is
provided to Employee in writing.
3.5 Deductions and Withholding of Taxes. There shall be deducted or
withheld from any amounts payable to Employee for all federal, state, city or
other taxes required by applicable law to be so withheld or deducted, standard
Employee deductions (e.g., social security and state disability insurance) and
any other amounts authorized for deduction by Employee or required by law.
3.6 Additional Benefits. Employee shall be entitled to receive other
benefits in accordance with the Company's then-current benefits policies for
senior executives of the Company, including, without limitation, the following:
(i) long term disability and life insurance plans for Employee, (ii) health,
hospitalization and major medical insurance plans, and (iii) benefits similar to
those described in clause (ii) for Employee and Employee's wife and children.
Employee shall be entitled to an automobile allowance of up to $350 per month
for the purchase or lease of an automobile. In addition
2
<PAGE> 3
thereto, Employee shall be entitled to reimbursement (i) for magazine,
periodicals and other professional journals up to an aggregate of One Thousand
Dollars ($1,000) per year and (ii) membership in the University of Pennsylvania
Club not to exceed One Thousand Two Hundred Dollars ($1,200) per year.
4. Vacation. Employee shall be entitled to four (4) weeks of paid
vacation in each calendar year. Employee shall be entitled to have accrued no
more than five (5) weeks unused vacation at any given time; any unused vacation
time in excess of such amount shall be cancelled.
5. Termination of Employment. Except as otherwise provided herein,
Employee's employment and all rights of Employee hereunder shall terminate upon
the termination of this Agreement, and neither Employee nor his successors will
have any rights hereunder, except with respect to compensation earned by and
payable to Employee hereunder prior to the effective date of such termination
and except with respect to any rights or monies vested in Employee's 401(k) plan
or other benefit plans in which Employee was participating at the time of such
effective date (collectively, "Earned and Vested Benefits"). This Agreement and
the employment of Employee shall terminate only upon the occurrence of any of
the following events effective upon the satisfaction of the specified conditions
and the expiration of any notice periods after the delivery of any required
notices.
5.1 Mutual Agreement. The Company and Employee may mutually agree in
writing to the termination of this Agreement, including the extent of the
continuation of rights and obligations of the Company and Employee.
5.2 Termination for Cause. The Company may terminate this Agreement
for "Cause", as defined below, at any time such Cause exists, by written notice
to the Employee. In the event the Company elects to terminate Employee for
Cause, the Management Committee of the Company shall send written notice to
Employee terminating such employment, indicating the basis for such termination
and specifying the termination date. "Cause" for termination of this Agreement
by the Company shall mean any of the following acts or circumstances of
Employee: (i) willful destruction of Company property having a material value to
the Company; (ii) fraud, embezzlement, theft, or comparable dishonest activity
(excluding acts involving a de minimis dollar value and not related to the
Company); (iii) conviction of or entering a plea of guilty or nolo contendere to
any crime constituting a felony or any misdemeanor involving fraud, dishonesty
or moral turpitude (excluding acts involving a de minimis dollar value and not
related to the Company); (iv) breach, neglect, refusal, or failure to materially
discharge the duties under this Agreement commensurate with Employee's title and
function; or (v) a willful and knowing material misrepresentation to the
Company, the Management Committee or any officer(s) to whom the Employee
reports. Notwithstanding the foregoing to the contrary, prior to discharging
Employee pursuant to clause (iv) of the immediately preceding sentence, the
Company shall give Employee at least fifteen (15) days' prior written notice of
any breach or failure and an opportunity to cure any such breach or failure. In
connection with a termination by the Company for Cause, the
3
<PAGE> 4
Company shall pay all Earned and Vested Benefits. Except as set forth in this
Section 5.2 and Section 5.6, the Company shall have no further obligations under
this Agreement in connection with a termination of the Employee for Cause.
5.3 Termination Without Cause. Notwithstanding any other provision of
this Section 5, in the event that Employee's employment is terminated by the
Company without Cause or if Employee resigns for Good Reason (hereinafter
defined), Employee shall receive all Earned and Vested Benefits and as a
severance benefit, the Employee shall receive the Base Salary provided for in
Section 3 hereof throughout the remainder of the Term of this Agreement. For
purposes of this Agreement, "Good Reason" shall mean (i) a relocation of
Employee, without his prior written consent, outside of the New York City
Metropolitan area, (ii) a failure to maintain Employee in a management position
substantially equivalent to that provided for in Section 1.1 hereof, (iii) a
material diminution by the Company of Employee's responsibilities which change
would cause Employee's position at the Company to become one of less
responsibility, importance or scope, (iv) a willful failure in bad faith to pay
the Base Salary or bonus to Employee when due or another material breach of this
Agreement by the Company that has a material adverse effect on Employee, or (v)
a willful failure by GFI Caminus LLC (or any successors) to make any of the
payments required to be made pursuant to Sections 2.5.1 or 2.5.2 of the Purchase
Agreement. All amounts due Employee under this Section shall be paid to Employee
without offset for any amounts earned by Employee in any other employment or
from any other source. Except as set forth in this Section 5.3, Section 5.6 and
Section 5.8, the Company shall have no further obligations under this Agreement
in connection with a termination of Employee without Cause or a resignation of
Employee for Good Reason.
5.4 Death/Disability. This Agreement shall terminate automatically
upon the death of Employee. For the purposes of this Agreement, "Disability"
shall mean that (i) for any period of one hundred and twenty (120) consecutive
days, or for one hundred and twenty (120) days in any period of two hundred and
seventy (270) consecutive days, Employee is absent or unable to perform
Employee's duties with the Company on a full time basis as a result of
incapacity due to mental or physical illness. Employee may be terminated by
written notice to Employee from the Company at any time after the Employee meets
the definition of Disability upon one (1) month's prior notice provided that
Employee does not return to his employment substantially in his full capacity
during such one (1) month period. In the event of the death or Disability of the
Employee, the Company shall pay Employee (or any estate, beneficiary or legal
representative of Employee) all Earned and Vested Benefits. Except as set forth
in this Section 5.4, Section 5.6 and Section 5.7, the Company shall have no
further obligations under this Agreement in connection with a death or
Disability of Employee.
5.5 Termination by Employee. Except as provided in Section 5.6 below,
in the event that Employee unilaterally elects to terminate his employment, the
Company shall have no further obligations to make any payments under this
Agreement and Employee shall forfeit any right to such payments, except for
Earned and Vested Benefits.
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5.6 Purchase Option in Partnership Interests. Upon the occurrence of
any of the events set forth in Sections 5.1 (within three (3) years of the date
hereof), 5.2, 5.4 (in the event of Disability, only if such Disability results
in Employee ceasing to have legal capacity to contract) and 5.5 (within three
(3) years of the date hereof), then prior to the completion of a Qualified
Public Offering (collectively the "Option Events"), the Company shall have the
right and option, in the discretion of the Management Committee of the Company,
to purchase (the "Purchase Option"), at any time during the ninety (90) days
following the occurrence of an Option Event, all of the Securities (as defined
in Appendix B to the Partnership Agreement) then owned, directly or indirectly,
by Employee (including, without limitation, those Securities held, indirectly
through ZAI*NET Software, Inc. or Rooney Software, L.L.C.), including all such
Securities acquired by any other Person pursuant to a Permitted Transfer and
including any interests therein of any holding company, legal representative,
estate, beneficiary, executor, administrator or trustee of the Employee (the
"Representative"); provided, however, upon the death or Disability (resulting in
cessation of legal capacity to contract) of Employee, to the extent that (i) all
of the Securities subject to the Purchase Option will, following such event, be
controlled (as to powers of voting and disposition) solely by Cynthia Chang, and
provided that such person remains the spouse of Employee at the date of death or
Disability ("Spouse"), and (ii) in the event of death, the entire beneficial
ownership interest in the Securities that would otherwise be subject to the
Purchase Option is transferred to Spouse or collectively to the children of
Employee and Spouse (including for purposes hereof any trust established for
estate planning purposes in which Spouse and such children are the only
beneficiaries), the occurrence of the death or Disability of Employee shall not
constitute an Option Event. The price to exercise the Purchase Option shall be
determined in accordance with the Appraised Value as set forth in Appendix B to
the Partnership Agreement. The exercise of the Purchase Option shall be by means
of a written notice of exercise (the "Notice") delivered by the Company to the
Employee and/or Representative. Payment for such Securities shall be made in
cash in three (3) equal installments, with the first installment payable on
closing date of the exercise of the Purchase Option, which date shall be no
later than thirty (30) days following the Notice date or such longer period as
may be reasonably necessary to determine the Appraised Value, and the two (2)
subsequent installment payments payable on the first and second anniversary
dates of such closing date. Each of the latter two payments shall include
interest computed at the rate of eight percent (8%) simple interest per annum,
payable in arrears on the unpaid amount of the purchase price. The Management
Committee shall have the option to transfer and assign the Purchase Option to
any designee.
5.7 Key Man Life Insurance; Put. During the Term of this Agreement
prior to Qualified Public Offering, the Company shall use commercially
reasonable efforts to maintain a key man insurance policy on the life of the
Employee for coverage equal to Two Million Five Hundred Thousand Dollars
($2,500,000). The Company or GFI Caminus LLC as the General Partner of the
Company shall own such policy and be the beneficiary thereunder. Provided that
the Company is able to secure such insurance, in the event of Employee's death
prior to a Qualified Public Offering, the Representative shall have the right
(the "Put") to put Securities held by Employee (including such
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Securities acquired by any other Person pursuant to a Permitted Transfer),
whether owned directly or indirectly through ZAI*NET (or any permitted assignee
pursuant to the Partnership Agreement), to the Company. Such Securities shall be
valued in the same manner as described in Section 5.6 above, and the amount
thereof that may be the subject of the Put shall not exceed the net proceeds
actually obtained by the Company pursuant to the foregoing life insurance
policy. If properly exercised, the Put shall be settled in cash promptly
following receipt of insurance proceeds by the Company. The Put shall be
exercised, if at all, by written notice from the Representative to the Company
within sixty (60) days following Employee's death. To the extent that the
foregoing life insurance is not available on commercially reasonable terms or an
exclusion from coverage is applicable, the Put shall not be available. Each
Disposition of Securities pursuant to a Put shall be free and clear of any and
all liens, claims, charges and encumbrances.
5.8 Put Option. Upon a termination of Employee's employment by the
Company without Cause prior to a Qualified Public Offering, Employee shall have
the right (the "Termination Put") to put Securities held by Employee (including
such Securities acquired by any other Person pursuant to a Permitted Transfer)
to the Company. Such Securities shall be valued in the same manner as described
in Section 5.6 above, and the payment terms of Section 5.6 shall apply equally
to an exercise of the Termination Put. The Termination Put shall be exercised,
if at all, by written notice from the Employee to the Company within sixty (60)
days following termination without Cause. Each Disposition of Securities
pursuant to a Termination Put shall be free and clear of any and all liens,
claims, charges and encumbrances. The Management Committee shall have the option
to transfer and assign its obligations under the Terminate Put to any designee.
6. Proprietary Rights.
6.1 Employee agrees that all intellectual property rights,
developments, designs, computer software, inventions, applications and
improvements, including but not limited to trade names, assumed names, service
names, service marks, trademarks, logos, patents, copyrights, licenses,
formulas, trade secrets and technology, whether in design, methods, processes,
formulae, machines or devices and all other applications (collectively,
"Employee Inventions"), whether made, created, invented, devised or developed
prior to the date of this Agreement for the Company or ZAI*NET or hereafter by
Employee during the rendition of his services hereunder, other than Employee
Inventions made, created, invented, devised or developed by Employee (i) on his
own personal time, (ii) without the use of the Company's facilities and
resources and (iii) which are not related to the Company Business and do not
otherwise relate to a matter governed or restricted by the Covenant Not to
Compete (collectively, "Unrelated Inventions"), are works made for hire and
shall be the exclusive property of the Company without separate compensation to
the Employee. Employee will, at the request and expense of the Company made at
any time, execute and deliver to the Company or its nominee such applications
and instruments as may be desirable and appropriate for obtaining for the
Company or its nominee, patents, copyrights, trademarks, know-how and other
intellectual property protection of the United States and all other countries
for vesting in the Company or its nominee, all of Employee's claim, right, title
and interest in said intellectual
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property rights, developments, designs, computer software, inventions,
improvements, applications and improvements and for maintaining, enforcing and
defending the same, and to otherwise vest in or evidence the Company's exclusive
ownership of all of the rights referred to herein. In the event that for
whatever reason the results of Employee's past or future work for the Company
should not be deemed to be works made for hire, Employee agrees to assign, and
hereby does assign, to the Company all claim, right, title and interest, in any
country, to each and every patent, copyright, trademark, computer software,
know-how or other intellectual property of any sort, other than Unrelated
Inventions, that is the result of work done in the course of the Employee's past
or future employment by the Company, or that the Employee creates or develops,
in whole or in part by, using the Company's equipment, supplies or facilities.
Each and every such assignment is and shall be in consideration of this
Agreement with the Company, and no further consideration therefor is or shall be
provided to Employee by the Company. Employee hereby waives enforcement of any
moral or legal rights which might limit the Company's rights to exploit any of
the foregoing materials in any manner. For all purposes of this Section 6,
references to the "Company" shall be deemed to include all predecessors entities
and businesses. Notwithstanding anything in the foregoing to the contrary, an
Employee Invention which is a software product shall not constitute an
"Unrelated Invention" unless Employee gives written notice to the Management
Committee of the Company of his intention to treat such Employee Invention as an
"Unrelated Invention", and the Management Committee of the Company, in its
reasonable, good faith determination, gives written notice to Employee of its
concurrence in such characterization.
6.2 Equitable Relief. Employee acknowledges that the provisions
contained in Section 6.1 hereof are reasonable and necessary to protect the
legitimate interests of the Company, that any breach or threatened breach of
such provisions will result in irreparable injury to the Company and that the
remedy at law for such breach or threatened breach would be inadequate.
Accordingly, in the event of the breach by Employee of any of the provisions of
Section 6.1 hereof, the Company, in addition and as a supplement to such other
rights and remedies as may exist in its favor, may apply to any court of law or
equity having jurisdiction to enforce this Agreement, and/or may apply for
injunctive relief against any act that would violate any of the provisions of
this Agreement (without being required to post a bond). Employee further
understands that monetary damages will not be sufficient to avoid or compensate
for a breach of the provisions contained in Section 6.1 hereof and that
injunctive relief would be appropriate to prevent any such breach or threatened
breach. Such right to obtain injunctive relief may be exercised, at the option
of the Company, concurrently with, prior to, after, or in lieu of, the exercise
of any other rights or remedies that the Company may have as a result of any
such breach or threatened breach.
