<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 15, 1999
REGISTRATION NO. 333-88437
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
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 13-4081739
(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>
<S> <C> <C> <C> <C>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) OFFERING PRICE PER UNIT PRICE(2) REGISTRATION FEE(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $0.01
per share..................... 4,996,750 shares $15.00 $74,951,250 $20,837
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 651,750 shares that the underwriters have an option to purchase
from the registrant and selling stockholders to cover over-allotments, if
any.
(2) Estimated pursuant to Rule 457(c) under the Securities Act of 1933 solely
for purposes of calculating the registration fee.
(3) $20,206 of this fee has been previously paid.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 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 NOVEMBER 15, 1999
[CAMINUS LOGO]
- --------------------------------------------------------------------------------
4,345,000 SHARES
COMMON STOCK
- --------------------------------------------------------------------------------
This is Caminus Corporation's initial public offering. We are offering 3,572,203
shares of common stock, and the selling stockholders identified in this
prospectus are offering 772,797 shares of common stock.
We expect that the public offering price will be between $13.00 and $15.00 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 651,750 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.]
[In the top left corner of the page is the Caminus logo. Directly below the logo
is the phrase, "A leading provider of software solutions and strategic advice to
participants in competitive energy markets."
To the right of this phrase are three phrases as follows:
"Make strategic decisions in competitive energy markets"
"Trade energy commodities and manage energy transactions"
"Manage complex energy risk scenarios"
Below the four phrases is a large box. In the center of the box is a large oval
graphic. Against a dark background is a series of interlocking lines connecting
ten terms. The terms are arranged in a circular pattern as follows: "Utilities,"
"Generators," "Processors," "Marketers," "Local Distribution Companies,"
"Retailers," "Pipelines," "Transmission Companies," "Municipalities" and
"Producers."
In the center of the interconnecting lines is the Caminus Corporation logo.
Directly above and below the circular graphic are snapshots of power plants and
workers in the energy industry.
Running along the bottom of the box are five small boxes which contain the
following terms: "Energy Trading," "Risk Management," "Analytics," "Scheduling
Systems" and "Strategic Consulting."]
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 types of risk and energy commodities,
such as electric power, natural gas, crude oil and coal, 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 enables 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, 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 have significant 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.......... 3,572,203 shares
Common stock offered by the selling
stockholders........................... 772,797 shares
Common stock to be outstanding after this
offering............................... 14,611,022 shares
Use of proceeds.......................... - Repayment of borrowings under
our credit facility
- Payment of a consulting and
advisory termination fee to GFI
- Special bonus payments
- 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 926,258 and 28,572 shares subject to outstanding options
under our 1998 and 1999 stock incentive plans, respectively, at a weighted
average exercise price of $4.76 per share and 568,978 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.
------------------------
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.
4
<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 and for the
period from our inception (April 29, 1998) through December 31, 1998, 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 September 30, 1998 and for the nine months ended September 30,
1999 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 periods. 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, non-cash compensation expense and
terminated acquisition costs. Terminated acquisition costs represent costs
associated with a potential acquisition that we ultimately decided not to
pursue. 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.
From the date of our formation as a limited liability company through
September 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 September 30, 1999 below
give effect to our sale of 3,572,203 shares of common stock in this offering, at
an assumed initial public offering price of $14.00 per share, after deducting
estimated underwriting discounts and our estimated offering expenses and after
the application of a portion of the proceeds to pay a special one-time bonus to
Nigel L. Evans and Michael Morrison, pay GFI a termination fee for its
consulting and advisory services and repay borrowings under our credit facility.
5
<PAGE> 7
<TABLE>
<CAPTION>
ZAI*NET
(PREDECESSOR) CAMINUS
------------------------- -----------------------------------------------------------
INCEPTION PRO FORMA INCEPTION
FOUR (APRIL 29, TWELVE (APRIL 29, NINE
MONTHS 1998) MONTHS 1998) MONTHS
YEAR ENDED ENDED THROUGH ENDED THROUGH ENDED
DECEMBER 31, APRIL 30, DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1998 1998 1998 1999
------------ ---------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Licenses..................... $1,521,447 $1,495,221 $ 3,639,143 $ 5,455,014 $ 1,925,858 $ 8,088,621
Software services............ 2,667,807 1,334,473 3,090,758 4,947,199 1,881,417 5,679,513
Strategic consulting......... -- -- 2,896,102 4,354,096 1,720,550 4,757,425
---------- ---------- ------------ ------------ ----------- -----------
Total revenues............. 4,189,254 2,829,694 9,626,003 14,756,309 5,527,825 18,525,559
---------- ---------- ------------ ------------ ----------- -----------
Acquired in-process research
and development.............. -- -- 4,822,000 4,822,000 3,053,000 1,000,000
Operating income (loss)........ (4,236) 436,030 (10,133,366) (18,094,778) (4,489,768) (5,781,600)
Net income (loss).............. 13,355 420,508 (10,371,188) (18,141,684) (4,680,440) (6,242,750)
Pro forma net loss............. (10,159,229) (17,965,460) (5,069,442) (6,592,319)
Basic and diluted net loss per
common share................. $ (1.41) $ (2.39) $ (0.65) $ (0.76)
Pro forma basic and diluted net
loss per share............... (1.38) (0.70) (0.80)
Weighted average shares --
basic and diluted............ 7,360,634 7,578,987 7,215,030 8,264,075
OTHER DATA:
Cash provided by (used in)
operating activities......... $ 401,048 $1,053,662 $ 951,676 $ 456,381 $ (932,513)
Cash used in investing
activities................... 206,245 99,881 10,892,906 10,264,424 10,719,054
Cash provided by (used in)
financing activities......... (290,050) (3,000) 12,699,637 12,874,999 9,693,866
Adjusted EBITDA................ 118,854 482,171 355,155 $ 397,280 382,350 2,079,747
<CAPTION>
CAMINUS
-------------
PRO FORMA
NINE
MONTHS
ENDED
SEPTEMBER 30,
1999
-------------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Licenses..................... $ 8,129,621
Software services............ 5,981,134
Strategic consulting......... 4,757,425
-----------
Total revenues............. 18,868,180
-----------
Acquired in-process research
and development.............. 1,000,000
Operating income (loss)........ (12,843,964)
Net income (loss).............. (13,308,591)
Pro forma net loss............. (13,658,159)
Basic and diluted net loss per
common share................. $ (1.62)
Pro forma basic and diluted net
loss per share...............
Weighted average shares --
basic and diluted............ 8,405,529
OTHER DATA:
Cash provided by (used in)
operating activities.........
Cash used in investing
activities...................
Cash provided by (used in)
financing activities.........
Adjusted EBITDA................ $ 1,738,853
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
---------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
----------- ----------- -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 801,351 $ 2,125,329 $44,335,412
Total assets................................................ 40,868,631 42,192,609 84,402,692
Borrowings under credit facility, net of current portion.... 1,000,000 1,000,000 --
Current portion of borrowings under credit facility......... 1,000,000 1,000,000 --
Stockholders' equity........................................ 27,050,273 27,659,247 71,869,330
</TABLE>
------------------------
All information in this prospectus assumes our reorganization as a
corporation immediately prior to this offering, and the conversion of each
membership interest in the limited liability company into .095238 of one share
of common stock of the corporation. 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;
- the issuance of an aggregate of 57,486 shares of common stock in November
1999 to three employees in connection with the acquisition of Positron
Energy Consulting;
- the issuance upon the closing of this offering of 160,209 shares of
common stock to David M. Stoner, our President and Chief Executive
Officer, as a bonus for his services; and
- the exercise prior to or in connection with this offering of options to
purchase common stock issued to GFI, Nigel L. Evans, Michael Morrison and
SS&C Technologies, Inc.
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. Please see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for detailed information on our limited operating history.
YOU SHOULD NOT RELY ON OUR HISTORICAL AND PRO FORMA FINANCIAL INFORMATION IN
DECIDING WHETHER TO INVEST IN OUR COMMON STOCK, BECAUSE SUCH 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 operational arrangements as a combined entity. Accordingly, you
should not rely on our historical and pro forma financial information as an
indication 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
7
<PAGE> 9
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 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
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. Our sales cycle varies depending on the size and type of
customer considering a purchase and whether we have conducted business with a
potential
8
<PAGE> 10
customer in the past. These potential customers frequently need to obtain
internal approvals from multiple decision makers prior to making purchase
decisions. 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.
WE MAY NOT BE ABLE TO OBTAIN OR SUSTAIN MARKET ACCEPTANCE FOR OUR PRODUCTS AND
SERVICES
Because the market for products and services in the energy industry is
rapidly evolving, a viable market for our products and services may not be
sustainable. We may not be able to continue to develop products and services
that serve the changing needs of energy market participants in this evolving
market. 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 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.
9
<PAGE> 11
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 may not 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
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.
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. 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. We may not
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
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 implementing our growth strategy. 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. 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.
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WE FACE RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS AND PLANS FOR
EXPANSION
One of our key strategies is to continue to expand our international
operations and sales and marketing efforts. If we are unsuccessful, we may lose
customers that operate globally, which will adversely affect our results of
operations. In addition, international operations are subject to inherent risks
that may limit our international expansion or cause us to incur significant
costs to compete effectively in international markets. These include:
- 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
- local economic conditions in foreign markets
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 July 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
- expenses associated with the transactions, including expenses associated
with amortization of acquired intangible assets
- the potential unknown liabilities associated with acquired businesses
IF NEW MEMBERS OF OUR SENIOR MANAGEMENT ARE NOT SUCCESSFULLY INTEGRATED WITH OUR
MANAGEMENT TEAM, WE MAY NOT BE ABLE TO SUCCESSFULLY MANAGE OUR BUSINESS
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
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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 may not be able to 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.
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
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 could
increase the cost of doing 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.
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WE MAY NOT BE SUCCESSFUL IF WE ARE NOT ABLE 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. Our trade secrets or
confidentiality agreements may not 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.
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.
OTHERS MAY CLAIM THAT WE INFRINGE ON THEIR INTELLECTUAL PROPERTY RIGHTS, WHICH
MAY LIMIT OUR ABILITY TO CONDUCT OUR BUSINESS
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. Third parties may 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
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<PAGE> 15
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. These employees have significant expertise in the energy industry
and would be difficult to replace. 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. In particular, the number
of people with significant knowledge about evolving energy markets is limited.
Newly hired employees will require training and it will take time for them to
achieve full productivity. We face intense competition in recruiting and may not
be able to hire enough qualified individuals in the future, and newly hired
employees may not achieve necessary levels of productivity.
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, we may not be able to successfully grow our business.
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
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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 claims of mismanagement, misrepresentation or breach of
contract and related litigation, which could be costly and time-consuming to
defend.
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, which is difficult to predict. 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. Because a
substantial portion of our operating expenses is fixed in the short term, any
unanticipated reduction in demand for our products and services would negatively
impact our operating results. 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.
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<PAGE> 17
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.
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 our software products and related
strategic consulting services.
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
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 anticipated demand for our products and
services. These data and projections are inherently imprecise, and you should
not place undue reliance on them.
RISKS RELATED TO THIS OFFERING
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."
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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
- announcements, by us or our competitors, of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments
- additions or departures of key personnel
- future sales of common stock
- changes in financial estimates by securities analysts
- loss of a major customer
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. Such volatility has been particularly common in technology companies. We
may in the future be the target of securities 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 10,266,022 shares outstanding at
the time of this offering:
- 27,356 shares may be sold 90 days after the effective date of this
offering
- 8,513,530 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 10,266,022 shares of common
stock have the right to require us to register their shares of common stock with
the
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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 1,523,808 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.
OUR EXECUTIVE OFFICERS AND DIRECTORS AND THEIR AFFILIATES WILL BE ABLE TO
EXERCISE CONTROL OVER ALL MATTERS REQUIRING STOCKHOLDER APPROVAL AND COULD MAKE
DECISIONS ABOUT OUR BUSINESS THAT CONFLICT WITH OTHER STOCKHOLDERS' INTERESTS
On completion of this offering, our executive officers and directors and
their affiliates will beneficially own approximately 53.9% of our outstanding
common stock. As a result, these stockholders will be able to exercise control
over all matters requiring stockholder approval even if other stockholders
oppose them. These matters include 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 on terms that other stockholders may find
favorable.
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
We are subject to the provisions of Section 203 of the General Corporation
Law of Delaware. Section 203 will prohibit us from engaging in certain business
combinations, unless the business combination is approved in a prescribed
manner. Accordingly, Section 203 may discourage, delay or prevent someone from
acquiring or merging with us.
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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:
- pay a price per share that substantially exceeds the value of your assets
after subtracting your liabilities; and
- contribute 49.9% of the total amount to fund Caminus Corporation, but
will own only 24.4% of the shares outstanding.
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. We undertake no obligation to update any of the forward-looking
statements after the date of this prospectus.
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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., whose predecessor 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 July 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. Each
outstanding share of membership interest in Caminus LLC will convert into
.095238 of one share 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 has 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 Corporation
financial statements.
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USE OF PROCEEDS
We estimate that the net proceeds from our sale of 3,572,203 shares of
common stock will be approximately $45,500,000, assuming an initial public
offering price of $14.00 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;
- to pay a termination fee for consulting and advisory services;
- 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 Corporation financial statements. We
intend to use $1,300,000 of the net proceeds to pay GFI as consideration for
terminating its consulting and advisory arrangements with us. Additionally, we
expect to use approximately $476,000 for a special bonus payment to the former
shareholders of Caminus Limited. 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. See "Certain
Transactions."
From time to time we engage in discussions with potential acquisition
candidates. However, 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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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 Corporation financial statements.
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CAPITALIZATION
The following table sets forth our capitalization as of September 30, 1999:
- On an actual basis, assuming our reorganization as a corporation
immediately prior to this offering, including the issuance of an
aggregate of 9,238,088 shares of common stock to our stockholders in
exchange for their membership interests in the limited liability company;
- On a pro forma basis to give effect to:
(1) the issuance of an aggregate of 57,486 shares of common stock in
November 1999 to three employees in connection with our acquisition of
Positron;
(2) the issuance upon the closing of this offering of 160,209 shares of
common stock to David M. Stoner as a bonus for his services and, in
addition, the forgiveness of his $1,000,000 loan, which was previously
recorded; and
(3) the issuance of an aggregate of 1,583,035 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, Nigel L. Evans,
Michael Morrison and SS&C Technologies, Inc., which, in the case of
the options held by Messrs. Evans and Morrison and SS&C Technologies,
would otherwise expire in connection with this offering; and
- On a pro forma as adjusted basis to give effect to the issuance and sale
by us of 3,572,203 shares of common stock in this offering at an assumed
initial public offering price of $14.00 per share and after deducting the
estimated underwriting discounts and our estimated offering expenses and
applying a portion of the net proceeds to pay a special one-time bonus to
Nigel L. Evans and Michael Morrison, pay GFI a termination fee for its
consulting and advisory services, and 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 September 30, 1999. It excludes 926,258
shares subject to options outstanding under our 1998 stock incentive plan at a
weighted average exercise price of $4.48 per share and 597,550 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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<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------------ ------------ ------------
<S> <C> <C> <C>
Cash and cash equivalents............. $ 801,351 $ 2,125,329 $ 44,335,412
============ ============ ============
Borrowings under credit facility,
including current portion........... $ 2,000,000 $ 2,000,000 $ --
============ ============ ============
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value per
share; 50,000,000 shares authorized;
11,000,389 shares issued and
9,238,088 shares outstanding,
actual; 12,801,120 shares issued and
11,038,819 shares outstanding, pro
forma; and 16,373,323 shares issued
and 14,611,022 shares outstanding,
pro forma as adjusted............... $ 110,004 $ 128,011 $ 163,733
Additional paid-in-capital............ 51,161,225 61,234,956 106,709,317
Treasury stock 1,762,301 shares, at
cost................................ (4,416,667) (4,416,667) (4,416,667)
Subscription receivable............... (2,907,065) (1,907,065) (1,907,065)
Accumulated deficit................... (16,613,938) (27,096,702) (28,396,702)
Unearned compensation................. (287,086) (287,086) (287,086)
Cumulative translation adjustment..... 3,800 3,800 3,800
------------ ------------ ------------
Total stockholders' equity....... 27,050,273 27,659,247 71,869,330
------------ ------------ ------------
Total capitalization, including
current portion of
borrowings..................... $ 29,050,273 $ 29,659,247 $ 71,869,330
============ ============ ============
</TABLE>
24
<PAGE> 26
DILUTION
Our pro forma net tangible book value at September 30, 1999 was
approximately $(3,680,477), or $(0.33) 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 and the
issuance of shares of common stock to David M. Stoner as a bonus for his
services, to three employees in connection with the Positron acquisition and
upon the expected exercise of options by GFI, Nigel L. Evans, Michael Morrison
and SS&C Technologies prior to or in connection with this offering. After giving
effect to our sale of 3,572,203 shares of common stock in this offering at an
assumed initial public offering price of $14.00 per share and our receipt of the
net proceeds, after deducting the estimated underwriting discounts and estimated
offering expenses and after applying a portion of the net proceeds towards the
payment of a termination fee to GFI, the payment of certain one-time bonuses and
the repayment of outstanding bank debt, our pro forma net tangible book value as
of September 30, 1999 would have been approximately $40,529,606, or $2.77 per
share. This represents an immediate increase in pro forma net tangible book
value of $3.10 per share to existing stockholders and an immediate dilution in
pro forma net tangible book value of $11.23 per share to new investors
purchasing shares in this offering. If the initial public offering price is
higher or lower, the dilution to new investors will be greater or less,
respectively. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $14.00
Pro forma net tangible book value per share as of September
30, 1999.................................................... $(0.33)
Increase per share attributable to this offering.......... 3.10
------
Pro forma net tangible book value per share after this
offering.................................................. 2.77
------
Dilution per share to new investors......................... $11.23
======
</TABLE>
25
<PAGE> 27
The following table summarizes, on a pro forma basis as of September 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 $14.00 per share for shares purchased in this offering, before
deducting underwriting discounts and our estimated offering expenses).
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ----------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing
stockholders....... 11,038,819 75.6% $ 50,256,098 50.1% $ 4.55
New investors........ 3,572,203 24.4 50,010,842 49.9 $14.00
---------- ----- ------------ -----
Total........... 14,611,022 100.0% $100,266,940 100.0%
========== ===== ============ =====
</TABLE>
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 70.3% of the shares of common stock
after this offering (67.0% if the underwriters' over-allotment option is
exercised in full). As of September 30, 1999, there were outstanding stock
options to purchase 926,258 shares of common stock under our 1998 stock
incentive plan at a weighted average exercise price of $4.47 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."
26
<PAGE> 28
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 from our inception (April 29, 1998) through
December 31, 1998 and the consolidated balance sheet data at December 31, 1998
are derived from, and 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 from our inception
(April 29, 1998) through September 30, 1998 and for the nine months ended
September 30, 1999 and the consolidated balance sheet data at September 30, 1999
are derived from, and are qualified by reference to, the unaudited financial
statements of Caminus Corporation 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, non-cash compensation expense and
terminated acquisition costs. Terminated acquisition costs represent costs
associated with a potential acquisition that we ultimately decided not to
pursue. 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.
From the date of our formation as a limited liability company through
September 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
3,572,203 shares of common stock in this offering, at an assumed initial public
offering price of $14.00 per share, after deducting estimated underwriting
discounts and our estimated offering expenses and after the application of a
portion of the proceeds to pay a special one-time bonus to Nigel L. Evans and
Michael Morrison, pay GFI a termination fee for its consulting and advisory
services and repay borrowings under our credit facility.
27
<PAGE> 29
<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:
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
---------- ---------- ---------- ---------- ----------
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
========== ========== ========== ========== ==========
OTHER DATA:
Cash provided by operating
activities.................... $ 96,344 $ 146,142 $ 131,110 $ 401,048 $1,053,662
Cash used in investing
activities.................... 71,197 167,158 100,112 206,245 99,881
Cash provided by (used in)
financing activities.......... (7,373) 22,687 54,450 (290,050) (3,000)
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 --
Stockholders' equity
(deficit).................... (28,782) 120,010 220,874 234,229
</TABLE>
28
<PAGE> 30
<TABLE>
<CAPTION>
CAMINUS
----------------------------------------------------------------------------------
PRO FORMA PRO FORMA
INCEPTION TWELVE INCEPTION NINE NINE
(APRIL 29, 1998) MONTHS (APRIL 29, 1998) MONTHS MONTHS
THROUGH ENDED THROUGH ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1998 1998 1999 1999
---------------- ------------ ---------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS:
Revenues:
Licenses............. $ 3,639,143 $ 5,455,014 $ 1,925,858 $ 8,088,621 $ 8,129,621
Software services.... 3,090,758 4,947,199 1,881,417 5,679,513 5,981,134
Strategic
consulting......... 2,896,102 4,354,096 1,720,550 4,757,425 4,757,425
------------ ------------ ----------- ----------- ------------
Total revenues..... 9,626,003 14,756,309 5,527,825 18,525,559 18,868,180
------------ ------------ ----------- ----------- ------------
Gross profit........... 4,940,985 8,126,983 2,855,235 12,673,116 12,733,815
Operating expenses..... 15,074,351 26,221,761 7,345,003 18,454,716 25,577,779
------------ ------------ ----------- ----------- ------------
Operating loss......... (10,133,366) (18,094,778) (4,489,768) (5,781,600) (12,843,964)
Other income (expense),
net.................. 96,909 120,109 56,535 (126,856) (130,333)
Provision for income
taxes................ 35,735 167,015 57,288 334,294 334,294
Minority interest...... (298,996) -- (189,920) -- --
------------ ------------ ----------- ----------- ------------
Net loss............... $(10,371,188) $(18,141,684) $(4,680,440) $(6,242,750) $(13,308,591)
============ ============ =========== =========== ============
Pro forma net loss..... $(10,159,229) $(17,965,460) $(5,069,442) $(6,592,319) $(13,658,159)
============ ============ =========== =========== ============
Basic and diluted net
loss per share....... $ (1.41) $ (2.39) $ (0.65) $ (0.76) $ (1.62)
Pro forma basic and
diluted net loss per
share................ (1.38) (0.70) (0.80)
Weighted average common
shares -- basic and
diluted.............. 7,360,634 7,578,987 7,215,030 8,264,075 8,405,529
OTHER DATA:
Cash provided by (used
in) operating
activities........... $ 951,676 $ 456,381 $ (932,513)
Cash used in investing
activities........... 10,892,906 10,264,424 10,719,054
Cash provided by
financing
activities........... 12,699,637 12,874,999 9,693,866
Adjusted EBITDA........ 355,155 $ 397,280 382,350 2,079,747 $ 1,738,853
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
---------------------------------------
DECEMBER 31, PRO FORMA
1998 ACTUAL PRO FORMA AS ADJUSTED
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents............. $ 2,770,538 $ 801,351 $ 2,125,329 $44,335,412
Total assets............ 31,069,002 40,868,631 42,192,609 84,402,692
Borrowings under credit
facility, net of
current portion....... -- 1,000,000 1,000,000 --
Current portion of
credit facility....... -- 1,000,000 1,000,000 --
Stockholders' equity.... 17,159,782 27,050,273 27,659,247 71,869,330
</TABLE>
29
<PAGE> 31
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, Positron Energy
Consulting in November 1998 and DC Systems in July 1999. 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 174 at September 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.
Our software license agreements are non-refundable. Payment terms require
that a significant portion of the license fee is payable on delivery of the
licensed product with the balance due in installments over a relatively short
period, generally four months or less.
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
30
<PAGE> 32
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 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 also provide software to customers under long-term development contracts
that can require significant modification to adapt the software to the unique
specifications of the customer. If the service elements are considered essential
to the functionality of the software products, both the software product
revenues and service revenues are recognized using the completed contract method
as prescribed in accordance with the provisions of SOP 81-1, "Accounting for
Performance of Construction Type and Certain Production Type Contracts."
Accordingly, license and software enhancement revenues are recognized under the
completed contract method when all development, testing and installation is
completed and the purchaser formally accepts the software. Revenues and costs
are recognized upon completion of the contract and are based on the labor hours
incurred. Costs of software enhancements include the direct labor component of
programmer and consultant cost to perform the software enhancement or service as
well as the prorated share of technical support and overhead costs associated
with the enhancement and services. Anticipated losses, if any, on uncompleted
contracts are recognized in the period in which such losses are determined.
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 46% of our
total revenues for the nine months ended September 30, 1999. A significant
portion 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.
31
<PAGE> 33
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 SEPTEMBER 30,
1998 TO THE NINE MONTHS ENDED SEPTEMBER 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 September 30, 1998 and for the nine months ended September 30,
1999. The consolidated financial information for the period from inception
through September 30, 1998 and the nine months ended September 30, 1999 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 period from inception through
September 30, 1998, which is approximately five months, is being compared to the
nine months ended September 30, 1999. Accordingly, increases in revenues and
expenses are primarily attributable to the comparison of periods containing
different numbers of months. The discussion below outlines other trends in the
business.
<TABLE>
<CAPTION>
INCEPTION THROUGH NINE MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1999
------------------ ------------------
<S> <C> <C>
Revenues:
Licenses....................................... 35% 44%
Software services............................ 34 31
Strategic consulting......................... 31 26
--- ---
Total revenues............................ 100 100
Cost of revenues:
Cost of licenses............................. 1 4
Cost of software services.................... 22 18
Cost of strategic consulting................. 25 10
--- ---
Gross profit.............................. 52 68
Operating expenses:
Sales and marketing.......................... 5 14
Research and development..................... 12 14
General and administrative................... 30 33
Acquired in-process research and
development............................... 55 5
Amortization of intangible assets............ 31 33
--- ---
Total operating expenses.................. 133 99
--- ---
Loss from operations........................... (81) (31)
Other income (expense)......................... (1) (1)
Provision for income taxes..................... (1) (2)
Minority interest.............................. (3) --
--- ---
Net loss....................................... (85)% (34)%
=== ===
</TABLE>
32
<PAGE> 34
Revenues
LICENSES. License revenues represented 35% and 44% of the total revenues
for the 1998 and 1999 periods, respectively, and increased $6.2 million, or
320%, from $1.9 million in the 1998 period to $8.1 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 revenues.
SOFTWARE SERVICES. Software services revenues represented 34% and 31% of
the total revenues for the 1998 and 1999 periods, respectively, and increased by
$3.8 million, or 202%, from $1.9 million in the 1998 period to $5.7 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. The greater increase in license
revenues as compared to the increase in software services revenues was
attributable to the increase in sales of licenses whereby the revenues were
recognized upon the execution of the license agreement and delivery of the
software to the client. Typically, software services are provided subsequent to
the recognition of the license revenues.
STRATEGIC CONSULTING. Strategic consulting revenues represented 31% and
26% of the total revenues for the 1998 and 1999 periods, respectively, and
increased $3.0 million, or 177%, from $1.7 million in the 1998 period to $4.8
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.
Cost of Revenues
COST OF LICENSES. Cost of licenses primarily consists of the personnel
costs associated with completing product enhancements and the software license
costs associated with third-party software that is integrated into our products.
Cost of licenses as a percentage of revenues was 1% and 4% for the 1998 and 1999
periods, respectively, and increased $0.6 million, or 679%, from $0.1 million in
the 1998 period to $0.7 million in 1999. The increase was primarily attributable
to the costs of product enhancements performed by DC Systems subsequent to our
July 1999 acquisition of DC Systems.
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 as a percentage of revenues was 22% and 18% for the 1998
and 1999 periods, respectively, and increased $2.0 million, or 166%, from $1.2
million in the 1998 period to $3.2 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
33
<PAGE> 35
strategic consulting as a percentage of revenues was 25% and 10% for the 1998
and 1999 periods, respectively, and increased $0.6 million, or 41%, from $1.4
million in the 1998 period to $1.9 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 as a percentage of revenues was 5% and
14% for the 1998 and 1999 periods, respectively, and increased $2.3 million, or
860%, from $0.3 million in the 1998 period to $2.5 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 as a percentage of revenues was 12% and 14% for the 1998 and 1999
periods, respectively, and increased $2.0 million, or 320%, from $0.6 million in
the 1998 period to $2.7 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 as a percentage of revenues was 30% and 33% for the 1998
and 1999 periods, respectively, and increased $4.5 million, or 269%, from $1.7
million in the 1998 period to $6.2 million in 1999. 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, which include $0.4 million of
professional fees associated with a 1999 acquisition that was never consummated.
ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT. Acquired in-process research
and development as a percentage of revenues was 55% and 5% for the 1998 and 1999
periods, respectively, and was $3.1 million in the 1998 period and $1.0 million
in 1999. Acquired in-process research and development represents the fair value
of the in-process research and development acquired during the 1998 purchase of
Zai*Net and the 1999 purchase of DC Systems, respectively. 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
34
<PAGE> 36
alternative future uses. Accordingly, such amount was expensed on the date of
acquisition. See note 3 of the Caminus Corporation 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, Positron and DC Systems, and other intangible assets.
Amortization of intangibles as a percentage of revenues was 31% and 33% for the
1998 and 1999 periods, respectively, and increased $4.4 million, or 254%, from
$1.7 million in the 1998 period to $6.1 million in 1999. The increase was
primarily attributable to our incurring amortization expense related to the 1998
acquisitions for a full nine months versus five months in the 1998 period, and
the additional amortization expense related to the DC Systems acquisition in the
1999 period.
Loss From Operations
As a result of the variances described above, operating loss increased by
$1.3 million, or 29%, from $4.5 million in the 1998 period to $5.8 million in
1999. Operating expenses as a percentage of revenues was 133% and 99% for the
1998 and 1999 periods, respectively.
Adjusted EBITDA
Adjusted EBITDA as a percentage of revenues was 7% and 11% for the 1998 and
1999 periods, respectively. Adjusted EBITDA increased $1.7 million, or 444%,
from $0.4 million in the 1998 period to $2.1 million in 1999.
Provision for Income Taxes
Our provision for income taxes for 1999 was $0.3 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.
Minority Interest
Minority interest represents the earnings attributable to the 29% of
Zai*Net that we did not own during the 1998 period.
35
<PAGE> 37
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 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 licenses.............................. -- 2
Cost of software services..................... 32 24
Cost of strategic consulting.................. -- 23
--- -----
Gross profit............................... 68 51
Operating expenses:
Research and development...................... 29 12
Selling, general and administrative........... 39 38
Acquired in-process research and development.. -- 50
Amortization of intangible assets............. -- 57
--- -----
Total operating expenses................... 68 157
--- -----
Loss from operations............................ -- (106)
--- -----
Other income.................................... -- 1
Provision for income taxes...................... -- --
Minority interest............................... -- (3)
--- -----
Net income (loss)............................... --% (108)%
=== =====
</TABLE>
Revenues
LICENSE. License revenues represented 36% and 38% of the total revenues
for the 1997 and 1998 periods, respectively, and increased $2.1 million, or
139%, from $1.5 million in 1997 to $3.6 million in 1998. This increase was
primarily
36
<PAGE> 38
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 represented 64% and 32% of
the total revenues for the 1997 and 1998 periods, respectively, and 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. The greater increase in license
revenues as compared to the increase in software services revenues was
attributable to the disproportional timing of the recognition of the respective
revenues. During 1997 many of our sales of licenses had acceptance criteria and,
accordingly, license revenues were deferred and the recognition of such revenues
occurred during 1998 when we completed our obligations under the license
agreement and the software had been accepted. Software services revenues were
recognized ratably over the implementation as such services were performed.
STRATEGIC CONSULTING. Strategic consulting revenues represented 0% and 30%
of the total revenues for the 1997 and 1998 periods, respectively, and were $2.9
million in 1998. There were no strategic consulting revenues in 1997 as the
predecessor company was not in that business.
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 and the cost of licensing third-party software. 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. Cost of revenues as a percentage of revenues was
32% and 49% for the 1997 and 1998 periods, respectively, and increased $3.4
million, or 252%, from $1.3 million in 1997 to $4.7 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 as a
percentage of revenues were 29% and 12% for the 1997 and 1998 periods,
respectively, and was approximately $1.2 million in each of 1997 and 1998.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses as a percentage of revenues were 39% and 38% for the 1997 and 1998
periods, respectively, and increased $2.0 million, or 120%, from $1.6 million in
1997 to $3.6 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.
37
<PAGE> 39
ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT. Acquired in-process research
and development expenses as a percentage of revenues were 0% and 50% for the
1997 and 1998 periods, respectively, and $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 13 of the Caminus
Corporation financial statements. Amortization of intangible assets as a
percentage of revenues was 0% and 57% for the 1997 and 1998 periods,
respectively, and 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. Operating
expenses as a percentage of revenues were 68% and 157% for the 1998 and 1999
periods, respectively.
Adjusted EBITDA
Adjusted EBITDA as a percentage of revenues was 3% and 4% for the 1997 and
1998 periods, respectively. Adjusted EBITDA increased $0.2 million, or 199%, to
$0.4 million in 1998.
Minority Interest
Minority interest in 1998 represents the earnings attributable to the 29%
of Zai*Net that we did not own.
38
<PAGE> 40
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...................................... 47% 36%
Software services........................... 53 64
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 represented 47% and 36% of the total revenues
for the 1996 and 1997 periods, respectively, and 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 represented 53% and 64% of the total
revenues for the 1996 and 1997 periods, respectively, and 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. The greater increase in software services revenues as
compared to the increase in license revenues was attributable to the
disproportional timing of the recognition of the respective revenues. During
1997, many of our sales of licenses had acceptance criteria and accordingly,
license revenues were deferred into 1998. Software service revenues were
recognized ratably over the implementation as such services were performed.
39
<PAGE> 41
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 as a percentage of revenues
was 37% and 32% for the 1996 and 1997 periods, respectively, and 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 technical support personnel to support the growth
of the implementations and the installed customer base.
Operating Expenses
RESEARCH AND DEVELOPMENT. Research and development expenses as a
percentage of revenues were 23% and 29% for the 1996 and 1997 periods,
respectively, and 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 as a percentage of revenues were 36% and 39% for the 1996 and 1997
periods, respectively, and 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 eleven quarters ended September
30, 1999, as well as such information expressed as a percentage of total
revenues for the periods indicated. The information for the six quarters ended
September 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
40
<PAGE> 42
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.
From the date of our formation as a limited liability company through
September 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.
<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
-------- -------- ---------- ---------- ----------
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
======== ======== ========== ========== ==========
</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
--- --- --- --- ---
Total revenues............. 100 100 100 100 100
--- --- --- --- ---
Gross profit................... 66 64 68 73 74
Operating expenses............. 57 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%
=== === === === ===
</TABLE>
41
<PAGE> 43
<TABLE>
<CAPTION>
CAMINUS
--------------------------------------------------------------------------------------
QUARTER ENDED
--------------------------------------------------------------------------------------
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1998 1998 1998 1999 1999 1999
----------- ------------- ------------ ----------- ----------- -------------
<S> <C> <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 $ 3,793,296
Software services...... 676,000 1,205,417 1,209,341 1,949,373 2,057,217 1,672,923
Strategic consulting... 855,768 864,782 1,175,552 1,509,504 1,430,558 1,817,363
----------- ----------- ----------- ----------- ----------- -----------
Total revenues....... 2,447,783 3,080,041 4,098,179 5,235,456 6,006,521 7,283,582
----------- ----------- ----------- ----------- ----------- -----------
Gross profit............. 1,369,971 1,485,264 2,085,750 3,654,117 4,052,222 4,966,777
Operating expenses....... 4,760,914 2,584,088 7,729,349 4,810,067 5,369,897 8,274,752
----------- ----------- ----------- ----------- ----------- -----------
Operating loss........... (3,390,943) (1,098,824) (5,643,599) (1,155,950) (1,317,675) (3,307,975)
Other income (expense),
net.................... 25,438 31,097 40,374 3,247 (54,949) (75,154)
Provision (benefit) for
income taxes........... 44,511 12,778 (21,554) 73,245 66,323 194,726
Minority interest........ (98,917) (91,002) (109,077) -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net loss................. $(3,508,933) $(1,171,507) $(5,690,748) $(1,225,948) $(1,438,947) $(3,577,855)
=========== =========== =========== =========== =========== ===========
Pro forma net loss....... $(3,405,511) $(1,139,160) $(5,614,558) $(1,442,079) $(1,470,668) $(3,679,572)
=========== =========== =========== =========== =========== ===========
Basic and diluted net
loss per common
share.................. $(0.50) $(0.16) $(0.75) $(0.15) $(0.18) $(0.43)
Pro forma basic and
diluted net loss per
common share........... $(0.48) $(0.16) $(0.74) $(0.18) $(0.18) $(0.44)
Weighted average
shares -- basic and
diluted................ 7,074,526 7,309,717 7,604,362 7,966,928 7,993,157 8,296,539
</TABLE>
<TABLE>
<CAPTION>
CAMINUS
-------------------------------------------------------------------------------
QUARTER ENDED
-------------------------------------------------------------------------------
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1998 1998 1998 1999 1999 1999
-------- ------------- ------------ --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Licenses............... 37% 33% 42% 34% 42% 52%
Software services...... 28 39 30 37 34 23
Strategic consulting... 35 28 29 29 24 25
---- --- ---- --- --- ---
Total revenues....... 100 100 100 100 100 100
---- --- ---- --- --- ---
Gross profit............. 56 48 51 70 67 68
Operating expenses....... 194 84 189 92 89 114
---- --- ---- --- --- ---
Operating income
(loss)................. (138) (36) (138) (22) (22) (45)
Other income (expense),
net.................... 1 1 1 -- (1) (1)
Provision (benefit) for
income taxes........... 2 -- (1) 1 1 3
Minority interest........ (4) (3) (3) -- -- --
---- --- ---- --- --- ---
Net loss................. (143)% (38)% (139)% (23)% (24)% (49)%
==== === ==== === === ===
Pro forma net loss....... (139)% (37)% (137)% (28)% (24)% (51)%
==== === ==== === === ===
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents as of September 30, 1999 were approximately $0.8
million, a decrease of approximately $2.0 million from December 31, 1998. Net
cash used in operating activities for the nine months ended September 30, 1999
was approximately $0.9 million. Net cash used in operating activities primarily
resulted from our net loss of $6.2 million, which was offset by depreciation and
42
<PAGE> 44
amortization and acquired in-process research and development write-offs, a $2.2
million increase in accounts receivable and a $1.1 million decrease in accounts
payable, partially offset by increases of $3.0 million in accrued liabilities
and $2.1 million in deferred revenues. The increase in accounts receivable and
accrued liabilities was primarily attributable to the growth of our business.
The increase in accrued liabilities was primarily related to professional fees
associated with an acquisition that we ultimately decided not to pursue and
certain costs of this offering. 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.
Deferred revenues decreased approximately $2.1 million during the nine months
ended September 30, 1999 primarily due to a decrease in deferred license
revenues, partially offset by an increase in deferred maintenance revenues.
Deferred license revenues decreased primarily due to completion of our
obligations under certain license agreements and the acceptance of the software
by the customers. Accordingly, certain license revenues, which were deferred at
December 31, 1998, were recognized during the nine months ended September 30,
1999. During 1999, we modified our standard license agreement by removing all
acceptance criteria. As a result, our current license agreements generally allow
for the recognition of revenues upon the execution and delivery of the software
to the customer. Deferred maintenance revenues increased primarily due to a
change in billing practice, where most customers are now invoiced on an annual
or quarterly basis instead of a monthly basis.
Net cash used in investing activities during the nine months ended
September 30, 1999 was approximately $10.7 million and resulted primarily from
the purchase of DC Systems for $9.9 million, net of cash acquired, and $0.8
million in capital expenditures for computer and communications equipment,
purchased software, office equipment, furniture, fixtures and leasehold
improvements.
Net cash provided by financing activities during the nine months ended
September 30, 1999 was approximately $9.7 million. During the nine months ended
September 30, 1999, financing activities provided cash of approximately $12.3
from the sale of equity, $2.0 million from borrowings under a credit agreement
entered into in June with Fleet Bank and approximately $1.8 million in
subscriptions received. These funds were used for the payment of the purchase
price for DC Systems, an earnout to the former owners of Zai*Net of $2.2
million, to repurchase an equity interest in us held by SS&C Technologies, Inc.
for $0.3 million and to pay the $1.7 million due under the distributor agreement
with SS&C and $0.3 million distribution to members for taxes.