7. Non-Disclosure/Non-Competition. As a condition to the execution of
this Agreement by the Company and as additional consideration therefor, Employee
shall concurrently herewith execute and deliver to the Company a Covenant Not to
Compete attached hereto as Exhibit A (the "Non-Compete Agreement"), which is
hereby incorporated by reference and shall be deemed an integral part hereof.
The Non-Compete
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Agreement shall survive the termination of this Agreement or Employee's
employment hereunder for any reason.
8. Miscellaneous.
8.1 Entire Agreement; Amendments. Except as provided in Section 7
hereof, this Agreement constitutes the entire agreement between the parties with
respect to the employment of Employee by the Company and supersedes any prior
understandings, agreements or representations between the parties, written or
oral, to the extent they have related in any way to the subject matter hereof.
No amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by the Company and Employee. No waiver by any
party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
8.2 Arbitration. Except as otherwise provided in Section 6.2 hereof or
otherwise required by law, any claim or controversy arising out of or relating
to the performance of this Agreement shall be settled by mandatory arbitration
in New York City, New York in accordance with the Commercial Arbitration Rules
of the American Arbitration Association then in effect. Such claim or
controversy shall be resolved by a three (3) arbitrator panel selected as
follows: one arbitrator selected by the Company, one arbitrator selected by
Employee and one arbitrator selected by each of the arbitrators selected by each
of the Company and Employee. Judgment upon the arbitration award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. All
discovery shall be governed by the Federal Rules of Civil Procedure. Either
party may apply to any court having jurisdiction hereof and seek injunctive
relief so as to maintain the status quo of the parties until such time as the
arbitration award is rendered or the claim or controversy otherwise resolved.
The prevailing party in any such matter shall recover all of its costs and
expenses, including reasonable attorneys' fees.
8.3 Notices. All notices under this Agreement will be in writing and
will be delivered by personal service or telegram, telecopy or certified mail
(if such service is not available, then by first class mail), postage prepaid,
or Federal Express (or other reputable overnight courier) to such address as may
be designated from time to time by the relevant party, and which will initially
be as set forth below. Any notice sent by certified mail will be deemed to have
been given three (3) days after the date on which it is mailed. Notices sent by
personal delivery shall be deemed effective on the date delivered, notices sent
by Federal Express (or other reputable overnight courier) shall be deemed
effective on the third business day following the sending thereof and notices
sent by telecopy shall be deemed effective on the date delivered. No objection
may be made to the manner of delivery of any notice actually received in writing
by an authorized agent of a party. Notices will be addressed as follows or to
such other address as the party to whom the same is directed will have specified
in conformity with the foregoing:
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If to Company:
ZAI*NET Software, L.P.
747 Third Avenue, 18th Floor
New York, New York 10017
Attn: President
Telephone: (212) 888-3600
Facsimile: (212) 888-0691
with a copy to:
GFI Energy Ventures LLC
12121 Wilshire Boulevard, Suite 1375
Los Angeles, California 90025
Attn: Lawrence D. Gilson
Telephone: (310) 442-0542
Facsimile: (310) 442-0540
If to Employee:
Brian Scanlan
c/o ZAI*NET Software, Inc.
747 Third Avenue, 18th Floor
New York, New York 10017
Telephone: (212) 888-3600
Facsimile: (212) 888-0691
with a copy to:
Zukerman Gore & Brandeis, LLP
900 Third Avenue
New York, New York 10022
Attn: Jeffrey D. Zukerman, Esq.
Telephone: (212) 223-6700
Facsimile: (212) 223-6433
8.4 Third-Party Benefits. None of the provisions of this Agreement
will be for the benefit of, or enforceable by, any third-party beneficiary,
except that each designee selected by the Company pursuant to Section 5.6 or
Section 5.8, and GFI Caminus LLC in its capacity as General Partner of the
Company, are intended as a third-party beneficiary of all rights of the Company
hereunder.
8.5 Successors and Assigns. This Agreement will be binding upon and
inure to the benefit of the parties, their respective successors and permitted
assigns. None of the parties hereto may assign any of their rights or
obligations under this Agreement without the prior written consent of all other
parties hereto, except that this Agreement
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may be assigned by the Company to any corporation or other business entity that
succeeds to all or substantially all of the business of the Company through
merger, consolidation, corporate reorganization or by acquisition of all or
substantially all of the assets or capital stock of the Company, provided that
in the event of any such assignment, the services to be rendered by Employee to
such assignee shall be of the same nature and professional status provided for
in this Agreement.
8.6 Governing Law. All questions with respect to this Agreement and
the rights and liabilities of the parties shall be governed by the laws of the
State of New York, regardless of the choice of law provisions of that state or
any other jurisdiction.
8.7 Headings and Gender. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement. All words shall be construed to be
of such gender and number as the circumstances require.
8.8 Severability. The validity, legality or enforceability of the
remainder of this Agreement will not be affected even if one or more of the
provisions of this Agreement will be held to be invalid, illegal or
unenforceable in any respect.
8.9 Attorneys' Fees. Subject to Section 8.2 hereof, if any action or
proceeding is brought to enforce or interpret any provision of this Agreement,
the prevailing party shall be entitled to recover as an element of its costs,
and not its damages, reasonable attorneys' fees and costs incurred in connection
with such action or proceeding.
8.10 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
8.11 Survival. The provisions of Section 6 and Section 7 of this
Agreement shall survive any termination of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
ZAI*NET SOFTWARE, L.P., a Delaware limited EMPLOYEE
partnership
By: GFI Caminus LLC,
Its: General Partner
By: /s/ Lawrence D. Gilson /s/ Brian Scanlan
------------------------------ --------------------------
Lawrence D. Gilson Brian Scanlan
Its: President
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Exhibit 10.24
COVENANT NOT TO COMPETE
This Covenant Not To Compete (the "Agreement"), dated as of May 12,
1998, by and between ZAI*NET SOFTWARE, L.P., a Delaware limited partnership
(the "Company"), and BRIAN SCANLAN (the "Covenantor"), is to evidence the
following agreements and understandings. Capitalized terms used herein have
the respective meanings in the Purchase Agreement (as hereinafter defined)
unless otherwise specified herein.
W I T N E S S E T H:
WHEREAS, pursuant to that certain Assignment and Assumption Agreement
dated as of the date hereof (the "Assignment Agreement"), and that certain
Purchase Agreement, dated as of the date hereof (the "Purchase Agreement"),
among the Company, GFI Caminus LLC, a Delaware limited liability company ("GFI
Caminus"), ZAI*NET Software, Inc., a Delaware corporation ("ZAI*NET"), and
Brian J. Scanlan, and the transactions related thereto and contemplated thereby
(collectively the "Purchase"), (a) ZAI*NET transferred substantially all of its
assets (including goodwill) to the Company, and (b) GFI Caminus has purchased a
seventy-one percent (71%) ownership interest (the "Ownership Interest") in the
Company;
WHEREAS, in connection with the Purchase, Covenantor is, in effect,
selling and transferring all of his right, title and interest in the
intellectual property and goodwill of ZAI*NET to the Company for substantial
consideration;
WHEREAS, by agreeing to enter into the Purchase Agreement and
consummate the transactions contemplated therein, GFI Caminus desires and is
seeking to acquire an equity ownership interest in the intellectual property,
goodwill and going concern value of the Company and if Covenantor were able to
compete with Company in any manner or engage in any other activities that are
hereinafter proscribed, then GFI Caminus would be deprived of a substantial
portion of the value sought to be obtained through the Purchase;
WHEREAS, the Company is in the business of developing, licensing,
installing and maintaining commodities trading and risk management software and
providing consulting and support services substantially related to such
software activities to the foreign exchange, natural gas, crude oil, refined
products and electric power industries (collectively, the "Company Business");
WHEREAS, the Covenantor is one of the founders of the Company and
ZAI*NET and has substantial knowledge of, and access and exposure to the
Company Business, including but not limited to intellectual property,
confidential and proprietary information of the Company;
WHEREAS, Covenantor must enter into this Agreement and the Employment
Agreement, dated as of even date herewith (the "Employment Agreement"), as a
condition precedent to GFI Caminus's execution of the Purchase Agreement;
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NOW, THEREFORE, in consideration of the mutual promises, covenants,
agreements, representations and warranties hereinafter set forth and for other
good and valuable consideration, the receipt, adequacy and sufficiency of which
is hereby acknowledged, all subject to the completion of the closing of the
Purchase, the parties hereto agree as follows:
1. Agreement Not to Compete.
1.1 Noncompetition. As a condition to the transactions
being completed pursuant to the Purchase Agreement, and as a means reasonably
designed to protect the intellectual property, confidential and proprietary
information of the Company, for a period consisting of the greater of (i) three
and one-half (3-1/2) years from the date hereof or (ii) two (2) years from the
conclusion of Covenantor's employment with the Company as a result of the
termination of the Employment Agreement or otherwise (such greater period the
"Term"), Covenantor will not, without the prior written consent of the Company
based upon approval from the Management Committee of the Company (or any
similar successor management body of the Company or any successor entity of the
Company), in the Geographical Area, directly or indirectly, engage in, assist
(financially or otherwise), associate with, or perform services (other than on
behalf of the Company or any of its Affiliates) in the Company Business,
including, without limitation, whether such engagement, assistance, association
or performance is as an individual, principal, officer, director, proprietor,
employee, partner, stockholder or other investor (other than as a holder of
less than five percent (5%) of the outstanding capital stock of a publicly
traded corporation), creditor, guarantor, consultant, advisor, agent, sales
representative or other participant, or otherwise permit his name to be used or
employed with any such Company Business. For purposes of this Agreement, (i)
"Affiliate" shall mean any person, partnership, limited liability company,
joint venture, trust, corporation or other entity, directly or indirectly,
controlling, controlled by or under common control with such person,
partnership, limited liability company, joint venture, trust, corporation or
other entity; and (ii) "Geographical Area" shall mean the world.
1.2 Reasonable Restrictions. Covenantor hereby
represents and acknowledges that: the restrictions stated herein on the
activities in which Covenantor may engage upon termination of his employment
with the Company are reasonable and that, despite such restrictions, Covenantor
will be able to earn his livelihood and engage in his profession following said
termination; the worldwide restriction is reasonable because the Company
presently does business or did business, or has a bona fide plan of doing
business during the Term, throughout the world; and the period of time
designated above is reasonable in relation to the nature of the Company's
business.
2. Non-Interference. During the Term, Covenantor will not,
without the prior written consent of the Company, directly, indirectly or as an
agent on behalf of or in conjunction with any person, firm, partnership,
corporation or other entity, (a) hire, solicit, encourage the resignation of,
or in any other manner seek to engage or employ any person (other than Cynthia
Chang) who is then, or within the prior twelve (12) months had been, an
employee of the Company or its Affiliates, whether or not for compensation and
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whether as an officer, covenantor, consultant, adviser, independent sales
representative, independent contractor or participant, or (b) except as may be
appropriate to perform Covenantor's duties under the Employment Agreement,
contact, solicit, service or otherwise have any dealings related to Company
Business with any person or entity with whom the Company or its Affiliates has
a former, current or prospective business relationship or who is or was at any
time during his employment with the Company (including any predecessor or
successor entity) a customer or client of the Company or its Affiliates, or a
prospective customer or client to which the Company or its Affiliates has made
a written or oral business proposal.
3. Future Employment. Nothing contained herein shall prevent
Covenantor from, during the Term seeking employment with or, after the
termination of Covenantor's employment with the Company becoming employed by a
utility, financial services company or other firm, provided that Covenantor's
responsibilities in connection with such employment do not involve, directly or
indirectly, activities related to any aspect of the Company Business.
4. Confidentiality. Covenantor agrees not to disclose, use,
transfer or sell any intellectual property, confidential or proprietary
information of the Company, whether Covenantor has such information in his
memory or embodied in writing or other physical form, unless such activities
are on behalf of and expressly authorized by the Company. For purposes of this
Agreement, the phrase "intellectual property, confidential or proprietary
information of the Company" means all information which is known or intended to
be known only to employees of the Company or others in a confidential
relationship with any of them, including, without limitation, that which
relates to marketing or brand recognition matters, such as logos, tradenames,
service names, and trademarks, or to technical matters, such as patents,
programs, components, devices, formulae, testing procedures, processes,
computer software and graphics products of the Company or any Affiliate, or to
business matters such as the identity of clients, customers or business
partners or terms of business relationships with clients, customers or business
partners. Notwithstanding the foregoing, the term "intellectual property,
confidential or proprietary information" of the Company shall not include
information which (i) is, at the time of the disclosure, a part of the public
domain through no act or omission by Covenantor, (ii) known to the Covenantor
prior to the time of disclosure by the Covenantor, provided that the
information was not obtained by the Covenantor in the course of rendering
services to the Company or any predecessor entity or (iii) is hereafter
disclosed to Covenantor by a third party who or which did not acquire the
information under an obligation of confidentiality to or through the Company or
any predecessor entity. Covenantor agrees not to remove from the premises of
the Company, any intellectual property, confidential or proprietary information
of the Company, except as permitted by the Company and except for Covenantor's
personal rolodex and other personal belongings and files that do not contain
intellectual property, confidential or proprietary information related to the
Company Business. Covenantor recognizes that all such intellectual property,
confidential or proprietary information of the Company, are the exclusive
property of the Company. Covenantor agrees to return to the Company all
written materials in his possession containing or reflecting intellectual
property, confidential or proprietary information of the Company promptly
following the cessation
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of any service relationship with the Company, except for Covenantor's personal
rolodex and other personal belongings and files that do not contain
intellectual property, confidential or proprietary information related to the
Company Business. Covenantor agrees that the restrictions contained in this
Section 4 shall continue to apply without time or geographic restrictions, so
long as any information remains intellectual property, confidential or
proprietary information of the Company.
5. Consideration. Covenantor agrees and acknowledges that the
value to be derived by him from the transactions contemplated by the Purchase
Agreement and the consideration payable to him pursuant to the Employment
Agreement constitute substantial value and shall serve as exclusive
consideration for his agreements set forth in this Agreement, and that no
additional consideration is payable or necessary in connection therewith.