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
43
<PAGE> 45
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 outstanding balance, we intend to terminate our existing credit
agreement.
We have funded our operations and acquisitions primarily from the proceeds
of equity sales and borrowings under our credit facility. We expect that our
working capital needs will continue to grow as we execute our growth strategy.
We believe, in the absence of this offering, that our ability to borrow under
our credit facility, the receipt of subscriptions receivable from certain of our
original limited liability company investors and cash to be generated from
operations would be sufficient to meet our expenditure requirements for at least
the next twelve months. Additionally, we intend to obtain additional equity
financing from an initial public offering of common stock during 1999.
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
44
<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.
45
<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.
For the nine months ended September 30, 1999, approximately 38% of our
revenues and 29% of our expenses was 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.
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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 types of risk and energy commodities,
such as electric power, natural gas, crude oil and coal, 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. For a discussion of our two business
segments, software solutions and strategic consulting, as well as geographic
information about us, please see the Caminus Corporation financial statements.
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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- 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>
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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,
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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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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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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. During 1998,
we increased our number of consultants in Europe from 23 to 28 in anticipation
of expanding our consulting services and we are planning a significant increase
in personnel in 2000. We also 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,
particularly markets in Europe.
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 July 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. 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 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 software solution covering a range of
functions, including trading, transaction management, risk management, analytics
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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; and
- 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
- weather derivatives
- foreign exchange transactions
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
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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 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.
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- 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.
-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.
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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 -- 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. A majority of our customers start with a
software solution providing basic functionality to a limited number of users and
add functionality and users as they expand their operations.
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.
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- 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.
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 have significant
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
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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 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.
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STRATEGIC RELATIONSHIPS
We continue to develop relationships, most of which are informal, with
third parties that can assist us in generating sales leads and provide us with
cooperative marketing support. 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.
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, $1.2 million and $2.7 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 nine
months ended September 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
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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.
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
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
Transok, Inc.
INDEPENDENT POWER PRODUCERS
AES Electric
TRANSMISSION COMPANIES
TenneT
National Grid Company plc
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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:
- 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;
- 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;
- internal development departments of a number of energy participants
developing systems for internal use or for sale to other market
participants; and
- 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.
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We believe that we are competitive with respect to all of the principal
competitive factors. See "Risk Factors -- 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" for a description of
risks relating to our competition.
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 sometimes necessary for the operation of our products. However, we believe we
can obtain replacements from other vendors and we are in the process of
developing replacement products ourselves. For example, the core technology we
acquired from Positron has allowed us to develop similar technology into an
analytical tool that prices options that we license for resale.
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 17,000 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 the following
cities;
<TABLE>
<CAPTION>
CITY SQUARE FOOTAGE
- ---- --------------
<S> <C>
Dallas, Texas.................................. 5,300
Houston, Texas................................. 4,800
London, England................................ 3,600
Cambridge, England............................. 6,000
</TABLE>
Other than our Cambridge office, which is the headquarters of our strategic
consulting business, each of our offices houses personnel for both our software
and strategic consulting business segments. We believe that our facilities are
adequate
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for our current needs and that suitable additional or substitute space will be
available as needed to accommodate expansion of our operations.
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, KEY EMPLOYEES AND DIRECTORS
Our executive officers, key employees 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
Michael B. Morrison.................. 42 Managing Director of Strategic Consulting
Simon Young.......................... 34 Vice President
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
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and as Vice President and Corporate Controller from March 1996 to February 1999.
Prior to 1994, Mr. Herman held various management positions at companies such as
Grand Union, Deloitte & Touche LLP and PricewaterhouseCoopers LLP.
MICHAEL B. MORRISON has served as our Managing Director of Strategic
Consulting since May 1998 and has worked at Caminus Limited since 1988. Mr.
Morrison has prime responsibility for managing the growth of our strategic
consulting business as it continues to expand throughout Europe. Prior to
joining Caminus, Mr. Morrison served in strategic planning and research
positions at Shell International, the World Bank and Carnegie-Mellon University.
SIMON YOUNG has served as Vice President in our development area since May
1998. From 1988 to May 1998, Mr. Young served as Executive Vice President of
Zai*Net Software, Inc., where he designed and developed high performance online
transaction processing systems for the energy and foreign exchange markets.
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
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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.
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
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equity awards to our non-employee directors from time to time under our stock
plans.
As of the date of this prospectus, each of our non-employee directors will
receive an option under our 1999 stock incentive plan to purchase 7,143 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.
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>
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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 947,886 shares of our
common stock. As of September 30, 1999, options to purchase an aggregate of
926,258 shares of our common stock at a weighted average exercise price of $4.48
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.
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 502,312 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 450,000 shares in any
calendar year. As of the date of this prospectus, options to purchase an
aggregate of 28,572 shares of our common stock at an exercise price per share
equal to the initial public offering price will be 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
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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;
- 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
95,238 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.
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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 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. The second loan 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 320,418 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
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<PAGE> 74
approximately $1,083,500 as of September 30, 1999, and (2) an award of 160,209
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 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.
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<PAGE> 75
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 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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<PAGE> 76
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 the financial results and market values of comparable publicly traded
software companies. We also considered the expected synergies from the
acquisition of Zai*Net Software, L.P. and Caminus Limited, including geographic
reach, product development expertise, the ability to cross-sell software and
services, improved administration and recruiting and increased market
differentiation. 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
8% interest, due May 12, 1999. Zai*Net Software, Inc. used the proceeds for
working capital purposes. Zak Associates, Inc., an entity controlled by Mr.
Scanlan, 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 2,055,210 shares of our common
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<PAGE> 77
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.
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 576,753 and
384,502 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 $.30 per share ($3.12 per share
of common stock on an as-converted basis) which will convert into options to
purchase 288,571 and 192,381 shares of our common stock, respectively, prior to
this offering. Messrs. Evans and Morrison plan to exercise their options on a
cashless basis immediately prior to the closing of this offering for a net total
of 224,743 and 149,829 shares of our common stock, respectively. 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 financial results and market
values of comparable publicly traded companies and considered the expected
synergies from the acquisition of Caminus Limited and Zai*Net Software, L.P., as
described above. 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.
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<PAGE> 78
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.
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 160,209 shares of our common stock prior to this offering.
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 nine months ended September 30, 1999,
such fees were $160,000 and $293,310, 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,
we have agreed to pay GFI a $1,300,000 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 on a cashless basis for a net total of 9,779,825 shares of our
Series C membership interest (which will convert into 931,411 shares of our
common stock).
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
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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 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 $0.62 per share will be exercised in
connection with this offering for 277,052 shares of our common stock ($6.50 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 a
principal stockholder. 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 1,195,759 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 160,209
shares of
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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 1,085,021 shares of our common stock.
GFI will exercise this option prior to this offering.
- 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 3,540,622 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 on a pro rata basis of the total $12 million
offering. 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
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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 24,249
shares of our common stock prior to this offering;
- Nigel Evans purchased 212,182 shares, which will convert into 20,208
shares of our common stock prior to this offering;
- Brian Scanlan purchased 212,182 shares, which will convert into 20,208
shares of our common stock prior to this offering;
- OCM Caminus Investment, Inc. purchased 4,493,143 shares, which will
convert into 427,918 shares of our common stock prior to this offering;
- RIT Capital Partners plc purchased 3,394,909 shares, which will convert
into 323,324 shares of our common stock prior to this offering; and
- Michael Morrison purchased 127,309 shares, which will convert into 12,125
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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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 11,038,819 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).................... 4,384,242 39.7% 431,830 3,952,412 27.1%
333 South Grand Avenue
28th Floor
Los Angeles, CA 90071
GFI Two LLC(2)............... 487,967 4.4 48,796 439,171 3.0
11611 San Vicente Blvd.
Suite 710
Los Angeles, CA 90049
Brian J. Scanlan(3).......... 1,222,470 11.1 0 1,222,470 8.4
747 Third Avenue
New York, NY 10017
Nigel L. Evans............... 821,704 7.4 89,897 731,807 5.0
Caminus Energy Limited
Caminus House, Castle Park
Cambridge CB3 0RA
United Kingdom
</TABLE>
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<PAGE> 83
<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(4)....................... 1,139,848 10.3% 113,985 1,025,863 7.0%
Spencer House
27 St. James's Place
London SWIA 1NR
United Kingdom
Simon Young(5)............... 647,257 5.9 0 647,257 4.4
Caminus LLC
3 America Square
London EC3N 2LR
United Kingdom
Michael B. Morrison.......... 546,456 5.0 59,932 486,524 3.3
Caminus Energy Limited
Caminus House, Castle Park
Cambridge CB3 0RA
United Kingdom
OTHER DIRECTORS AND EXECUTIVE
OFFICERS
David M. Stoner.............. 504,877 4.6 0 504,877 3.4
Lawrence D. Gilson(2)........ 487,967 4.4 48,796 439,171 3.0
Christopher S. Brothers(1)... 4,384,242 39.7 431,830 3,952,412 27.1
Anthony H. Bloom(4).......... 1,139,848 10.3 113,985 1,025,863 7.0
Richard K. Landers(2)........ 487,967 4.4 48,796 439,171 3.0
All executive officers and
directors as a group (8
persons)(6)................ 8,561,108 77.5 684,508 7,876,600 53.9
OTHER SELLING STOCKHOLDER
Durham Cam, Inc.............. 283,566 2.6 28,357 255,209 1.7
</TABLE>
- -------------------------
* Less than 1%
(1) Christopher S. Brothers is a Senior Vice President of Oaktree Capital
Management, LLC, a registered investment adviser under the Investment
Advisers Act of 1940. Oaktree Capital Management, LLC is the general partner
of OCM Principal Opportunities Fund, L.P., which is the sole shareholder of
OCM Caminus Investment, Inc., and may be deemed to beneficially own these
shares. Mr. Brothers and Oaktree Capital Management, LLC disclaim beneficial
ownership of such shares, except to the extent of his and its 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 6,504 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) 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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ownership of such shares, except to the extent of his direct pecuniary
interest therein.
(5) Includes 39,621 shares owned by Mr. Young's wife and 9,757 shares subject to
outstanding stock options held by Mr. Young's wife which are exercisable
within the 60-day period following September 30, 1999.
(6) Includes 6,504 shares of common stock subject to an outstanding option as
described in footnote 3.
In the event that the underwriters' over-allotment option is exercised in
full, the beneficial ownership of certain stockholders will change as follows:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
NUMBER OF OWNED AFTER
SHARES OFFERED THE OFFERING
IN THE -------------------
OVER-ALLOTMENT NUMBER PERCENT
-------------- -------- -------
<S> <C> <C> <C>
OCM Caminus Investment.......................... 6,594 3,945,818 26.1%
Simon Young..................................... 59,788 587,469 3.9
David M. Stoner................................. 50,488 454,389 3.0
Serena Hesmondalgh(1)........................... 9,163 82,472 *
Richard Couron(2)............................... 13,883 124,944 *
</TABLE>
- ---------------
* Less than 1%
(1) Prior to this offering, Serena Hesmondalgh, an employee of ours, owned
91,635 shares of our common stock.
(2) Prior to this offering, Richard Couron, our Senior Vice President of Fuels,
owned 138,827 shares of our common stock.
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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 issuance of 3,572,203 shares of common stock upon the closing of this
offering, we will have outstanding:
- 11,038,819 shares of common stock held by 37 stockholders of record; and
- options to purchase an aggregate of 954,830 shares of common stock with a
weighted average exercise price of $4.76.
For additional information relating to our common stock, certificate of
incorporation and by-laws, please see 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. 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 could make it more difficult for a third party to acquire,
or discourage a third party from acquiring, control of us. See "Management."
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<PAGE> 86
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 10,266,022 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.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company.
85
<PAGE> 87
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 14,611,022 shares of our common stock
outstanding, assuming no exercise of outstanding options to purchase common
stock. Of these outstanding shares, the 4,345,000 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 10,266,022 shares of common stock outstanding after this
offering are deemed "restricted securities" under Rule 144. Of these securities:
- 27,356 shares may be sold 90 days after the effective date of this
offering; and
- 8,513,530 additional shares may be sold upon expiration of the 180-day
lock-up agreements described below.
Our officers, directors and stockholders holding an aggregate of 10,165,541
shares of common stock 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 146,110
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 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
86
<PAGE> 88
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 1,523,808 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.
87
<PAGE> 89
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.............................................. 4,345,000
==========
</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 $1.0 million. The following table sets forth the discounts and
commissions to be allowed to the underwriters:
<TABLE>
<CAPTION>
PAID BY US
------------------------------------------
NO OPTION EXERCISE FULL OPTION EXERCISE
------------------ --------------------
<S> <C> <C>
Per share................................. $ $
Total..................................... $ $
</TABLE>
<TABLE>
<CAPTION>
PAID BY SELLING STOCKHOLDERS
------------------------------------------
NO OPTION EXERCISE FULL OPTION EXERCISE
------------------ --------------------
<S> <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 651,750 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 4,345,000, 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
88
<PAGE> 90
additional shares on the same terms as those on which the 4,345,000 shares are
being offered.
At our request, the underwriters have reserved up to 178,700 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 certain liabilities,
including certain liabilities under the Securities Act of 1933, as amended.
Alternatively, the underwriting agreement also provides that we or the selling
stockholders contribute to payments the underwriters may be required to make in
respect of such liabilities.
We have agreed, subject to certain exceptions, without the prior written
consent of Deutsche Bank Securities Inc. for a period of 180 days after the date
of this prospectus, not to directly or indirectly:
- offer, sell short 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
- enter into any agreement that transfers to another, in whole or in part,
any of the economic consequences of the ownership of the common stock.
Our officers, directors and principal stockholders, who hold or will hold
in the aggregate 10,165,541 shares of our common stock have agreed, subject to
certain exceptions, without the prior written consent of Deutsche Bank
Securities Inc. for a period of 180 days after the date of this prospectus, 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 or other securities convertible into or exchangeable or exercisable
for shares of our common stock, other than shares of common stock being
sold in this offering or
- enter into any agreement or transaction that transfers to another, in
whole or in part, any of the economic consequences of the ownership of
the common stock, other than shares of common stock being sold in this
offering.
If any of our officers, directors or principal stockholders request that
Deutsche Bank Securities Inc. consent to a transfer within 180 days after the
date of this prospectus, then 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.
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<PAGE> 91
The decision to consent to a proposed transfer during the 180 days following the
date of this prospectus 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. These transactions may be effected on the Nasdaq Stock
Market's National Market or otherwise and, if commenced, may be discontinued at
any time. Specifically, the underwriters may over-allot shares of our common
stock in 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
90
<PAGE> 92
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
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.
91
<PAGE> 93
CAMINUS CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
CAMINUS CORPORATION AND SUBSIDIARIES
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets as of December 31, 1998 and
September 30, 1999 (unaudited)......................... F-3
Consolidated Statements of Operations for the Period
From Inception (April 29, 1998) Through December 31,
1998, the period from inception through September 30,
1998 (unaudited) and for the Nine Months Ended
September 30, 1999 (unaudited)......................... F-4
Consolidated Statements of Changes in Stockholders'
Equity for the Period From Inception (April 29, 1998)
Through December 31, 1998 and for the Nine Months Ended
September 30, 1999 (unaudited)......................... F-5
Consolidated Statements of Cash Flows for the Period
From Inception (April 29, 1998) Through December 31,
1998, the period from inception through September 30,
1998 (unaudited) and for the Nine Months Ended
September 30, 1999 (unaudited)......................... F-6
Notes to Consolidated Financial Statements.............. F-7
ZAI*NET SOFTWARE, INC. (Predecessor)
Report of Independent Accountants....................... F-29
Balance Sheets as of December 31, 1996, December 31,
1997 and April 30, 1998................................ F-30
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-31
Statements of Cash Flows for the Years Ended December
31, 1996 and 1997 and for the Four Months Ended April
30, 1998............................................... F-32
Notes to the Financial Statements....................... F-33
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-39
Profit and Loss Accounts for the Years Ended April 30,
1997 and 1998.......................................... F-40
Balance Sheets as at April 30, 1997 and 1998............ F-41
Cash Flow Statements for the Years Ended April 30, 1997
and 1998............................................... F-42
Notes to the Financial Statements....................... F-43
DC SYSTEMS, INC. AND SUBSIDIARY
Report of Independent Accountants....................... F-50
Consolidated Balance Sheets as of December 31, 1997,
December 31, 1998 and June 30, 1999 (unaudited)........ F-51
Consolidated Statements of Operations for the Years
Ended December 31, 1997 and 1998 and for the Six Months
Ended June 30, 1998 and 1999 (unaudited)............... F-52
Consolidated Statements of Changes in Shareholder's
Deficit for the Years Ended December 31, 1997 and 1998
and for the Six Months Ended June 30, 1999
(unaudited)............................................ F-53
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1997 and 1998 and for the Six Months
Ended June 30, 1998 and 1999 (unaudited)............... F-54
Notes to Consolidated Financial Statements.............. F-55
PRO FORMA STATEMENTS OF OPERATIONS (unaudited)
Summary of Unaudited Pro Forma Condensed Consolidated
Statement of Operations for the Year Ended December 31,
1998 and the Nine Months September 30, 1999............ F-64
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Year Ended December 31, 1998........ F-65
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Nine Months Ended September 30,
1999................................................... F-66
Notes to Unaudited Pro Forma Condensed Consolidated
Statements of Operations............................... F-67
</TABLE>
F-1
<PAGE> 94
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Caminus Corporation
The recapitalization described in Note 1 to the financial statements has
not been consummated at November 12, 1999. When it has been consummated, we will
be in a position to furnish the following report:
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 Corporation and its subsidiaries (the "Company")
at December 31, 1998, and the results of their operations and their cash flows
for the period from inception (April 29, 1998) through December 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
PRICEWATERHOUSECOOPERS LLP
New York, New York
May 28, 1999, except
as to the fourth and fifth
paragraphs of Note 1 which
are as of November 12, 1999
F-2
<PAGE> 95
CAMINUS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................ $ 2,770,538 $ 801,351
Accounts receivable, net......................... 3,244,018 5,630,856
Prepaid expenses and other current assets........ 306,774 1,698,465
----------- -----------
Total current assets.......................... 6,321,330 8,130,672
Fixed assets, net.................................. 780,076 1,379,873
Developed technology, net.......................... 2,307,361 3,380,497
Other intangibles, net............................. 1,789,859 4,280,104
Goodwill, net...................................... 19,863,548 23,679,123
Other assets....................................... 6,828 18,362
----------- -----------
Total assets.................................. $31,069,002 $40,868,631
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................. $ 1,615,547 $ 596,802
Accrued liabilities.............................. 1,029,139 4,489,058
Borrowings under credit facility................. -- 1,000,000
Taxes payable.................................... -- 149,148
Payable to related parties....................... 6,187,500 3,971,500
Deferred revenue................................. 2,139,534 2,611,850
----------- -----------
Total current liabilities..................... 10,971,720 12,818,358
Borrowings under credit facility................... -- 1,000,000
Payable to related parties......................... 2,937,500 --
----------- -----------
Total liabilities............................. 13,909,220 13,818,358
Commitments and contingencies...................... -- --
Stockholders' equity: (Note 1)
Common stock, $0.01 par, 50,000,000 shares
authorized, 9,729,229 shares issued and 7,966,928
shares outstanding at December 31, 1998;
11,000,389 shares and 9,238,088 shares
outstanding at September 30, 1999 (unaudited).... 97,292 110,004
Additional paid-in capital......................... 36,576,183 51,161,225
Treasury stock, 1,762,301 shares in treasury at
December 31, 1998 and September 30, 1999
(unaudited), at cost............................. (4,416,667) (4,416,667)
Subscriptions receivable........................... (4,739,493) (2,907,065)
Unearned compensation.............................. -- (287,086)
Accumulated deficit................................ (10,371,188) (16,613,938)
Cumulative translation adjustment.................. 13,655 3,800
----------- -----------
Total stockholders' equity.................... 17,159,782 27,050,273
----------- -----------
Total liabilities and stockholders' equity.... $31,069,002 $40,868,631
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 96
CAMINUS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION PERIOD FROM INCEPTION
(APRIL 29, 1998) THROUGH (APRIL 29, 1998) THROUGH NINE MONTHS ENDED
DECEMBER 31, 1998 SEPTEMBER 30, 1998 SEPTEMBER 30, 1999
------------------------ ------------------------ ------------------
(UNAUDITED)
<S> <C> <C> <C>
Revenues:
Licenses......................... $ 3,639,143 $ 1,925,858 $ 8,088,621
Software services................ 3,090,758 1,881,417 5,679,513
Strategic consulting............. 2,896,102 1,720,550 4,757,425
------------ ----------- -----------
Total revenues................. 9,626,003 5,527,825 18,525,559
------------ ----------- -----------
Cost of revenues:
Cost of licenses................. 194,968 87,639 682,872
Cost of software services........ 2,278,433 1,221,809 3,244,616
Cost of strategic consulting..... 2,211,617 1,363,142 1,924,955
------------ ----------- -----------
Total cost of revenues......... 4,685,018 2,672,590 5,852,443
------------ ----------- -----------
Gross profit................. 4,940,985 2,855,235 12,673,116
------------ ----------- -----------
Operating expenses:
Sales and marketing.............. 470,549 262,815 2,523,012
Research and development......... 1,153,470 638,399 2,679,726
General and administrative....... 3,130,567 1,676,077 6,177,228
Acquired in-process research and
development.................... 4,822,000 3,053,000 1,000,000
Amortization of intangible
assets......................... 5,497,765 1,714,711 6,074,750
------------ ----------- -----------
Total operating expenses....... 15,074,351 7,345,003 18,454,716
------------ ----------- -----------
Loss from operations............... (10,133,366) (4,489,768) (5,781,600)
Other income and (expense):
Interest income.................... 96,909 56,535 46,434
Interest expense................. -- -- (165,006)
Other expense, net............... -- -- (8,284)
------------ ----------- -----------
Total other income (expense)... 96,909 56,535 (126,856)
------------ ----------- -----------
Loss before provision for income
taxes............................ (10,036,457) (4,433,232) (5,908,456)
Provision for income taxes......... 35,735 57,288 334,294
------------ ----------- -----------
Net loss before minority
interest......................... (10,072,192) (4,490,520) (6,242,750)
Minority interest.................. (298,996) (189,920) --
Net loss........................... $(10,371,188) $(4,680,440) $(6,242,750)
============ =========== ===========
Basic and diluted net loss per
share............................ $ (1.41) $ (0.65) $ (0.76)
============ =========== ===========
Weighted average shares used in
computing net loss per share..... 7,360,634 7,215,030 8,264,075
Pro forma (unaudited):
Loss before provision for income
taxes.......................... $(10,036,457) $(4,433,232) $(5,908,456)
Pro forma income tax provision
(benefit)...................... (176,224) 446,290 683,863
Minority interest................ (298,996) (189,920) --
------------ ----------- -----------
Pro forma net loss............... $(10,159,229) $(5,069,442) $(6,592,319)
============ =========== ===========
Pro forma basic and diluted net
loss per share................. $ (1.38) $ (0.70) $ (0.80)
============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 97
CAMINUS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
NUMBER OF COMMON PAID-IN TREASURY SUBSCRIPTIONS UNEARNED
SHARES STOCK CAPITAL STOCK RECEIVABLE COMPENSATION
---------- -------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at April 29, 1998
(inception)......................... $ -- $ -- $ -- $ -- $ --
Issuance of shares................... 6,712,764 67,128 20,122,002
Issuance of shares in connection with
the acquisition of Caminus Energy
Limited............................. 961,255 9,612 2,990,388
Issuance of shares in connection with
the acquisition of Zai*Net Software
L.P................................. 2,055,210 20,552 10,318,798
Stock subscriptions receivable....... (4,739,493)
Issuance of stock options in
connection with acquisitions........ 3,144,995
Purchase of treasury stock at cost... (1,762,301) (4,416,667)
Net loss.............................
Translation adjustment...............
---------- -------- ----------- ----------- ----------- ---------
Balance at December 31, 1998......... 7,966,928 97,292 36,576,183 (4,416,667) (4,739,493) --
---------- -------- ----------- ----------- ----------- ---------
Comprehensive loss for the period
from inception through December 31,
1998................................
Receipt of membership subscription
receivable (unaudited).............. 1,832,428
Issuance of additional shares
(unaudited)......................... 1,028,667 10,287 12,328,651
Issuance of shares in connection with
the acquisition of DC Systems
(unaudited)......................... 242,493 2,425 2,997,575
Reacquisition of stock option
(unaudited)......................... (250,000)
Distribution to stockholders
(unaudited)......................... (890,000)
Issuance of stock options below fair
market value (unaudited)............ 398,816 (398,816)
Amortization of unearned compensation
(unaudited)......................... 111,730
Net loss (unaudited).................
Translation adjustment (unaudited)...
---------- -------- ----------- ----------- ----------- ---------
Balance at September 30, 1999
(unaudited)......................... 9,238,088 $110,004 $51,161,225 $(4,416,667) $(2,907,065) $(287,086)
========== ======== =========== =========== =========== =========
Comprehensive loss for the nine
months ended September 30, 1999
(unaudited).........................
<CAPTION>
CUMULATIVE TOTAL CUMULATIVE
ACCUMULATED TRANSLATION STOCKHOLDERS' COMPREHENSIVE COMPREHENSIVE
DEFICIT ADJUSTMENT EQUITY LOSS LOSS
------------ ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at April 29, 1998
(inception)......................... $ -- $ -- $ --
Issuance of shares................... 20,189,130
Issuance of shares in connection with
the acquisition of Caminus Energy
Limited............................. 3,000,000
Issuance of shares in connection with
the acquisition of Zai*Net Software
L.P................................. 10,339,350
Stock subscriptions receivable....... (4,739,493)
Issuance of stock options in
connection with acquisitions........ 3,144,995
Purchase of treasury stock at cost... (4,416,667)
Net loss............................. (10,371,188) (10,371,188) $(10,371,188)
Translation adjustment............... 13,655 13,655 13,655
------------ ------- ------------ ------------
Balance at December 31, 1998......... (10,371,188) 13,655 17,159,782 $(10,357,533)
------------ ------- ------------ ============
(10,357,533)
------------
Comprehensive loss for the period
from inception through December 31,
1998................................
Receipt of membership subscription
receivable (unaudited).............. 1,832,428
Issuance of additional shares
(unaudited)......................... 12,338,938
Issuance of shares in connection with
the acquisition of DC Systems
(unaudited)......................... 3,000,000
Reacquisition of stock option
(unaudited)......................... (250,000)
Distribution to stockholders
(unaudited)......................... (890,000)
Issuance of stock options below fair
market value (unaudited)............ --
Amortization of unearned compensation
(unaudited)......................... 111,730
Net loss (unaudited)................. (6,242,750) -- (6,242,750) (6,242,750)
Translation adjustment (unaudited)... (9,855) (9,855) (9,855)
------------ ------- ------------ ------------
Balance at September 30, 1999
(unaudited)......................... $(16,613,938) $ 3,800 $ 27,050,273 $(16,610,138)
============ ======= ============ ============
Comprehensive loss for the nine
months ended September 30, 1999
(unaudited)......................... $ (6,252,605)
============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 98
CAMINUS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
INCEPTION INCEPTION
(APRIL 29, 1998) (APRIL 29, 1998) NINE MONTHS
THROUGH THROUGH ENDED
DECEMBER 31, 1998 SEPTEMBER 30, 1998 SEPTEMBER 30, 1999
----------------- ------------------ ------------------
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss......................................... $(10,371,188) $ (4,680,440) $ (6,242,750)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization................ 5,666,521 1,819,118 6,399,617
Acquired in-process research and
development................................ 4,822,000 3,053,000 1,000,000
Deferred taxes............................... -- -- (3,808)
Non-cash compensation expense................ -- -- 111,730
Minority interest............................ 298,996 189,920 --
Changes in operating assets and liabilities:
Accounts receivable.......................... (849,920) (15,680) (2,201,199)
Prepaid expenses and other current assets.... (97,456) (265,066) 153,925
Accounts payable............................. 183,433 (957,492) (1,121,093)
Accrued liabilities.......................... 635,030 297,615 2,958,789
Taxes payable................................ -- -- 148,139
Deferred revenue............................. 704,450 1,008,908 (2,092,335)
Other........................................ (40,190) 6,498 (43,528)
------------ ------------ ------------
Net cash provided by (used in) operating
activities..................................... 951,676 456,381 (932,513)
------------ ------------ ------------
Cash flows from investing activities:
Purchases of fixed assets...................... (500,597) (271,690) (799,862)
Acquisition of Caminus Energy Limited, net of
cash acquired................................ (2,502,567) (2,502,567) --
Acquisition of Zai*Net Software L.P., net of
cash acquired................................ (7,242,258) (7,242,258) --
Acquisition of Positron........................ (151,667) -- --
Acquisition of DC Systems, Inc., net of cash
acquired..................................... -- -- (9,919,192)
Other acquisition costs........................ (495,817) (247,909) --
------------ ------------ ------------
Net cash used in investing activities............ (10,892,906) (10,264,424) (10,719,054)
------------ ------------ ------------
Cash flows from financing activities:
Payments of obligation to affiliate............ (250,000) -- (4,000,000)
Payments of obligation to stockholders......... -- -- (2,187,500)
Proceeds from borrowings under credit
facility..................................... -- -- 2,000,000
Payments of distribution to stockholders....... -- -- (290,000)
Cash received for subscription receivable...... -- -- 1,832,428
Issuance of common stock....................... 12,949,637 12,874,999 12,338,938
------------ ------------ ------------
Net cash provided by financing activities........ 12,699,637 12,874,999 9,693,866
------------ ------------ ------------
Effect of exchange rates on cash flows........... 12,131 (80,982) (11,486)
------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents.................................... 2,770,538 2,985,974 (1,969,187)
Cash and cash equivalents, beginning of period... -- -- 2,770,538
------------ ------------ ------------
Cash and cash equivalents, end of period......... $ 2,770,538 2,985,974 $ 801,351
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 99
CAMINUS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
FORMATION OF THE BUSINESS
Caminus Corporation (formerly Caminus LLC) ("Caminus" or the "Company") is
a Delaware corporation which was originally organized as a limited liability
company 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. ("Zai*Net"
or "ZNLP"), and to provide industry expertise and risk management software
products in the evolving competitive gas and energy markets worldwide.
In conjunction with the formation of the Company and as consideration for
the identification of the acquired entities, an option, with an anti-dilution
provision, to acquire a 10% interest in the Company was granted to a member of
the investor group. This option has been valued at $1.6 million using the
Black-Scholes option pricing model and has been accounted for as part of the
purchase price of ZNLP and CEL. Any additional grants made under the
anti-dilution provision are required to be made at the current market price. The
option expires ten years from the date of the formation of the Company. In
connection with the initial public offering ("IPO") this option will be
exercised.
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. The value assigned to these shares was
consistent with the value per share established immediately prior to these
acquisitions based on cash capital contributions from founders upon formation of
the Company. (For more complete disclosure, see Note 3 -- Acquisitions).
PLANNED RECAPITALIZATION
In September 1999, the Board of Directors of Caminus authorized the filing
of a registration statement with the Securities and Exchange Commission that
would permit the Company to sell shares of the Company's common stock in
connection with the proposed IPO. These financial statements reflect the
recapitalization of Caminus LLC as a corporation immediately prior to the IPO,
and the conversion of each membership interest in the limited liability company
into .095238 of one share of common stock of the corporation. This transaction
affects the legal form only of the entities under common control, and the
proportionate ownership interests of the members pre- and post-merger are
preserved.
In connection with the planned IPO of the Company, Caminus Corporation will
no longer be treated as a limited liability company for tax purposes.
Accordingly, the consolidated statements of operations include net income for
all periods assuming the Company was taxable as a C Corporation and earnings
based on net income divided by the weighted average number of shares
outstanding.
F-7
<PAGE> 100
CAMINUS CORPORATION 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 Corporation 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. The adoption of SOP 98-9 did not have a material impact on the
consolidated financial position, results of operations or cash flows of the
Company. For arrangements containing multiple elements where vendor-specific
objective evidence does not exist, all revenue is deferred until all elements of
the arrangement have been delivered.
The Company also provides software to customers under long-term development
arrangements that can require significant modification to adapt the software to
the unique specifications of the customer. If the service elements are
considered essential to the functionality of the software products, both the
software product revenue and service revenue are recognized using the completed
contract method as prescribed in accordance with the provisions of SOP 81-1,
"Accounting for Performance of Construction Type and Certain Production Type
Contracts." Accordingly, license and software enhancement revenue is recognized
under the completed contract method when all development, testing and
installation is completed and the purchaser formally accepts the software. Costs
associated with these contracts are deferred until contract completion. Deferred
costs are classified in "Prepaid expenses and other current assets" on the
consolidated balance sheet. Costs of software enhancements include the direct
labor component of programmer and consultant cost to perform the software
enhancement or service as
F-8
<PAGE> 101
CAMINUS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
well as the prorated share of technical support and overhead costs associated
with the enhancement and services. Anticipated losses, if any, on uncompleted
contracts are recognized in the period in which such losses are determined.
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, where vendor-specific objective evidence of fair
value exists, 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 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.
F-9
<PAGE> 102
CAMINUS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 and $304,000 at December 31, 1998 and September 30, 1999
(unaudited), respectively.
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 reviewed at least annually but as often as necessary
for impairment based on future undiscounted cash flows of businesses acquired.
This analysis is performed according to the asset groupings established at the
time of the acquisition and at the enterprise level.
INCOME TAXES
The Company is currently 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 stockholders and they are obligated to
report such profit or loss on their own tax returns in the relevant
jurisdictions. Prior to the IPO the Company will convert to a C corporation and
will be subject to federal and state income taxes.
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 stockholders.
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
F-10
<PAGE> 103
CAMINUS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
any stockholder 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
borrowings under a credit facility. 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 SHARE
The Company computes net income (loss) per share 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 share is computed by dividing net loss for the period by the weighted
average number of shares outstanding for the period. The calculation of diluted
net loss per share excludes options to purchase shares as the effect would be
antidilutive.
At December 31, 1998, outstanding options to purchase 604,891 shares, with
exercise prices ranging from $2.31 to $5.78 as well as contingently issuable
options to purchase 1,935,483 shares, with exercise prices ranging from $1.89 to
$6.51 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
F-11
<PAGE> 104
CAMINUS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
INTERIM INFORMATION (UNAUDITED)
The accompanying unaudited consolidated financial statements as of and for
the period from Inception (April 29, 1998) through September 30, 1998 and for
the nine months ended September 30, 1999 have been prepared by the Company
pursuant to the rules of the Securities and Exchange Commission ("SEC") and, in
the opinion of the Company, include all adjustments (consisting of normal
recurring adjustments) necessary for a fair presentation of results of
operations, financial position and cash flows. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such SEC rules. The Company believes that the disclosures made are
adequate to keep the information presented from being misleading. The results of
operations and cash flows for the nine months ended September 30, 1999, are not
necessarily indicative of the results to be expected for the full year.
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. The acquisition of the 71% ownership interest was accounted for
using the purchase method of accounting, and accordingly, the results of ZNLP's
operations are included in the Company's consolidated financial statements from
the date of acquisition.
F-12
<PAGE> 105
CAMINUS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On December 31, 1998, the Company acquired the remaining 29% interest in
ZNLP in exchange for a 21% equity 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, Zai*Net had 4,988,209 options outstanding with an
average strike price of $2.31. These options were valued at their market value
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 equity....................................... 10,339,350
Issuance of options (see Note 1)......................... 1,173,071
Issuance of options to ZNLP employees.................... 1,496,463
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............................. $ 899,191
Acquired in-process research and development............. 4,822,000
Developed technology..................................... 2,596,000
Other identifiable intangible assets..................... 2,023,000
Goodwill................................................. 15,386,662
-----------
$25,726,853
===========
</TABLE>
The fair value assigned to intangible assets acquired was based on an
appraisal of the purchased in-process technology, developed technology, and
other intangible assets. Of the acquired intangible assets, $4,822,000
represents management's estimate of 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 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 resulting net cash flows from such projects, and discounting the
net cash flows back to their present value.
In estimating the net discounted cash flows from such projects, no material
changes from historical pricing, margins and expense levels are anticipated. The
F-13
<PAGE> 106
CAMINUS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
most significant and uncertain assumptions included completion of the products
in process on schedule, expectations about revenue growth and eventual
replacement of these products with new products over a three to four year
period. No residual cash flows of the Company were assumed to relate to IPR&D.
The discount rate of 25-35% 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 an equity 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-14
<PAGE> 107
CAMINUS CORPORATION 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 equity........................................ $3,000,000
Cash...................................................... 3,022,924
Issuance of options (see Note 1).......................... 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
480,952 shares to two officers of CEL (288,571 and 192,381 shares, respectively)
for $3.12 per share (total proceeds to Caminus of approximately $1.5 million).
These 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 shares 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
September 30, 1999. However, upon consummation of an IPO, the Company expects to
record a compensation related charge for the exercise of these options of
approximately $5.9 million, based on the estimated mid-point of the IPO filing
range.
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 shares of common stock of the Company were granted to three
employees/principals of Positron. The restrictions lapse only upon the
resolution of contingencies identified in the purchase agreement.
In November 1999, the Company's managing committee determined that all of
the contingencies identified in the purchase agreement were satisfied.
Accordingly, the restrictions on the shares have been lifted and the three
employees/principals of Positron received 57,486 unrestricted shares. The
Company will record a
F-15
<PAGE> 108
CAMINUS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
compensation charge of approximately $0.8 million based on the estimated mid-
point of the IPO filing range.
DC SYSTEMS ("DCS") (UNAUDITED)
On July 31, 1999, Caminus acquired DCS, a provider of software solutions to
the gas industry. The Company paid $10,000,000 in cash, and issued 242,493
shares of Caminus valued at $3,000,000. In connection with this transaction,
Caminus incurred approximately $500,000 of other direct acquisition costs. A
summary of the allocation of the purchase price is as follows:
<TABLE>
<S> <C>
Tangible net assets acquired......................... $ (953,706)
Acquired in-process research and development......... 1,000,000
Developed technology................................. 1,800,000
Other intangible assets.............................. 3,030,000
Goodwill............................................. 8,623,706
-----------
$13,500,000
===========
</TABLE>
The fair value assigned to intangible assets acquired was based on an
appraisal of the purchased in-process technology, developed technology, and
other intangible assets. Of the acquired intangible assets, $1,000,000
represents management's estimate of 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, 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 resulting net cash flows from such projects, and discounting the
net cash flows back to their present value.
In estimating the net discounted cash flows from such projects, no material
changes from historical pricing, margins and expense levels are anticipated. The
most significant and uncertain assumptions included completion of the products
in process on schedule, expectations about revenue growth and eventual
replacement of these products with new products over a three to four year
period. No residual cash flows of the Company were assumed to relate to IPR&D.
The discount rate of 25% 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 Plant*Master and other products. The
Company estimated that these products were approximately 50% 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 release during 1999 and
early 2000 with estimated future development costs totaling approximately
F-16
<PAGE> 109
CAMINUS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$600,000 at the time of acquisition. 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.
In July 1999, DC Systems declared a dividend to the existing shareholders
to cover the estimated tax liability associated with the sale of DC Systems to
the Company. This dividend amounted to $184,000 and is included in payable to
related parties on the consolidated balance sheet.
The above acquisitions were accounted for using the purchase method. Had
the acquisitions of ZNLP, CEL, Positron and DC Systems occurred on January 1,
1998 the unaudited pro forma revenue, net loss and related basic and diluted
loss per share for the year ended December 31, 1998 and the nine months ended
September 30, 1999 would have been: $14.8 million and $18.9 million; $18.1
million and $13.3 million, and $2.39 and $1.62, respectively. These results
which are based on various assumptions, are not necessarily indicative of what
would have occurred had the acquisitions been consummated on January 1, 1998.
F-17
<PAGE> 110
CAMINUS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 SEPTEMBER 30, 1999
----------------- ------------------
(UNAUDITED)
<S> <C> <C>
Computer hardware, software and office
equipment............................ $699,574 $1,416,066
Furniture, fixtures and leasehold
improvements........................... 240,678 440,574
Automobiles............................ 8,580 14,185
-------- ----------
948,832 1,870,825
Less -- Accumulated depreciation and
amortization......................... (168,756) (490,952)
-------- ----------
$780,076 $1,379,873
======== ==========
</TABLE>
Depreciation expense for the period from Inception through December 31,
1998 and for the nine months ended September 30, 1999 (unaudited) amounted to
$168,756 and $324,867, respectively.
5. INTANGIBLE ASSETS
The intangible assets arising from the acquisition transactions discussed
in Note 3 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 SEPTEMBER 30, 1999
----------------- ------------------
(UNAUDITED)
<S> <C> <C>
Developed technology................... $ 2,607,457 $ 4,407,457
Goodwill............................... 21,737,898 30,361,604
Other intangible assets................ 2,029,845 5,059,845
----------- -----------
26,375,200 39,828,906
Less -- Accumulated amortization....... (2,414,432) (8,489,182)
----------- -----------
$23,968,768 $31,339,724
=========== ===========
</TABLE>
Amortization expense for developed technology, goodwill and other
intangible assets for the period from Inception through December 31, 1998 and
for the nine months ended September 30, 1999 (unaudited) were $300,096,
$1,874,350 and $239,986, respectively; and $726,864, $4,808,131 and $539,755,
respectively.
F-18
<PAGE> 111
CAMINUS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------
<S> <C>
Accrued bonuses and commissions............................. $ 515,722
Accrued professional fees................................... 227,778
Accrued management fees..................................... 100,000
Other accrued expenses...................................... 185,639
----------
Total accrued liabilities.............................. $1,029,139
==========
</TABLE>
7. DEFERRED REVENUE
Deferred revenue consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------
<S> <C>
Deferred license revenue.................................... $2,139,534
Deferred maintenance revenue................................ --
----------
$2,139,534
==========
</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 September 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 September 30,
1999 was 8 1/4%. (unaudited)
F-19
<PAGE> 112
CAMINUS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Borrowing under the loans on September 30, 1999 amounted to $2.0 million
all under the revolving loan. (unaudited)
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 common stock outstanding. The Bank has
first security in and a lien on these shares of common stock.
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
THROUGH
DECEMBER 31, 1998
-----------------
<S> <C>
Current tax provision
Foreign taxes............................................... $ --
State and City............................................ 35,735
-------
Total current tax provision....................... 35,735
Deferred tax provision
Foreign................................................... --
State and City............................................ --
-------
Total deferred tax provision...................... --
-------
Provision for income taxes.................................. $35,735
=======
</TABLE>
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
THROUGH
DECEMBER 31, 1998
-----------------
<S> <C>
Statutory U.S. federal income tax........................... $ --
Local income taxes, net of federal income tax benefit....... 35,735
Foreign income taxes........................................ --
Taxes receivable............................................ --
--------
Provision for income taxes, at effective rate............... $ 35,735
========
</TABLE>
F-20
<PAGE> 113
CAMINUS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. 401(K) SAVINGS PLAN
ZNLP had previously maintained a 401(k) Savings Plan (the "Plan").
Effective with the acquisition of ZNLP by Caminus, the ZNLP plan was extended to
all eligible domestic employees of Caminus. 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, the Company elected
to match 100% of participant contributions up to a maximum of $1,000 per
participant. The 401(k) expense for the period from Inception through December
31, 1998 totaled $30,445.
11. STOCK OPTION PLAN
In May 1998, ZNLP established its stock option plan (the "ZNLP Plan"). Upon
closing of the purchase of the remaining 29% of ZNLP by the Company on December
31, 1998, Caminus canceled the options outstanding under the ZNLP Plan and
issued to the employees options to purchase shares of Caminus common stock.
Costs associated with this transaction were accounted for 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 stock options to key employees and
consultants of the Company. Under the terms of the Plan, options are granted to
purchase common stock in the Company at a price not less than 100% of the fair
market value 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 shares of common stock for the exercise of vested
options.
F-21
<PAGE> 114
CAMINUS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the Company's option plan activity:
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION
THROUGH DECEMBER 31, 1998
---------------------------
WEIGHTED AVERAGE
EXERCISE PRICE
OPTIONS PER SHARE
------- ----------------
<S> <C> <C>
Outstanding at beginning of period................ --
Granted........................................... 604,891 $2.74
Exercised......................................... --
Canceled.......................................... --
-------
Outstanding at end of year........................ 604,891 $2.74
=======
Options exercisable at period end................. --
=======
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-----------------------------------------------------
NUMBER
OUTSTANDING WEIGHTED AVERAGE WEIGHTED
RANGE OF AT DECEMBER 31, REMAINING AVERAGE EXERCISE
EXERCISE PRICES 1998 CONTRACTUAL LIFE PRICE
- --------------- --------------- ---------------- ----------------
<S> <C> <C> <C>
$2.31 397,637 9.3 years $2.31
$3.05-$4.62 207,254 9.5 years 3.57
--------
604,891 2.74
========
</TABLE>
At December 31, 1998, options to purchase approximately 270,550 shares were
available for grant.
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. No options have been granted to
consultants.
Had compensation cost for the Company's 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 in the period from Inception through
December 31, 1998. The fair values of options granted to employees during the
period from Inception through December 31, 1998 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
F-22
<PAGE> 115
CAMINUS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
rate of 5.50%; (2) dividend yield of 0.00%; (3) expected life of five years; and
(4) volatility of 40%.
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.
Future minimum annual lease commitments are as follows:
<TABLE>
<S> <C>
1999...................................................... $ 679,972
2000...................................................... 746,222
2001...................................................... 728,223
2002...................................................... 583,597
2003...................................................... 271,900
Thereafter................................................ 1,098,900
----------
$4,108,814
==========
</TABLE>
Rent expense for the period from Inception through December 31, 1998 was
$320,800.
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.
F-23
<PAGE> 116
CAMINUS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. RELATED PARTY TRANSACTIONS
SS&C
Pursuant to the former LLC Agreement, the Company granted a warrant to SS&C
Technologies ("SS&C") for 800,952 shares of common stock with an exercise price
of $0.11 per share. 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 shares 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 exclusive
distribution agreement to sell certain products developed by SS&C having a
valuation of $2,500,000. The value of the original distribution agreement was
capitalized as an asset and would have been amortized to income over its life,
39 months. The Company initially expected that the Caminus and SS&C products
would complement each other. However, Caminus later determined that it would not
invest its resources to sell this product.
Effective December 31, 1998, SS&C sold to the Company all of its
outstanding shares of common stock (including the shares of common stock and
warrant to acquire shares of common stock) in the Company. These shares of
common stock 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 shares of common stock 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 granted at a strike price in excess
of fair market value of the common stock and has been accounted for in
accordance with APB 25. 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 shares of common stock, 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 September 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.
F-24
<PAGE> 117
CAMINUS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 shares of common stock. 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 shares of common stock. 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. The $100,000 loan
was repaid, including interest, in November 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 shares of common stock. Such amounts
would be expected to be earned upon an IPO and would result in a compensation
related charge when earned of approximately $2.3 million based on the estimated
mid-point of the IPO filing range. (unaudited)
During 1999, Caminus made a distribution of $290,000 and recorded an
obligation to distribute $600,000 to its shareholders, for the estimated tax
associated with the former LLC's taxable income.
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.
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 shares
of common stock. 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. (unaudited)
Upon an IPO, the Company would be required to pay two officers of the
Company (the former shareholders of CEL) a special bonus of $476,000.
(unaudited)
As outlined in the former LLC Agreement, the Company is required to pay to
GFI Energy Ventures ("GFI"), a shareholder of the Company, an annual management
fee as consideration for financial, tax and general and administrative services.
This fee is calculated as 1% of the shareholders aggregate adjusted capital
contribution. Total management fees incurred for the period from Inception
through December 31, 1998 and for the nine months ended September 30, 1999 were
approximately $160,000 and $293,310, respectively. In November 1999, the Company
agreed to terminate its advisory arrangement with GFI effective as of December
31, 1999. As consideration, the Company will pay GFI $1,300,000 from the net
proceeds of the initial public offering. (unaudited)
F-25
<PAGE> 118
CAMINUS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, 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.
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 and other income, income taxes,
depreciation and amortization, the write-off of acquired IPR&D, terminated
acquisition costs, and non-cash compensation expense ("Adjusted EBITDA") as the
measure of a segment's profit or loss. Terminated acquisition costs represent
costs associated with a potential acquisition that management ultimately decided
not to pursue.
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 is summarized in the table below. The Company's
international revenues were derived primarily from the United Kingdom and the
Company's international long-lived assets at December 31, 1998 resided primarily
in the United Kingdom.
F-26
<PAGE> 119
CAMINUS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table illustrates the financial results of the two reportable
segments:
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION NINE MONTHS ENDED
THROUGH DECEMBER 31, 1998 SEPTEMBER 30, 1999
------------------------- -------------------------
STRATEGIC STRATEGIC
SOFTWARE CONSULTING SOFTWARE CONSULTING
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Operating Results:
Revenues:
Licenses............ $ 3,639,143 $ -- $ 8,088,621 $ --
Software services... 3,090,758 -- 5,679,513 --
Strategic
consulting........ -- 2,896,102 -- 4,757,425
----------- ----------- ----------- -----------
Total revenues.... $ 6,729,901 $ 2,896,102 $13,768,134 $ 4,757,425
=========== =========== =========== ===========
Adjusted EBITDA........ $ 364,859 $ (9,704) $ 786,407 $ 1,293,340
Terminated acquisition
costs.................. -- -- (350,000) --
Non-cash compensation
expense............. -- -- (111,730) --
Acquired IPR&D......... (4,822,000) -- (1,000,000) --
----------- ----------- ----------- -----------
(4,457,141) (9,704) (675,323) 1,293,340
Depreciation and
amortization........ (4,247,077) (1,419,444) (4,779,500) (1,620,117)
----------- ----------- ----------- -----------
Operating loss......... (8,704,218) (1,429,148) (5,454,823) (326,777)
=========== =========== =========== ===========
Other Data:
Capital expenditures... $ 379,677 $ 120,920 $ 594,129 $ 205,733
=========== =========== =========== ===========
AS OF AS OF
DECEMBER 31, 1998 SEPTEMBER 30, 1999
------------------------- -------------------------
Total assets........... $24,477,822 $ 6,591,180 $34,222,919 $ 6,645,712
=========== =========== =========== ===========
</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-27
<PAGE> 120
CAMINUS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
THROUGH
DECEMBER 31, 1998
-----------------
<S> <C>
Revenues:
United States............................................... $ 5,743,168
International (principally the United Kingdom)............ $ 3,882,835
</TABLE>
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1998
-----------------
<S> <C>
Long-lived assets:
United States............................................... $19,980,866
International (principally the United Kingdom)............ $ 5,065,802
</TABLE>
16. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
INCEPTION INCEPTION NINE MONTHS
THROUGH THROUGH ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1998 1998 1999
------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Accrual of SS&C option buyback....... $ -- $ -- $ 250,000
Issuance of equity in connection with
the acquisition of DC Systems........ -- 3,000,000
Notes payable issued in connection
with the acquisition of Zai*Net
Software, L.P...................... 4,375,000 4,375,000 --
Issuance of equity in connection with
the acquisition of Caminus Energy
Limited............................ 3,000,000 3,000,000 --
Issuance of equity for the
contributed distribution
agreement.......................... 2,500,000 2,500,000 --
Issuance of equity 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 4,416,667 --
Notes receivable for sale of stock... 1,000,000 -- --
</TABLE>
F-28
<PAGE> 121
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-29
<PAGE> 122
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-30
<PAGE> 123
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-31
<PAGE> 124
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-32
<PAGE> 125
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 where vendor-specific objective evidence exists, are deferred and
recognized ratably over the contract period.
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.
CASH AND CASH EQUIVALENTS
Cash equivalents are defined as highly liquid investments with an initial
maturity of three months or less.
F-33
<PAGE> 126
ZAI*NET SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.
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
F-34
<PAGE> 127
ZAI*NET SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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-35
<PAGE> 128
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-36
<PAGE> 129
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-37
<PAGE> 130
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-38
<PAGE> 131
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-39
<PAGE> 132
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-40
<PAGE> 133
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-41
<PAGE> 134
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-42
<PAGE> 135
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. Turnover is recognized as services are rendered.
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-43
<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
- --------------------------------------------------------------------------------
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-44
<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
- --------------------------------------------------------------------------------
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-45
<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
- --------------------------------------------------------------------------------
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-46
<PAGE> 139
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-47
<PAGE> 140
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-48
<PAGE> 141
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-49
<PAGE> 142
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of DC Systems, Inc:
In our opinion, the accompanying consolidated balance sheets and related
consolidated statements of operations, shareholder's deficit and cash flows
present fairly in all material respects, the financial position of DC Systems,
Inc. and its subsidiary at December 31, 1997 and 1998, and the results of their
operations and their cash flows for the years then ended 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
Dallas, Texas
October 5, 1999
F-50
<PAGE> 143
DC SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ JUNE 30,
1997 1998 1999
--------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ -- $ 24,907 $ 304,131
Accounts receivable.................................. 198,881 227,948 25,930
Deferred contract development cost................... 14,734 483,908 814,649
Prepaid expenses and other current assets............ 26,911 30,134 31,345
--------- ----------- -----------
Total current assets.............................. 240,526 766,897 1,176,055
Fixed assets, net...................................... 84,463 122,459 124,313
Deferred contract development cost..................... 190,086 78,216 --
Software development costs, net........................ 23,970 12,464 6,711
Deposits and other assets.............................. 10,603 10,603 12,800
--------- ----------- -----------
Total assets................................. $ 549,648 $ 990,639 $ 1,319,879
========= =========== ===========
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
Book overdraft....................................... $ 35,856 $ -- $ --
Accounts payable and accrued liabilities............. 159,741 217,533 167,500
Deferred contract development revenue................ 173,834 1,435,282 2,363,964
Capitalized lease obligation, current................ 7,758 13,288 13,968
Related party notes payable, current................. 69,280 28,171 29,609
--------- ----------- -----------
Total current liabilities......................... 446,469 1,694,274 2,575,041
Deferred contract development revenue.................. 433,317 99,186 --
Capitalized lease obligation........................... 17,211 14,458 7,299
Related party notes payable............................ -- 33,858 18,684
--------- ----------- -----------
Total liabilities................................. 896,997 1,841,776 2,601,024
Commitments and contingencies
Shareholder's deficit:
Common stock, $1 par value, 100,000 shares
authorized, 1,000 shares issued and outstanding... 1,000 1,000 1,000
Additional paid in capital........................... 543,000 1,074,064 6,096,843
Accumulated deficit.................................. (856,259) (1,876,397) (7,378,988)
--------- ----------- -----------
(312,259) (801,333) (1,281,145)
Less -- related party advances....................... (35,090) (49,804) --
Total shareholders deficit........................ (347,349) (851,137) (1,281,145)
--------- ----------- -----------
Total liabilities and shareholder's deficit....... $ 549,648 $ 990,639 $ 1,319,879
========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-51
<PAGE> 144
DC SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
----------------------- -------------------------
1997 1998 1998 1999
---------- ---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
License and software
enhancements................... $ 603,166 $ 320,650 $ 30,000 $ 41,000
Software services............ 640,654 521,968 205,837 253,943
---------- ---------- --------- -----------
Total revenues............ 1,243,820 842,618 235,837 294,943
Costs of revenues:
Costs of software
enhancements.............. 115,837 42,328 5,753 5,753
Costs of software services... 358,505 505,080 264,990 228,491
---------- ---------- --------- -----------
Total costs of revenues... 474,342 547,408 270,743 234,244
---------- ---------- --------- -----------
Gross profit (loss)............ 769,478 295,210 (34,906) 60,699
---------- ---------- --------- -----------
Operating expenses:
Research and development..... 70,922 64,048 46,067 15,731
Selling and marketing........ 228,557 224,821 125,643 104,741
General and administrative... 373,333 354,370 185,463 225,890
Equity participation
compensation.............. 139,505 531,064 270,639 5,022,779
---------- ---------- --------- -----------
Total operating
expenses................ 812,317 1,174,303 627,812 5,369,141
---------- ---------- --------- -----------
Operating loss................. (42,839) (879,093) (662,718) (5,308,442)
Interest expense............... 3,358 22,967 17,850 4,072
---------- ---------- --------- -----------
Net loss....................... $ (46,197) $ (902,060) $(680,568) $(5,312,514)
========== ========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-52
<PAGE> 145
DC SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S DEFICIT
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL REPURCHASED TOTAL
--------------- PAID-IN (ACCUMULATED RELATED PARTY EQUITY SHAREHOLDER'S
SHARES AMOUNT CAPITAL DEFICIT) ADVANCE INTEREST DEFICIT
------ ------ ---------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1996..................... 1,000 $1,000 $ 253,495 $ (644,562) $(33,515) $ -- $ (423,582)
Net loss................... -- -- -- (46,197) -- -- (46,197)
Capital contribution....... -- -- 150,000 -- -- -- 150,000
Related party advances..... -- -- -- -- (1,575) -- (1,575)
Equity participation
compensation............. -- -- 139,505 -- -- -- 139,505
Distributions.............. -- -- -- (165,500) -- -- (165,500)
----- ------ ---------- ----------- -------- -------- -----------
Balance, December 31,
1997..................... 1,000 1,000 543,000 (856,259) (35,090) -- (347,349)
Net loss................... -- -- -- (902,060) -- -- (902,060)
Repurchased equity
interest................. (60) -- -- -- -- (90,000) (90,000)
Reissued equity interest... 60 -- -- (90,000) -- 90,000 --
Related party advances..... -- -- -- -- (14,714) -- (14,714)
Equity participation
compensation............. -- -- 531,064 -- -- -- 531,064
Distributions.............. -- -- -- (28,078) -- -- (28,078)
----- ------ ---------- ----------- -------- -------- -----------
Balance, December 31,
1998..................... 1,000 1,000 1,074,064 (1,876,397) (49,804) -- (851,137)
Net loss (unaudited)....... -- -- -- (5,312,514) -- -- (5,312,514)
Related party repayments
(unaudited).............. -- -- -- -- 49,804 -- 49,804
Equity participation
compensation
(unaudited).............. -- -- 5,022,779 -- -- -- 5,022,779
Distributions
(unaudited).............. -- -- -- (190,077) -- -- (190,077)
----- ------ ---------- ----------- -------- -------- -----------
Balance, June 30, 1999
(unaudited).............. 1,000 $1,000 $6,096,843 $(7,378,988) $ -- $ -- $(1,281,145)
----- ------ ---------- ----------- -------- -------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-53
<PAGE> 146
DC SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
----------------------- --------------------------
1997 1998 1998 1999
--------- ---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.............................................. $(46,197) $(902,060) $(680,568) $(5,312,514)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization..................... 34,562 69,320 32,780 36,925
Equity participation compensation................. 139,505 531,064 270,639 5,022,779
Changes in operating assets and liabilities:
Accounts receivable............................ (172,645) (29,067) 198,881 202,018
Prepaid expenses and other current assets...... (6,853) (3,223) 9,015 (1,211)
Accounts payable and accrued liabilities....... 52,042 57,792 9,373 (50,033)
Deferred contract development cost............. (175,133) (357,304) (160,304) (252,525)
Deferred contract development revenues......... 115,068 927,317 592,014 829,496
Deposits and other assets...................... (7,197) -- -- (2,197)
-------- --------- --------- -----------
Net cash provided by (used in) operating
activities..................................... (66,848) 293,839 271,830 472,738
Cash flows from investing activities:
Purchases of fixed assets........................... (43,231) (81,330) (51,969) (33,026)
Additions to software development costs............. (11,152) -- -- --
-------- --------- --------- -----------
Net cash used in investing activities............. (54,383) (81,330) (51,969) (33,026)
Cash flows from financing activities:
Related party advances (repayments), net............ (1,575) (14,714) (13,534) --
Payments on related party notes payable............. (43,220) (92,751) (37,458) (13,736)
Payments on capital lease obligation................ (1,788) (11,703) (5,538) (6,479)
Capital contribution................................ 150,000 -- -- --
Distributions....................................... (53,000) (28,078) (28,078) (140,273)
Book overdrafts..................................... 35,856 (35,856) (35,856) --
Repurchased equity interest......................... -- (4,500) (4,500) --
-------- --------- --------- -----------
Net cash provided by (used in) financing
activities..................................... 86,273 (187,602) (124,964) (160,488)
Net increase (decrease) in cash and cash
equivalents......................................... (34,958) 24,907 94,897 279,224
Cash and cash equivalents at beginning of period...... 34,958 -- -- 24,907
-------- --------- --------- -----------
Cash and cash equivalents at end of period............ $ -- $ 24,907 $ 94,897 $ 304,131
======== ========= ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-54
<PAGE> 147
DC SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
DC Systems, Inc. ("DCS" or the "Company"), was incorporated in Texas on May
8, 1989 and initially provided software design consulting services for oil and
gas transmission companies. During the period 1993 through 1996, the Company
developed Gas*Master, a natural gas information system. DCS commenced marketing
the software in 1996 throughout North America to natural gas suppliers,
marketers and consumer utilities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated unaudited financial statements at June 30, 1999 and for
the six-month period then ended include the accounts of DCS and its wholly-owned
subsidiary, DCS Gas*Net Corporation, which was incorporated on January 7, 1999.
All intercompany transactions and balances have been eliminated upon
consolidation.
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. There was no allowance for doubtful accounts at
December 31, 1997, 1998 or June 30, 1999.
SOFTWARE DEVELOPMENT COSTS
The Company has capitalized software development costs in compliance with
Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting for the
Costs of Computer Software to be Sold, Leased, or Otherwise Marketed." Research
and development costs incurred prior to the establishment of the technological
feasibility of a software product are expensed as incurred. Capitalization of
software development costs begins upon establishment of technological
feasibility of the product. After technological feasibility is established,
material software development costs, which include salaries and related payroll
costs incurred in the development activities, are capitalized.
Except for initial enhancements to make the software more marketable to a
broader base of customers in 1996 and early 1997, the Company has made all
significant changes and improvements to the software under customer contracts.
F-55
<PAGE> 148
DC SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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
relatively short, and software development costs qualifying for capitalization
have been insignificant. The capitalized costs are 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. Generally, such deferred
costs are amortized over three years. Amortization expense, which is included in
costs of software services, was $10,547, $11,506 and $5,753 for years ended
December 31, 1997 and 1998 and the six-month period ended June 30, 1999,
respectively.
FIXED ASSETS
Fixed assets are recorded at cost. Depreciation and amortization are
calculated using the straight-line method over the estimated useful life of the
related asset which generally ranges from three to five years. Amortization of
assets recorded under capital leases is included in depreciation expense.
INCOME TAXES
The Company has elected to be taxed as an S corporation as allowed by the
Internal Revenue Code. Pursuant to this election, income of the Company is
included in the taxable income of the individual shareholders. It is
management's intention to pay distributions to shareholders as necessary to
satisfy any tax liability generated by the Company's earnings.
USE OF ESTIMATES
The accompanying financial statements are prepared in accordance 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.
CREDIT RISK
The Company typically contracts to receive license and software
modification, enhancement and annual maintenance fees in advance or as the work
is performed. In addition, most of the Company's customers are large natural gas
transmission or utility companies located throughout North America. Accordingly,
the Company does not require collateral and credit losses have been and are
anticipated to continue to be nominal.
F-56
<PAGE> 149
DC SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company uses the intrinsic value-based method of accounting for all of
its employee stock-based compensation plans. Equity participation compensation
expense associated with stock-based compensation is recognized over the vesting
period of the individual award consistent with the method described in Financial
Accounting Standards Board (FASB) Interpretation No. 28.
REVENUE RECOGNITION
The Company generates revenue from several sources, including licensing of
its software products, 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", SOP 98-4,
"Deferral of the Effective Date of Certain Provisions of SOP 97-2", and SOP
98-9, "Modifications of SOP 97-2, Software Revenue Recognition".
SOP 97-2 generally requires revenue earned on software arrangements
involving multiple elements to be allocated to each element based on the
relative fair value of the elements. License and software enhancements revenue
allocated to software products 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 and enhancement fees, revenue
is not recognized until acceptance occurs. Revenue allocated to maintenance is
recognized ratably over the maintenance term and revenue allocated to training
and other service elements is recognized as the services are performed. This
treatment results in deferred revenues and associated costs at each balance
sheet date.
The Company provides its software to customers under long-term development
arrangements as typical customer applications can require significant
modification to adapt the software to the unique specifications of the customer.
If the service elements are considered essential to the functionality of the
software products, both the software product revenue and service revenue are
recognized using the completed contract method as prescribed in accordance with
the provisions of SOP 81-1, "Accounting for Performance of Construction Type and
Certain Production Type Contracts." Accordingly, license and software
enhancement revenue is recognized under the completed contract method when all
development, testing and installation is completed and the purchaser formally
accepts the
F-57
<PAGE> 150
DC SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
software. Costs associated with these contracts are deferred until contract
completion. These license and software enhancement revenues and costs represent
the majority of the deferred balances at each period end. Costs of software
enhancements include the direct labor component of programmer and consultant
cost to perform the software enhancement or service as well as the prorated
share of technical support and overhead costs associated with the enhancement
and services. Anticipated losses, if any, on uncompleted contracts are
recognized in the period in which such losses are determined. Selling, general
and administrative costs are charged to expense as incurred.
Software services revenues include consulting services 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 the 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, where vendor-specific objective evidence of fair
value exists, deferred and recognized ratably over the contract period.
UNAUDITED INTERIM FINANCIAL DATA
The accompanying unaudited interim financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information. In the opinion of management, the accompanying unaudited
financial statements have been prepared on the same basis as the audited
financial statements, and include all adjustments, consisting only of normal
recurring adjustments, necessary for the fair presentation of the Company's
financial position as of June 30, 1999 and the results of its operations and its
cash flows for the six months ended June 30, 1998 and 1999.
F-58
<PAGE> 151
DC SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. FIXED ASSETS
Furniture, fixtures and equipment consisted of the following:
<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31, JUNE 30,
USEFUL LIFE -------------------- -----------
IN YEARS 1997 1998 1999
----------- -------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Computer equipment and
software............... 3-4 $ 81,151 $ 159,762 $ 198,420
Office furniture and
fixtures................. 5 13,642 30,841 26,209
Automobiles.............. 3 33,541 33,541 33,541
-------- --------- ---------
128,334 224,144 258,170
Less: accumulated
depreciation........... (43,871) (101,685) (133,857)
-------- --------- ---------
$ 84,463 $ 122,459 $ 124,313
======== ========= =========
</TABLE>
Depreciation expense amounted to $24,015, $57,814, $27,027 and $31,172 for
1997 and 1998 and for the six months ended June 30, 1998 and 1999, respectively.
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
-------------------- -----------
1997 1998 1999
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Accrued retirement plan
contributions.................. $ 44,914 $ 26,184 $ 6,953
Payroll taxes payable............ 32,044 61,878 --
Sales taxes payable.............. 71,930 112,750 157,719
Other accounts payable and
accrued liabilities............ 10,853 16,721 2,828
-------- -------- --------
$159,741 $217,533 $167,500
======== ======== ========
</TABLE>
5. RELATED PARTY ADVANCES RECEIVABLE AND NOTES PAYABLE
During 1997, 1998 and the six months ended June 30, 1999, the Company made
advances to and collected receivables from its shareholder for various purposes.
Balances from these transactions are reflected in shareholder's deficit
accompanying balance sheets.
F-59
<PAGE> 152
DC SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In June 1997, the Company executed a $112,500 note payable to its principal
shareholder for distributions. The note bears interest at 6% annually, with
weekly installments of $1,500 until the full amount including interest is paid
in full. This loan was repaid in 1998.
On June 30, 1998, the Company repurchased 6% beneficial ownership interest
from an existing beneficial owner for $90,000. This transfer was made effective
January 1, 1998. The purchase price comprised $4,500 payable in cash plus the
Company's note payable in the amount of $85,500. The note bears interest at 10%
annually, payable in installments of $2,759 over 36 months.
Related party notes payable comprised the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------ -----------
1997 1998 1999
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Note payable to shareholder........ $69,280 $ -- $ --
Note payable to beneficial owner... -- 62,029 48,293
Less -- current portion............ 69,280 28,171 29,609
------- ------- -------
Long-term portion.................. $ -- $33,858 $18,684
======= ======= =======
</TABLE>
Maturities of related party notes payable are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
------------ --------
<S> <C> <C>
1999.......................................... $28,171 $14,435
2000.......................................... 31,122 31,122
2001.......................................... 2,736 2,736
------- -------
$62,029 $48,293
======= =======
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
The Company leases computer equipment, and such leases are classified as
capital leases and included in fixed assets as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------ -----------
1997 1998 1999
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment................. $26,757 $41,237 $41,237
Less accumulated amortization...... (743) (13,962) (20,835)
------- ------- -------
$26,014 $27,275 $20,402
======= ======= =======
</TABLE>
F-60
<PAGE> 153
DC SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Certain other leases and the Company's obligation under its lease for
office space are treated as operating leases and the rentals are expensed as
incurred. Rent expense on these operating leases for the years ended December
31, 1997 and 1998 and the six months ended June 30, 1998 and 1999 totaled
$124,400, $142,580, $72,207 and $83,329, respectively. Generally, the Company's
leases provide for renewals for various periods at stipulated rates.
Future minimum lease obligations in effect at December 31, 1998 and June
30, 1999 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 JUNE 30, 1999
-------------------- --------------------
CAPITAL OPERATING CAPITAL OPERATING
LEASES LEASES LEASES LEASES
-------- --------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
1999....................... $ 15,466 $138,172 $ 15,466 $138,172
2000....................... 14,641 136,115 7,515 138,431
2001....................... 607 139,203 -- 139,203
2002....................... -- 92,802 -- 23,200
Thereafter................. -- -- -- --
-------- -------- -------- --------
Minimum lease payments..... 30,714 $506,292 22,981 $439,006
======== ========
Less amount representing
interest................. (2,968) (1,714)
Less current portion....... (13,288) (13,968)
-------- --------
Obligations under capital
leases................... $ 14,458 $ 7,299
======== ========
</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 materially adverse effect on the financial
position, results of operations and cash flows of the Company.
7. RETIREMENT PLAN
The Company has a 408(k) plan, as defined by the United States Internal
Revenue Code, which allows participants to contribute a percentage of their
compensation to the retirement plan on a pretax basis. The plan also allows for
discretionary employer contributions. Accrued employer contributions to the plan
amounted to $18,779, $28,956 and $11,063 for 1997, 1998 and the six months ended
June 30, 1999, respectively, and are reflected in general and administrative
expense.
F-61
<PAGE> 154
DC SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. MAJOR CUSTOMERS
Because of the Company's size and the long-term nature of its software
licensing and development service contracts with its customers, a few customers
can comprise a significant percentage of its revenues. In 1997, the Company
earned revenue from approximately 14 customers, with one customer accounting for
45% of the Company's revenue and three other customers accounting for 9% each.
In 1998, the Company earned revenue from approximately 16 customers, with one
customer accounting for 34% of the Company's revenue and two other customers
accounting for 22% each. For the six months ended June 30, 1999, the Company
earned revenue from approximately 14 customers, with one customer accounting for
47%, one customer accounting for 19% and one customer accounting for 15% of the
Company's revenue.
9. COMMON STOCK AND BENEFICIAL OWNERSHIP INTERESTS
DCS was formed in 1989 by the Company's present Chairman and Chief
Executive Officer ("Chairman") who at the time of formation owned 100% of the
issued and outstanding common stock of the Company. The Company's Chairman
granted beneficial ownership interests totaling 28.8% in the Company through
employment and other agreements to three key officers in 1994 and 1995 that
vested in August 1996 (18.8%), March 1997 (5%) and June 1997 (5%). In addition,
the Company's Chairman granted additional beneficial ownership interests that
are forfeitable upon the employee's separation of employment with the Company to
three additional employees in 1997 totaling 6% and to five additional employees
on January 1, 1999 totaling 5%. These beneficial ownership interests have been
treated as full ownership interests as if the Company had issued additional
common stock representing their percentage interest for both book and tax
purposes.
For financial reporting purposes, the Company has recognized equity
participation compensation expense for the beneficial ownership interests earned
by employees of $139,505, $531,064 and $5,022,779 for 1997, 1998 and the six
months ended June 30, 1999, respectively, reflecting the fair market value of
the beneficial ownership interests conveyed.
As described in Note 5, one beneficial owner sold a portion of his interest
(6%) back to the Company effective January 1, 1998 for $90,000. Concurrently,
this ownership interest was redistributed to the other beneficial owners of the
Company.
In March 1996, the Company issued a warrant to a related company to
purchase a 5% interest in the outstanding shares of the Company. This warrant
remained outstanding at December 31, 1997, 1998 and June 30, 1999. On June 9,
1997, the Chairman and the DCS beneficial owners sold its interest in a related
company warrant for $150,000 and contributed the proceeds to DCS.
The Company has historically followed the policy of distributing all of its
taxable income to its beneficial owners in the year following the year of
taxable
F-62
<PAGE> 155
DC SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
income. Distributions amounted to $165,500 in 1997, $28,078 in 1998 and $190,077
during the six months ended June 30, 1999. The 1997 distribution includes a
$112,500 note payable to the Company's Chairman. The distribution for the six
months ended June 30, 1999 includes forgiveness of $49,804 of advances
receivable from the Company's Chairman. An additional distribution was made in
August 1999 as a final adjustment to the distribution of 1998 taxable earnings.
This distribution totaled $27,398 and is not reflected in the accompanying
financial statements.
10. STATEMENT OF CASH FLOWS
Supplemental disclosures of cash flow information including interest paid
and noncash activities are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------ -----------------
1997 1998 1998 1999
-------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Interest paid................ $ 3,358 $22,967 $14,460 $ 4,072
Noncash investing activities:
Capital lease obligation... $ 26,757 $14,480 $14,480 $ --
Noncash financing activities:
Capital lease obligation... $ 26,757 $14,480 $14,480 $ --
Equity interest repurchased
with note payable....... $ -- $85,500 $85,500 $ --
Reissued equity interest... $ -- $90,000 $90,000 $ --
Related party advances
receivable from prior
period repaid through
distributions........... $ -- $ -- $ -- $49,804
Distribution financed with
note payable............ $112,500 $ -- $ -- $ --
</TABLE>
11. SALE OF EQUITY INTEREST
Effective July 31, 1999, the Company's shareholder and all beneficial
equity interest owners and the warrant holder sold all their equity interests in
the Company to Caminus LLC for $13 million and an obligation to pay the
shareholder and each beneficial equity interest owner of DCS 40% of the dividend
distribution each beneficial equity owner would have otherwise received had a
distribution of DCS' taxable income for the seven months ended July 31, 1999
occurred. Concurrently, the Company's S corporation status was terminated.
F-63
<PAGE> 156
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1999
The following unaudited pro forma condensed consolidated statements of
operations for the year ended December 31, 1998 and the nine months ended
September 30, 1999 give effect to acquisitions by Caminus of Zai*Net Software,
L.P. ("Zai*Net") and Caminus Energy Limited ("CEL") on May 12, 1998, Positron
Energy Consulting ("Positron") on November 13, 1998 and DC Systems, Inc. ("DCS")
on July 31, 1999. The unaudited pro forma condensed consolidated statements of
operations assume the acquisitions had occurred on January 1, 1998, except for
Positron which is included in the pro forma results of operations from November
13, 1998. The unaudited pro forma condensed consolidated statement of operations
for the year ended December 31, 1998 is based on the historical audited
consolidated statement of operations of Caminus for the period from Inception
(April 29, 1998) through December 31, 1998, which includes the results of
Zai*Net and CEL from May 12, 1998 and Positron from November 13, 1998 as well as
the unaudited statements of operations of Zai*Net and CEL for the period from
January 1, 1998 through April 30, 1998. The unaudited pro forma statement of
operations for the year ended December 31, 1998 does not include the historical
unaudited results of Positron from January 1, 1998 through November 12, 1998 as
the amounts were not considered significant in relation to the unaudited
combined pro forma results of operations taken as a whole. The unaudited pro
forma statement of operations for the nine months ended September 30, 1999 is
based on the historical unaudited statement of operations of Caminus as well as
the statement of operations of DCS for the period from January 1, 1999 through
July 31, 1999. The unaudited pro forma condensed consolidated financial
statements reflect the purchase method of accounting and the adjustments and
assumptions described in the accompanying notes. There is no requirement for any
unaudited pro forma balance sheet since all the acquisitions are reflected in
the historical unaudited consolidated balance sheet of Caminus at September 30,
1999.
The pro forma adjustments are based upon fair values of the acquired
companies at the time of their acquisition, as used in Caminus' purchase
accounting for these acquisitions. The unaudited pro forma condensed
consolidated statements of operations should be read in conjunction with the
respective audited and unaudited financial statements of the respective
companies appearing elsewhere in this Prospectus. The pro forma results are not
necessarily indicative of future results or the results that actually would have
occurred if the acquisitions had taken place on January 1, 1998.
F-64
<PAGE> 157
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
ZAI*NET(B) CAMINUS DC PRO FORMA PRO FORMA
CAMINUS(A) (PREDECESSOR) ENERGY LTD(B) SYSTEMS, INC.(C) ADJUSTMENTS CAMINUS
------------ ------------- -------------- ---------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue:
Licenses...................... $ 3,639,143 $1,495,221 $ -- $ 320,650 $ -- $ 5,455,014
Software services............. 3,090,758 1,334,473 -- 521,968 -- 4,947,199
Strategic consulting.......... 2,896,102 -- 1,457,994 -- 4,354,096
------------ ---------- ---------- ---------- ----------- ------------
Total revenue............... 9,626,003 2,829,694 1,457,994 842,618 -- 14,756,309
------------ ---------- ---------- ---------- ----------- ------------
Gross profit.................... 4,940,985 2,095,452 795,336 295,210 -- 8,126,983
Operating expenses:
Research and development...... 1,153,470 580,031 -- 64,048 -- 1,797,549
Selling, general and
administrative.............. 3,601,116 1,079,391 431,429 579,191 -- 5,691,127
DCS equity participation
compensation................ -- -- -- 531,064 -- 531,064
Acquired in-process research
and development............. 4,822,000 -- -- -- -- 4,822,000
Amortization of intangibles... 5,497,765 -- -- -- 7,882,256 13,380,021
------------ ---------- ---------- ---------- ----------- ------------
Total operating expenses.... 15,074,351 1,659,422 431,429 1,174,303 7,882,256 26,221,761
------------ ---------- ---------- ---------- ----------- ------------
Operating income (loss)......... (10,133,366) 436,030 363,907 (879,093) (7,882,256) (18,094,778)
------------ ---------- ---------- ---------- ----------- ------------
Other income (expense), net..... 96,909 8,294 37,873 (22,967) -- 120,109
Provision for income taxes...... 35,735 23,816 107,464 -- -- 167,015
------------ ---------- ---------- ---------- ----------- ------------
Income (loss) before minority
interest...................... (10,072,192) 420,508 294,316 (902,060) -- (18,141,684)
Minority interest............... (298,996) -- -- -- 298,996 --
Net income (loss)............... $(10,371,188) $ 420,508 $ 294,316 $ (902,060) $(7,583,260) $(18,141,684)
============ ========== ========== ========== =========== ============
Pro forma net loss.............. $(10,159,229) $(17,965,460)
============ ============
Basic and diluted net loss per
share......................... $(1.41) -- -- -- -- $(2.39)
Weighted average common
shares -- basic and diluted... 7,360,634 -- -- -- -- 7,578,987
</TABLE>
- -------------------------
Periods included:
(a) Inception (April 29, 1998) through December 31, 1998
(b) Four months ended April 30, 1998
(c) Year ended December 31, 1998
See accompanying notes to the unaudited pro forma financial statements
F-65
<PAGE> 158
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
DC PRO FORMA PRO FORMA
CAMINUS(A) SYSTEMS, INC.(B) ADJUSTMENTS CAMINUS
----------- ---------------- ----------- ------------
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenue:
Licenses...................... $ 8,088,621 $ 41,000 $ -- $ 8,129,621
Software services............. 5,679,513 301,621 -- 5,981,134
Strategic consulting.......... 4,757,425 -- 4,757,425
----------- ----------- ----------- ------------
Total revenue.............. 18,525,559 342,621 -- 18,868,180
----------- ----------- ----------- ------------
Gross profit.................... 12,673,116 60,699 -- 12,733,815
Operating expenses:
Research and development...... 2,679,726 24,352 -- 2,704,078
Selling, general and
administrative............. 8,700,240 428,167 -- 9,128,407
DCS equity participation
compensation............... -- 5,022,779 -- 5,022,779
Acquired in-process research
and development............ 1,000,000 -- 1,000,000
Amortization of intangibles... 6,074,750 -- 1,647,765 7,722,515
----------- ----------- ----------- ------------
Total operating expenses... 18,454,716 5,475,298 1,647,765 25,577,779
Operating loss.................. (5,781,600) (5,414,599) (1,647,765) (12,843,964)
Other expense, net.............. (126,856) (3,477) -- (130,333)
Provision for income taxes...... 334,294 -- -- 334,294
----------- ----------- ----------- ------------
Net loss........................ $(6,242,750) $(5,418,076) $(1,647,765) $(13,308,591)
=========== =========== =========== ============
Pro forma net loss.............. $(6,592,319) $(13,658,159)
=========== ============
Basic and diluted net loss per
share......................... $(0.76) -- -- $(1.62)
-------- --------
-------- --------
Weighted average common
shares -- basic and diluted... 8,264,075 -- -- 8,405,529
</TABLE>
- -------------------------
Periods included:
(a) Nine months ended September 30, 1999
(b) Seven months ended July 31, 1999
See accompanying notes to the unaudited pro forma financial statements
F-66
<PAGE> 159
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
The following facts and assumptions in notes (a) through (d) were used in
determining the pro forma effect of the various acquisitions by Caminus.
a) On May 12, 1998, Caminus acquired a 71% ownership interest in Zai*Net
for $7,740,000 in cash. The terms of the purchase agreement required the payment
of additional consideration totaling $4,375,000 to the former shareholder of
Zai*Net if revenues from certain Zai*Net products were in excess of certain
thresholds defined in the purchase agreement. Payment of this additional
consideration was guaranteed in connection with the acquisition of the remaining
29% interest in Zai*Net by Caminus in December 1998 and was accordingly recorded
as additional purchase price.