6. Miscellaneous.
6.1 Entire Agreement; Amendments. This Agreement and any
document referred to herein sets forth the entire understanding of the parties
relating to the subject matter hereof and supersedes all agreements,
representations, warranties, statements, promises and understandings, with
respect to the subject matter hereof. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Company and Employee. No waiver by any party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior os subsequent such
occurrence.
6.2 Arbitration. Subject to Section 6.4 hereof, and
except as otherwise required by law, any claim or controversy arising out of or
relating to the performance of this Agreement shall be settled by arbitration
in New York City, New York in accordance with the Commercial Arbitration Rules
of the American Arbitration Association then in effect. Such claim or
controversy shall be resolved by a three (3) arbitrator panel selected as
follows: one arbitrator selected by the Company, one arbitrator selected by
the Covenantor and one arbitrator selected by each of the arbitrators selected
by each of the Company and the Covenantor. Judgment upon the arbitration award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof. All discovery shall be governed by the Federal Rules of Civil
Procedure. Either party may apply to any court having jurisdiction hereof and
seek injunctive relief so as to maintain the status quo of the parties until
such time as the arbitration award is rendered or the claim or controversy
otherwise resolved. The prevailing party in any such matter shall recover all
of its costs and expenses, including reasonable attorneys' fees.
6.3 Notices. All notices under this Agreement will be in
writing and will be delivered by personal service or telegram, telecopy or
certified mail (if such service is not available, then by first class mail),
postage prepaid, Federal Express (or other reputable overnight courier) to such
address as may be designated from time to time by the relevant party, and which
will initially be as set forth below. Any notice sent by
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certified mail will be deemed to have been given three (3) days after the date
on which it is mailed. Notices sent by personal delivery shall be deemed
effective on the date delivered, notices sent by Federal Express (or other
reputable overnight courier) shall be deemed effective on the third business
day following the sending thereof and notices sent by telecopy shall be deemed
effective on the date delivered. No objection may be made to the manner of
delivery of any notice actually received in writing by an authorized agent of a
party. Notices will be addressed as follows or to such other address as the
party to whom the same is directed will have specified in conformity with the
foregoing:
If to Company:
ZAI*NET Software, L.P.
747 Third Avenue, 18th Floor
New York, New York 10017
Attn: President
Telephone: (212) 888-3600
Facsimile: (212) 888-0691
If to Covenantor:
Brian Scanlan
c/o ZAI*NET Software, Inc.
747 Third Avenue, 18th Floor
New York, New York 10017
Telephone: (212) 888-3600
Facsimile: (212) 888-0691
with a copy to:
Zukerman Gore & Brandeis, LLP
900 Third Avenue
New York, New York 10022
Attn: Jeffrey D. Zukerman, Esq.
Telephone: (212) 223-6700
Facsimile: (212) 223-6433
6.4 Equitable Relief; Accounting. Covenantor
acknowledges that the covenants contained in Sections 1, 2 and 4 hereof are
reasonable and necessary to protect the legitimate interests of the Company,
that any breach or threatened breach of such covenants will result in
irreparable injury to the Company and that the remedy at law for such breach or
threatened breach would be inadequate. Accordingly, in the event of the breach
by Covenantor of any of the provisions of this Agreement, the Company, in
addition and as a supplement to such other rights and remedies as may exist in
their favor, may apply to any court of law or equity having jurisdiction to
enforce this Agreement, and/or may apply for injunctive relief against any act
that would violate any of the provisions of this Agreement (without being
required to post a bond). Covenantor further understands that monetary damages
will not be sufficient to avoid or compensate for a
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breach of the covenants contained in Sections 1, 2 and 4 hereof and that
injunctive relief would be appropriate to prevent any such breach or threatened
breach. Such right to obtain injunctive relief may be exercised, at the option
of the Company, concurrently with, prior to, after, or in lieu of, the exercise
of any other rights or remedies that the Company may have as a result of any
such breach or threatened breach. In addition, Covenantor shall account for
and pay over to the Company all compensation, profits and other benefits
inuring to Covenantor's benefit that are derived or received by Covenantor
thereof resulting from any action or transaction constituting a breach of the
covenants contained in Sections 1, 2 and 4 hereof.
6.5 Third-Party Benefits. None of the provisions of this
Agreement will be for the benefit of, or enforceable by, any third-party
beneficiary, except that GFI Caminus LLC is intended as a third-party
beneficiary of all rights of the Company hereunder.
6.6 Successors and Assigns. This Agreement will be
binding upon and inure to the benefit of the parties, their respective
successors and permitted assigns. None of the parties hereto may assign any of
their rights or obligations under this Agreement without the prior written
consent of all other parties hereto, except that this Agreement may be assigned
by the Company to any corporation or other business entity that succeeds to all
or substantially all of the business of the Company through merger,
consolidation, corporate reorganization or by acquisition of all or
substantially all of the assets or capital stock of the Company.
6.7 Governing Law. All questions with respect to this
Agreement and the rights and liabilities of the parties shall be governed by
the laws of the State of New York, regardless of the choice of law provisions
of that state or any other jurisdiction.
6.8 Headings and Gender. The section headings contained
in this Agreement are inserted for convenience only and shall not affect in any
way the meaning or interpretation of this Agreement. All words shall be
construed to be of such gender and number as the circumstances require.
6.9 Severability. The validity, legality or
enforceability of the remainder of this Agreement will not be affected even if
one or more of the provisions of this Agreement are held to be invalid, illegal
or unenforceable in any respect. Further, if the period of time, the extent of
the geographic area, or the scope of the prescribed activities covered by this
Agreement should be deemed unenforceable, then this Agreement shall be
construed to cover the maximum period of time, geographic area and scope of
prescribed activities (not to exceed the maximum time, geographic area or scope
set forth herein) as may be valid under applicable law. The parties
specifically intend that any court determining the extent of the enforceability
of this Agreement shall, if it determines that the Agreement is not fully
enforceable in accordance with its terms, modify the period of time, geographic
area or scope of prescribed activities provided for herein to the minimum
extent necessary such that the provisions hereof as so modified are
enforceable.
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6.10 Attorneys' Fees. Subject to Section 6.2 hereof, if
any action or proceeding is brought to enforce or interpret any provision of
this Agreement, the prevailing party shall be entitled to recover as an element
of its costs, and not its damages, reasonable attorneys' fees and costs
incurred in connection with such action or proceeding.
6.11 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which will be deemed an
original, but all of which together will constitute one and the same
instrument.
6.12 Remedies Not Exclusive. No remedy conferred by any
of the specific provisions of this Agreement is intended to be exclusive of any
other remedy, and each and every remedy will be cumulative and will be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute or otherwise. The election of any one or more
remedies will not constitute a waiver of the right to pursue other available
remedies.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the first date set forth above.
ZAI*NET SOFTWARE, L.P., a Delaware limited COVENANTOR
partnership
By: GFI Caminus LLC,
Its: General Partner
By: /s/ Lawrence D. Gilson /s/ Brian Scanlan
---------------------- -----------------
Lawrence D. Gilson Brian Scanlan
Its: President
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Exhibit 10.25
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of May 12, 1998, by
and between SIMON YOUNG (the "Employee") and ZAI*NET SOFTWARE, L.P., a Delaware
limited partnership (the "Company") with reference to the following facts. Any
capitalized terms not otherwise defined herein shall have the respective
definitions as set forth in the Amended and Restated Limited Partnership
Agreement, dated as of the date hereof (the "Partnership Agreement").
WHEREAS, the Company desires to employ Employee as Executive Vice
President and Employee desires to be so employed on the terms and conditions
hereinafter set forth;
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter contained the parties hereby agree as
follows:
1. Employment.
1.1 Position and Duties. Employee shall be employed as
Executive Vice President of the Company upon the terms and provisions set forth
in this Agreement. Employee hereby accepts such employment on the terms and
conditions set forth herein. Employee agrees to devote his full time and best
efforts, skills and abilities to the business and affairs of the Company;
provided, however, that the foregoing shall not limit Employee from performing
charitable activities, managing personal passive investments or serving on the
board of directors of another entity to the extent that such outside activities
do not in any material way detract from Employee's performance of his duties
hereunder and are in compliance with Employee's Covenant Not to Compete dated
as of even date herewith. Employee shall perform all duties and have all
responsibilities consistent with the officer position indicated above as
specified by the Management Committee of the Company, provided that such duties
and responsibilities are commensurate with Employee's title, function and
position. Employee shall perform his duties principally at the Company's office
located in Houston, Texas (where Employee shall be based); provided, however,
Employee acknowledges that he will be required to travel in the ordinary course
of the Company's business as the reasonable needs of the Company shall require.
Notwithstanding the foregoing, the Company shall not relocate Employee from
Houston, Texas without Employee's consent.
1.2 Reporting. Employee shall report to the President of the Company.
2. Term. The term of this Agreement ("Term") shall commence as
of the date hereof and continue in full force and effect until three (3) years
from the date hereof, unless sooner terminated pursuant to the provisions of
this Agreement.
<PAGE> 2
3. Compensation and Benefits.
3.1 Base Salary. As compensation for the services to be
performed by Employee during the Term, the Company shall pay Employee a base
salary of One Hundred Fifty Thousand Dollars ($150,000), per annum, payable in
accordance with the Company's payroll practices in effect from time to time,
but not less often than monthly (as such amount may be increased by the
Management Committee pursuant to periodic reviews in accordance with Section
3.3 below, the "Base Salary"). Base Salary shall be payable in substantially
equal installments and reduced on a pro-rata basis for any fraction of a year
or month during which Employee is not so employed.
3.2 Bonus. During the Term, Employee shall be eligible
to participate in the Company's annual profit sharing plan for its key
employees (the "Annual Plan"), in accordance with the terms thereof as in
effect from time to time. Any such bonus earned by Employee shall be paid
annually not later than thirty (30) days after completion of the Company's
annual fiscal year audit or, upon mutual agreement of the parties, in another
fashion, subject to Employee being employed by the Company upon the date of
payment of any such bonus.
3.3 Periodic Review. The Management Committee shall
review Employee's compensation not less frequently then every twelve (12)
months. Following such review, the Management Committee may, in its
discretion, increase (but not decrease) Employee's compensation (including, in
the discretion of the Management Committee, Employee's Base Salary) for the
unexpired portion of the Term.
3.4 Reimbursements. Employee shall be reimbursed for all
reasonable travel, entertainment and other reasonable business expenses
incurred by Employee in the performance of his duties hereunder, including
expenses incurred in connection with Employee's use of a cellular phone, a
pager and a dedicated home telephone line used for Company business. The
Company shall reimburse Employee upon presentation to the Company of receipts
and an itemized accounting of such expenses in accordance with the Company's
reimbursement policy which is provided to Employee in writing.
3.5 Deductions and Withholding of Taxes. There shall be
deducted or withheld from any amounts payable to Employee for all federal,
state, city or other taxes required by applicable law to be so withheld or
deducted, standard Employee deductions (e.g., social security and state
disability insurance) and any other amounts authorized for deduction by
Employee or required by law.
3.6 Additional Benefits. Employee shall be entitled to
receive other benefits in accordance with the Company's then-current benefits
policies for senior executives of the Company, including, without limitation,
the following: (i) long term disability and life insurance plans for Employee,
(ii) health, hospitalization and major medical insurance plans, and (iii)
benefits similar to those described in clause (ii) for Employee and Employee's
wife and children. Employee shall be entitled to an automobile allowance of up
to $350 per month for the purchase or lease of an automobile. In addition
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<PAGE> 3
thereto, Employee shall be entitled to reimbursement for membership in the
Harvard University Club not to exceed One Thousand Two Hundred Dollars ($1,200)
per year.
4. Vacation. Employee shall be entitled to four (4) weeks of
paid vacation in each calendar year. Employee shall be entitled to have
accrued no more than five (5) weeks unused vacation at any given time; any
unused vacation time in excess of such amount shall be cancelled.
5. Termination of Employment. Except as otherwise provided
herein, Employee's employment and all rights of Employee hereunder shall
terminate upon the termination of this Agreement, and neither Employee nor his
successors will have any rights hereunder, except with respect to compensation
earned by and payable to Employee hereunder prior to the effective date of such
termination and except with respect to any rights or monies vested in
Employee's 401(k) plan or other benefit plans in which Employee was
participating at the time of such effective date (collectively, "Earned and
Vested Benefits"). This Agreement and the employment of Employee shall
terminate only upon the occurrence of any of the following events effective
upon the satisfaction of the specified conditions and the expiration of any
notice periods after the delivery of any required notices.
5.1 Mutual Agreement. The Company and Employee may
mutually agree in writing to the termination of this Agreement, including the
extent of the continuation of rights and obligations of the Company and
Employee.
5.2 Termination for Cause. The Company may terminate
this Agreement for "Cause", as defined below, at any time such Cause exists, by
written notice to the Employee. In the event the Company elects to terminate
Employee for Cause, the Management Committee of the Company shall send written
notice to Employee terminating such employment, indicating the basis for such
termination and specifying the termination date. "Cause" for termination of
this Agreement by the Company shall mean any of the following acts or
circumstances of Employee: (i) willful destruction of Company property having
a material value to the Company; (ii) fraud, embezzlement, theft, or comparable
dishonest activity (excluding acts involving a de minimis dollar value and not
related to the Company); (iii) conviction of or entering a plea of guilty or
nolo contendere to any crime constituting a felony or any misdemeanor involving
fraud, dishonesty or moral turpitude (excluding acts involving a de minimis
dollar value and not related to the Company); (iv) breach, neglect, refusal, or
failure to materially discharge the duties under this Agreement commensurate
with Employee's title and function; or (v) a willful and knowing material
misrepresentation to the Company, the Management Committee or any officer(s) to
whom the Employee reports. Notwithstanding the foregoing to the contrary,
prior to discharging Employee pursuant to clause (iv) of the immediately
preceding sentence, the Company shall give Employee at least fifteen (15) days'
prior written notice of any breach or failure and an opportunity to cure any
such breach or failure. In connection with a termination by the Company for
Cause, the Company shall pay all Earned and Vested Benefits. Except as set
forth in this Section 5.2 and Section 5.6, the Company shall have no further
obligations under this Agreement in
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<PAGE> 4
connection with a termination of the Employee for Cause.