On December 31, 1998, Caminus acquired the remaining 29% of Zai*Net for a
21% membership interest in Caminus valued at $10,339,350. Caminus converted all
the outstanding options of Zai*Net into options to acquire membership interests
in Caminus. The fair value of the converted options and the options granted to
GFI in connection with the formation of the Company and the identification of
the acquired entities was $2,669,534 and was recorded as additional purchase
price. Additionally, the Company incurred $602,969 in combined other direct
acquisition costs.
The acquisition of the 71% and 29% ownership interests in Zai*Net have been
accounted for as a purchase. A summary of the allocation of the combined
purchase price appears below:
<TABLE>
<S> <C>
Tangible net assets acquired..................... $ 600,195
Acquired in-process research and development..... 4,822,000
Developed technology............................. 2,596,000
Other intangible assets.......................... 2,023,000
Goodwill......................................... 15,685,658
-----------
$25,726,853
===========
</TABLE>
The useful lives for the acquired intangible assets range from three to
five years.
The pro forma adjustments for the year ended December 31, 1998 assume an
additional four and twelve months of amortization of intangible assets for the
May 12, 1998 and the December 31, 1998 acquisitions, respectively. This resulted
in additional amortization of $514,703 and $3,815,904 for the May 12, 1998 and
December 31, 1998 acquisitions, respectively. Additionally, the pro forma
adjustment column includes the elimination of the 29% minority interest of
Zai*Net in order to reflect the results of operations as if Caminus had
purchased 100% of Zainet on January 1, 1998.
b) On May 12, 1998, Caminus acquired CEL for $3,022,924 in cash, plus a
membership interest in Caminus valued at $3,000,000. The acquisition of CEL has
been accounted for as a purchase. The excess of purchase price over the tangible
F-67
<PAGE> 160
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS -- (CONTINUED)
net assets acquired was $6,217,870. The excess purchase price has been recorded
as goodwill and is being amortized over three years.
The pro forma adjustments for the year ended December 31, 1998 assume an
additional four months of goodwill amortization. This resulted in an additional
amortization of $690,874.
c) On November 13, 1998, Caminus acquired Positron for $151,667 in cash.
The acquisition of Positron has been accounted for as a purchase with the excess
of purchase price over tangible net assets acquired being recorded as goodwill.
This resulted in goodwill and other intangible assets of $151,667 with a
four-year useful life.
The pro forma adjustments for the year ended December 31, 1998 assume
additional amortization of $36,032.
d) On July 31, 1999, Caminus acquired DC Systems, Inc for $10,000,000 in
cash, plus membership interests in Caminus valued at $3,000,000. There were
$500,000 of other direct acquisition costs. A summary of the allocation of the
purchase price appears below:
<TABLE>
<S> <C>
Tangible net assets acquired..................... $(1,570,706)
Acquired in-process research and development..... 1,000,000
Deferred tax assets.............................. 617,000
Developed technology............................. 1,800,000
Assembled work force............................. 330,000
Customer List.................................... 2,700,000
Goodwill......................................... 8,623,706
-----------
$13,500,000
===========
</TABLE>
The useful lives for the acquired intangible costs range from three to five
years.
The pro forma adjustments for the year ended December 31, 1998 and the nine
months ended September 30, 1999 assume an additional and twelve and seven months
of amortization of intangible assets, respectively. This resulted in additional
amortization of $2,824,741 and $1,647,765 for the year ended December 31, 1998
and the nine months ended September 30, 1999, respectively.
F-68
<PAGE> 161
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................. 19
Caminus Corporation.................. 20
Use of Proceeds...................... 21
Dividend Policy...................... 22
Capitalization....................... 23
Dilution............................. 25
Selected Consolidated Financial
Data............................... 27
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 30
Business............................. 47
Management........................... 66
Certain Transactions................. 75
Principal and Selling Stockholders... 81
Description of Capital Stock......... 84
Shares Eligible for Future Sale...... 86
Underwriting......................... 88
Legal Matters........................ 90
Experts.............................. 90
Where You Can Find More
Information........................ 91
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.
[CAMINUS LOGO]
4,345,000 SHARES
COMMON STOCK
DEUTSCHE BANC ALEX. BROWN
BEAR, STEARNS & CO. INC.
CIBC WORLD MARKETS
PROSPECTUS
, 1999
<PAGE> 162
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........................................ $ 20,837
NASD filing fee............................................. 7,996
Nasdaq National Market listing fee.......................... 88,500
Blue Sky fees and expenses.................................. 10,000
Transfer Agent and Registrar fees........................... 10,000
Accounting fees and expenses................................ 275,000
Legal fees and expenses..................................... 350,000
Director and Officer Liability Insurance.................... 75,000
Printing and mailing expenses............................... 125,000
Miscellaneous............................................... 37,667
----------
Total.................................................. $1,000,000
==========
</TABLE>
- ---------------
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> 163
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> 164
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 ($3.12 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 5,527,216
shares of common stock of the Registrant prior to this offering. All of the
investors were accredited investors.
2. In July 1998, Caminus LLC issued an aggregate of 672,879 shares of
Series A membership interest (which will convert into 64,084 shares of
common stock of the Registrant prior to this offering) to an individual at
an aggregate purchase price of $200,000 ($3.12 per share of common stock on
an as-converted basis). Caminus LLC also issued the individual an option to
purchase 1,363,156 shares of Series B membership interest. The individual
investor was an accredited investor.
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 320,418 shares of common stock of the Registrant prior to this
offering) to an individual at an aggregate purchase price of $1,000,000
($3.12 per share of common stock on an as-converted basis). The individual
investor was an accredited investor.
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
57,486 shares of common stock of the Registrant prior to this offering) to
three individuals 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. One of the individuals was an
accredited investor. The three individuals were responsible for the
operations of Positron and were each involved in the negotiation of the
acquisition and the due diligence review of the Company in connection with
the acquisition. Each person had sufficient access to information about the
Company necessary to make an informed investment decision.
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 2,055,210 shares of common stock of the Registrant prior to
this offering) at an aggregate purchase price of $10,339,350 to twelve
investors in connection
II-3
<PAGE> 165
with its acquisition of Zai*Net Software, L.P. Nine of these investors were
not accredited investors. In connection with this transaction, each of
these persons had sufficient access to information about the Company
necessary to make an informed decision.
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
58,694 shares of common stock of the Registrant prior to this offering) to
five individuals at an aggregate purchase price of $338,958 ($5.78 per
share of common stock on an as-converted basis). None of these investors
was an accredited investor. However, each of these persons was actively
involved in the operations of the Company and had a significant amount of
information regarding the Company, its business and its management. Each
person had access to management of the Company and was afforded sufficient
access to information about the Company necessary to make an informed
investment decision.
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
969,973 shares of common stock of the Registrant prior to this offering) to
fourteen individuals in connection with a rights offering at an aggregate
purchase price of $12,000,000 ($12.37 per share of common stock on an
as-converted basis). All but five of these investors were accredited. The
five non-accredited investors were all employees of the Company. Each of
these persons was actively involved in the operations of the Company and
had a significant amount of information regarding the Company, its business
and its management. Each person had access to management of the Company and
was afforded sufficient access to information about the Company necessary
to make an informed investment decision.
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
242,493 shares of common stock of the Registrant prior to this offering) at
an aggregate purchase price of $3,000,000 to twelve recipients in
connection with its acquisition of DC Systems, Inc. Ten of these persons
were not accredited investors. Each of these individuals was an employee of
DC Systems and was provided information about the Company, its business and
its management. Each person had sufficient access to information about the
Company necessary to make an informed investment decision.
(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 321,366 shares of common stock of the
Registrant prior to this offering) at a weighted average exercise price of
$0.75 per share ($7.88 per share of common stock on an as-converted basis).
None of these options has been exercised. These option grants were made
under the Company's 1998 Stock Incentive Plan (the "Plan"). The Plan is a
written compensatory benefit plan and all optionees are officers or
employees who were employed by the Company at the time of the grant.
Additionally, the
II-4
<PAGE> 166
aggregate number of options granted in any consecutive 12-month period did
not exceed 15% of the outstanding amount of the class of securities being
issued. Presently, the Company has issued a total of 9,725,715 options for
series A membership interests and the outstanding number of series A
membership interests is 97,603,629.
2. As of the closing of this offering, the Registrant will grant
options to purchase an aggregate of 28,572 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 12,966,732
shares of Series C membership interest (which will convert into an option
to purchase 1,234,926 shares of common stock of the Registrant prior to
this offering) at an aggregate exercise price of $4,447,664. Such option
will be exercised on a cashless basis for a net total of 920,093 shares of
the Registrant's common stock. The investor is an accredited investor.
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 480,952 shares of common stock of
the Registrant prior to this offering) at an aggregate exercise price of
$1,500,000 ($3.12 per share of common stock on an as-converted basis) to
certain individuals in connection with its acquisition of Caminus Limited.
Such options will be exercised on a cashless basis for a net total of
360,917 shares of the Registrant's common stock. These individuals are each
an accredited investor.
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 277,052 shares of common stock of the
Registrant prior to this offering) at an aggregate exercise price of
$1,800,000 ($6.50 per share of common stock on an as-converted basis). The
investor is an accredited investor.
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 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.
II-5
<PAGE> 167
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 Merger Agreement among the Registrant, Caminus LLC
and Caminus Merger 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.
</TABLE>
II-6
<PAGE> 168
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
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** Agreement by and between Caminus LLC and GFI Energy
Ventures.
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.
10.31 Purchase and Option Agreement, as amended, by and between
Caminus Energy Ventures LLC and SS&C Technologies, Inc.,
dated December 31, 1998.
10.32 Revolving Promissory Note issued by Caminus LLC to Fleet
Bank, N.A., dated June 23, 1999.
10.33 Working Capital Promissory Note issued by Caminus LLC to
Fleet Bank, N.A., dated June 23, 1999.
</TABLE>
II-7
<PAGE> 169
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
10.34 Mortgage of Stocks and Shares, by Caminus Limited in favor
of Fleet Bank, N.A., dated June 23, 1999.
10.35 Mortgage of Stocks and Shares, by Caminus LLC in favor of
Fleet Bank, N.A., dated June 23, 1999.
10.36** Amendment to Limited Liability Company Agreement.
10.37 Form of Escrow Agreement by and among Caminus Corporation,
Caminus/DC Acquisition Corp., Escrow Agent and Buyer
Parties, as defined in the agreement, to be filed prior to
the effective date of this offering.
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.
27*** Financial Data Schedule.
</TABLE>
- -------------------------
* Previously filed.
** To be filed by amendment.
*** Superseding filing.
+ 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
Schedule II -- Valuation and Qualifying Accounts
All other schedules have been omitted because they are not required or
because the required information is given in the 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
II-8
<PAGE> 170
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-9
<PAGE> 171
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in New
York, New York, on this 12th day of November, 1999.
CAMINUS CORPORATION
By: /s/ DAVID M. STONER
------------------------------------
David M. Stoner
President and Chief Executive
Officer
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 November 12, 1999
- --------------------------------------------------- Executive Officer
David M. Stoner (Principal Executive
Officer) and Director
* Vice President, Chief November 12, 1999
- --------------------------------------------------- Financial Officer and
Mark A. Herman Treasurer (Principal
Financial Officer and
Principal Accounting
Officer)
* Chairman of the Board of November 12, 1999
- --------------------------------------------------- Directors
Lawrence D. Gilson
* Director November 12, 1999
- ---------------------------------------------------
Nigel L. Evans
* Director November 12, 1999
- ---------------------------------------------------
Brian J. Scanlan
* Director November 12, 1999
- ---------------------------------------------------
Christopher S. Brothers
* Director November 12, 1999
- ---------------------------------------------------
Anthony H. Bloom
* Director November 12, 1999
- ---------------------------------------------------
Richard K. Landers
</TABLE>
By: /s/ DAVID M. STONER
-------------------------------
David M. Stoner
Attorney-in-Fact
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<PAGE> 172
CAMINUS LLC
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
Allowance for doubtful accounts:
<TABLE>
<S> <C>
Balance, April 29, 1998..................................... $228,644
Provision................................................... --
Recoveries................................................ --
Charge-offs............................................... --
--------
Balance, December 31, 1998.................................. 228,644
Provision................................................. 75,000
Recoveries................................................ --
Charge-offs............................................... --
--------
Balance, September 30, 1999................................. $303,644
========
</TABLE>
<PAGE> 173
<TABLE>
<S> <C>
EXHIBIT INDEX
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
1** Form of Underwriting Agreement.
2.1**+ Form of Merger Agreement among the Registrant, Caminus LLC
and Caminus Merger 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.
</TABLE>
<PAGE> 174
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
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** Agreement by and between Caminus LLC and GFI Energy
Ventures.
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.
10.31 Purchase and Option Agreement, as amended, by and between
Caminus Energy Ventures LLC and SS&C Technologies, Inc.,
dated December 31, 1998.
10.32 Revolving Promissory Note issued by Caminus LLC to Fleet
Bank, N.A., dated June 23, 1999.
10.33 Working Capital Promissory Note issued by Caminus LLC to
Fleet Bank, N.A., dated June 23, 1999.
10.34 Mortgage of Stocks and Shares, by Caminus Limited in favor
of Fleet Bank, N.A., dated June 23, 1999.
10.35 Mortgage of Stocks and Shares, by Caminus LLC in favor of
Fleet Bank, N.A., dated June 23, 1999.
10.36** Amendment to Limited Liability Company Agreement.
10.37 Form of Escrow Agreement by and among Caminus Corporation,
Caminus/DC Acquisition Corp., Escrow Agent and Buyer
Parties, as defined in the agreement, to be filed prior to
the effective date of this offering.
21.1*** Subsidiaries of the Registrant.
23.1** Consent of Hale and Dorr LLP (included in Exhibit 5).
23.2 Consent of PricewaterhouseCoopers LLP.
</TABLE>
<PAGE> 175
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
23.3 Consent of Peters, Elworthy & Moore.
24* Power of Attorney.
27*** Financial Data Schedule.
</TABLE>
- -------------------------
* Previously filed.
** To be filed by amendment.
*** Superseding filing.
+ 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.
<PAGE> 1
Exhibit 2.3
STOCK PURCHASE AGREEMENT
BY AND AMONG
GFI CAMINUS LLC,
A DELAWARE LIMITED LIABILITY COMPANY
CAMINUS ENERGY LIMITED,
AN ENGLISH CORPORATION
DR. NIGEL L. EVANS, Ph.D.,
AN INDIVIDUAL
AND
DR. MICHAEL B. MORRISON, Ph.D.,
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 SHARES.................................................... 5
2.1 The Closing; Closing Date.............................................. 5
2.2 Sale and Purchase of Shares............................................ 5
2.3 Payment of Cash Amount................................................. 6
2.4 Payment of Equity Amount............................................... 6
2.5 Issuance of Option..................................................... 6
2.6 Closing Adjustment..................................................... 6
2.7 Net Worth Adjustment................................................... 7
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE SELLERS.................................. 7
3.1 Existence and Good Standing............................................ 7
3.1.1 The Company................................................... 7
3.1.2 Organizational Documents...................................... 8
3.1.3 Subsidiaries.................................................. 8
3.2 Capitalization and Title to Shares..................................... 8
3.3 Authority.............................................................. 9
3.4 No Conflicts........................................................... 9
3.5 Company Accounts....................................................... 10
3.6 Transaction Expenses................................................... 10
3.7 Material Contracts..................................................... 10
3.8 Intellectual Property.................................................. 11
3.9 Insurance.............................................................. 12
3.10 Labor Relations and Employee Agreements................................ 12
3.10.1 Compliance.................................................... 12
3.10.2 Employment Conditions and Agreements.......................... 13
3.10.3 Disclosed Scheme.............................................. 13
3.11 Payment of Taxes....................................................... 13
3.12 Books of Account; Bank Accounts........................................ 16
3.13 Condition of Tangible Assets........................................... 16
3.14 Ownership of Assets.................................................... 16
3.15 Brokers................................................................ 17
3.16 Litigation............................................................. 17
3.17 Personal Property Leases............................................... 17
3.18 Real Property Leases................................................... 17
3.19 Compliance with Laws; Permits.......................................... 18
3.20 Undisclosed Liabilities................................................ 18
3.21 Scope of Representations and Warranties................................ 18
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER........................................ 18
4.1 Existence and Good Standing............................................ 18
4.1.1 The Buyer..................................................... 18
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
4.1.2 Organizational Documents...................................... 19
4.1.3 Subsidiaries and Operations................................... 19
4.2 Agreement.............................................................. 19
4.2.1 Agreement Authorized......................................... 19
4.2.2 No Conflict.................................................. 19
4.3 Broker................................................................. 20
4.4 Capitalization......................................................... 20
4.5 Transaction Expenses................................................... 20
4.6 Scope of Representations and Warranties................................ 20
ARTICLE 5 TRANSACTION DOCUMENTS; DOCUMENT DELIVERY; COVENANTS............................ 21
5.1 Reliance............................................................... 21
5.2 Document Delivery...................................................... 21
5.3 Sellers Delivery of Documents.......................................... 21
5.4 Buyer Delivery of Documents............................................ 22
5.5 Covenant Not to Compete................................................ 22
5.6 Delivery of Transaction Documents...................................... 22
ARTICLE 6 INDEMNITY...................................................................... 22
6.1 Survival of Representations, Warranties, Agreements and Covenants...... 22
6.1.1 Sellers....................................................... 22
6.1.2 Buyer......................................................... 23
6.2 The Indemnity Obligation............................................... 23
6.3 Claims................................................................. 23
6.3.1 Notice........................................................ 23
6.3.2 Third Party Claim Procedures.................................. 24
6.4 Limitation on the Indemnifying Parties' Indemnification Obligations.... 24
6.5 Option to Recover Membership Interests or Options...................... 25
6.6 Sole and Exclusive Remedy.............................................. 25
6.7 Insurance Recoveries................................................... 26
6.8 Indemnity Limitations.................................................. 26
ARTICLE 7 MISCELLANEOUS.................................................................. 26
7.1 Entire Agreement....................................................... 26
7.2 Further Assurances..................................................... 26
7.3 Notices................................................................ 26
7.4 Governing Law and Submission to Jurisdiction........................... 29
7.5 Exhibits and Schedules................................................. 29
7.6 Captions............................................................... 29
7.7 Severability........................................................... 29
7.8 Counterparts........................................................... 30
7.9 Successors and Assigns................................................. 30
7.10 Waivers Strictly Construed............................................. 30
7.11 Number, Gender and Connection of Persons............................... 30
7.12 RTPA................................................................... 30
7.13 Statutory Update....................................................... 30
</TABLE>
<PAGE> 4
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "AGREEMENT") is entered into as of
May 12, 1998, by and among GFI CAMINUS LLC, a Delaware United States limited
liability company, whose principle place of business is located at 12121
Wilshire Boulevard, Suite 1375, Los Angeles, California 90025 ("BUYER" or "GFI
CAMINUS"), CAMINUS ENERGY LIMITED, a company incorporated in England under the
registration number 1889028 and whose registered office is at Caminus House,
Castle Park, Cambridge, CB3 ORA, United Kingdom (the "COMPANY"), DR. NIGEL L.
EVANS, Ph.D., an individual, of The Grove, Lady Street, Lavenham, Sudbury,
Suffolk, United Kingdom ("EVANS"), and DR. MICHAEL B. MORRISON, Ph.D., an
individual, of 21 Victoria Park, Cambridge, United Kingdom ("MORRISON" and
together with Evans, the "SELLERS"), with reference to the following facts and
circumstances.
RECITALS
WHEREAS, Buyer is a recently formed limited liability company organized
to acquire all of the equity interest in the Company and a seventy-one percent
(71%) partnership interest in ZAI*NET Software, L.P., a Delaware United States
limited partnership (the "PARTNERSHIP");
WHEREAS, Sellers are the beneficial owner of and together hold legal
title to all of the issued shares (the "SHARES") of the Company;
WHEREAS, Sellers desire to sell with full title guarantee, assign,
transfer and deliver to Buyer and Buyer desire to purchase and accept from
Sellers all of the issued Shares of the Company (the "PURCHASE");
WHEREAS, pursuant to the Subscription Agreement, dated as of the date
hereof (the "SUBSCRIPTION AGREEMENT"), among the Buyer, GFI Energy Ventures LLC
("VENTURES"), SS&C Technologies, Inc. ("SS&C"), OCM Caminus Investment, Inc.
("OAKTREE"), Dr. Serena K. Hesmondhalgh ("HESMONDHALGH"), RIT Capital Partners
("RIT") and Durham Enterprises Limited ("DURHAM"), (Ventures, SS&C, Oaktree,
Hesmondhalgh, RIT and Durham are referred to herein as the "INVESTORS"), the
Investors have agreed to make capital contributions to the Buyer and are
purchasing membership interests in the Buyer;
WHEREAS, pursuant to the SS&C Distributor Agreement, dated as of the
date hereof (the "LICENSE AGREEMENT"), between the Buyer and SS&C, SS&C is
licensing and/or granting to Buyer rights in certain proprietary technology
owned by SS&C as a portion of its capital contribution to the Buyer;
WHEREAS, pursuant to the Purchase Agreement, dated as of the date
hereof, among the Buyer, ZAI*NET Software, Inc., a Delaware United States
corporation, whose principle place of business is located at 747 Third Avenue,
New York, New York 10017 ("ZAI*NET") and Brian J. Scanlan, an individual, the
Buyer simultaneously herewith is purchasing and accepting from ZAI*NET a seventy
percent (70%) partnership interest of the Partnership (the "ZAI*NET PURCHASE");
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<PAGE> 5
WHEREAS, pursuant to the Purchase Agreement, the Buyer simultaneously
herewith, is purchasing and accepting from Brian J. Scanlan, a one percent (1%)
general partnership interest in the Partnership, which shall constitute all of
the issued and outstanding general partnership interests in the Partnership;
WHEREAS, the Buyer desires to consummate the Purchase simultaneously
with the consummation of the purchase of the seventy-one percent (71%)
partnership interest in the Partnership, and upon the simultaneous closing of
each such transaction, the Buyer will be a holding company for each of the
Company and the Partnership; and
NOW THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants and agreements contained herein and in
the Related Agreements (as hereinafter defined), the parties hereto hereby agree
as follows.
ARTICLE 1
DEFINITIONS
"Agreement" shall have the meaning in the introductory paragraph hereof.
"Basket" shall have the meaning as set forth in Section 6.4 hereof.
"Buyer" shall have the meaning in the introductory paragraph hereof.
"Caminus Options" shall have the meaning set forth in Section 2.5 hereof.
"Cash Consideration" shall have the meaning set forth in Section 2.3 hereof.
"Closing" shall have the meaning as set forth in Section 2.1 hereof.
"Closing Audit" shall mean an audit of the Company as of the close of business
on April 30, 1998 to be performed by the Company's independent public
accountants (as specified by Buyer) in accordance with UK GAAP not later than
sixty (60) days following the Closing.
"Closing Date" shall have the meaning as set forth in Section 2.1 hereof.
"Companies Act" shall mean the Companies Act 1985 under the laws of England and
Wales.
"Company" shall have the meaning in the introductory paragraph hereof.
"Company Agreement" shall mean that certain Limited Liability Company Agreement
of GFI Caminus, dated as of the date hereof, by and among Ventures, SS&C,
Oaktree, Evans, Morrison, Hesmondhalgh and the other members of GFI Caminus as
of such date.
"Company Accounts" shall have the meaning as set forth in Section 3.5 hereof.
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<PAGE> 6
"Date Compliance" or "Date Compliant" shall mean the ability to: (i) process and
continue to process data correctly and consistently with reference to any and
all dates; (ii) operate, perform and function without being adversely affected
by any date or change of date; and (iii) produce output (including any output
for any interface to other hardware, software or systems) which will in relation
to any date contained within such output explicitly and unambiguously identify
the date in full including the century within which the date falls.
"Encumbrance" shall mean any claim, lien, security interest, mortgage, charge,
restriction, bill of sale, equity or other rights exercisable by third parties
and of any nature whatsoever.
"Equity Consideration" shall have the meaning set forth in Section 2.4 hereof.
"Estimated Net Worth" shall have the meaning set forth in Section 2.7 hereof.
"Evans" shall have the meaning in the introductory paragraph hereof.
"GFI Caminus" shall have the meaning in the introductory paragraph hereof.
"Hesmondhalgh" shall have the meaning in the fourth Whereas clause hereof.
"Indemnified Party(ies)" shall have the meaning as set forth in Section 6.2
hereof.
"Indemnifying Party(ies)" shall have the meaning as set forth in Section 6.2
hereof.
"Investors" shall have the meaning set forth in the fourth Whereas clause
hereof.
"Knowledge" shall mean the actual knowledge or such knowledge as would have been
acquired, after due diligent and careful enquiry of the officers and key
employees of the Company, the Sellers or Buyer, as the case may be; provided,
however for purposes hereof, the officers and key employees of the Company shall
be only Evans, Morrison and Hesmondhalgh.
"License Agreement" shall have the meaning set forth 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.
"Morrison" shall have the meaning in the introductory paragraph hereof.
"Net Worth" shall mean the Company's assets less its liabilities (determined in
accordance with
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<PAGE> 7
UK GAAP) as of the close of business on April 30, 1998 and as determined
pursuant to the Closing Audit.
"Oaktree" shall have the meaning set forth in the fourth Whereas clause hereof.
"Partnership" shall have the meaning in the first Whereas clause hereof.
"Permitted Encumbrance" shall have the meaning as set forth in Section 3.14
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 third Whereas clause
hereto.
"Purchase Price" shall consist of the consideration payable and issuable by
Buyer in connection with the Purchase as specified in Sections 2.3, 2.4 and 2.5
hereof.
"Real Property Leases" shall have the meaning as set forth in Section 3.18
hereof.
"Related Agreements" shall mean (i) the service agreements and associated
covenants not to compete entered into between the Company and each of Evans,
Morrison and Hesmondhalgh dated as of the date hereof (each, a "SERVICE
AGREEMENT") (a form of said service agreements and associated covenants not to
compete is set forth as EXHIBIT A hereto) and (ii) the Company Agreement of GFI
Caminus (including any Appendices) attached hereto as EXHIBIT B.
"RTPA" shall mean the Restrictive Trade Practices Acts of 1976 and 1977, each as
amended.
"Sellers" shall have the meaning in the introductory paragraph hereof.
"Series A Membership Interests" shall mean the Series A membership interests of
GFI Caminus.
"Series B Membership Interests" shall mean the Series B membership interests of
GFI Caminus.
"Shares" shall have the meaning as set forth in the second Whereas clause
hereof.
"SS&C" shall have the meaning set forth in the fourth Whereas clause hereof.
"Subscription Agreement" shall have the meaning set forth in the fourth Whereas
clause hereof.
"Target Net Worth" shall have the meaning as set forth in Section 2.7 hereof.
"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.
"Taxes Act" shall mean the Income and Corporation Taxes Act 1988.
"TCGA" shall mean the Taxation of Chargeable Gains Act 1992.
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<PAGE> 8
"Third Party Claims" shall have the meaning as set forth in Section 6.3.2
hereof.
"Transaction Documents" shall collectively mean the Related Agreements, the
Zai*Net Agreements, the License Agreement and the Subscription Agreement, all
dated as of the date hereof.
"UK GAAP" shall have the meaning in Section 3.5 hereof.
"Ventures" shall have the meaning set forth in the fourth Whereas clause hereof.
"Warranties" shall mean the representations and warranties contained in Article
3 and Article 4 hereof.
"ZAI*NET" shall have the meaning in the sixth Whereas clause hereof.
"Zai*Net Agreements" shall mean the Purchase Agreement, dated as of the date
hereof, among Buyer, the Partnership, ZAI*NET and Brian J. Scanlan, the
Assignment and Assumption Agreement, dated as of the date hereof between
ZAI*NET, the Partnership and Brian J. Scanlan, the Amended and Restated Limited
Partnership Agreement of the Partnership (including the Appendices attached
thereto) and the respective Employment Agreements and the associated Covenants
Not to Compete, each dated as of the date hereof, between the Partnership and
each of Brian J. Scanlan and Simon Young.
"ZAI*NET Purchase" shall have the meaning set forth in the sixth Whereas clause
hereof.
ARTICLE 2
PURCHASE AND SALE OF SHARES
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
agree. The date upon which the Closing occurs is referred to herein as the
"CLOSING DATE".
2.2 SALE AND PURCHASE OF SHARES. Subject to the terms and conditions
set forth herein and in the Related Agreements, at the Closing each of the
Sellers who is the beneficial owner of the Shares set forth on SCHEDULE 3.2
attached hereto, shall sell or procure to be sold with full title guarantee and
deliver to Buyer, and Buyer shall purchase and accept from the Sellers, all of
the issued Shares in the Company in exchange for the Purchase Price. The Shares
shall be sold free from any Encumbrance, option, rights of pre-emption or any
other third party rights and together with all rights attached to such Shares at
the date of this Agreement or subsequently becoming attached thereto. The
Sellers shall waive and agree to procure the waiver of any restrictions on
transfer (including pre-emption rights) which may exist in relation to the
Shares under the articles of association of the Company or otherwise. The Buyer
shall pay all stamp duty and stamp duty reserve tax thereon. The Buyer shall not
be obligated to complete the
-5-
<PAGE> 9
Purchase of any of the Shares unless the Sellers complete the sale of all the
Shares simultaneously, but completion of the purchase of some of the Shares will
not affect the rights of the Buyer with respect to the purchase of the other
Shares.
2.3 PAYMENT OF CASH AMOUNT. Subject to the terms and conditions set
forth herein and in the Related Agreements, at the Closing Buyer shall pay to an
account or accounts designated by the Sellers, pro rata in accordance with the
Shares sold by each of them pursuant hereto, credited as fully paid, Three
Million Dollars (U.S. $3,000,000) plus or minus any cash adjustments in
accordance with the provisions of Sections 2.6 and 2.7 below, which represents
the cash portion of the Purchase Price (the "CASH CONSIDERATION").
2.4 PAYMENT OF EQUITY AMOUNT. Subject to the terms and conditions set
forth herein, the Company Agreement and in the Related Agreements, at the
Closing Buyer shall authorize, issue, grant and deliver to Sellers, pro rata in
accordance with the Shares sold by each of them pursuant hereto, Series A
Membership Interests, having the rights, preferences and privileges and subject
to the restrictions contained in the Company Agreement, which represents the
equity portion of the Purchase Price (the "EQUITY CONSIDERATION"). The parties
acknowledge that Sellers are receiving as of the date hereof an aggregate
Capital Account credit of Three Million Dollars (U.S. $3,000,000), corresponding
to such Series A Membership Interests, as reflected in the Company Agreement.
2.5 ISSUANCE OF OPTION. Subject to the terms and conditions set forth
herein, the Company Agreement and in the Related Agreements, at the Closing
Buyer shall authorize, issue, grant and deliver to each of Evans and Morrison
(or to an entity designated by them and which they control), pro rata in
accordance with the Shares sold by each of them pursuant hereto, options
(referred to in the Company Agreement as the "CAMINUS OPTIONS") to acquire
Series B Membership Interests having the rights, preferences and privileges and
subject to the restrictions contained in the Company Agreement, which represents
the option portion of the Purchase Price. The parties acknowledge that the
exercise price of the Caminus Options is One Million Five Hundred Thousand
Dollars (U.S. $1,500,000), subject to adjustment as provided in the Company
Agreement, and that upon exercise the holder(s) thereof would have the right to
the corresponding Capital Account credit and Percentage Interests (both as
defined in the Company Agreement) in the Company.
2.6 CLOSING ADJUSTMENT. The parties acknowledge that, immediately prior
to May 1, 1998, the Company has (i) distributed all cash to the Sellers; and
(ii) repaid all then outstanding indebtedness of the Company (excluding trade
payables and other ordinary course accrued obligations), except to the extent
reflected on SCHEDULE 2.6 attached hereto; provided, however, that if any amount
of cash is remaining in the Company as of the close of business on April 30,
1998 and not distributed to Sellers or any indebtedness is not repaid, then such
cash and indebtedness shall be reflected in the Net Worth Adjustment set forth
in Section 2.7 below. Prior to May 1, 1998, the Company shall be entitled to
distribute any cash on hand to the Sellers and, unless otherwise agreed to by
the parties hereto, will repay any loans (excluding trade payables and other
ordinary course accrued obligations) of the Company outstanding prior to or as
of the close of business on April 30, 1998. The Sellers and the Company
represent and warrant that except as permitted in this Section 2.6, since the
date of the Company's Interim Accounts (as
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<PAGE> 10
defined in Section 3.5), the Net Worth of the Company has been managed and
maintained in the ordinary course of business and consistent with past
practices.
2.7 NET WORTH ADJUSTMENT. The parties acknowledge that, at least ten
(10) days prior to the date of this Agreement, the Sellers and the Company
delivered to Buyer, their good faith projection of the Net Worth of the Company
as of the close of business on April 30, 1998 (which projection includes
adequate reserves, provisions or accruals for taxes for all periods through the
close of business on April 30, 1998 and year end discretionary bonuses) (the
"ESTIMATED NET WORTH"). In the event that Estimated Net Worth exceeds pound
sterling 215,000 (the "TARGET NET WORTH"), the cash amount payable at Closing
pursuant to Section 2.3 shall be increased by the amount of such excess. In the
event that the Estimated Net Worth is less than the Target Net Worth, the cash
amount payable at Closing pursuant to Section 2.3 hereof shall be decreased by
the amount of the shortfall. Immediately following the Closing, the Company and
the Buyer shall initiate the Closing Audit. Based upon the actual Net Worth as
reflected in the Closing Audit, the provisions of this Section 2.7 shall again
be applied, substituting actual Net Worth for Estimated Net Worth; and, based
upon such application, not later than thirty (30) days following the completion
of the Closing Audit, the Buyer shall pay to the Sellers, or the Sellers shall
pay to the Buyer, as applicable, the appropriate "true up" amount.
Notwithstanding anything herein to the contrary, any distribution, dividend or
similar payment by the Company to a shareholder or any third party which is not
fully reflected in the computation of Net Worth (e.g., any such payment on or
after May 1, 1998 and prior to or on the Closing Date) shall be deducted in
computing Net Worth.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
As an inducement for Buyer to enter into and consummate the
transactions contemplated by this Agreement (including the Related Agreements),
each of the Sellers, jointly and severally (except where expressly stated
otherwise), represents and warrants that, except as set forth in the Schedules
hereto prepared by the Sellers and delivered to Buyer, 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.
3.1 EXISTENCE AND GOOD STANDING.
3.1.1 THE COMPANY. The company is a company duly incorporated,
validly existing, in good standing and not insolvent under the laws of England,
having full power and authority to own its properties and to carry on its
business as conducted. the Company 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 on the Company.
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<PAGE> 11
3.1.2 ORGANIZATIONAL DOCUMENTS. Copies of the memorandum and
articles of association or other organizational documents and bye-laws of the
Company, effective prior to the date hereof, have been delivered to Buyer and as
delivered are true and complete as of the Closing Date, having attached thereto,
copies of all resolutions and agreements referred to in Section 380(2) of the
Companies Act. The Company has complied with all of the provisions of the
memorandum and articles of association and, in particular has not entered into
any ultra vires transactions. The statutory books and registers of the Company
and all current books of account are written up to date and all such documents
and other necessary records, deeds, agreements and documents relating to its
affairs are in its possession or under its control.
3.1.3 SUBSIDIARIES. The Company does not have, and has never had any
subsidiary, branch located outside of England or permanent establishment outside
the United Kingdom, and has complied in all material respects with all legal
requirements applicable to its business in the United Kingdom other than in
respect of Caminus Limited and Caminus Consultants Limited, both of which are
dormant and have never traded. The Company has no interest in the share capital
or other securities of any other entity.
3.2 CAPITALIZATION AND TITLE TO SHARES. Prior to giving effect to the
purchase and sale contemplated by this Agreement, the authorized and issued
share capital of the Company and the number of such issued Shares held by each
holder thereof is set forth on SCHEDULE 3.2 attached hereto. All of the issued
Shares are fully paid up and the Company has not exercised, purported to
exercise or claimed any Encumbrance over such Shares. Each of the Sellers
severally represents and warrants in respect of his Shares that he owns
beneficially and of record, free and clear of any Encumbrances, and has full
power and authority to sell with full title guarantee, assign, transfer,
deliver, vote and convey free and clear of any Encumbrances, the Shares, and
such Shares constitute all of the ownership interests in the Company owned by
each of the Sellers. There are no rights to call, outstanding options,
convertible securities, warrants, agreements, rights, contracts, calls,
commitments or demands of any character that either (i) obligates the Company to
issue, redeem, sell, convert or purchase any of the Shares, (ii) loan capital or
any other ownership interest in the Company, (iii) restricts or relates in any
way to the voting of any such securities, or (iv) restricts the transfer of or
otherwise relates to transactions in the Shares owned or held by the Sellers.
The Sellers, jointly and severally, represent and warrant that the pre-emption
rights contained in the Company's articles of association in respect of the
Shares sold and transferred pursuant hereto have been waived in writing by the
Sellers and are not subject to any other pre-emption rights. The register of
members of the Company contains a complete and accurate record of the members of
the Company and the Company has not received any notice of any application or
intended application for rectification. The Company and its officers have
complied with the provisions of the Companies Act, including the provisions as
to filing of returns, particulars, resolutions and other documents with the
United Kingdom Registrar of Companies, and all legal requirements of the United
Kingdom have been complied with in connection with the formation of the Company
and with issues of its share capital and other securities. Except as set forth
on SCHEDULE 3.2, attached hereto, the Company has not at any time, repaid,
redeemed or agreed to repay or redeem any shares of any class of its share
capital or otherwise reduced or agreed to reduce any class of its issued share
capital or purchased any of its own shares or carried out any transaction having
the effect of a reduction of capital; made or
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<PAGE> 12
resolved or agreed to make any issue of shares or other securities by way of
capitalization of profits or reserves; or given any financial assistance in
contravention of Section 151 of the Companies Act. There are no powers of
attorney given by the Company except any given incidental to and for the
purposes only of enforcement of any security.
3.3 AUTHORITY. Each of the Sellers severally represents and warrants
insofar as it is related to them as individual Sellers and otherwise jointly and
severally that they and the Company have 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 and the Company has duly
executed and delivered this Agreement and the Related Agreements (to which it is
a party), and has obtained the necessary authorization to execute and deliver
this Agreement and the Related Agreements (to which it is a party), and to
perform its or his 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. Each of this Agreement and the Related
Agreements to which such Seller or the Company is a party is a valid, legal and
binding obligation of such Seller or the Company enforceable against such Seller
or the Company 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). No other action will be
necessary by any of the Sellers or the Company to authorize the execution and
delivery of this Agreement and the Related Agreements and the consummation of
the transactions contemplated hereby and thereby.
3.4 NO CONFLICTS. The Company has complied with all provisions of its
memorandum and articles of association and, in particular, has not entered into
any ultra vires transaction. 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 memorandum and articles of association,
bye-laws or other organizational documents of the Company; (ii) conflicts with
or violates any provision of any foreign or other 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, the Company 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 Encumbrance on any of the properties or assets of any of the Sellers or the
Company pursuant to any note, mortgage, indenture, bond, lease, license, permit,
franchise, agreement, contract, undertaking or other instrument to which any of
the Sellers or the Company is a party or by which any of the Sellers, the
Company or any of their respective properties or assets may be bound or
affected, in each case described in clauses (ii) and (iii) which is reasonably
likely to have a Material Adverse Effect on any of the Sellers or the Company.
The execution, delivery and performance of this Agreement and the Related
Agreements by each of the Company and the Sellers does not require the notice
to, filing with, consent, approval or action of, any governmental authority or
any other third party whatsoever.
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<PAGE> 13
3.5 COMPANY ACCOUNTS. The Sellers have delivered to Buyer true and
correct copies of the accounts of the Company for the fiscal years ended April
30, 1996 and April 30, 1997 and as of and for the period ended March 31, 1998
(the "INTERIM ACCOUNTS", and collectively with the accounts for the fiscal years
ended April 30, 1996 and April 30, 1997, the "COMPANY ACCOUNTS"). All of the
Company Accounts (i) except the Interim Accounts, have been prepared under the
historical cost convention and in accordance with generally accepted accounting
practice commonly adopted and accepted by companies carrying on businesses in
the jurisdiction of England ("UK GAAP"); and (ii) (A) show a true and fair view
of the affairs of the Company as at their respective dates and of its results
for the fiscal periods ended on those dates; (B) comply with the requirements of
the Companies Act; (C) are prepared on consistent bases and policies of
accounting which are the same as those adopted by the Company since the
beginning of the first period covered without alteration; and (D) (save as the
Company Accounts expressly disclose) are not affected by any unusual or
non-recurring items. The Company Accounts make full provision or reserve for, or
disclose, all liabilities (including contingent and disputed liabilities) and
all capital commitments of the Company as at April 30, 1996, April 30, 1997 and
March 31, 1998, indicate clearly which of those liabilities are not usually
provided for or reserved, and make adequate provision or reserve for all bad and
doubtful debts (including, reserves, provisions or accruals for taxes and year
end discretionary bonuses). The profits shown in the Company Accounts have not
to a material extent been affected (except as disclosed in those accounts) by
any extraordinary or exceptional event or circumstance or by any other factor
rendering them unusually high or low. Since March 31, 1998, apart from the
dividends provided for in the Company Accounts, no dividend or other
distribution (as defined for the purposes of section 209 or 210 of the Taxes
Act) has been declared, paid or made by the Company other than as set forth in
SCHEDULE 3.5 attached hereto; the business of the Company has been carried on in
the ordinary course and so as to maintain it as a going concern; and there has
occurred no fact or circumstance constituting a Material Adverse Effect.
3.6 TRANSACTION EXPENSES. Any and all expenses, fees or costs incurred
by any of the Sellers or the Company in connection with the transactions
contemplated by this Agreement and the Related Agreements are set forth on
SCHEDULE 3.6. There are no other expenses, fees or costs incurred by any of the
Sellers or the Company in connection with the transactions contemplated by this
Agreement and the Related Agreements for which Buyer shall be responsible.
3.7 MATERIAL CONTRACTS. Set forth on SCHEDULE 3.7 attached hereto is a
complete and accurate list of all Material Contracts to which the Company 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 summary of the contractual
obligation, has been provided to Buyer. Each of the Material Contracts is in
full force and effect, without material breach or default by the Company and to
the Knowledge of the Sellers and the Company, 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. The
Company is not, and has not been party to any agreement between undertakings,
decision by any association of undertakings or concerted practice which
infringes or infringed Articles 85(1) of the Treaty of Rome (whether or not it
is or was exempted under Article 85(3) of the Treaty of Rome). The Company is
not, and has not been, party to any
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<PAGE> 14
agreement which is registrable under the RTPA (whether or not particulars of any
arrangement have been furnished to the United Kingdom Director General of Fair
Trading in accordance with that Act). None of the Material Contracts is subject
to termination or contains any provisions adverse to the Company that would be
triggered by the execution or performance of this Agreement or the Related
Agreements. "Material Contracts" means (a) all contracts or commitments arising
other than in the ordinary and usual course of business; (b) all contracts or
commitments involving an obligation which cannot or in reasonable probability
will not be completed or terminated within three (3) months from the Closing
Date or can be terminated within three (3) months from the Closing Date only
upon the payment of a penalty or the equivalent thereof; (c) all contracts or
commitments affecting ownership of or title to, any interest in real property
(other than as set forth in SCHEDULE 3.18); (d) all contracts or commitments
providing for payments or receipt of revenues in excess of Twenty Thousand
Pounds Sterling (pound sterling 20,000) per annum; (e) all loan agreements,
indentures, promissory notes and other documents evidencing or related to debt
for borrowed money or other funded indebtedness or capital lease obligations;
(f) all business sale or acquisition agreements, consulting agreements, license
or royalty agreements, nondisclosure agreements, non-compete agreements,
joint-venture agreements and service agreements (other than those set forth in
SCHEDULE 3.10.2); (g) all agreements between the Company and any shareholders or
a related party thereto or any officer or director of the Company; (h) all
agreements and commitments with respect to Intellectual Property; and (i) all
other agreements and commitments the loss of which would have a Material Adverse
Effect on the Company.
3.8 INTELLECTUAL PROPERTY. Set forth on SCHEDULE 3.8 attached hereto is
a list of all material inventions, trade names, trademarks, service names,
service marks, logos, patents, registered designs, design rights, know-how,
copyrights, licenses, formulas, trade secrets, programs, economic models,
strategic studies, reports, forecasting models, rate projections, computer
software (excluding commercially available general office computer software
licensed from unrelated third-parties and software covered by "shrink wrap"
licenses), technology and other intellectual property rights (whether registered
or not) and the goodwill therein (the "INTELLECTUAL PROPERTY") owned by the
Company or used or required by the Company in the operation of its business.
Except as set forth on SCHEDULE 3.8, the Company is the registered proprietor
(where available) and the beneficial owner of, and otherwise has good title to
and holds all of its right, title and interest in and to the Intellectual
Property, free and clear of all Encumbrances, as necessary to conduct its
business as presently being conducted, without the making of any payment,
royalty or sum in the nature of a royalty or the granting of any rights to
others. Except as set forth on SCHEDULE 3.8, the conduct of the business of the
Company as now conducted does not infringe or conflict with any Intellectual
Property rights of others. The Company has, as of the date hereof, satisfied all
requirements necessary to maintain the validity of all Intellectual Property,
and the right to use such Intellectual Property and is not subject to revocation
and has not been attacked or opposed by any person or entity. 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 the Sellers and the
Company, 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 compliance with all
applicable laws, rules and regulations in all jurisdictions in which the Company
conducts any business, including without limitation, those pertaining to
remittance of foreign exchange and taxation.
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<PAGE> 15
The execution and delivery of this Agreement, the Related Agreements and the
consummation of the transactions contemplated hereby or thereby will not alter
or impair the rights and interests of the Company in any of the Intellectual
Property and the Company 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. Except as set forth on SCHEDULE 3.8, the Company has not entered into any
agreement for the licensing or use of any Intellectual Property, or the
provision or acquisition of know-how or technical information or assistance. To
the actual knowledge of the Sellers and the Company (for this purpose,
"knowledge" shall not be deemed to include constructive knowledge), and the
Company and the Sellers having made no systematic or specific investigations,
the computer systems, information technology, and other equipment used by the
Company are Date Compliant or the Company has taken (upon discovery of any
potential problems), appropriate measures in connection with Date Compliance
procedures so as to avoid a Material Adverse Effect on the Company. To the
Knowledge of the Sellers, the Company has not disclosed, permitted to be
disclosed or arranged to disclose any of its know how, secrets, confidential
information or other Intellectual Property that is not publicly known or
available.
3.9 INSURANCE. The assets, properties and operations of the Company are
insured under various policies of general liability, error and omissions and
other forms of insurance, copies of which have been provided to Buyer and
descriptions of which are set forth on SCHEDULE 3.9 attached hereto. SCHEDULE
3.9 discloses for each policy the outstanding claims thereunder and the carrier
of such insurance policy. To the Knowledge of the Sellers, all such policies are
in full force and effect in accordance with their terms, no notice of
cancellation has been received, and 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.
3.10.1 COMPLIANCE. The Company is in material compliance with all
applicable 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 and withholding of taxes. The Company has in
relation to each of its employees and to each of its former employees complied
with its obligations under the Employment Rights Act 1996, the Trade Union and
Labour Relations (Consolidation) Act 1992, the Sex Discrimination Act 1975, the
Race Relations Act 1976, Article 119 of The Treaty of Rome, the Equal Treatment
Directive, the Disability Discrimination Act 1995 and all other statutes,
regulations and codes of practice relevant to its relations with its employees
and with any recognized trade union representing such employees and all
collective agreements from time to time in force relating to such relations or
the conditions of service of the employees. The Company has maintained adequate
and suitable records regarding the service of the employees, and discharged
fully its obligations to pay all salaries, wages, commissions, bonuses, overtime
pay, holiday pay, sick pay, accrued entitlement under incentive schemes PAYE and
national insurance contributions and other benefits of or connected with
employment up to the date of this Agreement. There are no inquiries or
investigations existing, pending or threatened affecting the Company by the
Equal Opportunities Commissions or Commission for
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Racial Equality.
3.10.2 EMPLOYMENT CONDITIONS AND AGREEMENTS. All material facts
relating to the salaries, ages, length of service, benefits, incentive schemes,
share option schemes, profit schemes, entitlements, collective agreements, union
membership, associations and any other arrangement or agreement of all employees
of the Company have been disclosed to the Buyer. Except as disclosed on SCHEDULE
3.10.2 attached hereto, the Company is not a party to any employment contract
with any employee, collective bargaining agreement, employees pension plan,
retirement plan, employees profit sharing plan, bonus plan, incentive plan,
welfare plan, severance agreement, termination agreement, any contract of
service with any employee or group of employers which is not terminable by the
Company by twelve (12) weeks notice or less without payment of compensation
(except as provided by statute), or any other similar agreement or plan. There
are no material labor controversies pending between the Company and any of its
employees. No agreement or arrangement exists for the provision by the Company
of any relevant benefits (as defined in section 612(1) of the Taxes Act, with
the omission of the exception in that definition) for any officer or employee or
former officer or employee of the Company or for any dependent of any such
person.
3.10.3 DISCLOSED SCHEME. No agreement or arrangement (other than
contributions to the private pension plans of its employees details of which are
included on SCHEDULE 3.10.3) exists for the provision by the Company of any
relevant benefits (as defined in section 612(1) of the Taxes Act with the
omission of the exception in that definition) for any person employed or
formerly employed by the Company or for any dependent of any such person. The
Company's private pension plan is in compliance with all applicable laws and the
Company has not breached and has complied with any and all obligations under the
Company's private pension plan. There are no disputes, complaints or claims by
any employee against the Company pending or threatened and there is no
industrial action or dispute threatened, existing or anticipated concerning any
of the Company's employees. Except as set forth in Schedule 3.10.3 the Company
has no obligation (whether actual or contingent present or future) to contribute
to any personal pension scheme (as defined in section 630 of the Taxes Act) in
respect of any person employed or formerly employed by the Company. No
undertaking or assurance has been given to all or any of the persons employed or
formerly employed by the Company as to the continuance, introduction, increase
or improvement of any retirement, death or disability benefits (whether or not
there is any legal obligation to do so). The Company is not providing and has
not at any time provided ex gratia pensions or other like payments for any
person employed or formerly employed by the Company or any dependant of any such
person. No company other than the Company participates in the Company's private
pension plan.
3.11 PAYMENT OF TAXES. (a) The Company has no liability in respect of
taxation (whether actual or contingent) arising in any part of the world that is
not adequately disclosed or provided for in full in the Company Accounts for
each period covered by such Company Accounts (other than as stated in the
Interim Accounts). The amount of the provision for deferred taxation contained
in the Company Accounts was, at the date the Company Accounts were prepared,
adequate and fully computed in accordance with UK GAAP and commonly adopted by
companies carrying on businesses similar to those carried on by the Company. The
Company has within the time limits prescribed by the relevant legislation duly
paid all Tax,
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<PAGE> 17
made all Tax Returns, given all notices, supplied all other information required
to be supplied to the Inland Revenue, Customs & Excise and any other
governmental authority and all such Tax Returns and notices were and remain
complete and accurate in all material respects and were made on a proper basis.
The Sellers have provided copies of such Tax Returns to Buyer for its taxable
years ending April 30, 1995, 1996 and 1997. There is no Tax dispute, audit,
investigation or other proceeding pending or, to the Knowledge of the Sellers or
the Company, threatened by the Inland Revenue, Custom & Excise or other
governmental authority against or affecting the Company. The Company has not
made a claim under Taxation of Chargeable Gains Act 1992 sections 152 or 154
which would affect the amount of the chargeable gain or allowance loss which
would, but for such claim, have arisen on a disposal of any of its assets. For
purposes of this Agreement, "TAX" and "TAXES" shall mean and refer to all taxes,
duties, levies, charges, rates, or other impositions or withholdings imposed of
any nature, whenever and by whatever authority imposed and whether of the United
Kingdom or elsewhere including (without limitation) income tax (including income
tax required to be deducted or withheld from or accounted for in respect of any
payment), corporation tax, advance corporation tax, capital gains tax, capital
transfer tax, inheritance tax, value added tax, customs duties, excise duties,
lottery duty, air passenger duty, insurance premium tax, rates (including the
uniform business rate), stamp duty, capital duty, stamp duty reserve tax,
national insurance and other similar contributions, any liability arising under
Section 419, Section 601 or Section 703 of the Taxes Act and any other taxes,
duties, rates, levies, charges, imposts or withholdings corresponding to,
similar to, replaced by or replacing any of them, together with any interest,
penalty or fine in connection with any taxation, and any liability to make a
payment by way of reimbursement, recharge, indemnity, damages or management
charge connected in any way with any taxation and regardless of whether any such
taxes, duties, rates, levies, charges, imposts, withholdings, interest,
penalties or fines are chargeable directly or primarily against or attributable
directly or primarily to the Company or any other person and of whether any
amount in respect of any of them is recoverable from any other person. "TAX
RETURN" means all returns, reports, forms or other information required to be
filed with respect to any Taxes.
(b) Neither the Company nor any director or officer of the Company (in
his capacity as such) has paid or become liable to pay, and there are no
circumstances by reason of which it is or they are likely to become liable to
pay, any penalty, fine, surcharge or interest whether charged by virtue of the
provisions of the Taxes Management Act 1970, the Customs and Excise Management
Act 1979 or the Value Added Tax Act 1994 or otherwise. All clearances obtained
by the Company have been properly obtained and all information supplied to the
Inland Revenue, Custom & Excise or other appropriate authority in connection
with such clearances was complete and accurate in all respects and any
transaction for which such clearance was obtained has been carried out only in
accordance with the terms of the clearance given therefor and the application on
which the clearance was based. There are no material and/or unusual
arrangements, agreements or undertakings, between the Company and the Inland
Revenue, Customs & Excise or any foreign tax authorities regarding or affecting
the taxation treatment of the Company. No payment has been made by the Company
(or may become due from the Company pursuant to a binding obligation incurred by
the Company prior to the Closing) which will not be deductible for corporation
tax purposes either in computing the profits of the Company or in computing the
corporation tax chargeable on the Company. No payment has been made to the
Company to which Section 601 of the Taxes Act applies (pension scheme
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<PAGE> 18
surpluses; payments to employers). The Company has not since the date of the
Company Accounts done or omitted to do or agreed to do, or permitted to be done,
any act as a result of which there may be made a balancing charge under the
Capital Allowances Act 1990 or a withdrawal of first year allowances or recovery
of excess relief within Section 46 or Section 47 Capital Allowances Act 1990.
The Company has incurred no expenditure on the provision of machinery or plan
for leasing (the meaning of which is, for this purpose, as extended by Section
50 of the Capital Allowances Act 1990). The Company has not made any election
under Section 37 of the Capital Allowances Act 1990 (short life assets) nor is
taken to have made such an election under sub-section (8)(c) thereof.
(c) There are no surrenders or claims for any advance corporation tax
under the provisions of Section 240 of the Taxes Act (surrender of advance
corporation tax) or any amount by way of group relief under the provisions of
Sections 402 to 413 (inclusive) of the Taxes Act (group relief) and of any
special arrangement with respect to group relief made pursuant to Inland Revenue
Statement of Practice SP10/93. The Company has been a close company but not a
close investment company for the purposes of the Taxes Act in the last six
years.
(d) The Company has not made any repayment of share capital to which
Section 210 of the Taxes Act applies or issued any share capital paid up
otherwise than by the receipt of new consideration within the meaning of Part VI
of the Taxes Act. The Company has not been concerned in any exempt distribution
within Section 213 to the Taxes Act within the period of six years preceding the
Closing Date. The Company has not issued any share capital which is of a
relevant class as defined in Section 249(2) of the Taxes Act (stock dividends)
nor does the Company own any such share capital. No dividend or other payment
specified by section 247 of the Taxes Act which has been paid by the Company has
been paid under an election made under the said Section 247 and SCHEDULE 3.11
attached hereto, contains details of any such elections which have been made by
the Company. The Company has not issued any security (within the meaning of
Section 254(l) of the Taxes Act) outstanding on the Closing Date in
circumstances such that any interest or other payment payable in respect of it
may be treated as a distribution under Section 209 of the Taxes Act. The Company
has not made an election to treat any dividend paid or to be paid by it as a
foreign income dividend pursuant to Section 246A of the Taxes Act and the
Company is not an international headquarters company for the purposes of Section
246S of the Taxes Act. The Company has neither been a party to nor otherwise
involved in any transaction, scheme or arrangement the main purpose or object or
one of the main purposes or objects of which was to avoid or reduce a liability
to tax.
(e) The Company is a registered and taxable person for the purposes of
the Value Added Tax Act 1994 and neither is nor has ever been treated for such
purposes as a member of group. The Company has complied with and observed in all
respects the terms of the Value Added Tax Act 1994 and Section 10 of the Finance
Act 1985 and all regulations made or notices issued thereunder and has
maintained and obtained full, complete, correct and up-to-date records, invoices
and other records (as the case may be) appropriate or requisite for the purposes
thereof. The Company is not in arrears with any payments or returns or
notifications under such legislation, regulations or notices or liable to any
abnormal or non-routine payment or any forfeiture or penalty or interest or
surcharge provisions contained therein. The Company neither is nor has agreed to
become, an agent, manager or factor (for the purposes of Section 47 of the
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<PAGE> 19
Value Added Tax Act 1994) of any person who is not resident in the United
Kingdom. No claims have been or could be made by the Company under Section 36 of
the Value Added Tax Act 1994 (refund of tax in cases of bad debts). The Company
holds no interest in any buildings or land in respect of which the Company or
any other person has made an election to waive the exemption to value added tax
in accordance with the provisions of paragraph 2 of Schedule 10 to the Value
Added Tax Act 1994, nor is the Company contractually committed (contingently or
otherwise) to receive any supply in respect of which such an election has been
made.
(f) All documents in the possession or under the control of the Company
or to the production of which the Company is entitled which are necessary to
establish the title of the Company to any asset and which, in the United Kingdom
or elsewhere, attract either stamp duty or require to be stamped with a
particular stamp denoting that no duty is chargeable or that the document has
been produced to the appropriate authority, have been properly stamped; and no
such documents which are outside the United Kingdom would attract stamp duty if
they were brought into the United Kingdom.
3.12 BOOKS OF ACCOUNT; BANK ACCOUNTS. The books, records and accounts
of the Company accurately and fairly reflect, in reasonable detail, the
transactions and the assets and liabilities of the Company with respect to its
business. The Company has not engaged in any material transaction with respect
to its business, maintained any bank account for its business 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 the Company.
SCHEDULE 3.12 attached hereto sets forth a list of all bank accounts, bank boxes
and other depositories of the Company identifying bank, branch and account
number, as well as the authorized signatories thereto. The Company 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 UK
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. The aggregate book value of all of
Company's tangible assets is less than Twenty Five Thousand Pounds Sterling
(pound sterling 25,000). Such tangible assets are in good operating condition
and repair, subject to ordinary wear and tear and comply with any applicable
legal requirement or restriction.
3.14 OWNERSHIP OF ASSETS. The Company can transfer title to all assets
and properties used by the Company, free and clear of all Encumbrances except
for Permitted Encumbrances. The Company's assets and properties are not subject
to any leasing, hiring or hire-purchase agreement, assignment, factoring,
deferred payment agreement or other similar agreement. For purposes of this
Agreement, "PERMITTED ENCUMBRANCES" shall mean Encumbrances 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; Encumbrances for
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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 proceedings and fully reserved on the
Company Accounts; 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 planning, building, restrictions and other governmental
ordinances.
3.15 BROKERS. No amount is payable by the Sellers or the Company 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.
3.16 LITIGATION. Except as disclosed on SCHEDULE 3.16 attached hereto,
there is no claim, action, suit, litigation, arbitration, investigation,
prosecution or other legal proceeding which is pending or to the Knowledge of
the Sellers or the Company threatened, before any court or governmental
authority, or arbitrator or board of arbitrators to which the Company or any of
the Sellers (in the case of any Seller, to the extent such matter relates in any
way to the Company) was or is a party, or to which any of the assets or
properties of the Company was or is subject. Neither the Company nor any of the
Sellers (in the case of any Seller, to the extent such matter relates in any way
to the Company) 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. The Company is not party to any
equipment or other personal property lease which requires annual payments in
excess of Twenty Thousand Pounds Sterling (pound sterling20,000) or has a term
longer than one (1) year from the date of this Agreement.
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 Company
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 and no licenses or collateral assurances, undertaking or
concessions have been granted. Each of the Real Property Leases is a head lease,
containing no particularly unusual or especially onerous provisions or any
rights for the landlord to determine such lease and is subject to a right of
re-entry only on the grounds of non-payment of rent or breach of a covenant. The
Company is not, in breach or default of such Real Property Leases in any
material respect and has paid the rent and all other sums payable under the Real
Property Lease on the due dates for payment. Except as disclosed on SCHEDULE
3.18, no license, consent or approval is required from the landlord or any
superior landlord 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. The security of tenure provisions
in Part II of the Landlord and Tenant Act 1954 are not excluded nor is the right
to compensation or disturbance. Where there are provisions for rent reviews and
they require any effect on the rent of goodwill, the tenant's occupation and
improvements carried out other than at the landlord's expense (whenever carried
out) are to be disregarded, and they provide for the rent to be assessed on the
basis of the relevant property being let as a whole with vacant possession for a
term equal to the residue then remaining of the original term of the lease on
the same terms as the lease (including the provisions for rent review) and the
review itself is not subject to review. All licenses, consents and approvals
required from the landlord and any superior landlord under any
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Real Property Lease have been obtained.
3.19 COMPLIANCE WITH LAWS; PERMITS. Each of the Company and the Sellers
with respect to the business of the Company has complied with and is in
compliance with all statutes, laws, ordinances, regulations, rules, permits,
judgments, orders and decrees applicable to it or any of its properties, assets,
operations and business, except where the failure so to comply would not
reasonably be expected to result in a Material Adverse Effect on the Company.
The Company is not required to hold or obtain any permits, licenses, easements,
variances, exemptions, consents, certificates, orders or approvals from
governmental authorities, excluding any such matters which are not material to
the business of the Company as such business is now being conducted.
3.20 UNDISCLOSED LIABILITIES. Except as set forth in the Company
Accounts or in SCHEDULE 3.20 attached hereto, there is no claim, liability or
obligation of any nature, whether absolute, accrued, known or unknown,
contingent or otherwise, affecting the Company or its business, other than
obligations incurred in the ordinary course of the business consistent with the
Company's past practice, which is reasonably likely (including those incurred in
the ordinary course of business) to have a Material Adverse Effect on the
Company.
3.21 SCOPE OF REPRESENTATIONS AND WARRANTIES. This Agreement (including
the Exhibit or Schedule), the Related Agreements and each other document and
certificate prepared or delivered by or on behalf of the Company and the Sellers
and furnished or to be furnished to Buyer in connection herewith, as of the date
hereof, does 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 BUYER
As an inducement for the Sellers to enter into and consummate the
transactions contemplated by this Agreement and the Related Agreements, Buyer
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.
4.1.1 THE BUYER. Buyer 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. Buyer 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. Buyer is a newly
formed limited liability company, organized to acquire the equity interest in
the Company and partnership interests in the Partnership and to act as a holding
company of those entities from and after the Closing Date. Buyer does not have
and has never had any business operations other than operations and activities
that are incidental and related to its formation and in preparation of the
purchase of its ownership interest in each of the Company and the Partnership.
Buyer has no
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material liabilities or obligations of any nature, whether absolute, accrued,
known or unknown, contingent or otherwise, except the liabilities and
obligations expressly stated in the Transaction Documents.
4.1.2 ORGANIZATIONAL DOCUMENTS. Copies of the Company Agreement,
Certificate of Limited Liability Company and other organizational documents,
effective on or prior to the date hereof, have been delivered to sellers and as
delivered are true and complete as of the Closing Date.
4.1.3 SUBSIDIARIES AND OPERATIONS. Prior to the date hereof, the
Buyer has never had any subsidiaries or any business operations and has complied
in all material respects with all legal requirements applicable to its
organization and existence.
4.2 AGREEMENT
4.2.1 AGREEMENT AUTHORIZED. Buyer has the requisite power and
authority to execute and deliver this Agreement, the Related Agreements and the
other Transaction Documents to which it is a party, as applicable, and perform
its obligations herein and therein, and consummate the transactions contemplated
hereby and thereby. Buyer has duly executed and delivered this Agreement, the
Related Agreements and the other Transaction Documents 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, the
Related Agreements and other Transaction Documents 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, the Related Agreements and the other Transaction Documents to
which it is a party is a valid, legal and binding obligation of Buyer
enforceable against Buyer 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, the Related Agreements and the other Transaction Documents to which
it is a party on behalf of Buyer has been specifically authorized to do so by
all necessary action. No other action will be necessary by Buyer to authorize
the execution and delivery of this Agreement, the Related Agreements and the
other Transaction Documents 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, the Related
Agreements or the other Transaction Documents 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 Company Agreement or other organizational
documents of Buyer; (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 Buyer or any of its properties or assets may be
bound or affected; or (iii) breaches or constitutes
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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 Encumbrance on any of
the properties or assets of Buyer pursuant to any note, mortgage, indenture,
bond, lease, license, permit, franchise, agreement, contract, undertaking or
other instrument to which Buyer is a party or by which Buyer 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 Buyer. The execution, delivery and
performance of this Agreement, the Related Agreements and the other Transaction
Documents to which it is a party, by Buyer 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 on Buyer.
4.3 BROKER. No amount is payable by Buyer by way of brokerage fees,
finder's commissions or otherwise to any party on account of this Agreement, the
Related Agreements, the Transaction Documents or the transactions contemplated
hereby or thereby.
4.4 CAPITALIZATION. All of the Series A Membership Interests and the
Caminus Options issuable pursuant to this Agreement, and the Series B Membership
Interests issuable upon the exercise of the Caminus Options have been and will
be (in the case of the Series B Membership Interests) duly authorized, validly
issued and are fully paid and nonassessable (subject only to the requirement to
pay the exercise price to exercise the Caminus Options), and were or will be
issued free of any preemptive rights. SCHEDULE 4.4 attached hereto sets forth a
list of all membership interests, options, warrants and other rights to acquire
Membership Interests or other securities of the Buyer issued and outstanding as
of the Closing Date. Except as set forth in SCHEDULE 4.4, or otherwise provided
in this Agreement, the Service Agreements and as set forth in the Company
Agreement, as of the Closing Date there are no options, convertible securities,
warrants, agreements, rights, contracts, calls, commitments or demands of any
character to which Buyer is a party that either (a) obligates Buyer to grant,
issue, redeem, sell or convert any of the Membership Interests, options or other
securities of Buyer; (b) obligates Buyer to repurchase, call or otherwise
acquire any of the Membership Interests, options or other securities of Buyer;
(c) subjects Buyer to any voting trusts, proxies or other arrangements or
understanding; or (d) restricts the sale, assignment or transfer of, or
otherwise relates to the ownership or voting interests of the any of the
Membership Interests, options or other securities of Buyer (excluding from the
foregoing subsections (a), (b), (c) and (d) the conversion rights held by
ZAI*NET Software, Inc. exercisable for equity interests in Buyer, as set forth
in the Purchase Agreement).
4.5 TRANSACTION EXPENSES. Buyer agrees to pay the expenses, fees and
costs set forth on SCHEDULE 3.6 incurred by any of the Sellers or the Company in
connection with the transactions contemplated by this Agreement and the Related
Agreements.
4.6 SCOPE OF REPRESENTATIONS AND WARRANTIES. This Agreement (including
any Exhibit or Schedule) and each other document or certificate prepared or
delivered by or on behalf of the Buyer and furnished or to be furnished to the
Sellers in connection herewith, as of the date hereof, does not contain any
untrue statement of a material fact, or omit to state a
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material fact necessary in order to make the statements contained herein and
therein not misleading.
ARTICLE 5
TRANSACTION DOCUMENTS; DOCUMENT DELIVERY; COVENANTS
5.1 RELIANCE. The parties acknowledge that the Transaction Documents
are being executed, delivered and performed (when applicable) simultaneously
with the execution, delivery and performance (when applicable) of this
Agreement, and that neither Buyer nor Sellers would have agreed to execute,
deliver or perform this Agreement in the absence of the simultaneous execution,
delivery and performance (when applicable) of such documents.
5.2 DOCUMENT DELIVERY. The parties acknowledge and agree that the
following documents are being delivered in connection with the Closing:
5.2.1 the Company Agreement, duly executed by Buyer, the Sellers and
the other members of the Buyer; and
5.2.2 the Related Agreements, duly executed by the respective
parties thereto.
5.3 SELLERS DELIVERY OF DOCUMENTS. The parties acknowledge and Sellers
agree that the Sellers are delivering the following documents in connection with
the Closing:
5.3.1 a letter from Mills & Reeve, counsel to the Company and the
Sellers to confirm the existence of the Company and similar matters in the form
attached hereto as Exhibit C;
5.3.2 certificate(s) from the Company dated the Closing Date, making
certain certifications concerning the articles of association, bye-laws and the
absence of breach of the representations, warranties, covenants and agreements
herein;
5.3.3 a duly executed transfer to the Buyer or its nominee of the
number of Shares sold by each Seller together with definitive Share certificates
(including any corresponding stock powers);
5.3.4 a power of attorney under which any document is executed on
behalf of a Seller;
5.3.5 any waivers, consents or other documents required to vest in
the Buyer the full beneficial ownership of the Shares and enable the Buyer to
procure them to be registered in the name of the Buyer or its nominees;
5.3.6 the certificate of incorporation, common seals, all statutory
and minute books (which shall be written up to, but not including the Closing
Date) and share certificate book of the Company together with all unused share
certificate forms;
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5.3.7 all deeds and documents relating to the title of the Company
to each of its properties; and
5.3.8 the written resignations of all directors of and the secretary
of the Company (other than any person whom the Buyer may wish to remain in
office) executed as a deed in the agreed terms.
5.4 BUYER DELIVERY OF DOCUMENTS. The parties acknowledge and Buyer
agrees that the following documents are being delivered by Buyer in connection
with the Closing:
5.4.1 the Transaction Documents, duly executed by the respective
parties thereto; and
5.4.2 certificate(s) or document(s) from the Buyer or the Secretary
of State for the State of Delaware, dated the Closing Date, evidencing the good
standing of the Buyer and the certification of the representations, warranties,
covenants and agreements herein.
5.5 COVENANT NOT TO COMPETE. Each of the Sellers acknowledge and agree
that he is selling and transferring to the Buyer all of his equity ownership
interest in the Company (including goodwill) and is entering into a Service
Agreement with the Company, and if he were able to compete with the Company in
any manner that is proscribed by the Covenant Not to Compete attached hereto as
EXHIBIT D, then the Buyer would be deprived of a substantial portion of the
goodwill and going concern value sought to be obtained in the Purchase. In
consideration of this Agreement and the Service Agreement, and as a means to
reasonably protect the intellectual property, confidential and proprietary
information of the Company, each Seller, will not directly or indirectly, carry
on or be interested in a Competing Business or act as a consultant, employee or
officer in any executive, sales, marketing, research or technical support
capacity in a Competing Business as set forth more fully in Covenant Not to
Compete.
5.6 DELIVERY OF TRANSACTION DOCUMENTS. The Buyer has delivered copies
of all Transaction Documents, on or prior to the date hereof, to the Sellers and
as delivered are true and complete as of the Closing Date and are the only
material agreements and instruments evidencing the transactions contemplated by
the Purchase and the ZAI*NET Purchase and the funding thereof.
ARTICLE 6
INDEMNITY
6.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, AGREEMENTS AND COVENANTS
6.1.1 SELLERS. Except for the representations and warranties set
forth in each of Sections 3.1, 3.2 and 3.3 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 liability or other matters that are the subject of an indemnity claim),
all representations, warranties, agreements and covenants of the Sellers made
hereunder or in connection with the transactions contemplated by this Agreement
(including the Exhibits
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and Schedules attached hereto) shall survive the Closing for a period of ninety
(90) days from the completion date of the fiscal year audit for the first fiscal
year and subsequent to April 30, 1998, 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). Sellers shall indemnify and hold Buyer
(or any successor entity) harmless in accordance with the provisions of Section
6.2 hereof.
6.1.2 BUYER. Except for the representations and warranties set forth
in each of Sections 4.1, 4.2.1 and 4.4 (as to which survival shall be
indefinite), all representations, warranties, agreements and covenants of Buyer
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 one (1) year, 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). Buyer shall indemnify and hold Sellers
(or any successor) harmless in accordance with the provisions of Section 6.2
hereof.
6.2 THE INDEMNITY OBLIGATION. Subject to the provisions of Article 6
hereof, each of Buyer on the one hand and the Sellers on the other hand,
including in each case any assignee or successor thereto in accordance with
Section 7.9 herein, and each officer, director, and trustee of any of the
foregoing (in such capacity, individually an "INDEMNIFIED PARTY" and
collectively the "INDEMNIFIED PARTIES"), shall be indemnified, held harmless and
reimbursed by the Sellers or Buyer, as the case may be (in such capacity,
individually an "INDEMNIFYING PARTY" and collectively the "INDEMNIFYING
PARTIES"), for any and all losses, liabilities, damages, costs and expenses
(including, without limitation, reasonable legal fees) (hereinafter "LOSSES"),
actually suffered or incurred by such Indemnified Party or Parties, which is
incurred as a result of any breach of any representation, warranty, agreement or
covenant made in this Agreement (including the Schedules and Exhibits hereto and
all instruments and undertakings delivered or made in connection herewith) or
any certificate delivered pursuant to this Agreement by the Indemnifying Party
or Parties. A breach by the Buyer or Sellers (as the case may be) of any of the
terms of this Agreement shall give rise only to an action for damages (which
shall be interpreted within English law principles notwithstanding any
indication to the contrary) and shall not entitle the Buyer or Sellers (as the
case may be) to rescind or repudiate this Agreement. Where the matter or default
giving rise to a breach of any representation, warranty, agreement or covenant
is reasonably capable of remedy, the breach shall not entitle the Indemnified
Party to damages or other compensation unless written notice of the breach is
given to the Indemnifying Party and the matter or default is not remedied to the
reasonable satisfaction of the Indemnified Party within thirty (30) days after
the date on which such notice is served.
6.3 CLAIMS.
6.3.1 NOTICE.
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The Indemnified Party shall promptly give the Indemnifying Parties
written notice of any matter which it 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 fully 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.
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 the Indemnified Party, but for this
Section 6.4, otherwise shall have become entitled hereunder shall
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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 including those that make up 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. 3.3 and 3.11 ("EXCLUDED MATTERS"), and
Sections 4.1, 4.2.1, 4.4 and 4.5 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 RECOVER MEMBERSHIP INTERESTS OR OPTIONS. With respect to
any indemnification obligation for Losses determined to be owing to Buyer from
the Sellers, Buyer may, at its option, recover from the Sellers, pro rata with
respect to the Shares sold by each of them pursuant hereto, the Equity
Consideration and/or Caminus Options issued pursuant hereto. Notwithstanding the
foregoing, in the event that Buyer elects to pursue such a remedy, it will first
give notice to the Sellers of its intention to recover such interests in the
Company, indicating the underlying basis for the indemnification claim and the
related amount of Losses. If the Sellers object to the proposed recovery of
Equity Consideration and/or Caminus Options set forth in the Buyer's notice in a
notice to Buyer to that effect delivered by the Sellers within ten (10) days of
Buyer's notice (which notice from the Sellers shall reasonably detail the basis
for the Sellers' objection to the indemnification claim or the amount of Losses
corresponding thereto), then the recovery of Equity Consideration and/or Caminus
Options shall be suspended until the earlier of (a) the parties' mutual
agreement as to the recovery of such Equity Consideration and/or Caminus Options
in connection with the pertinent claim for indemnification, or (b) the
determination by a court of competent jurisdiction as to the propriety of such
indemnification claim, the Losses corresponding thereto and Buyer's right to
recover Equity Consideration and/or Caminus Options in accordance with this
Section 6.5. The value of Equity Consideration recovered in accordance with this
Section 6.5 shall be based on an assumed aggregate valuation of the entire
Equity Consideration equal to Three Million Dollars ($3,000,000), without regard
to the actual value of the Equity Consideration as of the date of recovery. The
value of such Caminus Options recovered in accordance with this Section 6.5
shall be based on an assumed aggregate valuation of the entire Caminus Options
equal to One Million Five Hundred Thousand Dollars ($1,500,000), without regard
to the actual value of the Caminus Options as of the date of recovery.
Notwithstanding the foregoing, in the event that Buyer elects to recover the
Equity Consideration and/or Caminus Options in accordance with this provision,
then the Sellers, within ten (10) days of notice of such election, may elect to
make cash payment of the indemnification amount, in lieu of permitting Buyer to
recover the Equity Consideration and/or Caminus Options, by notice to Buyer to
that effect and payment of the indemnification amount to Buyer within such ten
(10) day period.
6.6 SOLE AND EXCLUSIVE REMEDY. The indemnification obligations
specified under this Article 6 shall constitute the sole and exclusive remedies
of the Indemnified Party with respect to the matters described in Section 6.1.1
and 6.1.2, respectively. The parties hereto agree that in respect of any matter
which may give rise to a liability under this Agreement, such liability shall
not be met more than once.
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6.7 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.
6.8 INDEMNITY LIMITATIONS. Notwithstanding anything contained in this
Agreement to the contrary, neither Seller shall be required to indemnify Buyer
pursuant to this Agreement to the extent that the aggregate indemnification
obligations of such Seller would exceed such Seller's portion of the Cash
Consideration, the Equity Consideration and the Caminus Options (the
"INDEMNIFICATION CAP"). Further, notwithstanding anything contained in this
Agreement to the contrary, neither Seller shall be required to make cash
indemnification payments to the extent that the aggregate such payments by such
Seller would exceed his portion of the Cash Consideration (exclusive of cash
payments elected to be made by such Seller pursuant to Section 6.5 above, in
lieu of permitting Buyer to recover Equity Consideration and/or Caminus
Options). To the extent that a Seller elects to make a cash indemnification
payment pursuant to Section 6.5 above, then the Equity Consideration and/or
Caminus Options, as applicable, that were the subject of such election, shall be
deducted and removed from the Indemnification Cap, such that Buyer shall not
thereafter have recourse to such property pursuant to this Article 6.