5.3 Termination Without Cause. Notwithstanding any other
provision of this Section 5, in the event that Employee's employment is
terminated by the Company without Cause or if Employee resigns for Good Reason
(hereinafter defined), Employee shall receive all Earned and Vested Benefits
and as a severance benefit, the Employee shall receive the Base Salary provided
for in Section 3 hereof throughout the remainder of the Term of this Agreement.
For purposes of this Agreement, "Good Reason" shall mean (i) a relocation of
Employee, without his prior written consent, outside of the Houston
Metropolitan area (excluding a relocation to New York City to work in the
Company's headquarters), (ii) a failure to maintain Employee in a management
position substantially equivalent to that provided for in Section 1.1 hereof,
(iii) a material diminution by the Company of Employee's responsibilities which
change would cause Employee's position at the Company to become one of less
responsibility, importance or scope or (iv) a willful failure in bad faith to
pay the Base Salary or bonus to Employee when due or another material breach of
this Agreement by the Company that has a material adverse effect on Employee.
All amounts due Employee under this Section shall be paid to Employee without
offset for any amounts earned by Employee in any other employment or from any
other source. Except as set forth in this Section 5.3, Section 5.6 and Section
5.8, the Company shall have no further obligations under this Agreement in
connection with a termination of Employee without Cause or a resignation of
Employee for Good Reason.
5.4 Death/Disability. This Agreement shall terminate
automatically upon the death of Employee. For the purposes of this Agreement,
"Disability" shall mean that (i) for any period of one hundred and twenty (120)
consecutive days, or for one hundred and twenty (120) days in any period of two
hundred and seventy (270) consecutive days, Employee is absent or unable to
perform Employee's duties with the Company on a full time basis as a result of
incapacity due to mental or physical illness. Employee may be terminated by
written notice to Employee from the Company at any time after the Employee
meets the definition of Disability upon one (1) month's prior notice provided
that Employee does not return to his employment substantially in his full
capacity during such one (1) month period. In the event of the death or
Disability of the Employee, the Company shall pay Employee (or any estate,
beneficiary or legal representative of Employee) all Earned and Vested
Benefits. Except as set forth in this Section 5.4, Section 5.6 and Section
5.7, the Company shall have no further obligations under this Agreement in
connection with a death or Disability of Employee.
5.5 Termination by Employee. Except as provided in
Section 5.6 below, in the event that Employee unilaterally elects to terminate
his employment, the Company shall have no further obligations to make any
payments under this Agreement and Employee shall forfeit any right to such
payments, except for Earned and Vested Benefits.
5.6 Purchase Option in Partnership Interests. Upon the
occurrence of any of the events set forth in Sections 5.1 (within three (3)
years of the date hereof), 5.2, 5.4 (in the event of Disability, only if such
Disability results in Employee ceasing to have
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<PAGE> 5
legal capacity to contract) and 5.5 (within three (3) years of the date hereof)
then prior to the completion of a Qualified Public Offering (collectively the
"Option Events"), the Company shall have the right and option, in the
discretion of the Management Committee of the Company, to purchase (the
"Purchase Option"), at any time during the ninety (90) days following the
occurrence of an Option Event, all of the Securities (as defined in Appendix B
to the Partnership Agreement) then owned, directly or indirectly, by Employee
(including, without limitation, those Securities held, indirectly through
ZAI*NET Software, Inc. or Rooney Software, L.L.C.), including all such
Securities acquired by any other Person pursuant to a Permitted Transfer and
including any interests therein of any holding company, legal representative,
estate, beneficiary, executor, administrator or trustee of the Employee (the
"Representative"); provided, however, upon death or Disability (resulting in
cessation of legal capacity to contract) of Employee, to the extent that (i)
all of the Securities subject to the Purchase Option will, following such
event, be controlled (as to powers of voting and disposition) solely by Lavanya
Doddamani (subject to her valid marriage to Simon Young), and provided that
such person remains the spouse of Employee at the date of death or Disability
("Spouse"), and (ii) in the event of death, the entire beneficial ownership
interest in the Securities that would otherwise be subject to the Purchase
Option is transferred to Spouse or collectively to the children of Employee and
Spouse (including for purposes hereof any trust established for estate planning
purposes in which Spouse and such children are the only beneficiaries), the
occurrence of the death or Disability of Employee shall not constitute an
Option Event. The price to exercise the Purchase Option shall be determined in
accordance with the Appraised Value as set forth in Appendix B to the
Partnership Agreement. The exercise of the Purchase Option shall be by means
of a written notice of exercise (the "Notice") delivered by the Company to the
Employee and/or Representative. Payment for such Securities shall be made in
cash in three (3) equal installments, with the first installment payable on
closing date of the exercise of the Purchase Option, which date shall be no
later than thirty (30) days following the Notice date or such longer period as
may be reasonably necessary to determine the Appraised Value, and the two (2)
subsequent installment payments payable on the first and second anniversary
dates of such closing date. Each of the latter two payments shall include
interest computed at the rate of eight percent (8%) simple interest per annum,
payable in arrears on the unpaid amount of the purchase price. The Management
Committee shall have the option to transfer and assign the Purchase Option to
any designee.
5.7 Key Man Life Insurance; Put. During the Term of this
Agreement prior to Qualified Public Offering, the Company shall use
commercially reasonable efforts to maintain a key man insurance policy on the
life of the Employee for coverage equal to Two Million Five Hundred Thousand
Dollars ($2,500,000). The Company or GFI Caminus LLC as the General Partner of
the Company shall own such policy and be the beneficiary thereunder. Provided
that the Company is able to secure such insurance, in the event of Employee's
death prior to a Qualified Public Offering, the Representative shall have the
right (the "Put") to put Securities held by Employee (including such Securities
acquired by any other Person pursuant to a Permitted Transfer), whether owned
directly or indirectly through ZAI*NET (or any permitted assignee pursuant to
the Partnership Agreement), to the Company. Such Securities shall be valued in
the same
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<PAGE> 6
manner as described in Section 5.6 above, and the amount thereof that may be
the subject of the Put shall not exceed the net proceeds actually obtained by
the Company pursuant to the foregoing life insurance policy. If properly
exercised, the Put shall be settled in cash promptly following receipt of
insurance proceeds by the Company. The Put shall be exercised, if at all, by
written notice from the Representative to the Company within sixty (60) days
following Employee's death. To the extent that the foregoing life insurance is
not available on commercially reasonable terms or an exclusion from coverage is
applicable, the Put shall not be available. Each Disposition of Securities
pursuant to a Put shall be free and clear of any and all liens, claims, charges
and encumbrances.
5.8 Put Option. Upon a termination of Employee's
employment by the Company without Cause prior to a Qualified Public Offering,
Employee shall have the right (the "Termination Put") to put Securities held by
Employee (including such Securities acquired by any other Person pursuant to a
Permitted Transfer) to the Company. Such Securities shall be valued in the
same manner as described in Section 5.6 above, and the payment terms of Section
5.6 shall apply equally to an exercise of the Termination Put. The Termination
Put shall be exercised, if at all, by written notice from the Employee to the
Company within sixty (60) days following termination without Cause. Each
Disposition of Securities pursuant to a Termination Put shall be free and clear
of any and all liens, claims, charges and encumbrances. The Management
Committee shall have the option to transfer and assign its obligations under
the Terminate Put to any designee.
6. Proprietary Rights.
6.1 Employee agrees that all intellectual property
rights, developments, designs, computer software, inventions, applications and
improvements, including but not limited to trade names, assumed names, service
names, service marks, trademarks, logos, patents, copyrights, licenses,
formulas, trade secrets and technology, whether in design, methods, processes,
formulae, machines or devices and all other applications (collectively,
"Employee Inventions"), whether made, created, invented, devised or developed
prior to the date of this Agreement for the Company or ZAI*NET or hereafter by
Employee during the rendition of his services hereunder, other than Employee
Inventions made, created, invented, devised or developed by Employee (i) on his
own personal time, (ii) without the use of the Company's facilities and
resources and (iii) which are not related to the Company Business and do not
otherwise relate to a matter governed or restricted by the Covenant Not to
Compete (collectively, "Unrelated Inventions"), are works made for hire and
shall be the exclusive property of the Company without separate compensation to
the Employee. Employee will, at the request and expense of the Company made at
any time, execute and deliver to the Company or its nominee such applications
and instruments as may be desirable and appropriate for obtaining for the
Company or its nominee, patents, copyrights, trademarks, know-how and other
intellectual property protection of the United States and all other countries
for vesting in the Company or its nominee, all of Employee's claim, right,
title and interest in said intellectual property rights, developments, designs,
computer software, inventions, improvements, applications and improvements and
for maintaining, enforcing and defending the same, and to otherwise vest in or
evidence the Company's exclusive ownership of all of the
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rights referred to herein. In the event that for whatever reason the results
of Employee's past or future work for the Company should not be deemed to be
works made for hire, Employee agrees to assign, and hereby does assign, to the
Company all claim, right, title and interest, in any country, to each and every
patent, copyright, trademark, computer software, know-how or other intellectual
property of any sort, other than Unrelated Inventions, that is the result of
work done in the course of the Employee's past or future employment by the
Company, or that the Employee creates or develops, in whole or in part by,
using the Company's equipment, supplies or facilities. Each and every such
assignment is and shall be in consideration of this Agreement with the Company,
and no further consideration therefor is or shall be provided to Employee by
the Company. Employee hereby waives enforcement of any moral or legal rights
which might limit the Company's rights to exploit any of the foregoing
materials in any manner. For all purposes of this Section 6, references to the
"Company" shall be deemed to include all predecessors entities and businesses.
Notwithstanding anything in the foregoing to the contrary, an Employee
Invention which is a software product shall not constitute an "Unrelated
Invention" unless Employee gives written notice to the Management Committee of
the Company of his intention to treat such Employee Invention as an "Unrelated
Invention", and the Management Committee of the Company, in its reasonable,
good faith determination, gives written notice to Employee of its concurrence
in such characterization.
6.2 Equitable Relief. Employee acknowledges that the
provisions contained in Section 6.1 hereof are reasonable and necessary to
protect the legitimate interests of the Company, that any breach or threatened
breach of such provisions will result in irreparable injury to the Company and
that the remedy at law for such breach or threatened breach would be
inadequate. Accordingly, in the event of the breach by Employee of any of the
provisions of Section 6.1 hereof, the Company, in addition and as a supplement
to such other rights and remedies as may exist in its favor, may apply to any
court of law or equity having jurisdiction to enforce this Agreement, and/or
may apply for injunctive relief against any act that would violate any of the
provisions of this Agreement (without being required to post a bond). Employee
further understands that monetary damages will not be sufficient to avoid or
compensate for a breach of the provisions contained in Section 6.1 hereof and
that injunctive relief would be appropriate to prevent any such breach or
threatened breach. Such right to obtain injunctive relief may be exercised, at
the option of the Company, concurrently with, prior to, after, or in lieu of,
the exercise of any other rights or remedies that the Company may have as a
result of any such breach or threatened breach.
7. Non-Disclosure/Non-Competition. As a condition to the
execution of this Agreement by the Company and as additional consideration
therefor, Employee shall concurrently herewith execute and deliver to the
Company a Covenant Not to Compete attached hereto as Exhibit A (the
"Non-Compete Agreement"), which is hereby incorporated by reference and shall
be deemed an integral part hereof. The Non-Compete Agreement shall survive the
termination of this Agreement or Employee's employment hereunder for any
reason.
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8. Miscellaneous.
8.1 Entire Agreement; Amendments. Except as provided in
Section 7 hereof, this Agreement constitutes the entire agreement between the
parties with respect to the employment of Employee by the Company and
supersedes any prior understandings, agreements or representations between the
parties, written or oral, to the extent they have related in any way to the
subject matter hereof. No amendment of any provision of this Agreement shall
be valid unless the same shall be in writing and signed by the Company and
Employee. No waiver by any party of any default, misrepresentation, or breach
of warranty or covenant hereunder, whether intentional or not, shall be deemed
to extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by
virtue of any prior os subsequent such occurrence.
8.2 Arbitration. Except as otherwise provided in Section
6.2 hereof or otherwise required by law, any claim or controversy arising out
of or relating to the performance of this Agreement shall be settled by
mandatory arbitration in New York City, New York in accordance with the
Commercial Arbitration Rules of the American Arbitration Association then in
effect. Such claim or controversy shall be resolved by a three (3) arbitrator
panel selected as follows: one arbitrator selected by the Company, one
arbitrator selected by Employee and one arbitrator selected by each of the
arbitrators selected by each of the Company and Employee. Judgment upon the
arbitration award rendered by the arbitrators may be entered in any court
having jurisdiction thereof. All discovery shall be governed by the Federal
Rules of Civil Procedure. Either party may apply to any court having
jurisdiction hereof and seek injunctive relief so as to maintain the status quo
of the parties until such time as the arbitration award is rendered or the
claim or controversy otherwise resolved. The prevailing party in any such
matter shall recover all of its costs and expenses, including reasonable
attorneys' fees.
8.3 Notices. All notices under this Agreement will be in
writing and will be delivered by personal service or telegram, telecopy or
certified mail (if such service is not available, then by first class mail),
postage prepaid, or Federal Express (or other reputable overnight courier) to
such address as may be designated from time to time by the relevant party, and
which will initially be as set forth below. Any notice sent by certified mail
will be deemed to have been given three (3) days after the date on which it is
mailed. Notices sent by personal delivery shall be deemed effective on the date
delivered, notices sent by Federal Express (or other reputable overnight
courier) shall be deemed effective on the third business day following the
sending thereof and notices sent by telecopy shall be deemed effective on the
date delivered. No objection may be made to the manner of delivery of any
notice actually received in writing by an authorized agent of a party. Notices
will be addressed as follows or to such other address as the party to whom the
same is directed will have specified in conformity with the foregoing:
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If to Company:
ZAI*NET Software, L.P.
747 Third Avenue, 18th Floor
New York, New York 10017
Attn: President
Telephone: (212) 888-3600
Facsimile: (212) 888-0691
with a copy to:
GFI Energy Ventures LLC
12121 Wilshire Boulevard, Suite 1375
Los Angeles, California 90025
Attn: Lawrence D. Gilson
Telephone: (310) 442-0542
Facsimile: (310) 442-0540
If to Employee:
Simon Young
c/o ZAI*NET Software, L.P.
5444 Westheimer Street, Suite 1500
Houston, Texas 77056
Telephone: (713) 626-1305
Facsimile: (713) 626-9422
with a copy to:
Zukerman Gore & Brandeis, LLP
900 Third Avenue
New York, New York 10022
Attn: Jeffrey D. Zukerman, Esq.