Notwithstanding the foregoing, the Excluded Matters shall not be subject to the
Indemnification Cap.
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 constitutes
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 Company:
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Caminus Energy Limited
Caminus House, Castle Park
Cambridge, CB3 ORA
United Kingdom
Telephone No.: 011-44-1223-322-736
Telecopy No.: 011-44-1223-301-637
Attention: Managing Director
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With a copy to:
GFI Caminus LLC
c/o GFI Energy Ventures LLC
12121 Wilshire Boulevard, Suite 1375
Los Angeles, California 90025
Telephone No.: 310-442-0542
Telecopy No.: 310-442-0540
Attention: Lawrence D. Gilson
If to the Sellers:
Dr. Nigel Evans and Dr. Michael Morrison
c/o Caminus Energy Limited
Caminus House, Castle Park
Cambridge, CB3 ORA
United Kingdom
Telephone No.: 011-44-1223-322-736
Telecopy No.: 011-44-1223-301-637
With a copy to:
Mills & Reeve
Francis House, 112 Hills Road
Cambridge CB2 1PH
United Kingdom
Telephone No.: 011-44-1223-364-422
Telecopy No.: 011-44-1223-355-848
Attention: Glynne Stanfield, Esq.
If to Buyer:
GFI Caminus LLC
c/o GFI Energy Ventures LLC
12121 Wilshire Boulevard, Suite 1375
Los Angeles, California 90025
Telephone No.: 310-442-0542
Telecopy No.: 310-442-0540
Attention: Lawrence D. Gilson
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With a copy to:
Irell & Manella LLP
333 South Hope Street, Suite 3300
Los Angeles, California 90071
Telephone No.: 213-620-1555
Telecopy No.: 213-229-0515
Attention: Anthony T. Iler, Esq.
With a copy to:
Oaktree Capital Management LLC
550 S. Hope Street, 22nd Floor
Los Angeles, California 90071
Telephone No.: 213-614-0900
Telecopy No.: 213-694-1593
Attention: Christopher S. Brothers
Any notice sent by certified mail shall be deemed to have been given
five (5) 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 GOVERNING LAW AND SUBMISSION TO JURISDICTION. This Agreement shall
be governed by English law 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 non-exclusive jurisdiction of the High
Court of Justice in England and Wales. 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.
7.5 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.
7.6 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.
7.7 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
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held to be invalid, illegal or enforceable 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.
7.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts which together shall be one and the same instrument.
7.9 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties, their respective successors and permitted
assigns; provided, however, a party may not assign an indemnification claim
pursuant to Article 6 hereof, without the prior written consent of the other
party (which consent shall not be unreasonably withheld or delayed).
Notwithstanding the foregoing to the contrary, Buyer shall be entitled to assign
an interest in this Agreement (including claims pursuant to Article 6) in
connection with any merger, sale, consolidation or other disposition of the
Company or all or substantially all of Buyer's interest therein.
7.10 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.
7.11 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. A person shall be deemed to be connected with another if that person is
connected with another within the meaning of Section 839 of the Taxes Act.
7.12 RTPA. To the extent that any provision of this Agreement, or any
other arrangement of which it forms part, is a restriction or information
provision for the purposes of the RTPA by virtue of which this Agreement or any
such arrangement is registrable under the RTPA, no such restriction or provision
shall take effect until the day after particulars of this Agreement or, as the
case may be, that arrangement, have been furnished to the Director General of
Fair Trading in accordance with the RTPA.
7.13 STATUTORY UPDATE. In this Agreement, except where the context
otherwise requires, a reference to a statute or statutory provision shall
include a reference to such statute or provision as from time to time
consolidated, modified, amended, re-enacted or replaced by any subsequent
statute or statutory provision, to any repealed statute or statutory provision
which it
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re-enacts (with or without modification) and any subordinate legislation made
under the relevant statute; provided, however, that any statutory update as set
forth in this Section 7.13 shall not apply to Articles 3 and 4 of this Agreement
and any reference to a statute or statutory provision in Articles 3 and 4 of
this Agreement are references to such statute in effect as of the Closing Date.
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<PAGE> 35
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
Caminus Energy Limited
By: /s/ Nigel L. Evans
-----------------------------------------
Name: Dr. Nigel L. Evans, Ph.D.
-----------------------------------------
Its: Chief Executive Officer
-----------------------------------------
Dr. Nigel L. Evans, Ph.D.
/s/ Nigel L. Evans
-----------------------------------------
Dr. Michael B. Morrison, Ph.D.
/s/ Michael B. Morrison
-----------------------------------------
GFI Caminus LLC
By: /s/ Lawrence D. Gilson
-----------------------------------------
Name: Lawrence D. Gilson
-----------------------------------------
Its: President
-----------------------------------------
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LIST OF EXHIBITS
Exhibit A - Form of Service Agreement
Exhibit B - Form of Company Agreement
Exhibit C - Form of Letter
Exhibit D - Form of Covenant Not to Compete
LIST OF SCHEDULES
Schedule 2.6 - Distributions to Sellers
Schedule 3.2 - Issued Share Capital
Schedule 3.5 - Accrued and Other Liabilities
Schedule 3.6 - Transaction Expenses
Schedule 3.7 - Material Contracts
Schedule 3.8 - Intellectual Property
Schedule 3.9 - Insurance Policies
Schedule 3.10.2 - Employment Agreements
Schedule 3.12 - Bank Accounts
Schedule 3.16 - Litigation
Schedule 3.18 - Real Property Leases
Schedule 3.20 - Undisclosed Liabilities
Schedule 4.2.1 - Governmental Notices and Regulatory Approval
Schedule 4.2.2 - Required Consents
Schedule 4.4 - Outstanding Securities
<PAGE> 1
Exhibit 2.4
PURCHASE AGREEMENT
THIS IS A PURCHASE AGREEMENT ("Agreement") dated November 13, 1998 (the
"Closing Date") by and between ZAI*NET Software, L.P., a Delaware Limited
Partnership ("Buyer"), and Corwin Joy, an individual, doing business as Positron
Energy Consulting ("Seller").
RECITALS
A. Seller carries on the business of designing and selling software
for the analysis, measurement and management of investment and
trading-related financial risk(s) for energy firms and providing
related consulting services (the "Business").
B. Seller desires to sell to Buyer and Buyer desires to purchase from
Seller, as of the Closing Date, the Business and the Contract
Assets (as defined in Section 1.1). To accomplish such
transaction, Seller is delivering to Buyer a bill of sale and
instrument of assignment with respect to the Contract Assets and
Buyer is delivering to Seller an instrument of assumption with
respect to the Assumed Liabilities.
C. As additional consideration for the Contract Assets, Caminus
Energy Ventures LLC, a Delaware limited liability company and
general partner in the Buyer ("Caminus") is issuing to Seller a
membership interest in Caminus pursuant to and subject to the
Contingent Purchase Price Agreement attached as Appendix C hereto
("Contingent Purchase Price Agreement").
D. In addition, Seller and Buyer are entering into an employment
agreement (the "Employment Agreement") and covenant not to compete
as of the Closing Date.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration had and received, and upon the
terms and subject to the conditions contained herein, the parties agrees as
follows (capitalized terms used herein that are not otherwise defined shall have
the meaning set forth in Appendix A hereto):
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Assets to Be Acquired. Upon the terms and subject to the
conditions contained herein, Seller shall sell, assign and transfer to Buyer,
and Buyer shall purchase and acquire from Seller, on the Closing Date, the
following properties and assets of Seller used or held for use in the Business
as of the Closing Date (collectively, the "Contract Assets"), free and clear of
any Liens (except for the Assumed Liabilities):
<PAGE> 2
1.1.1 all furniture and fixtures, all computers, all equipment,
all machinery and all office or administrative supplies which are used in the
Business including the items listed or described on Exhibit 1;
1.1.2 all rights and incidents of interest of Seller in and to
all Contracts relating to the Business or the ownership of the Contract Assets;
1.1.3 all right, title and interest in the software described on
Appendix B hereto (the "Software");
1.1.4 all Intellectual Property used in the conduct of the
Business or otherwise constituting a part of the technology usable in or related
to the Business;
1.1.5 all customer lists, manuals, books, files, records,
engineering data, procedures, systems, computer programs, models, ratios,
instructions, patterns, drawings, plans, designs specifications, parts lists,
descriptions, data, art work, advertising material and dealer and distributor
lists which are used in or relate to the Business;
1.1.6 the business and goodwill as a going concern of the
Business; and
1.1.7 all other properties, assets, rights and interests of every
kind and description, wherever located, of Seller, which are used or held for
use in connection with the Business.
1.2 Excluded Assets. Notwithstanding anything contained in Section 1.1
to the contrary, Seller shall not sell, assign or transfer to Buyer, and Buyer
shall neither purchase nor acquire from Seller, any of the following
(collectively, the "Excluded Assets"):
1.2.1 any cash, certificates of deposit or other cash equivalent
items attributable to the operations of the Business prior to the Closing Date;
1.2.2 all accounts receivable arising in connection with the
Business prior to the Closing Date; and
1.2.3 the Office Lease.
ARTICLE II
CONSIDERATION
2.1 Cash Payment. As partial consideration for the transfer of the
Contract Assets by Seller to Buyer, Buyer shall pay to Seller on the Closing
Date the sum of One Hundred Fifty-One Thousand Six Hundred Sixty-Seven Dollars
($151,667.00).
2.2 Additional Contingent Payments to Seller. As additional
consideration for the transfer of the Contract Assets, Buyer will make payments
to Seller (subject to the terms and conditions herein) as follows:
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<PAGE> 3
2.2.1 Payments Related to 1998 Western Resources and PacifiCorp
Licenses. Buyer shall assign to Seller the right to receive all fees paid by
Western Resources or PacifiCorp for licenses of the Software (or its functional
successor) purchased on or before January 31, 1999 that are billed by Seller on
or before July 31, 1999. Buyer and Seller agree that amounts owing to Seller
under this Section 2.2.1 shall be paid directly by Western Resources or
PacifiCorp to Seller.
2.2.2 Payments Related to PacifiCorp and Vitol Gas and Electric.
Buyer shall pay to Seller twenty percent of all fees invoiced by Buyer to
PacifiCorp and Vitol Gas and Electric ("Vitol") prior to October 3, 1999 for
licenses of Buyer's software; provided, however, the maximum amount that Seller
shall be entitled to receive pursuant to the preceding clause shall be equal to
$100,000 with respect to fees invoiced to Vitol and $100,000 with respect to
fees invoiced to PacifiCorp; provided, further, following the Closing Date, if
Seller is not employed by Buyer on the date that any such amount is invoiced to
PacifiCorp or Vitol, Seller shall not be entitled to the payment provided in
this Section unless the reason Seller is not employed by Buyer on such date is
because Seller was terminated by Buyer without Cause or Seller terminated his
employment with Buyer for Good Reason.
2.3 Contingent Purchase Price Agreement. As additional consideration
for the purchase of the Contract Assets, Caminus is issuing to the Seller a
membership interest in Caminus, as set forth in, and subject to, the Contingent
Purchase Price Agreement.
2.4 Assumption of Contracts. As further consideration for the Contract
Assets, Buyer shall assume all liabilities and obligations of Seller under the
Contracts listed on Exhibit 2 (the "Assigned Contracts"), except for Liabilities
arising from Seller's breach before the Closing of any such Assigned Contract;
provided, however, Buyer shall not assume any obligations pursuant to such
Contracts to the extent that the unreimbursed Buyer's Adjusted Costs of
compliance with such Contracts attributable to Liabilities related to the two
year period following the Closing Date exceed $100,000 (all of the liabilities
assumed pursuant to this Section 2.4 shall be referred to as the "Assumed
Liabilities"). In addition, Buyer's Adjusted Costs of compliance shall not
include costs associated with any extensions of the maintenance or warranty
period beyond the applicable period set forth in the Assigned Contracts as of
the Closing Date which are agreed to by Buyer.
2.5 Excluded Liabilities. Notwithstanding anything to the contrary in
this Agreement, Buyer shall not assume or be liable with respect to any
Liability of Seller, its employees or agents other than the Assumed Liabilities
(collectively, all of the Liabilities not assumed by Buyer shall be referred to
as the "Excluded Liabilities"). All of the Excluded Liabilities shall remain the
sole responsibility of Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
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<PAGE> 4
3.1 Authority for Agreements. This Agreement has been duly executed
and delivered by Seller, and constitutes the binding and enforceable obligation
of Seller in accordance with its terms.
3.2 No Violation to Result. The execution and delivery of this
Agreement and the performance of the transactions contemplated hereunder are not
in violation or breach of, do not conflict with or constitute a default under,
and will not accelerate or permit the acceleration of the performance required
by, any Contract to which Seller is a party or by which the Seller or any of the
Contract Assets is bound, or under any Law, applicable to Seller or to any of
the Contract Assets, and will not result in the creation or imposition of any
Lien upon any of the Contract Assets, and will not be an event which, after
notice or lapse of time or both, will result in any of the foregoing.
3.3 Title to Assets. Seller has good and marketable title to the
Contract Assets, free and clear of all Liens. The Contract Assets are in the
sole possession and under the sole control of Seller.
3.4 Intellectual Property. Exhibit 3 contains an accurate and complete
list of all Intellectual Property (including the Software) used by Seller in the
conduct of the Business. Except as noted on Exhibit 3, Seller owns all such
Intellectual Property, and has the right to use, sell, license or dispose of all
such Intellectual Property, free and clear of any Liens (other than the Assumed
Liabilities). Except as noted on Exhibit 3, Seller has not entered into any
license agreement with respect to such Intellectual Property. Except as noted on
Exhibit 3, Seller is not required to pay any royalty, license fee or similar
compensation in connection with the Software or the conduct of the Business. The
Software and the operations of the Business as now conducted do not infringe,
and no other party has asserted that the Software or such operations do
infringe, the patents, patent applications, copyrights, trademarks, trade
secrets or other intellectual property rights of anyone. The use of any such
Intellectual Property in the conduct of the Business does not violate any
license agreement between Seller and any third party.
3.5 Brokers. Seller has not expressly or impliedly engaged any broker,
finder or agent with respect to any transaction contemplated by this Agreement.
3.6 Dedicated Assets. Except for the Excluded Assets, the Contract
Assets constitute all the property, tangible and intangible, used or held for
use in the Business, so as to permit the conduct of the Business by Buyer
immediately after the Closing Date in substantially the same manner and
substantially to the same extent that the Business was being conducted as of the
Closing Date.
3.7 Contracts. Exhibit 4 correctly lists or describes each Contract to
which Seller is a party or is bound in any respect relating to the Contract
Assets or the Business. Each of the Contracts listed or described on Exhibit 4
is in full force and effect, is a legal and binding obligation enforceable by or
against Seller, and, to the best knowledge of Seller, the other parties thereto.
As of the Closing Date, the Seller has performed all obligations required
pursuant to each of such Contracts to have been performed by it. No event has
occurred which constitutes or, with the giving of notice or passage of time or
both, would constitute a default by any party thereunder. Seller has made
available to Buyer correct and
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<PAGE> 5
complete copies of each Contracts listed on Exhibit 4 including all
modifications or amendments thereto.
3.8 No Litigation. There is no Lawsuit or Claim pending or, to
Seller's knowledge, threatened against Seller relating to or affecting the
Business or involving any property or asset included in the Contract Assets.
3.9 Compliance with Laws. To the Knowledge of Seller, Seller has
complied in all respects with all Laws imposed by any Governmental Authority
applicable to the Business or the Contract Assets.
3.10 Accuracy of Statements. Exhibit 5 contains a true and correct
schedule of the receipts and expenditures of the Business for 1997 and the
period January 1, 1998, through October 31, 1998, as well as a schedule of
accounts receivable and accounts payable as of October 31, 1998, which
accurately reflects the results and operations of the Business prior to the
Closing Date. Neither this Agreement nor any information to be furnished by or
on behalf of Seller to Buyer in connection with this Agreement will contain any
untrue statement of a material fact regarding any of the Seller, the Contract
Assets or the Business or omits or will omit to state a material fact necessary
to make the statements regarding any of the Seller, the Contract Assets or the
Business contained herein or therein, in light of the circumstances in which
they are made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer hereby represents and warrants to Seller as follows:
4.1 Organization. The Buyer is a limited partnership 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.
4.2 Authority. The Buyer has the requisite power and authority to
deliver this Agreement, and perform its obligations herein, and consummate the
transactions contemplated hereby. The Buyer 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 the Buyer enforceable against the Buyer 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).
ARTICLE V
INDEMNIFICATION
5.1 Indemnification. From and after the Closing Date, but subject to
the conditions and limitations set forth in this Agreement, Seller shall defend,
indemnify and
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save the Buyer and the other Buyer Indemnified Parties harmless from and against
any and all Losses whatsoever resulting from or arising out of (i) any breach of
any representation or warranty of Seller contained herein, (ii) any breach of
any covenant or other obligation of Seller contained herein, (iii) any Excluded
Liability, or (iv) any claim by any Governmental Authority that Caminus or Buyer
should have withheld taxes with respect to any amounts payable to Seller
pursuant to this Agreement or pursuant to the Contingent Purchase Price
Agreement; provided, however, Seller shall not be required to indemnify the
Buyer Indemnified Parties with respect to matters set forth in clause (i) of
this Section 5.1 until the aggregate of such amounts exceeds $20,000, and then
shall be required to indemnify the Buyer Indemnified Parties with respect to all
such amounts (including the first $20,000). Any amounts owed by Seller under
this Section may, at the election of the Buyer Indemnified Parties, be satisfied
by reducing or offsetting any amounts or obligations owed to Seller by any Buyer
Indemnified Party (including, without limitation, Buyer, or Caminus) under this
Agreement, the Contingent Purchase Price Agreement or otherwise.
5.2 Claims. If a Buyer Indemnified Party ("Claimant") desires to make
a claim against the Seller (the "Indemnitor") under this Agreement, the Claimant
shall give prompt written notice to the Indemnitor of the institution of any
Lawsuit or Claim at any time instituted against or made upon Claimant in
connection with which the Claimant could claim indemnification and shall advise
the Indemnitor in writing, to the extent known, of the amount and circumstances
surrounding the same and shall permit the Indemnitor, at its option, to
participate in the defense of such Lawsuit or Claim by counsel of its own choice
and at its expense. No such Lawsuit or Claim, except the settlement thereof
which involves (i) the payment of money only either by a party or parties other
than the Claimant and (ii) the unconditional release from all related liability
of the Claimant, may be settled by the Indemnitor without the written consent of
the Claimant. The foregoing notwithstanding, the failure of any Claimant to give
any notice required to be given hereunder shall not affect such Claimant's right
to indemnification hereunder except to the extent the Indemnitor 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 action is sought by reason
of such failure. Payment by a Claimant to a third Person with respect to a Loss
shall not affect such Claimant's rights to indemnification pursuant to this
Agreement.
5.3 Treatment of Obligations to Provide Support, Maintenance or Other
Services to Customers. If, after the Closing Date, support, maintenance or other
service obligations are owed by either Buyer or Seller to customers of Buyer or
Seller, and Buyer is entitled to indemnification with respect to such
obligations (whether such obligations constitute Excluded Liabilities as defined
in Section 2.5 or result from breaches of representations and warranties), Buyer
shall, at its election, be entitled to satisfy such obligations in the manner it
deems appropriate, and Seller shall be required to indemnify Buyer financially
with respect to the satisfaction of such obligations.
5.4 Representations and Warranties Survive. The representations and
warranties of the parties to this Agreement shall survive the Closing Date.
ARTICLE VI
GENERAL PROVISION
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6.1 Notices. All notices, requests, consents and other communications
hereunder shall be in writing (including facsimile or telex) and shall be
effective upon receipt, in each case addressed:
If to Seller to:
Corwin John Joy
531 Frasier Street
Houston, TX 77007-2704
Fax No.: (713) 548-0609
Attention: Corwin Joy
If to Buyer to:
ZAI*NET Software, L.P.
747 Third Avenue, 18th Floor
New York, New York 10017
Facsimile: (212) 888-0691
Attention: President
With a copy to:
Caminus Energy Ventures LLC
747 Third Avenue, 18th Floor
New York, New York 10017
Facsimile: (212) 888-0691
Attention: CEO
provided, however, that if any party shall have designated a different address
by notice to the other, then to the last address so designated.
6.2 Assignment. This Agreement and the rights and duties hereunder
shall be binding upon and inure to the benefit of the successors and assigns of
each of the parties hereto, but shall not be assignable or delegable by any
party without the prior written consent of the other, except that Buyer may
assign all of its rights and obligations hereunder to any Affiliate of Buyer
(including Caminus).
6.3 Arbitration. Buyer and Seller 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 each party may strike one. 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
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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.
6.4 Waivers. Any waiver by Seller or Buyer of any breach of or failure
to comply with any provision of this Agreement by the other party shall be in
writing and shall not be construed as, or constitute, a continuing waiver of
such provision, or a waiver of any other breach of, or failure to comply with,
any other provision of this Agreement.
6.5 Complete Agreement. Except for the confidentiality agreement dated
August 11, 1998, between the parties, the Contingent Purchase Price Agreement,
the Employment Agreement and the Covenant Not To Compete, and except as set
forth in any instrument signed by the party to be bound thereby which makes
reference to this Agreement, this Agreement and the documents in the form of the
Exhibits hereto set forth the entire understanding of the parties hereto and
supersede all prior agreements, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any party (or any
officer, employee or representative of any party).
6.6 Governing Law. This Agreement shall be construed and enforced in
accordance with and governed by the internal substantive laws of the State of
California and of the United States of America.
6.7 Third Parties. Nothing herein is intended or shall be construed to
confer upon or give to any person other than the parties hereto, any rights or
remedies under or by reason of this Agreement.
6.8 Amendment. This Agreement may not be amended orally but only by an
instrument in writing duly executed by the parties.
6.9 Headings. The headings of the Articles and Sections of this
Agreement and in the Exhibits to this Agreement are inserted for convenience of
reference only and shall not be deemed to constitute a part hereof or thereof.
6.10 Exhibits. The Exhibits attached hereto and referred to in this
Agreement are a part of this Agreement for all purposes.
6.11 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
6.12 Severability. If any provision of this Agreement is declared
invalid or unenforceable by a court of competent jurisdiction, the validity or
enforceability of any other provision of this Agreement shall not be affected.
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<PAGE> 9
6.13 Expenses, Taxes, Etc. Each party will pay all fees and expenses
incurred by it in connection with this Agreement and the transactions
contemplated hereby; provided, however, that all documentary, stamp and excise
taxes and all transfer, filing, recordation and similar taxes and fees and all
sales and use taxes and related taxes, if any, incurred in connection with this
Agreement and the transactions contemplated hereby will be borne by Seller.
6.14 Further Assurance. After the Closing, Seller shall from time to
time, at Buyer's request and without further cost and expense to Buyer, execute
and deliver to Buyer such other instruments of conveyance and transfer
(including, without limitation, additional assignments suitable for filing or
recording with respect to Intellectual Property) and take such other action as
Buyer may reasonably request so as more effectively to sell, assign and transfer
to Buyer title to and possession of the Contract Assets as provided in this
Agreement or otherwise to consummate the transactions contemplated by this
Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the day and year first above written.
CORWIN JOY ZAI*NET SOFTWARE, L.P.
By: Caminus Energy Ventures LLC, its
General Partner
By: /s/ Corwin Joy By: /s/ Richard Landers
---------------------------------- ----------------------------------
Name: Name: Richard Landers
Title: Title: Member, Management Committee
-9-
<PAGE> 10
APPENDIX A
CERTAIN DEFINITIONS
"AFFILIATE" means, with respect to any party, another party that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such party.
"BUYER INDEMNIFIED PARTIES" means Buyer and Caminus and their respective
subsidiaries and Affiliates, any assignee or successor thereof, and each
officer, director and employee of each of the foregoing.
"BUYER'S ADJUSTED COSTS" associated with any activity shall mean 160% of
the wages payable to Buyer's employees performing the activity with respect to
the time spent performing the activity, plus any direct expenses incurred.
"CAUSE" shall have the meaning set forth in the Employment Agreement.
"CONTRACT" means any note, debt instrument, license, commitment,
contract, agreement, lease, commitment, license, sales and purchase orders,
agreements or any other instrument, whether written or oral.
"GOOD REASON" shall have the meaning set forth in the Employment
Agreement.
"GOVERNMENTAL AUTHORITY" means any federal, national, state, municipal,
local or other government, governmental authority, regulatory or administrative
agency, governmental commission, department, board, bureau, agency or
instrumentality, political subdivision, court, tribunal, official arbitrator or
arbitral body, in each case whether domestic or foreign.
"INTELLECTUAL PROPERTY" means any patents, inventions (whether or not
patentable), trademarks and associated goodwill, trade names, service marks,
trade secrets (including algorithms and formulas), know-how, service marks,
logos, copyrights, rights of publicity, and registrations and applications for
each of the foregoing, and computer software programs (including the Software),
computer databases and related documentation and materials.
"KNOWLEDGE" means actual knowledge after reasonable investigation and due
inquiry.
"LAW" means any law, judgment, decree, rule or regulation of any
Governmental Authority or court, whether federal, state, local or otherwise.
"LAWSUIT OR CLAIM" means any claim, lawsuit, demand, suit, hearing,
governmental investigation, notice of a violation, litigation, proceeding,
arbitration, or other dispute, whether civil, criminal, administrative or
otherwise.
"LIABILITY" means any liability or obligation, known or unknown, fixed,
contingent or otherwise.
<PAGE> 11
"LIEN" means any security interest, lien, charge, mortgage, deed,
assignment, pledge, encumbrance or restriction in favor of any third person
(whether or not perfected) of any kind or nature.
"LOSSES" means losses, damages, claims, diminutions in value, costs and
expenses, interest, awards, judgments and penalties (including reasonable legal
fees and costs) suffered or incurred.
"OFFICE LEASE" shall mean the office lease between Seller and Paul M.
Sternberg, dated as of July 1, 1998.
"ORDER" means any order, writ, rule, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.
A-2
<PAGE> 12
APPENDIX B
DESCRIPTION OF SOFTWARE
The Positron software includes the following modules and tools:
Value at Risk Module:
Full Simulation Based Model Using HJM Methodology to Simulate Forward Curves.
Captures Forward Curve Correlation Relationships
Captures Cross Location Risks
Captures Cross Commodity Risks
Captures full option risk.
Nucleus Integration:
Captures full set of open positions from Nucleus.
Explicitly imports Power Options, Exchange Options & OTC options for fine
grained risk management.
Automatically uploads curves & volatilities as stored in Nucleus
Understands Nucleus book structure and allows risks to be broken down both by
individual book and across books.
Option Pricing Tools:
Asians
Americans
Baskets
Binaries
Compounds
Forward Start Options
Spreads
Swaptions
Rainbows
Option Pricing Support Functions:
Low discrepancy sequences
Bivariate and inverse normal
Cholesky decomposition
Numerical search algorithms
Correlated deviates
Flexible deal portfolios:
The ability to group deals by trader, region, counterparty or custom criteria on
the fly.
Inclusion/exclusion of deals and advanced what-if scenarios.
Powerful grouping and viewing of a company's traded books to get a clear
understanding of risks across the company.
Complete MTM values and detailed sensitivities such as delta, gamma, vega, eta,
and rho are reported.
A-3
<PAGE> 13
Rate Server Engine:
Tools to manage and build price curves including bootstrapping, interpolation
algorithms, intra-day and intra-month pricing, peak/off-peak rates, settlement
formulas and curve objects to intelligently manage and control price
information.
The Positron Rate Server can be called from Excel or a variety of other high end
tools to get settlements, formulas, or real time price information and provides
an excellent enterprise wide way to manage price quotes throughout your
business.
Financial position reporting:
Report net delta, gamma, vega and rho positions either summarized by portfolio
or broken out by deal.
Show exchange traded hedge strips and backwardated roll graph of positions.
Perform P&L breakdown to show gains and losses from previous day and how they
can be attributed to individual risk categories.
A-4
<PAGE> 14
APPENDIX C
CONTINGENT PURCHASE PRICE AGREEMENT
THIS CONTINGENT PURCHASE PRICE AGREEMENT (the "Agreement"), dated as of
November ____, 1998, by and among ZAI*NET Software, L.P., a Delaware Limited
Partnership ("ZAI*NET"), Caminus Energy Ventures LLC, a Delaware limited
liability company (the "Company"), and Corwin Joy ("Investor"). Capitalized
terms used herein and not otherwise defined shall have the meaning set forth in
Section 10 hereof, or if not defined therein, the respective meanings in the LLC
Agreement (as defined below).
WHEREAS, the Investor has entered into a Purchase Agreement
(the "Purchase Agreement") dated as of the date hereof with ZAI*NET, an
Affiliate of the Company, pursuant to which ZAI*NET is purchasing the Investor's
business (the "Purchase");
WHEREAS, as additional consideration for the Purchase, the
Company will issue to Investor membership interests in the Company as set forth
opposite Investor's name on Schedule I hereto (the "Membership Interest")
subject to the satisfaction of certain conditions;
WHEREAS, upon the issuance of the Membership Interest, the
Investor will become a Member of the Company and subject to the rights,
privileges and obligations under this Agreement and the Limited Liability
Agreement of the Company, originally dated as of May 12, 1998, including the
Appendices thereto (the "LLC Agreement"), attached hereto as EXHIBIT A;
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. Issuance of Membership Interest. The Company is hereby issuing to
the Investor the Membership Interest, subject to the terms and conditions of
this Agreement.
2. Conditions to be Met in order for Investor to Retain Membership
Interest.
(a) First Anniversary Condition. If, on the first anniversary
of the Closing Date, (i) the Software has been Successfully Integrated into
ZAI*NET's operations, (ii) ZAI*NET has sold at least two Software Licenses
following the Closing Date, and (iii) the Investor has not terminated his
employment with ZAI*NET (other than for Good Reason) and has not been terminated
by ZAI*NET for Cause, then the Investor shall be permitted to retain and keep
one-half of the Membership Interest set forth on Schedule I hereto (and
associated Proceeds (as defined below)); provided, however, if the conditions
set forth in part (i) and part (iii) of this Section have been satisfied, but
only one Software License has been sold after the Closing Date, then the
Investor shall be permitted to retain one-quarter of the Membership Interest
(and associated Proceeds) set forth on Schedule I hereto. Following the first
anniversary of the Closing Date, a portion of the Membership
<PAGE> 15
Interest shall be cancelled equal to one-half of the Membership Interest set
forth on Schedule I hereto less the portion which the Investor is permitted to
retain pursuant to this Section 2(a), and any Proceeds associated with the
cancelled interest shall be retained by the Company.
(b) Second Anniversary Condition. If, on the second
anniversary of the Closing Date, (i) the Software has been Successfully
Integrated into ZAI*NET's operations, (ii) ZAI*NET has sold at least six
Software Licenses, and (iii) Investor has not terminated his employment with
ZAI*NET (other than for Good Reason) and has not been terminated by ZAI*NET for
Cause, then the Investor shall be permitted to retain and keep one-half of the
Membership Interest set forth on Schedule I hereto (and associated Proceeds);
provided, however, if the conditions set forth in part (i) and part (iii) of
this Section have been satisfied, but fewer than six Software Licenses have been
sold after the Closing Date, then the Investor shall be permitted to retain the
Second Anniversary Percentage of the Membership Interest set forth on Schedule I
hereto. Following the second anniversary of the Closing Date, a portion of the
Membership Interest shall be cancelled equal to one-half of the Membership
Interest set forth on Schedule I hereto less the portion which the Investor is
permitted to retain pursuant to this Section 2(b), and any Proceeds associated
with the cancelled interest shall be retained by the Company.
(c) Company to Use Reasonable Efforts to Sell Licenses.
Following the Closing Date, the Company shall use reasonable good faith efforts
to sell Software Licenses.
(d) Membership Interest Not Transferable Prior to Satisfaction
of Conditions. In addition to the restrictions on transfer set forth in the LLC
Agreement, the Investor may not Dispose of the Membership Interest (or any
portion thereof) prior to the satisfaction of the conditions set forth in
Section 2(a) and Section 2(b). After the conditions in either Section 2(a) or
Section 2(b) are satisfied (in full or in part), the Investor may (subject to
the terms of the LLC Agreement and the other provisions of this Agreement)
Dispose of any portion of the Membership Interest which the Investor has the
right to retain and which is no longer subject to the conditions of Section 2(a)
and Section 2(b).
(e) Retention of Proceeds Until Conditions are Satisfied. All
distributions, dividends, proceeds and other interests that would otherwise be
payable or distributable to Investor in respect of the Membership Interest,
including cash, property or Securities issuable in respect of the Membership
Interest as a result of any merger, consolidation, combination, reorganization
or similar transaction (collectively, "Proceeds") shall not be paid or
distributed to the Investor but shall instead be retained by the Company until
the conditions set forth in Section 2(a) and Section 2(b) are satisfied. After
the conditions in either Section 2(a) or Section 2(b) are satisfied (in full or
in part), the Company shall pay or distribute to the Investor any previously
retained Proceeds held by the Company attributable to the portion of the
Membership Interest which the Investor has the right to retain and which is no
longer subject to the conditions of Section 2(a) and Section 2(b).
(f) Membership Interest Subject to Dilution. The Investor
acknowledges that the figures set forth on Schedule I reflect only membership
interests issued through the date hereof, and that the Membership Interest will
be subject to dilution (on the same basis
A-2
<PAGE> 16
as other Series A Membership Interests) in the event of the issuance of
additional membership interests.
3. Repurchase Rights of Company
(a) Repurchase Rights. In addition to the rights of the
Company and the other investors therein pursuant to the LLC Agreement, upon the
death, Disability or termination of the employment relationship of the Investor
with ZAI*NET, the Company shall have an option to purchase any or all of the
Securities which the Investor is entitled to retain pursuant to this Agreement
and which are owned by the Investor and his or her Permitted Transferees. The
repurchase right set forth in this Section 3(a) shall expire upon the closing of
a Qualified Public Offering. The Company may assign its right to repurchase
under Section 3 to any designee selected by the Company.
(b) Manner of Exercise. The Company shall exercise the option
under Section 3(a) by written notice stating the number of the Securities owned
by the Investor and his or her Permitted Transferees that are being purchased,
which notice may be delivered to the Investor at any time following such event.
(c) Purchase Price. In the case of any purchase pursuant to
this Section 3, the purchase price shall be equal to the Fair Market Value of
the Securities as of the date of termination; provided, however, if the
Investor's employment was terminated by ZAI*NET for Cause or by the Investor
without Good Reason, then the purchase price shall be equal to the lesser of (i)
the Fair Market Value of the Securities as of the date of termination, and (ii)
the Original Value of such Securities.
(d) Closing. The closing of any purchase pursuant to Section 3
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. Any amounts owed by the Company to the
Investor hereunder may be set off against all amounts owing by the Investor to
the Company, ZAI*NET or their Affiliates (including, without limitation, any
amounts owing under the Purchase Agreement).
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investor as follows:
(a) Organization. The Company 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. The Company has the requisite power and
authority to deliver this Agreement, and perform its obligations herein, and
consummate the transactions contemplated hereby. The Company 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 the Company enforceable against the
A-3
<PAGE> 17
Company 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).
(c) Membership Interest Duly Authorized. The Membership
Interest to be issued to the Investor 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.
5. Representations and Warranties of the Investor. The Investor hereby
represents and warrants to the Company as follows:
(a) No Registration. The Investor understands that the
Membership Interest that may be acquired by the Investor 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 Interests 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
disclosures made to the Investor by the Company. The Investor understands that
any certificate or other document representing the Membership Interest (if any)
will bear the following legend (or a comparable legend): "THESE SECURITIES HAVE
NOT BEEN REGISTERED UNDER ANY FEDERAL OR STATE SECURITIES LAWS AND THEREFORE
CANNOT BE SOLD OR TRANSFERRED UNLESS THEY ARE REGISTERED UNDER SUCH SECURITIES
LAWS OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE."
(b) Investors Experience; Other Information. The Investor has
significant experience with the industry in which the Company is engaged and as
a result is capable of evaluating an investment in the Company. The Investor has
sufficient knowledge of finance, securities and investments so as to permit the
Investor to evaluate the merits of an investment in the Membership Interest. The
Investor has skill and experience in investments based on actual participation.
The Investor has had an opportunity to review the financial statements of the
Company, ask questions of and receive answers from the Company, or a person or
persons acting on its behalf, concerning the terms and conditions of his, her or
its investment, which questions have been answered to the full satisfaction of
the Investor, and has also had an opportunity to obtain any additional
information which the Company possesses or can reasonably acquire without undue
expense that is necessary to verify the accuracy of the information furnished to
the Investor.
(c) Limitations on Disposition and Resale. The Investor
understands that the Membership Interests cannot be (i) Disposed of unless such
Disposition is in accordance with the this Agreement and the LLC Agreement
(including Appendix B thereto) and (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 such Investor to liquidate his investment in the Company; and the Investor
agrees not to Dispose of his Membership Interests unless such Disposition is in
accordance with this Agreement and the LLC Agreement and the Membership
Interests have
A-4
<PAGE> 18
been so registered or an exemption from the requirement of registration is
available under the Securities Act.
6. LLC Agreement. The Membership Interest issued hereunder shall be
subject to the terms and conditions of the LLC Agreement. The Investor
acknowledges, by his execution and delivery hereof, that he has received a copy
of the LLC Agreement and has read and understands the terms and provisions of
the LLC Agreement and has agreed to be bound thereby. The Investor shall not be
subject to mandatory capital calls pursuant to Section 4.1.2 of the LLC
Agreement.
7. Reorganizations. The Investor agrees to execute and deliver any and
all further documents, consents and writings, and to perform such other actions,
as may be or become reasonably necessary or expedient to effect and consummate
any merger, consolidation, reorganization, combination or similar transaction
proposed by the Company.
8. Arbitration. The parties to this Agreement 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 each party may strike one. 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.
9. Expenses. Each party will pay all fees and expenses incurred by it
in connection with this Agreement and the transactions contemplated hereby.
10. Definitions.
(a) "Cause" shall have the meaning set forth in the Employment
Agreement between ZAI*NET and the Investor.
(b) "Closing Date" shall have the meaning set forth in the
Purchase Agreement.
(c) "Disability" shall have the meaning set forth in the
Employment Agreement between ZAI*NET and the Investor.
(d) "Fair Market Value" means, as of any date, with respect to
a Security, the value of such Security determined as follows:
A-5
<PAGE> 19
(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 Management 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 average, for the
last five market trading days prior to the day of determination, of the
mean for each such day between the high bid and low asked prices for
the Security, as reported in the Wall Street journal or such other
source as the Management 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 this Agreement, 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 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 by the Company or any
Affiliate.
(e) "Original Value" means, with respect to Membership
Interests or any Securities, an amount equal to (i) the amount shown next to
Investor's name in the "Capital Account Credit"' column of Schedule I, times
(ii) a fraction equal to the fraction that such Membership Interests or
Securities represent of the total Membership Interests or Securities that
Investor would be entitled to retain under this Agreement if all conditions set
forth in Section 2 were satisfied.
(f) "Second Anniversary Percentage" shall be calculated as set
forth in Schedule II.
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<PAGE> 20
(g) "Software" shall have the meaning set forth in the
Purchase Agreement.
(h) "Software License" means a license of ZAI*NET software
following the Closing Date that includes the Software (or its functional
successor).
(i) "Successfully Integrated" means that the Software is
capable of receiving information electronically about a trade captured by
ZAI*NET's risk management system, automatically (i.e., without manual
intervention) evaluating that trade, using the full suite of Positron tools,
i.e., credit risk, value at risk, and pricing; and automatically (i.e., without
manual intervention) reporting the results of such evaluations via the ZAI*NET
reporting tools.