Telephone: (212) 223-6700
Facsimile: (212) 223-6433
8.4 Third-Party Benefits. None of the provisions of this
Agreement will be for the benefit of, or enforceable by, any third-party
beneficiary, except that each designee selected by the Company pursuant to
Section 5.6 or Section 5.8, and GFI Caminus LLC in its capacity as General
Partner of the Company, are intended as a third-party beneficiary of all rights
of the Company hereunder.
8.5 Successors and Assigns. This Agreement will be
binding upon and inure to the benefit of the parties, their respective
successors and permitted assigns. None of the parties hereto may assign any of
their rights or obligations under this Agreement without the prior written
consent of all other parties hereto, except that this Agreement
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<PAGE> 10
may be assigned by the Company to any corporation or other business entity that
succeeds to all or substantially all of the business of the Company through
merger, consolidation, corporate reorganization or by acquisition of all or
substantially all of the assets or capital stock of the Company, provided that
in the event of any such assignment, the services to be rendered by Employee to
such assignee shall be of the same nature and professional status provided for
in this Agreement.
8.6 Governing Law. All questions with respect to this
Agreement and the rights and liabilities of the parties shall be governed by
the laws of the State of New York, regardless of the choice of law provisions
of that state or any other jurisdiction.
8.7 Headings and Gender. The section headings contained
in this Agreement are inserted for convenience only and shall not affect in any
way the meaning or interpretation of this Agreement. All words shall be
construed to be of such gender and number as the circumstances require.
8.8 Severability. The validity, legality or
enforceability of the remainder of this Agreement will not be affected even if
one or more of the provisions of this Agreement will be held to be invalid,
illegal or unenforceable in any respect.
8.9 Attorneys' Fees. Subject to Section 8.2 hereof, if
any action or proceeding is brought to enforce or interpret any provision of
this Agreement, the prevailing party shall be entitled to recover as an element
of its costs, and not its damages, reasonable attorneys' fees and costs
incurred in connection with such action or proceeding.
8.10 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which will be deemed an
original, but all of which together will constitute one and the same
instrument.
8.11 Survival. The provisions of Section 6 and Section 7
of this Agreement shall survive any termination of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
ZAI*NET SOFTWARE, L.P., a Delaware limited EMPLOYEE
partnership
By: /s/ Brian Scanlan /s/ Simon Young
---------------------------------------- -------------------------
Simon Young
Name: Brian Scanlan
Its: President
11
<PAGE> 1
EXHIBIT 10.26
COVENANT NOT TO COMPETE
This Covenant Not To Compete (the "Agreement"), dated as of May 12, 1998,
by and between ZAI*NET SOFTWARE, L.P., a Delaware limited partnership (the
"Company"), and SIMON YOUNG (the "Covenantor"), is to evidence the following
agreements and understandings. Capitalized terms used herein have the respective
meanings in the Purchase Agreement (as hereinafter defined) unless otherwise
specified herein.
W I T N E S S E T H:
WHEREAS, pursuant to that certain Assignment and Assumption Agreement dated
as of the date hereof (the "Assignment Agreement"), and that certain Purchase
Agreement, dated as of the date hereof (the "Purchase Agreement"), among the
Company, GFI Caminus LLC, a Delaware limited liability company ("GFI Caminus"),
ZAI*NET Software, Inc., a Delaware corporation ("ZAI*NET"), and Brian J.
Scanlan, and the transactions related thereto and contemplated thereby
(collectively the "Purchase"), (a) ZAI*NET transferred substantially all of its
assets (including goodwill) to the Company, and (b) GFI Caminus has purchased a
seventy-one percent (71%) ownership interest (the "Ownership Interest") in the
Company;
WHEREAS, by agreeing to enter into the Purchase Agreement and consummate
the transactions contemplated therein, GFI Caminus desires and is seeking to
acquire an equity ownership interest in the intellectual property, goodwill and
going concern value of the Company and if Covenantor were able to compete with
Company in any manner or engage in any other activities that are hereinafter
proscribed, then GFI Caminus would be deprived of a substantial portion of the
value sought to be obtained through the Purchase;
WHEREAS, the Company is in the business of developing, licensing,
installing and maintaining commodities trading and risk management software and
providing consulting and support services substantially related to such software
activities to the foreign exchange, natural gas, crude oil, refined products and
electric power industries (collectively, the "Company Business");
WHEREAS, the Covenantor has been the Executive Vice President of the
ZAI*NET prior to the consummation of the Assignment Agreement and has
substantial knowledge of, and access and exposure to the Company Business,
including but not limited to intellectual property, confidential and proprietary
information of the Company;
WHEREAS, Covenantor must enter into this Agreement and the Employment
Agreement, dated as of even date herewith (the "Employment Agreement"), as a
condition precedent to GFI Caminus's execution of the Purchase Agreement;
NOW, THEREFORE, in consideration of the mutual promises, covenants,
agreements, representations and warranties hereinafter set forth and for other
good and valuable consideration, the receipt, adequacy and sufficiency of which
is hereby acknowledged, all subject to the completion of the closing of the
Purchase, the parties hereto agree as follows:
<PAGE> 2
1. Agreement Not to Compete.
1.1 Noncompetition. As a condition to the transactions being completed
pursuant to the Purchase Agreement, and as a means reasonably designed to
protect the intellectual property, confidential and proprietary information of
the Company, for a period consisting of the greater of (i) three and one-half
(3-1/2) years from the date hereof or (ii) two (2) years from the conclusion of
Covenantor's employment with the Company as a result of the termination of the
Employment Agreement or otherwise (such greater period the "Term"), Covenantor
will not, without the prior written consent of the Company based upon approval
from the Management Committee of the Company (or any similar successor
management body of the Company or any successor entity of the Company), in the
Geographical Area, directly or indirectly, engage in, assist (financially or
otherwise), associate with, or perform services (other than on behalf of the
Company or any of its Affiliates) in the Company Business, including, without
limitation, whether such engagement, assistance, association or performance is
as an individual, principal, officer, director, proprietor, employee, partner,
stockholder or other investor (other than as a holder of less than five percent
(5%) of the outstanding capital stock of a publicly traded corporation),
creditor, guarantor, consultant, advisor, agent, sales representative or other
participant, or otherwise permit his name to be used or employed with any such
Company Business. For purposes of this Agreement, (i) "Affiliate" shall mean any
person, partnership, limited liability company, joint venture, trust,
corporation or other entity, directly or indirectly, controlling, controlled by
or under common control with such person, partnership, limited liability
company, joint venture, trust, corporation or other entity; and (ii)
"Geographical Area" shall mean the world.
1.2 Reasonable Restrictions. Covenantor hereby represents and
acknowledges that: the restrictions stated herein on the activities in which
Covenantor may engage upon termination of his employment with the Company are
reasonable and that, despite such restrictions, Covenantor will be able to earn
his livelihood and engage in his profession following said termination; the
worldwide restriction is reasonable because the Company presently does business
or did business, or has a bona fide plan of doing business during the Term,
throughout the world; and the period of time designated above is reasonable in
relation to the nature of the Company's business.
2. Non-Interference. During the Term, Covenantor will not, without the
prior written consent of the Company, directly, indirectly or as an agent on
behalf of or in conjunction with any person, firm, partnership, corporation or
other entity, (a) hire, solicit, encourage the resignation of, or in any other
manner seek to engage or employ any person who is then, or within the prior
twelve (12) months had been, an employee of the Company or its Affiliates,
whether or not for compensation and whether as an officer, covenantor,
consultant, adviser, independent sales representative, independent contractor or
participant, or (b) except as may be appropriate to perform Covenantor's duties
under the Employment Agreement, contact, solicit, service or otherwise have any
dealings related to Company Business with any person or entity with whom the
Company or its Affiliates has a former, current or prospective business
relationship or who is or was at
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<PAGE> 3
any time during his employment with the Company (including any predecessor or
successor entity) a customer or client of the Company or its Affiliates, or a
prospective customer or client to which the Company or its Affiliates has made a
written or oral business proposal.
3. Future Employment. Nothing contained herein shall prevent Covenantor
from, during the Term seeking employment with or, after the termination of
Covenantor's employment with the Company becoming employed by a utility,
financial services company or other firm, provided that Covenantor's
responsibilities in connection with such employment do not involve, directly or
indirectly, activities related to any aspect of the Company Business.
4. Confidentiality. Covenantor agrees not to disclose, use, transfer or
sell any intellectual property, confidential or proprietary information of the
Company, whether Covenantor has such information in his memory or embodied in
writing or other physical form, unless such activities are on behalf of and
expressly authorized by the Company. For purposes of this Agreement, the phrase
"intellectual property, confidential or proprietary information of the Company"
means all information which is known or intended to be known only to employees
of the Company or others in a confidential relationship with any of them,
including, without limitation, that which relates to marketing or brand
recognition matters, such as logos, tradenames, service names, and trademarks,
or to technical matters, such as patents, programs, components, devices,
formulae, testing procedures, processes, computer software and graphics products
of the Company or any Affiliate, or to business matters such as the identity of
clients, customers or business partners or terms of business relationships with
clients, customers or business partners. Notwithstanding the foregoing, the term
"intellectual property, confidential or proprietary information" of the Company
shall not include information which (i) is, at the time of the disclosure, a
part of the public domain through no act or omission by Covenantor, (ii) known
to the Covenantor prior to the time of disclosure by the Covenantor, provided
that the information was not obtained by the Covenantor in the course of
rendering services to the Company or any predecessor entity or (iii) is
hereafter disclosed to Covenantor by a third party who or which did not acquire
the information under an obligation of confidentiality to or through the Company
or any predecessor entity. Covenantor agrees not to remove from the premises of
the Company, any intellectual property, confidential or proprietary information
of the Company, except as permitted by the Company and except for Covenantor's
personal rolodex and other personal belongings and files that do not contain
intellectual property, confidential or proprietary information related to the
Company Business. Covenantor recognizes that all such intellectual property,
confidential or proprietary information of the Company, are the exclusive
property of the Company. Covenantor agrees to return to the Company all written
materials in his possession containing or reflecting intellectual property,
confidential or proprietary information of the Company promptly following the
cessation of any service relationship with the Company, except for Covenantor's
personal rolodex and other personal belongings and files that do not contain
intellectual property, confidential or proprietary information related to the
Company Business. Covenantor agrees that the restrictions contained in this
Section 4 shall continue to apply without time
3
<PAGE> 4
or geographic restrictions, so long as any information remains intellectual
property, confidential or proprietary information of the Company.
5. Consideration. Covenantor agrees and acknowledges that the value to be
derived by him from the transactions contemplated by the Purchase Agreement and
the consideration payable to him pursuant to the Employment Agreement constitute
substantial value and shall serve as exclusive consideration for his agreements
set forth in this Agreement, and that no additional consideration is payable or
necessary in connection therewith.
6. Miscellaneous.
6.1 Entire Agreement; Amendments. This Agreement and any document
referred to herein sets forth the entire understanding of the parties relating
to the subject matter hereof and supersedes all agreements, representations,
warranties, statements, promises and understandings, with respect to the subject
matter hereof. No amendment of any provision of this Agreement shall be valid
unless the same shall be in writing and signed by the Company and Employee. No
waiver by any party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior os subsequent such occurrence.
6.2 Arbitration. Subject to Section 6.4 hereof, and except as
otherwise required by law, any claim or controversy arising out of or relating
to the performance of this Agreement shall be settled by arbitration in New York
City, New York in accordance with the Commercial Arbitration Rules of the
American Arbitration Association then in effect. Such claim or controversy shall
be resolved by a three (3) arbitrator panel selected as follows: one arbitrator
selected by the Company, one arbitrator selected by the Covenantor and one
arbitrator selected by each of the arbitrators selected by each of the Company
and the Covenantor. Judgment upon the arbitration award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. All
discovery shall be governed by the Federal Rules of Civil Procedure. Either
party may apply to any court having jurisdiction hereof and seek injunctive
relief so as to maintain the status quo of the parties until such time as the
arbitration award is rendered or the claim or controversy otherwise resolved.
The prevailing party in any such matter shall recover all of its costs and
expenses, including reasonable attorneys' fees.
6.3 Notices. All notices under this Agreement will be in writing and
will be delivered by personal service or telegram, telecopy or certified mail
(if such service is not available, then by first class mail), postage prepaid,
Federal Express (or other reputable overnight courier) to such address as may be
designated from time to time by the relevant party, and which will initially be
as set forth below. Any notice sent by certified mail will be deemed to have
been given three (3) days after the date on which it is mailed. Notices sent by
personal delivery shall be deemed effective on the date delivered, notices sent
by Federal Express (or other reputable overnight courier) shall be deemed
4
<PAGE> 5
effective on the third business day following the sending thereof and notices
sent by telecopy shall be deemed effective on the date delivered. No objection
may be made to the manner of delivery of any notice actually received in writing
by an authorized agent of a party. Notices will be addressed as follows or to
such other address as the party to whom the same is directed will have specified
in conformity with the foregoing:
If to Company:
ZAI*NET Software, L.P.
747 Third Avenue, 18th Floor
New York, New York 10017
Attn: President
Telephone: (212) 888-3600
Facsimile: (212) 888-0691
If to Covenantor:
Simon Young
c/o ZAI*NET Software, L.P.
5444 Westheimer Street, Suite 1500
Houston, Texas 77056
Telephone: (713) 626-1305
Facsimile: (713) 626-9422
with a copy to:
Zukerman Gore & Brandeis, LLP
900 Third Avenue
New York, New York 10022
Attn: Jeffrey D. Zukerman, Esq.
Telephone: (212) 223-6700
Facsimile: (212) 223-6433
6.4 Equitable Relief; Accounting. Covenantor acknowledges that the
covenants contained in Sections 1, 2 and 4 hereof are reasonable and necessary
to protect the legitimate interests of the Company, that any breach or
threatened breach of such covenants will result in irreparable injury to the
Company and that the remedy at law for such breach or threatened breach would be
inadequate. Accordingly, in the event of the breach by Covenantor of any of the
provisions of this Agreement, the Company, in addition and as a supplement to
such other rights and remedies as may exist in their favor, may apply to any
court of law or equity having jurisdiction to enforce this Agreement, and/or may
apply for injunctive relief against any act that would violate any of the
provisions of this Agreement (without being required to post a bond). Covenantor
further understands that monetary damages will not be sufficient to avoid or
compensate for a breach of the covenants contained in Sections 1, 2 and 4 hereof
and that injunctive relief would be appropriate to prevent any such breach or
threatened breach. Such right to
5
<PAGE> 6
obtain injunctive relief may be exercised, at the option of the Company,
concurrently with, prior to, after, or in lieu of, the exercise of any other
rights or remedies that the Company may have as a result of any such breach or
threatened breach. In addition, Covenantor shall account for and pay over to the
Company all compensation, profits and other benefits inuring to Covenantor's
benefit that are derived or received by Covenantor thereof resulting from any
action or transaction constituting a breach of the covenants contained in
Sections 1, 2 and 4 hereof.
6.5 Third-Party Benefits. None of the provisions of this Agreement
will be for the benefit of, or enforceable by, any third-party beneficiary,
except that GFI Caminus LLC is intended as a third-party beneficiary of all
rights of the Company hereunder.
6.6 Successors and Assigns. This Agreement will be binding upon and
inure to the benefit of the parties, their respective successors and permitted
assigns. None of the parties hereto may assign any of their rights or
obligations under this Agreement without the prior written consent of all other
parties hereto, except that this Agreement may be assigned by the Company to any
corporation or other business entity that succeeds to all or substantially all
of the business of the Company through merger, consolidation, corporate
reorganization or by acquisition of all or substantially all of the assets or
capital stock of the Company.
6.7 Governing Law. All questions with respect to this Agreement and
the rights and liabilities of the parties shall be governed by the laws of the
State of New York, regardless of the choice of law provisions of that state or
any other jurisdiction.
6.8 Headings and Gender. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement. All words shall be construed to be
of such gender and number as the circumstances require.
6.9 Severability. The validity, legality or enforceability of the
remainder of this Agreement will not be affected even if one or more of the
provisions of this Agreement are held to be invalid, illegal or unenforceable in
any respect. Further, if the period of time, the extent of the geographic area,
or the scope of the prescribed activities covered by this Agreement should be
deemed unenforceable, then this Agreement shall be construed to cover the
maximum period of time, geographic area and scope of prescribed activities (not
to exceed the maximum time, geographic area or scope set forth herein) as may be
valid under applicable law. The parties specifically intend that any court
determining the extent of the enforceability of this Agreement shall, if it
determines that the Agreement is not fully enforceable in accordance with its
terms, modify the period of time, geographic area or scope of prescribed
activities provided for herein to the minimum extent necessary such that the
provisions hereof as so modified are enforceable.
6.10 Attorneys' Fees. Subject to Section 6.2 hereof, if any action or
6
<PAGE> 7
proceeding is brought to enforce or interpret any provision of this Agreement,
the prevailing party shall be entitled to recover as an element of its costs,
and not its damages, reasonable attorneys' fees and costs incurred in connection
with such action or proceeding.
6.11 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
6.12 Remedies Not Exclusive. No remedy conferred by any of the
specific provisions of this Agreement is intended to be exclusive of any other
remedy, and each and every remedy will be cumulative and will be in addition to
every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise. The election of any one or more remedies will
not constitute a waiver of the right to pursue other available remedies.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the first date set forth above.
ZAI*NET SOFTWARE, L.P., a Delaware limited COVENANTOR
partnership
By: /s/ Brian Scanlan /s/ Simon Young
------------------ ---------------------
Simon Young
Name: Brian Scanlan
Its: President
7
<PAGE> 1
Exhibit 10.27
DISTRIBUTOR AGREEMENT
This DISTRIBUTOR AGREEMENT (the "Agreement") is entered into as of this
12th day of May, 1998, (the "Agreement Date"), between SS&C Technologies,
Incorporated ("SS&C"), a Delaware corporation with an address for purposes of
this Agreement at 705 Corporate Place, Bloomfield, Connecticut 06102, and GFI
Caminus LLC (except where the context indicates otherwise, collectively with its
subsidiaries, ZAI*NET Software, L.P., a Delaware limited partnership
("ZAI*NET"), and Caminus Energy Limited, an English company ("Caminus"), "GFI
Caminus"), a Delaware limited liability company with an address for the purposes
of this Agreement at 12121 Wilshire Boulevard, Suite 1375, Los Angeles,
California 90025.
WHEREAS SS&C desires to acquire a non-exclusive world-wide license to
sell and distribute certain software products proprietary to GFI Caminus as set
forth in this Agreement, and whereas GFI Caminus desires to issue and assign
such license to SS&C;
WHEREAS GFI Caminus and SS&C desire to work together to establish an
enterprise distribution network with respect to the aforementioned
distributorship licenses;
NOW THEREFORE, in consideration of the premises and the respective
representations, warranties and agreements contained herein and in the Limited
Liability Company Agreement of GFI Caminus dated as of even date herewith (the
"LLC Agreement"), the parties hereto hereby agree as follows:
1. Certain Definitions.
"Category One Product" shall mean any existing SS&C Product set forth on
Schedule 1 hereto.
"Category Two Product" shall mean any module, upgrade, enhancement or
similar or analogous software based upon a Category One Product that is
developed by employees and/or agents of SS&C (whether or not with the
assistance of GFI Caminus and whether or not such module, upgrade,
enhancement or similar or analogous software utilizes source code written
and/or supplied by GFI Caminus) but modified to relate to energy assets.
"Category Three Product" shall mean any software program or product that
is not a Category One Product or Category Two Product and that is
developed by employees and/or agents of GFI Caminus (whether or not with
the assistance of SS&C as provided for herein and whether or not such
program or product utilizes source code written and/or supplied by SS&C),
as set forth on Schedule 1 hereto, together with any fixes, updates, new
versions, revisions, and enhancements provided by GFI Caminus or created
by or on behalf of GFI Caminus (whether or not with the assistance of
SS&C) with respect to such programs or products in accordance with the
terms hereof.
<PAGE> 2
"Customer" shall mean an end-user of Products, licensed to use the
relevant Products in the operation of its business and not for purposes
of resale or other distribution.
"Directly Competitive" shall mean, with respect to any Category Three
Product or Outsourcing Services, any other product that would be
generally recognized as either a replacement of or substitute for such
Product or Outsourcing Service in the relevant industry, or would likely
be included in a competitive bid by third parties seeking business
solutions which are typically filled by such Products or Outsourcing
Services.
"Energy Market" shall mean utilities, energy providers, marketers or
traders or other participants in the buying or selling of energy or
energy related products or derivatives thereof throughout the world.
"Error" shall mean the failure of a Product to function in accordance
with its specifications as contained in its on-line help text.
"GFI Caminus Materials" shall mean the materials accompanying or related
to the Category Three Products as provided by GFI Caminus, embodying the
Category Three Product, Category Three Product documentation (whether in
printed or electronic form), manuals, education materials, product
brochures and other collaterals, and the like, which may be provided on
magnetic media, via the internet or in tangible form as determined by GFI
Caminus.
"Keys" shall mean the security clearance codes necessary for a Customer
to use a Product or Products.
"License Agreement" shall mean the standard license agreement of GFI
Caminus with respect to the licensing of Category Three Products
(modified to reflect the terms hereof), initially substantially in the
form attached hereto as Exhibit A.
"License Fees" shall mean fees owed by a Customer for the right to use a
Product or Products under a License Agreement.
"Maintenance Fees" shall mean fees owed by a Customer for Maintenance
Support provided with respect to any Product or Products licensed by such
customer under a License Agreement.
"Maintenance Support" shall mean telephone response line service during
normal business hours, error correction through the supply of temporary
fixes, and the incorporation of new releases of the Products as supplied
by SS&C or GFI Caminus, as the case may be, into the Customers' copies of
the Products, as more fully specified in the Maintenance Support
Agreement.
"Maintenance Support Agreements" shall mean the standard maintenance
support agreement of GFI Caminus with respect to maintenance to be
provided for the Category Three Products, as provided to SS&C from time
to time upon the modification thereof.
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<PAGE> 3
"Materials" shall mean either of the SS&C Materials or the GFI Caminus
Materials, as the context may require.
"Order" shall mean written notification from SS&C that a Customer has
licensed a GFI Caminus Product or GFI Caminus Products. A form of the
Order is attached hereto as Exhibit B.
"Outsourcing Services" shall mean processing services which are provided
to third parties by GFI Caminus using Category Three Products, which
services would be generally recognized as either a replacement of,
substitute for or supplement to the licensing of a particular Product to
such third parties.
"Product" shall mean either an SS&C Product or a Category Three Product,
as the context requires.
"SS&C Materials" shall mean the materials accompanying or related to the
SS&C Products as provided by SS&C, embodying the SS&C Product, SS&C
Product documentation (whether in printed or electronic form), manuals,
education materials, product brochures and other collaterals, and the
like, which may be provided on magnetic media, via the internet or in
tangible form as determined by SS&C.
"SS&C Products" shall mean Category One Products and Category Two
Products, together with any fixes, updates, new versions, revisions, and
enhancements provided by SS&C or created by or on behalf or with the
assistance of GFI Caminus in accordance with the terms hereof.
"Standard Price" or "Standard Prices" shall mean, with respect to any
Product, the standard License Fees, Maintenance Fees and other charges
applicable in the Territory in U.S. Dollars or local country currency, as
SS&C or GFI Caminus may determine from time to time, as the case may be.
The initial Standard Prices are as set forth on Schedule 1 hereto.
"Territory" shall mean and include the entire world, except as set forth
on Schedule 1 hereto and except as may be modified in writing by the
parties from time to time as set forth herein.
2. Appointment of SS&C; Duties.
a) Non-exclusive License. GFI Caminus hereby retains SS&C, and SS&C
hereby agrees to be so retained, as a non-exclusive distributor
and marketer of Category Three Products throughout the Territory
with the right to distribute and market such Products other than
to the Energy Market during the Initial Term and any subsequent
renewal terms provided for in Section 5 below, on the further
terms and subject to the further conditions as set forth in this
Agreement.
1) SS&C shall have the non-exclusive right, and hereby accepts
such right, to solicit Customers located in the Territory
and to license the Category Three Products and accompanying
documentation to Customers other than
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those in the Energy Market.
2) Notwithstanding anything herein to the contrary, in no
event shall SS&C have the right to distribute or market any
Category Three Product in or to the Energy Market.
b) Sales Assistance.
1) Staff; Training. SS&C agrees to use commercially reasonable
efforts to train its sales force in the licensing of
Category Three Products and to provide technical and/or
support personnel for technical sales and implementation
consulting services to Customers with respect to Category
Three Products. GFI Caminus agrees to provide reasonable
assistance as requested by SS&C with respect to the
training, qualification and selection of such
representatives.
2) Marketing. SS&C will be responsible for marketing,
implementation, on-site education services and license
solicitation with respect to the Category Three Products in
the Territory and shall use commercially reasonable efforts
in promoting the licensing of the Category Three Products,
all at no cost to GFI Caminus. GFI Caminus will provide
reasonable assistance as requested by SS&C with respect to
the marketing of Category Three Products. Such assistance
may include presentations made at prospective Customer's
site(s), and shall be provided at no charge.
3) Product Literature. Upon GFI Caminus's request, SS&C will
submit all materials and documentation that it has created
pursuant to this Agreement (including, but not limited to,
materials containing trade secret or proprietary
information about a Category Three Product, marketing and
promotional materials) to GFI Caminus for review and
approval, which approval shall not be unreasonably
withheld. SS&C will include on all such materials any
notice of copyright, trademark or other marking used by GFI
Caminus on its own comparable materials or specifically
requested by it.
c) Licensing.
1) Exclusive Means of Licensing. SS&C agrees to offer Category
Three Products for licensing only under the terms of the
License Agreement. The failure of SS&C to include any of
the provisions set forth in the License Agreement in any of
its licensing agreements with Customers purchasing or
licensing Category Three Products without GFI Caminus's
prior written consent shall be a material breach of this
Agreement.
2) Orders. SS&C will submit a written Order to GFI Caminus for
each Category Three Product proposed to be licensed or
provided to any Customer or third party. Each Order must be
submitted within three (3) business days of each occasion
where SS&C has provided the SS&C
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<PAGE> 5
Products to another entity, including all Customers. Each
Order shall contain all of the information specified in
Exhibit B. SS&C shall cause such Customer to execute and
enter into a License Agreement with respect to such
Category Three Product, and shall, within three (3)
business days of the execution of such License Agreement,
provide an executed copy thereof, as well as a copy of the
Customer Non-Disclosure Agreements (if any) for such
Customer, to GFI Caminus.
3) Promptly upon receipt of an executed License Agreement, GFI
Caminus shall transmit to the relevant Customer all
necessary Keys for purposes of implementing the Category
Three Product licensed thereto.
4) Customer Breach. In the event of a breach by a Customer of
the terms of a License Agreement, SS&C will promptly notify
GFI Caminus and take all reasonable steps which may be
necessary to remedy the breach, including taking actions
for seizure or injunctive relief. For each License
Agreement which is terminated, SS&C will provide GFI
Caminus with prompt written notice and the reason for
termination.
d) Distribution. GFI Caminus will provide SS&C with a master copy of
the Category Three Products and GFI Caminus Materials. GFI Caminus
agrees to manufacture copies of the Category Three Products and
GFI Caminus Materials and distribute those copies to Customers of
Category Three Products, per SS&C's request. SS&C is authorized to
manufacture copies of the Category Three Products and GFI Caminus
Materials, and to distribute those copies to its Customers,
provided that in each case a valid License Agreement has been
signed by such Customer.
e) Maintenance and Other Fees. The parties agree that fees for
implementation consulting services shall be earned and retained by
whichever of them performs the applicable services. The parties
agree that GFI Caminus shall provide Maintenance Support for the
Category Three Products, and SS&C agrees to use commercially
reasonable efforts to cause Customers of Category Three Products
to enter into GFI Caminus Maintenance Support Agreements at GFI
Caminus' then current standard rates and terms. The party entitled
to retain fees referred to in this paragraph shall be solely
responsible for collecting such fees and providing the
corresponding services to the Customer, and will indemnify the
other party and hold it harmless from and against any complaints
or claims from the Customer related thereto.