11. Additional Document. The Investor 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.
12. Governing Law. This Agreement is governed by and shall be construed
in accordance with the law of the State of Delaware, 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.
13. 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.
14. Assignment. The Investor 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 the Company. The Company
may assign its rights and obligations hereunder to any Affiliate. Except as
provided in the first sentence of this Section 14, this Agreement shall be
binding upon and shall inure to the benefit of the parties' respective
successors, assigns, executors and administrators.
15. 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.
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<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first set above.
THE COMPANY
CAMINUS ENERGY VENTURES LLC
By: /s/ Richard Landers
-----------------------------------
Name: Richard Landers
Its: Member, Management Committee
ZAI*NET
ZAI*NET SOFTWARE, L.P.
By: Caminus Energy Ventures LLC,
its General Partner
By: /s/ Richard Landers
-----------------------------------
Name: Richard Landers
Its: Member, Management Committee
THE INVESTOR
CORWIN JOY
/s/ Corwin Joy
---------------------------------------
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<PAGE> 22
SCHEDULE I
SCHEDULE OF MEMBERSHIP INTERESTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Name and Address Membership Interest
of Member Capital Account Credit (subject to dilution)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Corwin Joy $303,333 0.64748%
- --------------------------------------------------------------------------------------------------------------------
All Other Members $46,545,000 99.35252%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
SCHEDULE II
SECOND ANNIVERSARY PERCENTAGE
LICENSES OF THE
SOFTWARE SOLD IN
SECOND YEAR
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
0 1 2 3 4 5 6
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0 0.00% 8.33% 16.67% 25.00% 33.33% 41.67% 50.00%
- --------------------------------------------------------------------------------------------------------------------
LICENSES OF 1 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 50.00%
- --------------------------------------------------------------------------------------------------------------------
THE 2 0.00% 12.50% 25.00% 37.50% 50.00% 50.00% 50.00%
- --------------------------------------------------------------------------------------------------------------------
SOFTWARE 3 12.50% 25.00% 37.50% 50.00% 50.00% 50.00% 50.00%
- --------------------------------------------------------------------------------------------------------------------
SOLD IN 4 25.00% 37.50% 50.00% 50.00% 50.00% 50.00% 50.00%
- --------------------------------------------------------------------------------------------------------------------
FIRST YEAR 5 37.50% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00%
- --------------------------------------------------------------------------------------------------------------------
6 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
The "Second Anniversary Percentage" shall be calculated based on the
above chart. For example, if all other conditions were met and if 1 Software
License were sold during the first year following the Closing Date, and 2
Software Licenses were sold during the second year following the Closing Date,
the "Second Anniversary Percentage" would be equal to 20.00%.
In that case, Corwin would be entitled to retain a 0.16224% Membership
Interest as of the first anniversary (subject to adjustment to reflect dilution
since the Closing Date), and the remaining portion of one-half of the Membership
Interest (0. 16224%) would be cancelled. On the second anniversary, Corwin would
be entitled to retain an additional 0. 12979% Membership Interest as (subject to
adjustment to reflect dilution since the Closing Date), and the remaining
Membership Interest (0. 19469%) would be cancelled.
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<PAGE> 23
EXHIBIT 1
LIST OF EQUIPMENT, COMPUTERS, ETC.
<TABLE>
<S> <C> <C>
COMPUTER HARDWARE
7/19/96 Dell Dell Latitude Lap Top Computer $ 3,588.00
7/27/96 Computer City Laser Jet 5L $ 480.00
7/30/96 Computer City Optima 144+ Fax Modem $ 185.00
8/12/96 Dell Sportster Modem $ 233.00
8/13/96 Dell Lite Pro 210 $ 4,677.00
10/4/96 Micro Center Houston 10 Base-T Equipment $ 87.00
10/7/96 Computer City New Media Ethernet $ 194.00
5/28/97 Dell Corwin Home Office P200 $ 4,096.71
6/6/97 Computer City Corwin Home Office P200 Monitor $ 757.74
6/9/97 CDW Computer Centers 4.3GB Hard Drive, CJ Home PC $ 976.75
6/16/97 Dell Back-UPS PRO 420 $ 247.89
7/17/97 Dell CDR_Drive Internal, CJ Home PC $ 735.10
7/31/97 Dell XPI-CD Laptop $ 5,376.77
8/1/97 Insync Internet Ascend Pipeline 75 - Destroyed by lightning $ 920.13
9/26/97 Insync Internet Replacement Ascend P70 - Analog port down $ 920.13
11/20/97 Dell P300, used by Arthur $ 3,374.78
11/25/97 Computer City Modem, Cable, Access 97, ScanJet $ 603.91
3/9/98 Micro Center Houston 2 x HP LaserJet 6L, Cables, Extra Printer Ram $ 863.84
3/25/98 Micro Center Houston External CD-R & Controller $ 961.26
6/16/98 Micro Time P400 Workstation + Server $ 6,698.00
7/23/98 Insync Internet 2 x Ascend P75S Pipelines $ 1,968.03
7/29/98 CDW Computer Centers Seagate 9.1GB Drive, Server $ 834.08
7/30/98 Dell 128MBx3 RAM, Server, Office $ 706.02
8/29/98 Eric Virro Ascend P50 Pipeline - Home Office $ 400.00
8/28/98 Paul A Lamar 2 x Hitachi Computer Monitors $ 2,010.75
-------------------
TOTAL COMPUTER HARDWARE $ 41,895.89
-------------------
COMPUTER SOFTWARE
7/11/96 Microsoft MicroSoft Access $ 306.00
7/12/96 Software Safari MicroSoft Excel 5.0 $ 162.00
7/12/96 Software Safari MicroSoft Office $ 260.00
8/7/96 Computer City DT/Lang Visual C++ $ 102.00
8/30/96 Stirling Technologies, Inc. Install Shield $ 218.00
9/8/96 Micro Center Houston MS Visual C++ $ 108.00
9/8/96 Egghead Software Windows NT Workstation $ 325.00
10/3/96 Computer City Lantastic $ 109.00
10/3/96 Computer City DT/OSYS WIN F/Work $ 161.00
10/5/96 Micro Center Houston Novell $ 184.00
10/21/96 Micro Center Houston Que Access '95 $ 55.00
3/10/97 Logic Works Inc. Erwin $ 3,566.84
3/19/97 Nu-Mega Technologies Bounds Checker Pro $ 506.00
4/4/97 Mortice Kern Systems MKS Source Integrity $ 609.00
6/6/97 Computer City Norton Utilities, Antivirus $ 176.43
7/26/97 Egghead Software Windows NT Server $ 831.28
</TABLE>
<PAGE> 24
<TABLE>
<S> <C> <C>
8/3/97 UCA Microsoft Visual Studio x 2 $ 2,173.67
8/4/97 Nu-Mega Technologies Bounds Checker Pro $ 555.50
8/7/97 Mortice Kern Systems MKS Source Integrity $ 619.00
12/1/97 Provantage Corp TimeLock Software $ 626.00
3/10/98 Oracle Direct Mktg Oracle Server, 5 Client Pack $ 1,611.69
3/23/98 Microsoft MS Office Developer SDK & Training CDs $ 705.20
4/16/98 CDW Computer Centers Crystal Reports V6 x 2 $ 501.75
7/9/98 Raleigh Group International Visual Intercept $ 1,418.00
8/29/98 Richard A Langham Expenses for 7/10-8/13 $ 257.95
8/31/98 Compuware Corp Active X Components / Software $ 1,084.36
-------------------
TOTAL COMPUTER SOFTWARE $ 17,232.67
-------------------
FURNITURE
9/2/96 Office Depot Office Chair $ 71.00
5/22/97 Danish Inspirations Bookcase x 2 $ 430.84
8/18/97 Danish Inspirations Home Office Bookcase, Desk $ 452.49
4/21/98 Danish Inspirations Ergonomic Office Chair $ 1,146.37
6/22/98 Danish Inspirations 3 Desks, 1 Filing Cabinet, 3 Chair $ 3,071.05
-------------------
TOTAL $ 5,171.75
FURNITURE
-------------------
TOTAL ASSETS $ 64,300.31
-------------------
TOTAL ASSETS LESS ACCUMULATED DEPRECIATION $ 22,875.53
===================
</TABLE>
<TABLE>
<CAPTION>
DATE NAME MEMO AMOUNT
---- ---- ---- ------
<S> <C> <C>
ACCUMULATED DEPRECIATION
1/31/97 January Monthly Depreciation $ (1,954.75)
2/28/97 February Monthly Depreciation $ (1,954.75)
3/31/97 March Monthly Depreciation $ (1,954.75)
4/30/97 April Monthly Depreciation $ (1,954.75)
5/31/97 May Monthly Depreciation $ (1,954.75)
6/30/97 June Monthly Depreciation $ (1,954.75)
7/31/97 July Monthly Depreciation $ (1,954.75)
8/31/97 August Monthly Depreciation $ (1,954.75)
9/30/97 September Monthly Depreciation $ (1,954.75)
10/31/97 October Monthly Depreciation $ (1,954.75)
11/30/97 November Monthly Depreciation $ (1,954.75)
12/31/97 December Monthly Depreciation $ (1,954.75)
1/31/98 January Monthly Depreciation $ (1,996.42)
2/28/98 February Monthly Depreciation $ (1,996.42)
3/31/98 March Monthly Depreciation $ (1,996.42)
4/30/98 April Monthly Depreciation $ (1,996.42)
5/31/98 May Monthly Depreciation $ (1,996.42)
6/30/98 June Monthly Depreciation $ (1,996.42)
7/31/98 July Monthly Depreciation $ (1,996.42)
8/31/98 August Monthly Depreciation $ (1,996.42)
9/30/98 September Monthly Depreciation $ (1,996.42)
--------------------
TOTAL ACCUMULATED DEPRECIATION $ (41,424.78)
--------------------
</TABLE>
A-2
<PAGE> 25
EXHIBIT 2
ASSIGNED CONTRACTS
1. Computer Program License Agreement between Conectiv, Inc. and Positron
Energy Consulting, Inc. dated May 1, 1998.
2. Software License Agreement between Positron Energy Consulting (licensor)
and Vitol Gas and Electric (licensee) dated May 21, 1997.
3. Edison Source Purchase Order issued to Positron Energy Consulting dated
February 20, 1997.
4. Edison Enterprises Purchase Order Change Order issued to Positron Energy
Consulting dated February 17, 1998.
5. Software License Agreement (Edison Source Purchase Order) between
Positron Energy Consulting (licensor) and Edison Source (licensee) dated
December 8, 1997.
6. Confidentiality and Mutual Nondisclosure Agreement between Edison Source
and Corwin Joy dated December 6, 1996.
7. Software License Agreement (Edison Source Purchase Order 97-01-TJO-006)
between Positron Energy Consulting (licensor) and Edison Source
(licensee) dated January 20, 1997.
8. Con Edison Purchase Order issued to Positron Energy Consulting dated
January 23, 1998.
9. Consolidated Edison Company on New York, Inc. Standard Terms and
Conditions of Service Contracts.
10. Software License Agreement between Positron Energy Consulting and Western
Resources dated as of October 5, 1998.
11. Program Maintenance Agreement between Positron Energy Consulting and
Western Resources dated as of October 5, 1998.
12. Software License Agreement between Positron Energy Consulting and
Pacificorp, as amended by Amendment 1 dated as of October 20, 1998.
<PAGE> 26
EXHIBIT 3
INTELLECTUAL PROPERTY
1. The Software.
2. Farpoint Technologies, Inc. Software License Agreement (undated).
3. DynamiCube License Agreement (undated).
4. True DBGrid Pro License and Redistributable Files Agreement (undated).
5. Software FX. Inc. Chart FX License Card (undated).
6. Numerical Recipes Software (undated).
7. Computer Program License Agreement between Conectiv, Inc. and Positron
Energy Consulting, Inc. dated May 1. 1998.
8. Filing Receipt for Trademark Application filed September 1, 1998
Licenses of the Software
1. Software License Agreement between Positron Energy Consulting (licensor)
and Vitol Gas and Electric (licensee) dated May 21, 1997.
2. Software License Agreement (Edison Source Purchase Order) between
Positron Energy Consulting (licensor) and Edison Source (licensee) dated
December 8, 1997.
3. Software License Agreement (Edison Source Purchase Order 97-01-TJO-006)
between Positron Energy Consulting (licensor) and Edison Source
(licensee) dated January 20, 1997.
4. Software License Agreement between Positron Energy Consulting and Western
Resources dated as of October 5, 1998.
5. Software License Agreement between Positron Energy Consulting and
Pacificorp, as amended by Amendment 1 dated as of October 20, 1998.
<PAGE> 27
EXHIBIT 4
LIST OF CONTRACTS
Contracts on Exhibit 2
Office Lease
<PAGE> 28
EXHIBIT 5
SCHEDULE OF RECEIPTS AND EXPENDITURES
POSITRON ENERGY CONSULTING
PROFIT AND LOSS
FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE TEN MONTHS
ENDED OCTOBER 31, 1998
<TABLE>
<CAPTION>
JAN - DEC '97 JAN - OCT '98
----------------------------------------
<S> <C> <C>
ORDINARY INCOME/EXPENSE
INCOME
REIMBURSED EXPENSES $65,201.10 $78,479.65
SALES
Consulting Income $148,781.25 $272,075.00
Discount $0.00 $(26,622.50)
Software Income $77,500.00 $80,000.00
----------------------------------------
TOTAL SALES $226,281.25 $325,452.50
----------------------------------------
TOTAL INCOME $291,482.35 $403,932.15
----------------------------------------
COST OF GOODS SOLD
Contract Labor $10,000.00 $0.00
Direct Labor $8,333.32 $92,708.23
Reimbursable Travel Expense $63,891.68 $40,370.50
Reimbursed Expenses Employees $0.00 $38,476.38
----------------------------------------
TOTAL COGS $82,225.00 $171,555.11
----------------------------------------
GROSS PROFIT $209,257.35 $232,377.04
----------------------------------------
EXPENSE
Bank Service Charges $77.72 $43.15
Computer Software Expense $2,958.19 $2,607.35
Computer Supplies Expense $2,711.48 $2,978.69
Contributions $124.00 $50.00
Depreciation Expense $23,457.00 $19,964.20
Dues and Subscriptions $481.15 $20.00
Education $1,840.50 $6,223.14
Finance Charge $2,327.36 $2,063.38
Insurance: Property $0.00 $368.00
Internet Service $1,667.28 $5,270.82
Licenses and Permits $0.00 $1,365.00
Marketing $382.11 $39,206.84
Office Supplies $622.92 $1,421.89
Pager $277.71 $0.00
Payroll Taxes $920.88 $5,872.59
Postage and Delivery $151.71 $625.89
Printing and Reproduction $0.00 $2,038.86
Professional Fees: Accounting $250.00 $4,316.43
Professional Fees: Legal Fees $2,250.43 $901.00
Rent $2,400.00 $3,275.00
</TABLE>
<PAGE> 29
<TABLE>
<S> <C> <C>
Repairs: Building $0.00 $1,522.65
Repairs: Computer $0.00 $35.00
Telephone $1,505.96 $4,808.08
Travel & Ent: Meals $76.56 $311.36
Travel: Education $0.00 $1,017.40
Travel: Marketing $8,221.34 $12,307.77
Travel: Other $125.00 $0.00
Utilities: Gas and Electric $541.68 $385.36
Utilities: Water $48.90 $69.76
----------------------------------------
TOTAL EXPENSE $53,419.88 $119,069.61
----------------------------------------
NET INCOME $155,837.47 $113,307.43
========================================
</TABLE>
POSITRON ENERGY CONSULTING
Open Invoices by Customer
AS OF OCTOBER 31, 1998
<TABLE>
<CAPTION>
TYPE NUMBER DATE OPEN BALANCE
---- ------ ---- ------------
<S> <C> <C> <C>
CONECTIV
Invoice 46 10/31/98 $11,250.00
------------------------
Total Conectiv $11,250.00
------------------------
PACIFICORP
Invoice 45 9/23/98 $12,323.92
Invoice 49 10/30/98 $3,924.71
------------------------
Total Pacificorp $16,248.63
------------------------
VITOL GAS AND ELECTRIC
Invoice 42 8/30/98 $5,000.00
Invoice 48 10/26/98 $6,615.00
------------------------
Total Vitol Gas and Electric $11,615.00
------------------------
WESTERN RESOURCES
Invoice 50 10/30/98 $697.41
------------------------
Total Western Resources $697.41
------------------------
TOTAL $39,811.04
========================
</TABLE>
POSITRON ENERGY CONSULTING
Accounts Payable
AS OF OCTOBER 31, 1998
<TABLE>
<CAPTION>
BALANCE
-------
<S> <C>
American Express $161.61
Citibank DIVIDEND Card $2,776.47
First USA Visa 0242 $154.80
------------------
TOTAL $3,092.88
==================
</TABLE>
A-2
<PAGE> 1
Exhibit 2.6
PURCHASE AGREEMENT
BY AND AMONG
DC SYSTEMS, INC.,
A TEXAS CORPORATION,
CAMINUS LLC,
A DELAWARE LIMITED LIABILITY COMPANY,
CAMINUS/DC ACQUISITION CORP.,
A DELAWARE CORPORATION
AND
JOY ARMSTRONG
RENE ANDERSON
LISA J. CONLEY
RICHARD D. COURON
RICHARD L. COURON
DAVID L. COVICH
JEREMY D. FRYE
KYLE GERRILD
KURT E. GERRILD
ANDREW C. HARDIN
ALAN W. NASH
SCOTT TUCKER
GREGG ALLEN
TIM ALLEN
JULY 31, 1999
<PAGE> 2
PURCHASE AGREEMENT
This PURCHASE AGREEMENT (the "AGREEMENT") is entered into as of this
31st day of July, 1999, by and among DC SYSTEMS, INC., a Texas corporation ("DC
SYSTEMS"), CAMINUS LLC, a Delaware limited liability company ("CAMINUS"),
CAMINUS/DC ACQUISITION CORP., a Delaware corporation ("ACQUISITION SUB"), and
JOY ARMSTRONG, RENE ANDERSON, LISA J. CONLEY, RICHARD D. COURON, RICHARD L.
COURON, DAVID L. COVICH, JEREMY D. FRYE, KYLE GERRILD, KURT E. GERRILD, ANDREW
C. HARDIN, ALAN W. NASH, SCOTT TUCKER, GREGG ALLEN and TIM ALLEN (the
"SHAREHOLDERS"), with reference to the following facts and circumstances.
RECITALS
WHEREAS, the Shareholders own all of the capital stock of and other
equity interests in DC Systems, including, without limitation, the warrants to
purchase the capital stock of DC Systems held by Gregg Allen and Tim Allen;
WHEREAS, the Shareholders desire to sell, assign and transfer to
Caminus and Caminus, through Acquisition Sub, desires to purchase and accept
from the Shareholders all of their equity interests in DC Systems (the
"Purchase");
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:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the following terms shall be defined as
follows:
"AAA" shall have the meaning as set forth in Section 7.6 hereof.
"ADDITIONAL TAX" shall have the meaning set forth in Section 5.4.3.
"AGREEMENT" means this Purchase Agreement, including all exhibits and
schedules.
"CAPITAL GAIN RATE" shall have the meaning set forth in Section 5.4.3.
"CODE" means the Internal Revenue Code of 1986, as amended.
"DC SYSTEMS FINANCIAL STATEMENTS" shall have the meaning as set forth
in Section 3.5.
<PAGE> 3
"DISPUTED MATTER" shall have the meaning as set forth in Section 7.6.
"EFFECTIVE DATE" shall mean July 31, 1999.
"ESCROW AGENT" shall have the meaning given to it in the Escrow
Agreement.
"ESCROW AGREEMENT" shall mean an escrow agreement among Caminus, the
Escrow Agent and the Shareholders, in substantially the form attached as EXHIBIT
A. The parties acknowledge that the Escrow Agreement will not be executed and
delivered in conjunction with this Agreement; rather, the Escrow Agreement will
be used only if Caminus undergoes a reorganization (referred to herein as the
"REORGANIZATION") into a subchapter C corporation. At the time of the
Reorganization, the Escrow Agreement will be executed and delivered by the
parties thereto (and each of the parties that will receive Membership Interests
pursuant to this Agreement, hereby agrees to enter into the Escrow Agreement at
that time in substantially the form attached as EXHIBIT A) pursuant to which the
shares of Caminus issued in exchange for the Membership Interests in the
Reorganization will be deposited into the escrow established pursuant to the
Escrow Agreement, to be held in accordance with and until the Release Date
specified in the Escrow Agreement.
"EXECUTION DATE" shall mean August ___, 1999.
"EXPENSES" shall have the meaning as set forth in Section 5.5 hereof.
"GAAP" shall mean generally accepted accounting principles applied on a
consistent basis.
"INDEMNIFIED PARTY" shall have the meaning as set forth in Section
6.3.1 hereof.
"INDEMNIFYING PARTY" shall have the meaning as set forth in Section
6.3.1 hereof.
"KNOWLEDGE" or "KNOWLEDGE" shall mean, with respect to DC Systems, any
Shareholder, Caminus, or Acquisition Sub, actual knowledge of such Person or the
officers and key employees of such Person and such Person's affiliates, as
applicable.
"LIEN" shall mean any claim, security interest, charge, restriction, or
encumbrance of any kind of any party and of any nature whatsoever.
"LIMITED LIABILITY COMPANY AGREEMENT" shall mean the limited liability
company agreement of Caminus, as amended.
"LOSSES" shall have the meaning as set forth in Section 6.2.1.
-2-
<PAGE> 4
"MATERIAL ADVERSE EFFECT" means for all purposes of this Agreement,
with respect to any Person and any statement, representation, warranty or
covenant contained herein, any change or effect that individually or when taken
together with all other changes or effects relating to such statement,
representation, warranty or covenant 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, results
of operation or prospects of such Person, or does or is reasonably likely to
materially adversely affect the ability of such Person 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 to conduct its business after the Effective Date
substantially as such business has been conducted historically and immediately
prior thereto.
"MEMBERSHIP INTERESTS" means an aggregate of 2,546,182 notional shares
of Series A membership interests in Caminus (representing 2.61% of the issued
and outstanding Series A membership interests in Caminus after giving effect to
the issuance thereof and of the additional notional shares to be issued to fund
the Purchase), bearing an aggregate initial capital account of Three Million
Dollars ($3,000,000). The Membership Interests shall be allocated among the
Shareholders as specified in SCHEDULE 7.4.
"OUTSTANDING LIABILITIES" shall mean any and all of DC Systems'
liabilities or obligations of any nature (contingent or otherwise, and
including, without limitation, all liabilities for Taxes) arising, accruing, or
pertaining to periods prior to the Execution Date (whether or not GAAP would
require such liabilities to be reflected on DC Systems' balance sheet as of
Execution Date), other than (i) liabilities or obligations that would be
properly included as accounts payable or other current liabilities on a balance
sheet (prepared as of the Execution Date, in accordance with GAAP, consistently
applied) of DC Systems that have been incurred in the ordinary course of the DC
Systems' business consistent with past practice; (ii) liabilities or obligations
arising from or related to Personal Property Leases, Real Property Leases,
Material Contracts set forth on SCHEDULE 3.6 (for purposes of this clause (ii),
excluding the Material Contracts with customers of DC Systems, which are covered
by clause (iii) following), insurance policies set forth on SCHEDULE 3.8, or
Employee Plans set forth in SCHEDULE 3.9.2, in each case to the extent such
liabilities or obligations arise from and pertain solely to events or periods of
time after the Execution Date of any kind; or (iii) liabilities or obligations
arising from or related to the Material Contracts with customers of DC Systems
set forth on SCHEDULE 3.6, to the extent such liabilities or obligations arise
from and pertain solely to alleged breaches of warranties or delivery
obligations of any kind or failures to make on-time delivery, regardless of the
time period(s) to which such alleged breaches relate; provided, however, that,
notwithstanding the foregoing, any liabilities for Expenses
-3-
<PAGE> 5
incurred by the Shareholders or DC Systems prior to the Execution Date shall
constitute "Outstanding Liabilities."
"PERMITS" shall have the meaning as set forth in Section 3.17.
"PERMITTED LIEN" shall have the meaning as set forth in Section 3.12.
"PERSON" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a governmental or political subdivision or any agency or
instrumentality thereof.
"PERSONAL PROPERTY LEASES" shall have the meaning as set forth in
Section 3.15.
"PURCHASE" shall have the meaning as set forth in the second Whereas
clause hereto.
"PURCHASE PRICE" means the cash payments by Caminus to the Shareholders
in the aggregate amount of Ten Million Dollars ($10,000,000) made pursuant to
Section 2.3 hereof (as adjusted as provided therein), plus the Tax Make-Up
Payment.
"REAL PROPERTY LEASES" shall have the meaning as set forth in Section
3.16.
"RELATED AGREEMENTS" shall mean (i) the employment letters or
agreements entered into between DC Systems and Richard D. Couron, Joy Armstrong,
Alan W. Nash, and David L. Covich, forms of which are attached in EXHIBITS B, C,
D AND E, dated as of the date hereof, (ii) the covenants not to compete entered
into between Caminus and each Shareholder, a form of which is attached as
EXHIBIT F, (iii) the Escrow Agreement (if such agreement is required to be
executed and delivered, as provided in the definition of "Escrow Agreement" in
Article 1 hereof), and (iv) the Joinder Agreement, a form of which is attached
as EXHIBIT G.
"REORGANIZATION" shall have the meaning as set forth in the definition
of "Escrow Agreement" above.
"SECTION 338(H)(10) ELECTION" shall have the meaning as set forth in
Section 5.3.
"SELLERS" shall mean, with respect to this Agreement and the
transactions contemplated hereby and with respect to the Related Agreements and
the transactions contemplated thereby (to the extent such Persons are parties
thereto), DC Systems and the Shareholders.
"SHAREHOLDER AGREEMENT" shall have the meaning as set forth in Section
3.18.
-4-
<PAGE> 6
"STOCK" shall mean all of the capital stock of DC Systems, together
with any and all options, warrants (including, without limitation, the warrants
to purchase the capital stock of DC Systems held by Gregg Allen and Tim Allen),
and other commitments to issue or transfer such capital stock to any Person.
"TAX" and "TAXES" shall have the meanings as set forth in Section 3.10.
"TAX MAKE-UP PAYMENT" shall have the meaning as set forth in Section
5.4.1.
"TAX RETURN" shall have the meaning as set forth in Section 3.10.
"THIRD PARTY CLAIMS" shall have the meaning as set forth in Section
6.3.2.
ARTICLE 2
PURCHASE AND SALE OF CAPITAL STOCK
2.1 SALE OF STOCK. Subject to the terms and conditions set forth herein
and in the Related Agreements, as of the Effective Date the Shareholders hereby
sell, assign and transfer, free and clear of any and all Liens, and deliver
certificates representing, the Stock to Acquisition Sub, and Acquisition Sub
hereby purchases and accepts the Stock from the Shareholders. Upon execution of
this Agreement certificates representing the Stock shall be duly indorsed for
transfer to Acquisition Sub or accompanied by duly executed stock powers
separate from certificates, as instructed by Caminus or Acquisition Sub.
2.2 PAYMENT OF LIABILITIES AT EXECUTION. Except as specifically
indicated in SCHEDULE 2.2, the Shareholders have discharged or shall discharge,
upon execution of this Agreement, all Outstanding Liabilities. To the extent
Caminus or Acquisition Sub discovers Outstanding Liabilities after the execution
of this Agreement that were not discharged by the Shareholders prior to or upon
such execution, the Shareholders shall discharge such Outstanding Liabilities
upon notice from Caminus.
2.3 PAYMENT OF PURCHASE PRICE. Subject to the terms and conditions set
forth herein and in the Related Agreements, the Purchase Price, less the amount
of any liabilities included on SCHEDULE 2.2 (i.e., Outstanding Liabilities that
are not discharged by the Shareholders upon or prior to the execution of this
Agreement, in accordance with Section 2.2), shall be paid to the Shareholders by
Caminus upon the execution of this Agreement by wire transfer according to wire
transfer instructions delivered by each Shareholder to Caminus at least one day
prior to such execution. The payment of the Purchase Price will be allocated
among the Shareholders in accordance with SCHEDULE 7.4 attached hereto.
2.4 MEMBERSHIP INTERESTS. Subject to the terms and conditions set forth
herein and in the Related Agreements, upon the execution of this Agreement,
Caminus shall admit the Shareholders as members of Caminus and grant them the
-5-
<PAGE> 7
Membership Interests, pursuant to a Joinder Agreement to the Limited Liability
Company Agreement, in the form attached hereto as EXHIBIT G. As members, the
Shareholders shall have the same rights, privileges and obligations as other
members pursuant to the terms and provisions of the Limited Liability Company
Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF DC SYSTEMS
AND THE SHAREHOLDERS
As an inducement for Caminus to enter into and consummate the
transactions contemplated by this Agreement (including the Related Agreements),
DC Systems, Richard D. Couron and Alan W. Nash, jointly and severally, and each
other Shareholder (with respect to each other Shareholder, solely with respect
to Sections 3.2, 3.4, 3.7.2, 3.14.2, 3.17, 3.18 and 3.22, and in each instance
solely with respect to him or her), 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 execution of this
Agreement as provided in Section 6.1 hereof.
3.1 EXISTENCE AND GOOD STANDING.
3.1.1 DC SYSTEMS. At the Execution Date, DC Systems is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas, having full power and authority to own its properties and
to carry on its business as conducted. At the Execution Date, DC Systems is duly
qualified to transact business and is in good standing in each jurisdiction in
which the operation of its business or 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.
3.1.2 ORGANIZATIONAL DOCUMENTS. Copies of the articles of
incorporation and by-laws of DC Systems, effective prior to and as of the date
hereof, have been delivered to Caminus and as delivered are true and complete.
3.1.3 SUBSIDIARIES. DC Systems does not own or have any
subsidiaries, or own any interest in a partnership, joint venture or other
business entity, other than its wholly owned subsidiary DCS*Gasnet Corporation,
a Texas corporation. For purposes of this ARTICLE 3, and except where the
context otherwise requires, "DC SYSTEMS" includes DC Systems, Inc. and
DCS*Gasnet Corporation.
3.2 AUTHORITY. Each of the Sellers has the requisite power and
authority to execute and deliver this Agreement and the Related Agreements to
which such Seller is a party, and perform such Seller's obligations herein and
therein, and consummate the transactions contemplated hereby and thereby. Each
of the Sellers has duly
-6-
<PAGE> 8
executed and delivered this Agreement and the Related Agreements to which such
Seller is a party and has obtained, to the extent applicable, any necessary
authorization in accordance with all applicable laws and such Seller's
organizational documents to execute and deliver this Agreement and the Related
Agreements to which such Seller is a party, and to perform such Seller's
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. 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). Any Person executing this Agreement and any Related
Agreements on behalf of a Seller 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 the consummation of the transactions contemplated
hereby and thereby. Each of the Sellers agrees that, if the Escrow Agreement is
required to be executed and delivered as provided in the definition of "Escrow
Agreement" set forth in ARTICLE 1, then each of the foregoing representations
and warranties shall be automatically deemed made by the Sellers with respect to
the Escrow Agreement at that time.
3.3 STOCKHOLDERS' MEETING. DC Systems 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 DC Systems 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, 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 articles of incorporation, by-laws or other
organizational documents of DC Systems; (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 that, 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
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or impose) any Lien on any of the properties or assets of any of the Sellers
pursuant to any material 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. Each of the Sellers
agrees that, if the Escrow Agreement is required to be executed and delivered as
provided in the definition of "Escrow Agreement" set forth in ARTICLE 1, then
each of the foregoing representations and warranties shall be automatically
deemed made by the Sellers with respect to the Escrow Agreement at that time.
3.5 FINANCIAL STATEMENTS. DC Systems has delivered to Caminus true and
complete copies of the unaudited balance sheets of DC Systems for June 1999, and
for December 1998 and December 1997, and the related statements of income (the
"DC SYSTEMS FINANCIAL STATEMENTS"). Such balance sheets were created in the
normal course of DC Systems' business and, as of their respective dates, are
true and correct, in all material respects, and, in all material respects,
fairly present in accord with DC Systems' business and accounting practices (as
disclosed on SCHEDULE 3.5) and consistently applied, except as disclosed on
SCHEDULE 3.5, the financial position, assets and liabilities of DC Systems, at
the dates indicated. Similarly, such statements of income are true and correct,
in all material respects, as of their respective dates, and, in all material
respects, fairly present in accord with DC Systems' business and accounting
practices (as disclosed on SCHEDULE 3.5) and consistently applied, except as
disclosed on SCHEDULE 3.5, the results of operations for the periods indicated.
The officers of DC Systems have no Knowledge of any material claims, obligations
or liabilities of DC Systems relating to the period prior to the Execution Date,
other than those set forth in the DC Systems Financial Statements included in
SCHEDULE 3.5. For avoidance of ambiguity, the parties acknowledge and agree
that, for purposes of the previous sentence, (i) liabilities or obligations
arising from or related to Personal Property Leases, Real Property Leases,
Material Contracts set forth on SCHEDULE 3.6 (for purposes of this clause (i),
excluding the Material Contracts with customers of DC Systems, which are covered
by clause (ii) following), insurance policies set forth on SCHEDULE 3.8, and
Employee Plans set forth in SCHEDULE 3.9.2 shall not be considered to relate to
the period prior to the Execution Date to the extent such liabilities or
obligations arise from and pertain solely to events or periods of time after the
Execution Date; and (ii) liabilities or obligations arising from or related to
the Material Contracts with customers of DC Systems set forth on SCHEDULE 3.6
shall be disregarded to the extent such liabilities or obligations arise from
and pertain solely to alleged breaches of warranties or delivery obligations of
any kind or failures to make on-time delivery, regardless of the time period(s)
to which such alleged breaches relate. The officers of DC Systems have no
Knowledge of any events or circumstances that have occurred or come into
existence since the date of the most recent DC Systems Financial Statements that
may reasonably be expected, individually or in the aggregate, to have or
constitute a Material Adverse Effect.
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3.6 MATERIAL CONTRACTS.
3.6.1 GENERALLY. Set forth on SCHEDULE 3.6 is a complete and
accurate list of all material active contracts and agreements, oral or written,
to which the DC Systems is a party or by which any of its assets, properties or
business is bound except for contracts and agreements listed in other Schedules.
With respect to each of the contracts set forth on SCHEDULE 3.6, a true and
correct copy, or if a copy is not available, a true and correct summary of the
contractual obligation, has been made available to Caminus and to its auditors
PriceWaterhouseCoopers. Each such contract is in full force and effect, to the
Knowledge of DC Systems and subject to the further provisions of Section 3.6.2,
without material breach or default by DC Systems. Except as set forth in
SCHEDULE 3.6, to the Knowledge of DC Systems no party to any such contract other
than DC Systems is in breach or default thereof and no notice has been received
regarding termination or suspension thereof.
3.6.2 SOFTWARE CONTRACTS. The parties hereto expressly
understand and agree that software license and development agreements frequently
have delivery dates which are not met by software vendors for a variety of
reasons caused by or attributable to both licensor and licensees and that this
is the case with certain of the contracts set forth on SCHEDULE 3.6. DC Systems
has negotiated or may have negotiated with certain of its customers to extend
product delivery dates, substitute different deliverables for those stated in
their contracts (because the needs of the licensee(s) changed or for other
reasons) or to alter terms and provisions of its contracts in other ways to
eliminate or moderate potential claims, obligations and liabilities. Such
negotiations, to the extent material, have been documented through amendments,
addenda, work orders, status reports or other written documents. DC Systems has
indicated on SCHEDULE 3.6 the contracts in which DC Systems may not have
achieved anticipated delivery dates or anticipates not achieving such delivery
dates. The parties acknowledge and agree that DC Systems makes no
representations or warranties, other than those contained in Section 3.14, that
claims will not arise respecting timing or acceptance of its software under the
contracts listed in SCHEDULE 3.6.
3.7 INTELLECTUAL PROPERTY.
3.7.1 Set forth on SCHEDULE 3.7 is a list of all significant
trade names, trademarks, service names, service marks, logos, patents, patent
applications, invention disclosures, 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 DC
Systems or used or required by DC Systems in the operation of its businesses.
Except as set forth on SCHEDULE 3.7, DC Systems holds all of its right, title
and interest in and to the Intellectual Property, free and clear of all Liens.
DC Systems owns or has the right to use, without the making of any payment or
the granting of any rights to others, all the
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Intellectual Property. Except as set forth on SCHEDULE 3.7, the officers of DC
Systems have no Knowledge that the conduct of the businesses of DC Systems as
now conducted infringes or conflicts with any intellectual property rights of
others. Except as set forth on SCHEDULE 3.7, the officers of DC Systems have no
Knowledge that DC Systems has not, 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
3.7, the officers of DC Systems have no Knowledge of any material infringement
by others of any Intellectual Property owned or used by DC Systems. Except as
set forth on SCHEDULE 3.7, there is no pending or, to the Knowledge of the
officers of DC Systems, threatened claim that DC Systems is or has infringed
upon the intellectual property rights of any third party. Except as set forth on
SCHEDULE 3.7, the officers of DC Systems have no Knowledge that any licenses,
rights and other agreements pertaining to the Intellectual Property are not in
compliance in all material respects with all applicable laws, rules and
regulations in all jurisdictions in which DC Systems conducts any business,
including without limitation, those pertaining to remittance of foreign exchange
and taxation. The execution and delivery of this Agreement and the Related
Agreements and the consummation of the transactions contemplated hereby and
thereby will not alter or impair the rights and interests of DC Systems in any
of the Intellectual Property owned or used by DC Systems and DC Systems will
have the same rights and interests in such items at and after the Execution Date
as it has had immediately prior to the Execution Date.
3.7.2 Except as specified in SCHEDULE 3.7.2, each Shareholder
represents and warrants, with respect to such Shareholder's Authored Software,
that all work of authoring and developing such Authored Software performed by
such Shareholder was performed while such Shareholder was a full-time employee
of DC Systems within the scope of such Shareholder's employment. Each
Shareholder agrees that the Authored Software and all portions thereof are works
made for hire on behalf of DC Systems; and that upon creation, ownership of all
copyrights (including all renewals and extensions) in those works vested in DC
Systems. In the event any such Authored Software, or any party thereof, is
deemed not to be a work made for hire for any reason, or any Shareholder
possesses any copyrights in such Authored Software for any reason, such
Shareholder hereby grants, transfers and assigns to DC Systems all right, title
and interest in that Authored Software and all copyrights in that Authored
Software and all renewals and extensions thereof, and agrees to provide all
assistance reasonably requested by DC Systems in the establishment, preservation
and enforcement of its copyright in such Authored Software. Each Shareholder
hereby waives all moral rights with respect to the Authored Software, including
without limitation any and all rights of identification of authorship and any
and all rights of approval, restriction or limitation on use or subsequent
modifications. Each Shareholder further hereby assigns to DC Systems all of such
Shareholder's right, title and interest in or to any and all Intellectual
Property other than copyright, if any, embodied, fixed, practiced, infringed or
used in the Authored
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Software. Each Shareholder agrees to execute any additional documents necessary
or reasonably requested by DC Systems to effect or evidence the assignments of
this Section 3.7.2 ("SUPPORTING DOCUMENTS"). If any Shareholder fails or refuses
to execute any Supporting Documents, such Shareholder hereby agrees, on behalf
of such himself or herself and his or her successors, assigns, donees,
executors, administrators, transferees and personal representatives, to the
fullest extent permitted by law, that the president of DC Systems, and of any
successor to DC Systems, shall be, and are hereby, irrevocably appointed such
Shareholder's attorneys-in-fact with full authority to execute any Supporting
Documents requested by DC Systems, and to perform all other acts necessary to
effect, perfect or evidence the assignments of this Section 3.7.2. For purposes
of this Section 3.7.2, "AUTHORED SOFTWARE" shall mean, with respect to any
Shareholder, all software authored or developed, in whole or in part by such
Shareholder and constituting Intellectual Property used or required by DC
Systems in the operation of its businesses as currently or historically
conducted. Without limiting the generality of the foregoing, Richard D. Couron
and Alan W. Nash hereby assign to DC Systems all of their right, title and
interest, including without limitation all rights under their agreement,
effective August 19, 1994, to any and all ideas, designs and software developed
by Nash prior to and during his employment with DC Systems with respect to an
on-line database for the natural gas, energy or utility industry, including
exclusive rights to use the names "GASNET" and "M*NET."