3. Fees and Royalties.
a) Standard Prices. GFI Caminus may change the Standard Prices with
respect to its Products with ninety (90) days' prior written
notice. To the maximum extent permitted by law, SS&C will not
license the Products of GFI Caminus to any prospective Customer
with a License Fee which differs from the Standard Prices by more
than the standard discount as set forth in Schedule 1 hereto (as
modified
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from time to time) unless agreed upon in advance between SS&C and
GFI Caminus.
b) Royalties. The licensing of Category Three Products by Customers
of SS&C shall be without royalty to SS&C; instead, GFI Caminus
shall be entitled to all License Fees and a percentage of the
License Fees received by GFI Caminus as a result of such licensing
activity by SS&C (including such License Fees received by GFI
Caminus after the termination of this Agreement) shall be credited
as Incremental License Revenues for purposes of Section 5.2 of
Appendix B to the LLC Agreement (such credit to be applied
regardless of GFI Caminus's receipt of such License Fees). The
percentage of such License Fees so credited shall be as agreed
upon by the parties in connection with each such license
transaction (taking into account SS&C's "degree" of responsibility
for the sale, evaluating such factors as lead generation,
prospecting, the degree of cooperative selling, etc.).
Notwithstanding the foregoing sentence, in no event shall the
percentage of such License Fees so credited be less than five
percent (5%) (the "Minimum Percentage"). GFI Caminus shall invoice
Customers for the Category Three Products for applicable License
Fees, and shall be responsible for collecting such License Fees.
4. Reporting.
a) Within ten (10) business days after the start of each calendar
quarter, SS&C will furnish to GFI Caminus a report forecasting its
prospective sales of Products, such report to be in a format which
is mutually agreeable to both parties.
b) At the end of each Quota Period, SS&C shall submit to GFI Caminus
a statement regarding License Agreement(s) entered into by SS&C
and its Customers.
5. Term and Termination.
a) The "Initial Term" of the Agreement is the five (5) years
beginning on the Agreement Date, unless terminated as provided
below. The Initial Term shall be extended automatically for
successive one year periods until either party notifies the other
to the contrary at least ninety (90) calendar days in advance of
the commencement of the next one year period, which either party
may do entirely in its discretion.
b) GFI Caminus may terminate this Agreement immediately, by written
notice to that effect, if SS&C distributes, without the prior
written consent of GFI Caminus, any confidential GFI Caminus
Materials or Information (as hereinafter defined) prior to
execution of the applicable License Agreement if such distribution
is knowing or intentional or if it otherwise subjects the other
party to any material risk or prejudice.
c) GFI Caminus may terminate this Agreement immediately, by written
notice to that effect, if SS&C distributes, without the prior
written consent of GFI Caminus,
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<PAGE> 7
any materials that enable the recipient to use any Product of GFI
Caminus prior to execution of the applicable License Agreement.
d) Either party may terminate this Agreement immediately, by written
notice to that effect, if:
1) The other party commits any other material breach of this
Agreement, and fails to remedy that breach fully within
thirty (30) calendar days after notice to that effect from
the terminating party; or
2) The other party becomes bankrupt or unable to pay its debts
as and when due.
e) In the event of termination or expiration of this Agreement for
any reason:
1) Return or Destruction of Products. Each party will, at the
option of the other party, either:
i) deliver to the other party all of such other party's
Materials and all copies of its products in the
possession of such party, as well as all other items
containing Information of such other party (as
hereinafter defined), or
ii) destroy all of those items.
2) Officer's Certificate. Each party will furnish to the other
with a certificate signed by an officer of the other
warranting compliance with the requirements of Section
6(e)(1). Such actions will not eliminate the obligations of
either party to ensure confidential treatment of the
Information.
3) Business in the Pipeline. SS&C will immediately provide GFI
Caminus with a list of prospective customers, details of
any proposals made, and the status of each sale, including
all information which is required to be reported as
specified in Section 5(a) above. A prospective customer
includes without limitation any company to which were made,
given or provided proposals, quotes, Product
demonstrations, presentations or sales calls.
i) GFI Caminus hereby agrees to honor any written
commitments made by the other on its behalf in
compliance with the terms of this Agreement and the
License Agreement, and will use reasonable efforts
(resources permitting) to close any potential
business within a reasonable time.
ii) For any License Agreements executed between GFI
Caminus and an identified prospect within 120 days
from the effective date of the termination of this
Agreement, GFI Caminus will credit to
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<PAGE> 8
SS&C as Incremental License Revenues for purposes of
Section 5.2 of Appendix B to the LLC Agreement an
amount equal to (1) the License Fees that GFI
Caminus receives pursuant to such License Agreements
(minus any additional direct expenses (including
travel and additional commissions) incurred by GFI
Caminus in order to close such sales) multiplied by
(2) the Minimum Percentage as specified in Section
3(b) hereof. This credit will be applied within 45
days from the end of the quarter within which GFI
Caminus receives the License Fees.
4) Business Transition.
i) Upon the termination of this Agreement, the rights
and obligations under all of the License Agreements
will be automatically assigned from SS&C to GFI
Caminus.
ii) Each party, upon the reasonable request of the
other, will participate in joint communications
and/or sales calls to Customers for the purpose of
managing a smooth transition, and to use reasonable
efforts to secure each Customer's written agreement
to the automatic assignment of each License
Agreement as set forth above.
iii) GFI Caminus will be required to assume or perform
any obligation that SS&C may have undertaken which
is in addition to or inconsistent with the
obligations of GFI Caminus under its respective
License Agreement without GFI Caminus's express
acceptance or written agreement, and SS&C will
indemnify GFI Caminus against any loss, liability,
or expense that GFI Caminus may incur in connection
with the same.
5) Balance Owing. Within ninety (90) calendar days after
notice of termination, SS&C and GFI Caminus shall agree on
the current outstanding balance of all monies due to SS&C
and GFI Caminus through the date of termination.
f) Each party's obligations of confidentiality and Sections 1,
2(d)(1), 3, 5, 6, 7(a), 8(c), 8(d), 9, 10, and 11 shall survive
the termination of the parties' relationship under this Agreement
or of the Agreement itself.
6. Proprietary Rights. Each party acknowledges that the information about
the Materials and Products and about all copies, translations,
adaptations, updates or modifications which are part of the Products of
the other party (collectively, the "Information") is proprietary to and
may embody trade secrets or other intellectual property rights of the
other party, or third parties which have granted such other party the
right to sublicense such Products. Each party specifically acknowledges
and agrees that the other may use security codes and other devices of its
choosing to prevent unauthorized copying of such
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<PAGE> 9
other party's Products and agrees that it shall not make or permit any
efforts to reverse engineer or otherwise defeat these codes and that it
shall retain these codes in all copies of the Products.
a) Each party will use its best efforts to protect the Information of
the other party from disclosure or transfer to third persons,
except:
1) Customers of Category Three Products under fully executed
License Agreements;
2) Those employees of either party who both have a need to
know the Information in connection with providing the
services called for in this Agreement by either party and
who acknowledge the proprietary nature of the Information,
and have entered into written nondisclosure agreements
prohibiting the disclosure of Information, except as
permitted in this Section 6; or
3) Those employees of a prospective Customer who have executed
non-disclosure agreements with GFI Caminus and SS&C in the
form of the agreement attached hereto as Exhibit C (the
"Customer Non-Disclosure Agreement") to determine whether
to enter into a License Agreement, and only under
circumstances of a demonstration to a bona-fide prospect
whereby GFI Caminus retains responsibility for the
supervision of such demonstration.
b) All patents, copyrights, trade secrets, and other proprietary
rights in or related to the Products, Information, and Materials
are and will remain the exclusive property of the party from whom
such items originated or a third party which has granted such
party the right to sublicense such rights whether or not
recognized or perfected under the laws of the Territory. Neither
party will take any action that jeopardizes such proprietary
rights of the other party or acquire any right in such Products,
Information, or Materials, except the right to use the Products as
specifically provided under this Agreement. Each party, or the
third party which has granted such party the right to sublicense
the programs, will own all rights in any copy, translation,
adaptation, compilation, selection, arrangement or derivation of
the Products, Information, or Materials of such party, including
any significant improvement or development thereof. At the request
of a party, the other party will obtain the execution of any
instrument that may be required to assign these rights to such
requesting party or perfect these rights in such party's name.
c) Each party will use the Products, Information, and Materials of
the other party only to perform its activities and obligations
under this Agreement. Neither party will copy, translate, adapt,
decompile, dissemble, or reverse engineer the Products of the
other party (except as expressly provided in this Agreement)
without such other party's specific prior written approval.
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<PAGE> 10
d) Neither party may create, license, sell or support any Products or
modifications to the Products of the other party for or to any
person who is not an authorized Customer of the Products or who
has failed to pay or perform any of its obligations under the
relevant License Agreement, including without limitation
obligations to pay License Fees, and to protect the
confidentiality of the Products as required in the License
Agreement.
1) To the extent that they are not part of the Category Three
Products, SS&C will retain ownership of separate computer
programs created under separate agreements with Customers
of Category Three Products for use with such Products. SS&C
hereby grants GFI Caminus a fully-paid, royalty-free,
perpetual license (which shall survive termination of this
Agreement for any reason) to use, modify, copy and
sublicense all such programs to the extent necessary to
enable GFI Caminus, at GFI Caminus's sole option, to
provide support services to such Customer for the Category
Three Products and such programs, and/or (with SS&C's prior
consent) to integrate such programs into a Category Three
Product. GFI Caminus provides no warranty, and GFI Caminus
shall not be required to modify or provide any support
services, with respect to such programs. SS&C shall not
make any representations or warranties on GFI Caminus's
behalf, nor indicate that GFI Caminus supports such
programs.
2) Notwithstanding anything in this Agreement to the contrary,
and except for such rights and licenses as are provided to
the other party pursuant to this Agreement, (i) all
Category One Products and all Category Two Products are the
exclusive property of SS&C, and (ii) all Category Three
Products are the exclusive property of GFI Caminus.
e) All Error corrections with respect to Category Three Products
("GFI Caminus Corrections") which are at any time created by or on
behalf of SS&C are and shall be the sole property of GFI Caminus;
SS&C hereby assigns and agrees to assign any and all copyrights,
inventions, patents and rights to apply for patents, trade
secrets, moral rights and other intellectual and industrial
property rights in such GFI Caminus Corrections to GFI Caminus;
SS&C hereby agrees that all such GFI Caminus Corrections shall be
deemed for all purposes to be "works made for hire" under the US
and all applicable copyright laws and SS&C hereby waives and
agrees to not assert any moral rights which may arise therein;
SS&C agrees to obtain from all of its employees and other parties
participating or contributing to the creation of GFI Caminus
Corrections written agreements which comply with this provision
and under which all such rights are vested in or assigned to GFI
Caminus or waived, as provided herein; and SS&C agrees to execute
and deliver all papers, agreements and instruments and to take all
other actions requested by GFI Caminus in order to effectively
accomplish the foregoing. Except as set forth in this Section
6(e), Section 6(b) hereof shall apply to all such GFI Caminus
Corrections.
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<PAGE> 11
f) Each party will use its best efforts to protect the proprietary or
confidential information received from those customers or
prospective customers of the other party, and the subsidiaries and
affiliates of these Customers and prospective Customers, from
disclosure or transfer to third persons, except to those employees
of the other party who (i) have a need to know the information in
connection with providing the services set forth herein and (ii)
who acknowledge the proprietary nature of the customer information
and materials and agree not to disclose the information, except as
permitted in this Paragraph 6(f).
7. Trademarks.
a) SS&C acknowledges that "ZAI*NET" and other Category Three Product
names are the registered or common law trademarks of GFI Caminus,
and agrees that it shall not register these marks or any other GFI
Caminus trademark, service mark, trade name, or company name or
use the same in any fashion or for any purpose, except in
connection with its activities under this Agreement. In the event
that GFI Caminus registers a trademark in the Territory, SS&C
shall, at GFI Caminus's request, file as a registered user of the
mark.
b) GFI Caminus will grant a limited license to SS&C to use GFI
Caminus's trademarks to the extent reasonably necessary to enable
SS&C to perform its obligations under this Agreement pursuant to a
separate written agreement between the parties.
8. Other Terms.
a) GFI Caminus will furnish SS&C, upon SS&C's reasonable request,
free of charges other than media and distribution charges, with
the following Materials: one (1) copy each of source (as generally
available) and object code for the Category Three Products, and
one (1) copy of existing user documentation for the Category Three
Products, Category Three Product fixes and releases generally made
available by ZAI*NET or GFI Caminus to its customers, and
distributors. Additional copies of the foregoing materials, as
well as copies of all promotional materials created by GFI Caminus
or ZAI*NET, will be furnished on request for a reasonable charge
(including freight and customs, if applicable), established by GFI
Caminus. License Agreements will be executed by SS&C at the
inception of the Agreement, and appropriate Schedules to such
License Agreement(s) will be executed as part of the request
process for these Materials.
b) Each party shall maintain accurate records of payments received
under this Agreement and all License Agreements for a period of at
least three (3) years from date of payment. For so long as either
party is entitled to receive payments in connection with a License
Agreement, and for six (6) months thereafter, the party so
entitled may cause the other party's records related to such
License Agreement to be audited by an auditor selected by the
unanimous agreement of the parties, and such other party will
provide the entitled party with reasonable access to these
records; provided, however, that the audits may be conducted no
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<PAGE> 12
more frequently than twice per calendar year. If an audit reveals
any underpayment, such underpayment shall promptly be remedied by
the underpaying party.
c) Neither party will enter into any agreements which violate or
conflict with the terms of this Agreement, nor do any act, or make
any omission, that is unlawful in the country, state, or province
in which it occurs.
d) Other Licensees.
1) SS&C may from time to time engage (i) a subsidiary or
affiliate entity or person or (ii) subcontractors
("Contractors") to perform certain of its consulting
services or similar obligations hereunder.
2) SS&C may from time to time wish to engage a third party to
solicit Customers of the Products within the Territory
("Sales Agents").
3) No Sales Agent may be engaged by SS&C without GFI Caminus's
prior approval. Without limiting the foregoing, no Sales
Agent may be engaged for any purpose or given any access to
any Products if such prospective Sales Agent markets,
supports or distributes or in any way represents a software
product which is Directly Competitive with a Category Three
Product.
4) All Contractors and Sales Agents shall be engaged under
written agreements which contain the same provisions as
this Agreement as deemed applicable by the parties hereto,
and which terminate immediately upon termination of this
Agreement by either party for any reason.
5) All Contractors and Sales Agents may be provided licenses
to the Products and Information only under fully executed
License Agreements, without warranty, and they shall be
considered as "Customers" under this Agreement. With
respect to such License Agreements, GFI Caminus will
provide maintenance support assistance to SS&C only.
6) For each Sales Agent appointed, SS&C will provide GFI
Caminus with the following information: name, address,
contact name(s), telephone number(s), description of
business (including list of any competitive software
products represented), scope of responsibility (i.e.,
marketing, support, distribution, translation, etc.),
territory, date of license and license term.
7) Sales Agents are marketing agents and shall not license,
sublicense, copy or distribute SS&C Products or Category
Three Products to Customers or other third parties, and
Sales Agents shall not have custody or control over any
Keys.
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<PAGE> 13
8) In the event that SS&C engages a Contractor or Sales Agent,
the parties agree that SS&C is not assigning this Agreement
or any of its rights or duties hereunder; and that SS&C
remains bound by each and every term hereof. Nothing
contained herein shall in any way constitute a waiver by
GFI Caminus of any of its rights, or the release of SS&C
from any of its obligations, under this Agreement. SS&C
shall have no liability to any Contractors or Sales Agents
not engaged by it. SS&C shall provide written notice to GFI
Caminus of any claim, dispute or legal action arising under
the arrangement between SS&C and its Contractors or Sales
Agents within ten (10) days from the date on which SS&C
becomes aware of such claim, dispute or action. GFI Caminus
shall have complete control over legal proceedings
involving its confidential information, copyright, patent
or other intellectual or industrial property rights.
9. Warranties and Indemnity by SS&C.
a) SS&C represents and warrants that it has the full right and power
to enter in this Agreement, and that any Category Three Product
modifications, enhancements, Error corrections and other software
or materials created by or on behalf of SS&C do not and will not
infringe on any patent, copyright, trade secret, trademark, moral
right or other intellectual or industrial property right of any
person.
b) SS&C will defend, indemnify and hold GFI Caminus and its
subsidiaries, affiliates, agents, distributors, assigns,
predecessors, stockholders, directors and employees harmless from
and against any and all claims, suits, actions, or losses,
including legal expenses, arising out of:
1) Any failure of SS&C to license or provide the Category
Three Products to any entity without obtaining a License
Agreement; or
2) Any failure of SS&C to license the Category Three Products
only under the terms of the License Agreement, or the
agreement by SS&C to any term or condition which has the
effect of limiting or eliminating the effect of any
provision in the License Agreement; or
3) The appointment by SS&C of Contractors or Sales Agents, the
failure of SS&C to engage a Contractor or Sales Agent under
the same terms and conditions as contained in this
Agreement, or arising out of any actions taken by such
Contractors or Sales Agents in their capacity as SS&C's
agents or otherwise; or
4) The acts or omissions of SS&C or its officers, agents, or
employees that are claimed to be unlawful; or
5) Any breach of SS&C's representations or warranties in
Section 9(a) above, or any claim that GFI Caminus's or
SS&C's use of any material created by SS&C constitutes an
infringement of any trademark, copyright,
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<PAGE> 14
patent or moral right, or a misappropriation of a trade
secret, or a breach of contract; or
6) Any representations or warranties made by SS&C to Customers
or potential Customers or other persons concerning the
Category Three Products on behalf of GFI Caminus, or that
may be binding on GFI Caminus except consistent with the
sales activities contemplated by this Agreement; or
7) Any other claim, suit, or proceeding to the extent that it
alleges any negligent or wrongful act or omission of the
SS&C or its officers, agents, or employees.
10. Warranties and Indemnity by GFI Caminus.
a) GFI Caminus represents and warrants that it has the full right and
power to enter in this Agreement, and that any SS&C Product
modifications, enhancements, Error corrections and other software
or materials created by or on behalf of GFI Caminus do not and
will not infringe on any patent, copyright, trade secret,
trademark, moral right or other intellectual or industrial
property right of any person.
b) GFI Caminus will defend, indemnify and hold SS&C and its
subsidiaries, affiliates, agents, distributors, assigns,
predecessors, stockholders, directors and employees harmless from
and against any and all claims, suits, actions, or losses,
including legal expenses, arising out of:
1) The acts or omissions of GFI Caminus or its officers,
agents, or employees that are claimed to be unlawful; or
2) Any breach of GFI Caminus's representations or warranties
in Section 10(a) above, or any claim that SS&C's or GFI
Caminus's use of any material created by GFI Caminus
constitutes an infringement of any trademark, copyright,
patent or moral right, or a misappropriation of a trade
secret, or a breach of contract; or
3) Any other claim, suit, or proceeding to the extent that it
alleges any negligent or wrongful act or omission of the
GFI Caminus or its officers, agents, or employees.
c) GFI Caminus warrants that, for the first three (3) months after
the date on which GFI Caminus ships Category Three Products to
SS&C, the Products will function substantially in accordance with
their specifications contained in the applicable On-Line Help Text
(not defined herein). In case of breach of this warranty or any
other duty related to the quality of the Products, GFI Caminus's
sole responsibility will be to use its reasonable efforts to
correct material errors in the program coding, and obtaining such
efforts will be SS&C's exclusive remedy against GFI Caminus.
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<PAGE> 15
d) The warranty specified in Section 10(c) will not apply to a
Product if its correction is required due to (i) natural disaster
or electric power failure, (ii) the failure to maintain
appropriate environmental conditions, (iii) the neglect, misuse,
or other cause other than the ordinary use of the Product, (iv)
the improper installation of the Product, (v) a modification of
the Product (including modifications made by SS&C), (vi) the
failure to install any update or revision promptly, or (vii) any
other cause not inherent in the Product.
e) GFI Caminus shall defend, indemnify and hold SS&C and its
subsidiaries, affiliates, agents, distributors, assigns,
predecessors, stockholders, directors and employees harmless from
and against any suit or proceeding brought against SS&C so far as
it is based on a claim that the use, execution, or licensing of
the Category Three Products or the use or copying of any GFI
Caminus Material furnished, as such and not in combination with
any other article or process, constitutes an infringement of any
patent, copyright, trade secret, trademark, moral right or other
intellectual or industrial property right of any person, if
notified thirty (30) calendar days after its commencement and
given full and complete authority, information, and assistance for
its defense, and GFI Caminus shall pay all damages and costs
awarded against SS&C, but shall not be responsible for any
compromise made without its consent. If claimed or held to
constitute such infringement, GFI Caminus shall, at its option and
expense, either procure for SS&C the right to continue using the
Category Three Product and GFI Caminus Material; modify the
Category Three Product so that, while it retains its functional
equivalence, it is no longer infringing; or terminate this
Agreement solely with respect to the distribution of the
infringing product.
11. Liabilities.
a) EXCEPT AS PROVIDED IN SECTIONS 9 AND 10, ALL WARRANTIES,
CONDITIONS, REPRESENTATIONS, INDEMNITIES, OR GUARANTEES, WHETHER
EXPRESS OR IMPLIED, ARISING BY LAW, CUSTOM, PRIOR ORAL OR WRITTEN
STATEMENTS, OR OTHERWISE (INCLUDING, BUT NOT LIMITED TO,
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR PARTICULAR PURPOSE OR
OF ERROR-FREE AND UNINTERRUPTED USE OR AGAINST INFRINGEMENT) ARE
HEREBY OVERRIDDEN, EXCLUDED, AND DISCLAIMED.
b) EXCEPT FOR DAMAGES ARISING UNDER SECTIONS 6, 7, 9 OR 10, UNDER NO
CIRCUMSTANCES WILL SS&C OR GFI CAMINUS OR ANY OF THEIR RESPECTIVE
RELATED COMPANIES BE LIABLE TO THE OTHER PARTY FOR ANY
CONSEQUENTIAL, INDIRECT, SPECIAL, OR INCIDENTAL DAMAGES, WHETHER
FORESEEABLE OR UNFORESEEABLE, BASED ON CLAIMS OF SS&C, GFI
CAMINUS, LICENSEES, OR CUSTOMERS (INCLUDING, BUT NOT LIMITED TO,
CLAIMS FOR LOSS OF DATA, GOODWILL, PROFIT, USE OF MONEY OR USE OF
THE PROGRAMS, INTERRUPTION IN USE OR AVAILABILITY OR DATA OR THE
PROGRAMS, STOPPAGE OF OTHER WORK OR
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<PAGE> 16
IMPAIRMENT OF OTHER ASSETS), ARISING OUT OF BREACH OF EXPRESS OR
IMPLIED WARRANTY, BREACH OF CONTRACT, MISREPRESENTATION,
NEGLIGENCE, STRICT LIABILITY IN TORT OR OTHERWISE, WHETHER BASED
ON THIS AGREEMENT, ANY COMMITMENT PERFORMED OR UNDERTAKEN UNDER OR
IN CONNECTION WITH THIS AGREEMENT OR OTHERWISE, EXCEPT ONLY IN THE
CASE OF PERSONAL INJURY WHERE AND TO THE EXTENT THAT APPLICABLE
LAW REQUIRES SUCH LIABILITY.
c) EXCEPT FOR DAMAGES ARISING UNDER SECTIONS 6, 7, 9 OR 10, UNDER NO
CIRCUMSTANCES WILL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR
DAMAGES IN EXCESS OF ONE MILLION DOLLARS ($1,000,000.00).
12. Miscellaneous.
a) Assignment. Each party acknowledges that the other party is
entering into this Agreement in reliance upon the personal
reputation, qualifications, and abilities of the other party; and
accordingly, neither party may assign this Agreement or any of its
rights and obligations under this Agreement without the prior
written consent of the other party, which consent shall not be
unreasonably withheld; (provided, however, that either party may
assign its rights and obligations hereunder, without the consent
of the other party, in connection with a sale of all or
substantially all of its assets or a controlling interest in its
ownership to another person or entity).
b) Applicable Law. This Agreement shall be governed by, subject to,
and interpreted in accordance with the laws of the State of
Delaware of the United States of America without giving effect to
conflict of law principles thereof.
c) Partial Invalidity. Whenever possible each provision of this
Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but in the event that any
provision herein is held to be invalid or unenforceable under any
circumstances, (i) such holding shall not affect the validity or
enforceability of such provision under other circumstances, of any
other provision herein, or of this Agreement as a whole, and (ii)
GFI Caminus and SS&C shall in good faith amend this Agreement to
reflect as near as may be the spirit and intention of such invalid
and unenforceable provision so that the same shall comply with the
applicable law.
d) Modification. No modifications or amendments to this Agreement
shall be binding upon the parties unless in writing signed by both
parties.
e) Waiver. A failure or delay of either party to enforce its rights
hereunder shall in no way be construed to be a waiver of such
rights or any other rights hereunder.
f) Notices. All "notices" under this Agreement shall be in writing,
and may be given by personal delivery, or by registered or
certified mail, postage prepaid, return
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receipt requested (or by other courier that provides written proof
of delivery), or facsimile or other telecommunications which
provides written proof of delivery to the parties at their
respective addresses set forth on Page 1 of this Agreement, or to
any other address either party from time to time designates to the
other by such notice. Such notices shall be deemed given when
delivered personally, or on the same business day as when
delivered via courier with proof of delivery, or seven (7) days
from when mailed if sent via registered or certified mail, or on
the next business day if transmitted via facsimile.
g) Headings. The headings used in this Agreement are for convenience
of reference only and are not to be used for interpreting it.
h) Complete Agreement. This Agreement constitutes the entire
agreement between the parties and supersedes all previous
agreements, promises, proposals, negotiations, and understandings
between the parties respecting its subject matter hereof,
including, but not limited to, any Licensing Agreement, letter
agreement or other agreement previously executed between the
parties.
i) USA Control. Each party believes that the Materials it has
furnished or will furnish to the other constitute "technical data"
for purposes of export control regulations of the United States of
America. Accordingly each party agrees that neither the Materials
themselves, nor any copies or direct products of them (as defined
in such regulations), may be exported or otherwise transferred to
any country in violation of the laws of the United States of
America unless specifically authorized by the United States
Department of Commerce, and authorized in writing by each party
hereto.
j) Independent Contractors. The parties are, and shall remain,
independent contractors. Except as provided herein, each party is
not, and will not act as, an agent of the other party, nor shall
either party or any of its employees be deemed to be employees of
the other party.
-17-
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto cause this Agreement to be
executed by their duly authorized representatives.
SS&C TECHNOLOGIES, INC. GFI CAMINUS LLC
By: /s/ William C. Stone By: /s/ Larry Gilson
------------------------------ -----------------------------------
Name: William C. Stone Name: Larry Gilson
---------------------------- ---------------------------------
Title: Chief Executive Officer Title: Chairman
--------------------------- --------------------------------
Date: Date:
---------------------------- ---------------------------------
SCHEDULE & EXHIBITS
Schedule 1 Products, Standard Prices, Standard Discount
Exhibit A: License Agreement [To be provided]
Exhibit B: Order Form [To be provided]
Exhibit C: Customer Non-Disclosure Agreement [To be provided]
-18-
<PAGE> 19
SCHEDULE 1:
A. PRODUCTS
Products include the base product and any modules marketed as part of the
product line.
Category Three Products consist of the following:
[To be provided]
B. STANDARD PRICES
[To be provided]
C. STANDARD DISCOUNT
[To be provided]
<PAGE> 1
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
Company Jurisdiction
------- ------------
1. Caminus Limited United Kingdom
(subsidiary of the Registrant)
2. Caminus Energy Limited United Kingdom
(subsidiary of Caminus Limited)
3. Zai*Net Software Limited United Kingdom
(subsidiary of Caminus Limited)
4. Caminus Consultants Limited United Kingdom
(subsidiary of Caminus Limited)
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated September 23, 1999,
relating to the financial statements of Caminus LLC, and of our report dated
August 28, 1998, relating to the financial statements of ZAI*NET SOFTWARE, Inc.,
which appear in such Prospectus. We also consent to the references to use under
the headings "Experts" and "Selected Consolidated Financial Data" in such
Registration Statement. However, it should be noted that PricewaterhouseCoopers
LLP has not prepared or certified such "Selected Consolidated Financial Data."
PRICEWATERHOUSECOOPERS LLP
New York, New York
September 30, 1999
<PAGE> 1
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated 30 September 1998, relating to the financial statements of Caminus
Limited (formerly Caminus Energy Limited), which appear in such Registration
Statement. We also consent to the reference to us under the heading "Experts" in
such Registration Statement.
PETERS, ELWORTHY & MOORE
Cambridge, United Kingdom
29 September 1999
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<PERIOD-TYPE> 8-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> APR-29-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 JUN-30-1999
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<INCOME-CONTINUING> (10,072,192) (2,468,897)
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