3.8 INSURANCE. The material assets, properties and operations of DC
Systems are insured under various policies of general liability and other forms
of insurance, copies of which have been made available to Caminus. SCHEDULE 3.8
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 received with respect to any such policy and 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 due
under such policies prior to the execution of this Agreement have been paid in
full.
3.9 EMPLOYEE MATTERS AND BENEFIT PLANS.
3.9.1 DEFINITIONS. With the exception of the definition of
"Affiliate" (which definition shall apply only to this Section 3.9), for
purposes of this Agreement, the following terms shall have the meanings set
forth below:
"AFFILIATE" shall mean any other person or entity
under common control with DC Systems within the
meaning of Section 414(b), (c), (m) or (o) of the
Code and the regulations issued thereunder.
"DC SYSTEMS EMPLOYEE PLAN" shall mean any plan,
program, policy, practice, contract, agreement or
other arrangement providing for compensation,
severance, termination pay,
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deferred compensation, performance awards, stock or
stock-related awards, fringe benefits or other
employee benefits or remuneration of any kind,
whether written or unwritten or otherwise, funded or
unfunded, including without limitation, each
"employee benefit plan," within the meaning of
Section 3(3) of ERISA which is or has been
maintained, contributed to, or required to be
contributed to, by DC Systems or any Affiliate for
the benefit of any Employee, or with respect to which
DC Systems or any Affiliate has or may have any
liability or obligation.
"DOL" shall mean the U.S. Department of Labor.
"EMPLOYEE" shall mean any current or former employee,
consultant or director of DC Systems or any
Affiliate.
"EMPLOYEE AGREEMENT" shall mean each management,
employment, severance, consulting, relocation,
repatriation, expatriation, visas, work permit or
other agreement, contract or understanding between DC
Systems or any Affiliate and any Employee.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
"IRS" shall mean the Internal Revenue Service.
3.9.2 SCHEDULE. SCHEDULE 3.9.2 contains an accurate and
complete list of all DC Systems Employee Plans. Except as set forth in SCHEDULE
3.9.2, DC Systems has no agreements with employees other than the employment
agreements made available to Caminus and the employment agreements disclosed in
the DC Systems Financial Statements. DC Systems does not have any plan or
commitment to establish any new DC Systems Employee Plan or Employee Agreement,
to modify any DC Systems Employee Plan or Employee Agreement (except to the
extent required by law or to conform any such DC Systems Employee Plan or
Employee Agreement to the requirements or any applicable law, in each case as
previously disclosed to Caminus in writing, or as required by this Agreement),
or to enter into any DC Systems Employee Plan or Employee Agreement.
3.9.3 DOCUMENTS. DC Systems has made available to Caminus: (i)
correct and complete copies of all documents embodying each DC Systems Employee
Plan and each Employee Agreement including (without limitation) all amendments
thereto and all related trust documents; (ii) the most recent summary plan
description together with the summary(ies) of material modifications thereto, if
any, required under ERISA with respect to each DC Systems Employee Plan; (iii)
all
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material written agreements and contracts relating to each DC Systems Employee
Plan, including, but not limited to, administrative service agreements, group
annuity contracts and group insurance contracts; (iv) all correspondence to or
from any governmental agency relating to any DC Systems Employee Plan; (v) all
policies pertaining to fiduciary liability insurance covering the fiduciaries
for each DC Systems Employee Plan; and (vi) all discrimination tests for each DC
Systems Employee Plan for the most recent plan year, if required.
3.9.4 EMPLOYEE PLAN COMPLIANCE. DC Systems has performed all
material obligations required to be performed by it under, is not in default or
violation of, and has no knowledge of any material default or violation by any
other party to each DC Systems Employee Plan, and each DC Systems Employee Plan
has been established and maintained in accordance with its terms and in material
compliance and all applicable laws, including, but not limited to, ERISA. Any DC
Systems Employee Plan which is intended to meet the requirements of Sections
408(k) or 408(p) of the Code and which permits an election described in Section
408(k)(8) of the Code (i.e., a "SARSEP") (i) was established by the execution of
IRS Form 5305A-SEP, (ii) has substantially met such requirements at all times
since its inception, including all requirements regarding reporting and notices
to employees, and (iii) permitted, by its terms, such election on December 31,
1996. There are no actions, suits or claims pending or threatened or reasonably
anticipated (other than routine claims for benefits) against any DC Systems
Employee Plan or against the assets of any DC Systems Employee Plan. Each DC
Systems Employee Plan can be amended, terminated or otherwise discontinued after
the Effective Time in accordance with its terms, without liability to Caminus,
Acquisition Sub, DC Systems or any Affiliate (other than ordinary administration
expenses). There are no audits, inquiries or proceedings pending or threatened
by the IRS or DOL with respect to any DC Systems Employee Plan. Neither DC
Systems nor any Affiliate is subject to any penalty or tax with respect to any
DC Systems Employee Plan under Section 502(i) of ERISA or Sections 4975 through
4980 of the Code. Each DC Systems Employee Plan which is an accident and health
plan intended to meet the requirements for tax-favored status under Subchapter B
of Chapter 1 of the Code has met and meets such requirements. The benefits under
each DC Systems Employee Plan which is a "welfare benefit plan" under Section
3(1) of ERISA are paid from the assets of DC Systems and its Affiliates, through
insurance policies, or a combination of both.
3.9.5 ABSENCE OF CERTAIN PENSION PLANS. Neither DC Systems nor
any Affiliate has ever maintained, established, sponsored, participated in, or
contributed to, (i) any pension plan which is subject to Title IV of ERISA or
Section 412 of the Code, (ii) any "multiemployer plan," as defined in Section
3(37) of ERISA, or (iii) any pension, profit sharing, or stock bonus plan which
is intended to qualify under Section 401 of the Code.
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3.9.6 NO POST-EMPLOYMENT OBLIGATIONS. No DC Systems Employee
Plan provides or has any liability to provide, retiree life insurance, retiree
health or other retiree employee welfare benefits to any person for any reason,
except as may be required by applicable law, and DC Systems has never
represented, promised or contracted (whether in oral or written form) to any
Employee (either individually or to Employees as a group) or any other person
that such Employee(s) or other person would be provided with retiree life
insurance, retiree health or other retiree employee welfare benefit, except to
the extent required by applicable law. At all times, DC Systems and its
Affiliates have normally employed fewer than 20 Employees on a typical business
day. DC Systems and its Affiliates have substantially complied with all
applicable state and local laws requiring the continuation of health care
coverage beyond the termination of employment.
3.9.7 EFFECT OF TRANSACTION. The execution of this Agreement
and the Related Agreements and the consummation of the transactions contemplated
hereby and thereby will not constitute an event under any DC Systems Employee
Plan, Employee Agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee. No payment or benefit which will or may
be made by DC Systems or its Affiliates with respect to any Employee as a result
of the transactions contemplated by this Agreement or the Related Agreements or
otherwise which will be characterized as a "parachute payment," within the
meaning of Section 280G(b)(2) of the Code (but without regard to clause (ii)
thereof); provided that this representation does not cover any payment or
benefit provided to any Person following the Execution Date by or at the
direction of Caminus, other than payments or benefits that are required to be
paid or provided pursuant to any DC Systems Employee Plan in existence on or
prior to the Execution Date.
3.9.8 EMPLOYMENT MATTERS. DC Systems: (i) is in material
compliance in all respects with all applicable foreign, federal, state and local
laws, rules and regulations respecting employment, employment practices, terms
and conditions of employment and wages and hours, in each case, with respect to
Employees; (ii) has withheld and reported all amounts required by law or by
agreement to be withheld and reported with respect to wages, salaries and other
payments to Employees; (iii) is not liable for any arrears of wages or any taxes
or any penalty for failure to comply with any of the foregoing; and (iv) is not
liable for any payment to any trust or other fund governed by or maintained by
or on behalf of any governmental authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Employees (other than routine payments to be made in the normal course of
business and consistent with past practice). There are no pending, threatened,
or, to the Knowledge of the officers of DC Systems, reasonably anticipated
claims or actions against DC Systems under any worker's compensation policy or
long-term disability policy. DC Systems has made available
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to Caminus copies of all employment, consulting, and similar agreements and
arrangements between DC Systems and any individual. All such agreements and
arrangements are terminable by DC Systems at-will by payment of 2-weeks'
severance pay or less. All members of the boards of directors of DC Systems and
DCS*Gasnet Corporation shall have resigned prior to or shall resign upon
execution of this Agreement.
3.9.9 LABOR. No work stoppage or labor strike against DC
Systems is pending, threatened or reasonably anticipated. DC Systems does not
know of any activities or proceedings of any labor union to organize any
Employees. There are no actions, suits, claims, labor disputes or grievances
pending or, to the Knowledge of the officers of DC Systems, threatened or
reasonably anticipated against DC Systems relating to any labor, safety or
discrimination matters involving any Employee, including, without limitation,
charges of unfair labor practices or discrimination complaints, which, if
adversely determined, would, individually or in the aggregate, result in any
material liability to DC Systems, Caminus, Acquisition Sub or any Affiliate. DC
Systems has not engaged in any unfair labor practices within the meaning of the
National Labor Relations Act. DC Systems is not presently, nor has it been in
the past, a party to, or bound by, any collective bargaining agreement or union
contract with respect to Employees and no collective bargaining agreement is
being negotiated by DC Systems.
3.10 PAYMENT OF TAXES.
3.10.1 GENERAL. DC Systems has timely filed all Tax Returns
required to have been filed by it, including, without limitation, Tax Returns
with respect to state income, sales and use tax, 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; provided, however that to the extent any such
Tax Returns were not filed on a timely basis or such taxes were not accrued and
paid on a timely basis or such Tax Returns were not true, correct and complete
in all respects, DC Systems has taken appropriate actions to correct any
deficiency and has paid all associated penalties and interest. DC Systems has
provided copies of its federal income tax returns to Caminus for its taxable
years ending December 31, 1996, December 31, 1997, and December 31, 1998. The DC
Systems Financial Statements for the period ending June 30, 1999 include an
adequate reserve for all Taxes not yet due or with respect to which Tax Returns
are not required to have been filed, in each case to reflect the operations of
DC Systems through June 30, 1999. Except as set forth in SCHEDULE 3.10, there is
no Tax audit, investigation or other proceeding pending or, to the Knowledge of
the officers of DC Systems, threatened by a governmental authority against or
affecting DC Systems. 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
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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.
3.10.2 S CORPORATION STATUS. DC Systems has made and continues
to have in effect a valid and timely election to be treated as an "S
corporation" under Section 1361 et seq. of the Code (and any corresponding
provisions of all applicable state and local income tax laws) for all taxable
years since its formation, and it will be treated as an S corporation under the
Code and all such state and local tax laws for all taxable years or portions
thereof ending on or prior to the date of this Agreement. DC Systems has never
been a Subchapter C corporation for federal, New York, Texas or California tax
purposes.
3.11 BOOKS OF ACCOUNT; BANK ACCOUNTS. The books, records and accounts
of DC Systems accurately and fairly reflect, in reasonable detail, based upon
the business practices and accounting methodologies used by DC Systems (as
disclosed on SCHEDULE 3.5) and consistently applied, except as disclosed on
SCHEDULE 3.5, the transactions and the assets and liabilities of DC Systems with
respect to its businesses. DC Systems 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 DC Systems. SCHEDULE 3.11 sets forth a list of all bank
accounts, bank boxes and other depositories of DC Systems identifying bank,
branch and account number, as well as the authorized signatories thereto. DC
Systems has maintained a system of internal accounting control sufficient to
provide reasonable assurances for the purposes of its business operations that
(i) transactions are executed in accordance with management's general or
specific authorization, (ii) transactions are recorded as necessary to permit
preparation of financial statements that fairly present the financial position,
assets, liabilities, results of operations, cash flow and changes in
stockholders' equity of DC Systems, and (iii) access to assets, properties,
books, records and accounts is permitted only in accordance with management's
general or specific authorization.
3.12 OWNERSHIP OF ASSETS. Except as described in SCHEDULE 3.12, DC
Systems has good and marketable title to, or holds under valid leases or
licenses, all of its material assets, rights and properties, free and clear of
all Liens except for Permitted Liens, and such assets, rights, and properties
constitute all material assets, rights, and properties used or held for use by,
or necessary or desirable for the
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operations (as currently and historically conducted) of DC Systems. For purposes
of this Agreement, "PERMITTED LIENS" shall mean 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 proceedings and fully
reserved on the DC Systems Financial Statements; and zoning, building,
restrictions and other governmental ordinances. All machinery, equipment,
furniture, motor vehicles and other tangible assets necessary or appropriate for
the conduct of the business and operations of DC Systems are in good operating
condition and repair, subject to ordinary wear and tear.
3.13 BROKERS. No amount is payable by the Sellers 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.
3.14 LITIGATION.
3.14.1 Except as disclosed on SCHEDULE 3.14, there is no
material claim, action, suit, litigation, arbitration, investigation or other
legal proceeding which is pending or, to the Knowledge of the officers of DC
Systems, threatened, before any court or governmental authority, or arbitrator
or board of arbitrators to which DC Systems is a party, or to which any of the
assets, or properties of DC Systems is subject. DC Systems is not in default
with respect to any order, writ, injunction, decree or demand of any court or
other governmental or regulatory authority.
3.14.2 Except as disclosed on SCHEDULE 3.14, there is no
material claim, action, suit, litigation, arbitration, investigation or other
legal proceeding, relating in any way to DC Systems or any of the Stock, which
is pending or, to the Knowledge of the Sellers, threatened, before any court or
governmental authority, or arbitrator or board of arbitrators to which any
Shareholder is a party, or to which any of the Stock is subject. No Shareholder
is in default with respect to any order, writ, injunction, decree or demand of
any court or other governmental or regulatory authority, relating in any way to
DC Systems or any of the Stock.
3.15 PERSONAL PROPERTY LEASES. SCHEDULE 3.15 sets forth a list of all
material personal property leases ("PERSONAL PROPERTY LEASES") to which DC
Systems 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. DC Systems is not in material breach or default of any of
such Personal Property Leases. Except as disclosed on SCHEDULE 3.15, 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.
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3.16 REAL PROPERTY LEASES. SCHEDULE 3.16 sets forth a list of all real
property leases ("REAL PROPERTY LEASES") to which DC Systems 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. DC
Systems is not in material breach or default of any of such Real Property
Leases. Except as disclosed on SCHEDULE 3.16, 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.
3.17 COMPLIANCE WITH LAWS; PERMITS. The officers of DC Systems have no
Knowledge that DC Systems, and (with respect to DC Systems and the Stock) each
Shareholder has no Knowledge that such Shareholder has not complied with or is
not in compliance with all federal, state, local and foreign statutes, laws,
ordinances, regulations, rules, permits, judgments, orders and decrees
applicable to such Person, any of the Stock, and any of the properties, assets,
operations and businesses of DC Systems, except where the failure so to comply
would not reasonably be expected to result in a Material Adverse Effect. The
officers of DC Systems have no Knowledge of any failures by DC Systems to hold
any permits, licenses, easements, variances, exemptions, consents, certificates,
orders and approvals from governmental authorities which failures, individually
or in the aggregate, might reasonably be expected to result in a Material
Adverse Effect (collectively, the "PERMITS") and all such Permits of which the
officers of DC Systems have Knowledge are listed on SCHEDULE 3.17. The officers
of DC Systems have no Knowledge that DC Systems is not 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.
3.18 CAPITALIZATION; STOCK. The authorized capital stock of DC Systems
consists of 100,000,000 shares of common stock. As of the Execution Date the
outstanding capital stock of DC Systems consists of 100,000,000 shares of common
stock. Each of the Sellers has, prior to the Execution Date, executed a
Shareholder Agreement (the "SHAREHOLDER AGREEMENT") in which such Seller has
agreed as to the allocation of the outstanding Stock and related matters. The
Shareholder Agreement constitutes a duly executed, valid, legal and binding
agreement with respect to each Seller, enforceable against such Seller in
accordance with its terms. As of the execution of this Agreement, the Stock is
owned beneficially and of record as set forth in Article 1 of Shareholder
Agreement, no other persons have any legal or equitable interest therein, and
there are no other outstanding subscriptions, options, rights, warrants,
convertible securities, stock appreciation rights, phantom equity, or other
agreements or commitments obligating DC Systems to issue, transfer, sell,
redeem, repurchase or otherwise acquire any shares of its capital stock of any
class. All of the Stock is being sold, assigned and transferred to Acquisition
Sub pursuant to this Agreement free and clear of any and all Liens, and upon the
Execution Date the Stock will represent 100% of the issued and outstanding
shares of capital stock of
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DC Systems. Except for the Shareholder Agreement, there are no agreements or
understandings between any Seller and any other Seller or any other person that
restrict the transfer or otherwise relate to the Stock.
3.19 UNDISCLOSED LIABILITIES. Except for obligations incurred in the
ordinary course of the business consistent with DC Systems' past practice or as
set forth in Sections 3.5 and 3.6, in the DC Systems Financial Statements or in
SCHEDULE 3.5 or in other Schedules to this Agreement, to the extent specifically
referenced in SCHEDULE 3.5, there is no claim, liability or obligation of any
nature, whether absolute, accrued, known or unknown, contingent or otherwise,
affecting DC Systems or its business which is reasonably likely, individually or
aggregated with all other such obligations, to have a Material Adverse Effect.
Notwithstanding the foregoing, all payments and liabilities of DC Systems,
accrued or arising prior to or on the Execution Date, for Expenses incurred in
connection with the transactions contemplated by this Agreement or the Related
Agreements shall be separately listed on SCHEDULE 3.5.
3.20 SCOPE OF REPRESENTATIONS AND WARRANTIES. This Agreement, the
Related Agreements (including all exhibits or schedules to the Related
Agreements) and each other document and certificate prepared or delivered by or
on behalf of the Sellers and furnished or to be furnished to 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.
3.21 CONDUCT OF BUSINESS IN ORDINARY COURSE. From June 1, 1999 through
the Execution Date, except as set forth in SCHEDULE 3.21, DC Systems has
conducted its business in the ordinary course consistent with past practice and
has used all reasonable efforts to preserve intact its business organizations
and relationships with third parties and to keep available the services of its
present officers and key employees. Without limiting the generality of the
foregoing, from June 1, 1999 through the Execution Date, DC Systems (i) has not
sold, acquired or compromised any assets other than in the ordinary course of
business and in a manner consistent with reasonable business practices, (ii) has
not declared, set aside or paid any dividend or other distribution with respect
to any shares of its capital stock, except as set forth in SCHEDULE 3.21, (iii)
has not repurchased, redeemed or otherwise acquired any outstanding shares of
the capital stock of DC Systems or other securities of, or other ownership
interests in DC Systems, and (iv) has paid trade and other current obligations
in a reasonable commercial manner consistent with past practice.
3.22 INVESTMENT REPRESENTATION. Each Shareholder represents that such
Shareholder is acquiring such Shareholder's portion of the Membership Interests
for such Shareholder's own account, for investment and not for resale or
distribution.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF CAMINUS
As an inducement for the Sellers to enter into and consummate the
transactions contemplated by this Agreement and the Related Agreements, 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 execution of this Agreement, as provided in Section 6.2.
4.1 EXISTENCE AND GOOD STANDING. 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. 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.
Acquisition Sub 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.
Acquisition Sub is duly qualified to transact business and is in good standing
in each jurisdiction in which the operation of its business or the ownership of
its assets requires it to be so qualified.
4.2 AGREEMENT.
4.2.1 AGREEMENT AUTHORIZED. Caminus and Acquisition Sub have
the requisite power and authority to execute and deliver this Agreement and the
Related Agreements, as applicable, and perform their respective obligations
herein and therein, and consummate the transactions contemplated hereby and
thereby. Caminus and Acquisition Sub have duly executed and delivered this
Agreement and the Related Agreements to which they are parties, and have
obtained the necessary authorization in accordance with all applicable laws and
their organizational documents to execute and deliver this Agreement and the
Related Agreements to which they are parties, and perform their 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 4.2.1. Each of this Agreement and the Related
Agreements to which Caminus or Acquisition Sub is a party is a valid, legal and
binding obligation of such party enforceable against such party 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 persons executing this Agreement and the Related Agreements to
which it is a party on behalf of Caminus and Acquisition Sub have been
specifically authorized to do so by all necessary action. No other action will
be necessary by Caminus or Acquisition Sub to authorize the execution and
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delivery of this Agreement and the Related Agreements to which they are parties
and the consummation of the transactions contemplated hereby and thereby.
4.2.2 NO CONFLICT. Except as set forth in SCHEDULE 4.2.2,
neither the execution and delivery of this Agreement or the Related Agreements
to which either Caminus or Acquisition Sub is a party, nor the consummation of
the transactions contemplated hereby or thereby, (i) violates or conflicts with
any provision of the organizational documents of Caminus or Acquisition Sub;
(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
Caminus or Acquisition Sub 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 Caminus or
Acquisition Sub pursuant to any material note, mortgage, indenture, bond, lease,
license, permit, franchise, agreement, contract, undertaking or other instrument
to which Caminus or Acquisition Sub, respectively, is a party or by which any of
their respective properties or assets may be bound or affected.
4.3 BROKERS. No amount is payable by Caminus or Acquisition Sub 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 CAPITALIZATION. SCHEDULE 4.4 sets forth all of the equity interests
in Caminus, after giving effect to the transactions described herein as
occurring upon the execution of this Agreement. The Membership Interests are
validly issued, fully paid and nonassessable, and free of preemptive rights.
Except as reflected on SCHEDULE 4.4 or as provided in the Limited Liability
Company Agreement, there are no outstanding subscriptions, options, rights,
warrants, convertible securities, stock appreciation rights, phantom equity, or
other agreements or commitments obligating Caminus to issue, transfer, sell,
redeem, repurchase or otherwise acquire any equity interests.
4.5 LITIGATION. There is no material claim, action, suit, litigation,
arbitration, investigation or other legal proceeding which is pending or, to the
Knowledge of Caminus, threatened, before any court or governmental authority, or
arbitrator or board of arbitrators to which Caminus or Acquisition Sub was or is
a party, or to which any of their assets or properties is subject. Neither
Caminus nor Acquisition Sub is in default with respect to any order, writ,
injunction, decree or demand of any court or other governmental or regulatory
authority.
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4.6 INVESTMENT REPRESENTATION. Caminus and Acquisition Sub represent
that Acquisition Sub is acquiring the Stock for its own account, for investment
and not for resale or distribution.
4.7 LIMITED LIABILITY COMPANY AGREEMENT. Caminus has furnished DC
Systems with a true and accurate copy of the Limited Liability Company
Agreement, as amended up to the date of this Agreement, which is entitled
"Limited Liability Company Agreement of GFI Caminus LLC". Caminus represents and
warrants that "Caminus LLC" and "GFI Caminus LLC" are two separate names of the
same legal entity (the name "GFI Caminus LLC" having been previously changed to
"Caminus Energy LLC" and then to "Caminus LLC").
4.8 SECURITIES LAW COMPLIANCE. The issuance of the Membership Interests
and any securities which may be issued to the Shareholders pursuant to the
Reorganization shall comply, in all material respects, with the requirements of
the Securities Act of 1933, as amended, as well as any applicable state
securities laws.
4.9 SENIORITY OF DC SYSTEMS EMPLOYEES. To the maximum extent permitted
by Caminus' employee benefit programs, the employees of DC Systems will be
admitted to the various employee benefits programs of Caminus upon the Execution
Date and for purposes of such programs will be deemed to have been employees of
Caminus for the same period of time they were employees of DC Systems. Nothing
in this Section 4.9 shall be construed as an agreement by Acquisition Sub,
Caminus, or any of their affiliates, express or implied, (i) to employ any
current employee of DC Systems or contract for any such employee's services,
(ii) to restrict the right of Acquisition Sub, Caminus, or any of their
affiliates to discharge any such employee or cease contracting for such
employee's services after execution of this Agreement, or (iii) to modify,
extend or otherwise affect in any manner whatsoever, the terms of any employment
agreement or contract for services which may exist between DC Systems or any of
its affiliates and any of their respective employees.
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
Caminus would not have agreed to execute, deliver or perform this Agreement in
the absence thereof.
5.2 DOCUMENT DELIVERY. The parties acknowledge that the following
documents are being delivered in connection with the execution of this Agreement
(except as provided in clause (ix) below):
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(i) the Related Agreements (other than the Escrow
Agreement), duly executed by the respective parties
thereto;
(ii) an opinion from Alan W. Nash, counsel to DC Systems
and the Shareholders in the form attached hereto as
EXHIBIT H.
(iii) an opinion from Irell & Manella LLP, counsel to
Caminus, in the form attached hereto as EXHIBIT I;
(iv) certificates from DC Systems and the Shareholders,
dated the Execution Date, in form and substance
reasonably satisfactory to Caminus;
(v) the Limited Liability Company Agreement, duly
executed by each Shareholder;
(vi) certificates or other instruments representing all of
the Stock, together with duly executed stock powers,
or, as applicable, other duly executed documents of
assignment, transferring the Stock to Caminus;
(vii) such other documents, instruments, certifications and
further assurances as Caminus or its counsel may have
reasonably requested;
(viii) a completed and fully-executed Section 338(h)(10)
Election on Internal Revenue Service Form 8023 with
respect to the Purchase; and
(ix) a schedule reflecting the parties' agreement on the
tax basis and GAAP book value of the assets and
properties of DC Systems immediately after giving
effect to the execution of this Agreement, the
Related Agreements, and the other transactions
contemplated hereby to occur on the Execution Date
(the "AGREED VALUATIONS"). Such schedule shall be
prepared by Caminus or DC Systems (subject to the
approval of Shareholders, which approval shall not be
unreasonably withheld) within 30 days following the
Execution 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.
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5.3 TAX ELECTION. The parties acknowledge and agree that they intend to
make a Section 338(h)(10) Election, within the meaning of Treasury Regulations
Section 1.338-1(c)(11), promulgated under the Code (a "SECTION 338(h)(10)
ELECTION") with respect to the Purchase. Each party shall use all reasonable
efforts to make such Section 338(h)(10) Election and to cause the Purchase to
qualify for such Section 338(h)(10) Election, and shall not take any actions
which could prevent the Purchase from qualifying for such a Section 338(h)(10)
Election.
5.4 TAX MAKE-UP PAYMENT.
5.4.1 As additional consideration for the Purchase (and for
all purposes of this Agreement such amount to be added to the "Purchase Price"),
Caminus shall pay to the Shareholders an aggregate amount of cash (the "TAX
MAKE-UP PAYMENT"), calculated as follows (such payments to be made as soon as
practicable following completion of the computation of DC Systems' income for
its short subchapter S corporation year, and in any event not later than April
15, 2000):
Additional Tax
---------------------
1 - Capital Gain Rate
5.4.2 The Tax Make-Up Payment will be allocated among the
Shareholders in accordance with SCHEDULE 7.4.
5.4.3 For purposes of Section 5.4.1, the following terms shall
have the following meanings:
"ADDITIONAL TAX" shall mean the difference between (a) the
aggregate amount of federal income tax payable by the Shareholders as a
result of the Purchase, including the Section 338(h) (10) Election
(using the Capital Gain Rate and the highest federal income tax rate
for individuals on ordinary income), and (b) the aggregate amount of
federal income tax payable by the Shareholders as a result of the
Purchase, computed as if no Section 338(h)(10) Election had been made.
"CAPITAL GAIN RATE" shall mean, with respect to each
Shareholder, the highest federal income tax rate for individuals on
long-term capital gains or short-term capital gains, as applicable to
the Stock sold by such Shareholder to Acquisition Sub under this
Agreement, for the holding period specified with respect to such
Shareholder on SCHEDULE 7.4.
5.5 EXPENSES. Notwithstanding anything to the contrary in this
Agreement or any Related Agreement, all Expenses (as defined below) incurred by
the Shareholders or DC Systems at any time shall be borne solely and entirely by
the Shareholders. For purposes of this Agreement, "EXPENSES" shall include all
out-of-
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pocket expenses (including, without limitation, all fees and expenses of
counsel, accountants, investment bankers, experts and consultants to a party
hereto and its affiliates) incurred by a party or on its behalf in connection
with or related to the authorization, preparation, negotiation, execution and
performance of this Agreement and the Related Agreements, and all other matters
related to the consummation of the transactions contemplated hereby or thereby.
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, 3.4(i), 3.7, 3.18 and 3.22 of this
Agreement (as to which survival shall be indefinite) and in Section 3.10 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, warranties and covenants of DC Systems and the
Shareholders made hereunder or in connection with the transactions contemplated
by this Agreement shall survive the execution of this Agreement only through
December 31, 2000, 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; provided that the lapse
of such representations, warranties and covenants at the end of such period
shall not affect any bona fide claims asserted prior to the end of such period
with respect to such representations, warranties and covenants.
6.1.2 CAMINUS. Except for the representations and warranties
set forth in each of Sections 4.1, 4.2.1 and 4.6 (as to which survival shall be
indefinite), all representations, warranties and covenants of Caminus made
hereunder or in connection with the transactions contemplated by this Agreement
shall survive the execution of this Agreement only through December 31, 2000,
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; provided that the lapse of such
representations, warranties and covenants at the end of such period shall not
affect any bona fide claims asserted prior to the end of such period with
respect to such representations, warranties and covenants.
6.2 THE INDEMNITY OBLIGATION.
6.2.1 Subject to the provisions of Sections 6.3.3, 6.4, and
6.5, the Shareholders, shall indemnify, hold harmless and reimburse Caminus for
any and all losses, liabilities, damages, costs and expenses (including, without
limitation, reasonable legal fees) (hereinafter "LOSSES"), actually suffered or
incurred by Caminus, or any affiliate thereof or any assignee or successor
thereof, and each officer, director, and trustee of any of the foregoing, which
is incurred as a result of
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any breach of any representation, warranty or agreement made by any Seller in
this Agreement (including 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. Notwithstanding the
foregoing, Caminus agrees that the Shareholders other than Richard D. Couron and
Alan W. Nash shall not have responsibility for any Losses resulting from a
breach of the representations and warranties in ARTICLE 3, except for those
representations and warranties specifically identified in the first paragraph of
ARTICLE 3.
6.2.2 Subject to the provisions of Section 6.3.3, Caminus
shall indemnify, hold harmless and reimburse each Shareholder for any and all
Losses incurred by such Shareholder as a result of any breach of any
representation, warranty or agreement made by Caminus in this Agreement
(including 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.
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
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(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.
6.3.3 CLAIM RESTRICTIONS. Notwithstanding anything to the
contrary herein, the parties agree that:
(a) no claim shall be made by an Indemnified Party for
indemnification under this ARTICLE 6, to the extent
such claim pertains to a violation of this Agreement
reasonably susceptible to cure, unless the
Indemnifying Party fails to cure such violation
within 30 days of notice of such violation from the
Indemnified Party (unless provision of such 30-day
cure period would result in material prejudice to the
Indemnified Party, in which case the cure period
shall be reduced in duration to the maximum number of
days that would not result in such prejudice); and
(b) no claim shall be made by an Indemnified Party for
indemnification under this ARTICLE 6 for breaches of
such party's representations and warranties in this
Agreement unless the aggregate total of such claims
exceeds $100,000 (provided,
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that a breach of the representations and warranties
included in Sections 3.1, 3.2, 3.4, 3.7, 3.18 and
3.22 shall neither be subject to nor count toward the
foregoing numerical threshold).
6.4 INDEMNIFICATION FROM SHARES. The parties agree that Caminus shall
have recourse to the Membership Interests to satisfy any and all obligations
that the Shareholders may have to Caminus pursuant to this Agreement (including,
without limitation, pursuant to this Article 6). Further, as provided in the
definition of "Escrow Agreement" in Article 1 hereof, in the event that Caminus
undergoes the Reorganization, then the parties agree to obtain an Escrow Agent
(which shall be mutually agreeable to Caminus and the Seller Representative
specified in the Escrow Agreement or, if the Seller Representative has not been
specified, then to a majority-in-interest of the Shareholders) and enter into
the Escrow Agreement in substantially the form attached to this Agreement as
EXHIBIT A. Thereupon, Caminus shall have recourse to the shares of capital stock
issued in exchange for the Membership Interests in the Reorganization, which
will be deposited into the escrow established pursuant to the Escrow Agreement.
Prior to the Reorganization, to the extent that Caminus recovers notional shares
of the Membership Interests, such notional shares shall be valued at the rate of
$1.18 per notional share (i.e., reflecting the valuation of Caminus of
$100,000,000 as of and in connection with the Purchase, regardless of any change
in such valuation after the date hereof) (hereinafter the "VALUATION PER
SHARE"). From and after the Reorganization, to the extent that Caminus recovers
shares of capital stock from the escrow established pursuant to the Escrow
Agreement, such shares shall be valued in accord with Section 8 of the Escrow
Agreement. As more specifically provided in the Escrow Agreement, to the extent
that, in any initial public offering of Caminus' equity securities after the
Reorganization or thereafter, any Shareholder would otherwise be entitled to
sell any post-initial public offering shares of capital stock of Caminus, such
Shareholder shall be entitled to direct the Escrow Agent to do so, provided that
the proceeds of any such sale(s) shall be deposited into the escrow established
pursuant to the Escrow Agreement until the Release Date specified therein.
Subject to the provisions of Section 6.7, the remedies of Caminus expressed in
this Section 6.4 shall not constitute a limitation of Caminus' remedies; rather,
Caminus shall also be entitled to whatever other rights or remedies may be
available at law or in equity.
6.5 INDEMNITY LIMITATIONS. Notwithstanding anything contained in this
Agreement to the contrary, the Shareholders shall not be required to indemnify
Caminus pursuant to ARTICLE 6 for breaches of the Shareholders' representations
and warranties in this Agreement (i) with respect to all representations and
warranties except for those contained in Sections 3.1, 3.2, 3.4, 3.7, 3.18, and
3.22, for any amounts in excess of Three Million Dollars ($3,000,000) in the
aggregate, and (ii) with respect to all representations and warranties contained
in this Agreement (including, without limitation, those in Sections 3.1, 3.2,
3.4, 3.7, 3.18, and 3.22), for any amounts in excess of Thirteen Million Dollars
($13,000,000) in the aggregate or
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Ten Million Dollars ($10,000,000) plus the value of the Membership Interests, if
the Membership Interests upon the date of any ultimate payment hereunder should
be less than Three Million Dollars ($3,000,000), whichever amount is less.
6.6 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.
6.7 SOLE REMEDY. The indemnification remedies described in this ARTICLE
6 shall be the sole and exclusive remedy for any Indemnified Party for any Loss
incurred as a result of a breach of any representation or warranty or failure to
perform any undertaking or covenant contained in this Agreement or the Related
Agreements except that equitable remedies shall be available with respect to the
Covenants Not to Compete executed by the Shareholders.
ARTICLE 7
MISCELLANEOUS
7.1 CONSTRUCTION. Throughout this Agreement, as the context requires,
(i) the singular tense and number includes the plural, and the plural tense and
number includes the singular; (ii) the past tense includes the present, and the
present tense includes the past; and (iii) references to parties, sections,
schedules, and exhibits mean the parties, sections, schedules, and exhibits of
and to this Agreement. All exhibits and schedules referred to in this Agreement
are hereby incorporated in and made part of this Agreement. The section headings
in this Agreement are inserted only as a matter of convenience, and in no way
define, limit, extend, or interpret the scope of this Agreement or of any
particular section. If there is any apparent conflict or inconsistency between
the provisions set forth in this Agreement, and the provisions set forth in any
schedule or exhibit, to the extent possible such provisions shall be interpreted
in a manner so as to make them consistent. If it is not possible to interpret
such provisions consistently, the provisions set forth in the body of this
Agreement shall prevail.
7.2 ENTIRE AGREEMENT. This Agreement together with the Related
Agreements and the certificates and other instruments delivered in connection
herewith constitutes 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.
7.3 FURTHER ASSURANCES. Each party hereto shall at any time and from
time to time following the execution of this Agreement promptly execute and
deliver,
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<PAGE> 31
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.
7.4 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 Caminus or Acquisition Sub:
Caminus LLC
747 Third Avenue, 18th Floor
New York, NY 10017
Fax: (212) 888-0691
Attention: David M. Stoner, President
With a copy to:
GFI Energy Ventures LLC
11611 San Vicente Blvd., Suite 710
Los Angeles, CA 90049
Fax: (310) 442-0540
Attention: Richard K. Landers, Principal
With a copy to:
Irell & Manella LLP
333 South Hope Street, Suite 3300
Los Angeles, California 90071
Fax : (213) 229-0515
Attention: Anthony T. Iler, Esq.
If to any Shareholder, at the address specified for such Shareholder on
SCHEDULE 7.4.
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 7.4. Notice by personal
service shall be deemed given when received.
7.5 GOVERNING LAW AND SUBMISSION TO JURISDICTION. This Agreement shall
be governed by the laws of New York applicable to contracts executed and
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<PAGE> 32
wholly performed therein, without giving effect to the conflict of laws
provisions thereof.
7.6 ARBITRATION. Any controversy, dispute, or claim between or among
the parties, whether arising under the common law or any statute, including any
claim arising out of, in connection with, or in relation to the interpretation,
performance or breach of this Agreement (a "DISPUTED MATTER"), will be resolved
exclusively by arbitration, before a panel of three arbitrators, conducted in
the Borough of Manhattan, New York City, New York, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association ("AAA"),
and judgment upon any award rendered by the arbitrator may be entered by any
court of appropriate jurisdiction. Such arbitration will be administered by the
AAA if either of the parties requests such administration. Subject to Section
7.7, the parties shall, initially, bear the costs of arbitration (including
arbitrators' fees) equally.
7.7 COSTS AND ATTORNEYS FEES. In any dispute between or among the
parties concerning any provision of this Agreement or their rights and duties
under it, the party prevailing in such dispute shall be entitled, in addition to
such other relief as may be granted, to an award of its reasonable attorneys'
and expert witness fees and court costs (including the costs of the arbitration
procedure described in Section 7.6 and the fees of the arbitrators in any such
procedure) incurred by reason of the arbitration of the dispute, the enforcement
of any arbitration award, and any other court or other proceedings related to
such dispute. For purposes of this Section 7.7, the prevailing party is the
party that most closely obtains the relief it sought whether or not the suit or
other legal proceeding is settled or carried out to its conclusion.
7.8 SEVERABILITY. The validity, legality or enforceability 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 enforceable in any respect.
7.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts which together shall be one and the same instrument.
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 THIRD PARTY BENEFITS. None of the provisions of this Agreement
will be for the benefit of, or enforceable by, any third party beneficiary.
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<PAGE> 33
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
DC SYSTEMS, INC.,
a Texas corporation
By: /s/ Richard D. Couron
--------------------------------------
Name: Richard D. Couron
Its: Chief Executive Officer
CAMINUS LLC,
a Delaware limited liability company
By: /s/ David M. Stoner
--------------------------------------
Name: David M. Stoner
Its: President
CAMINUS/DC ACQUISITION CORP.,
a Delaware corporation
By: /s/ David M. Stoner
--------------------------------------
Name: David M. Stoner
Its: President
/s/ Joy Armstrong
------------------------------------------
JOY ARMSTRONG
/s/ Rene Anderson
------------------------------------------
RENE ANDERSON
/s/ Lisa J. Conley
------------------------------------------
LISA J. CONLEY
/s/ Richard D. Couron
------------------------------------------
RICHARD D. COURON
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<PAGE> 34
/s/ Richard L. Couron
------------------------------------------
RICHARD L. COURON
/s/ David L. Covich
------------------------------------------
DAVID L. COVICH
/s/ Jeremy D. Frye
------------------------------------------
JEREMY D. FRYE
/s/ Kyle Gerrild
------------------------------------------
KYLE GERRILD
/s/ Kurt E. Gerrild
------------------------------------------
KURT E. GERRILD
/s/ Andrew C. Hardin
------------------------------------------
ANDREW C. HARDIN
/s/ Alan W. Nash
------------------------------------------
ALAN W. NASH
/s/ Scott Tucker
------------------------------------------
SCOTT TUCKER
/s/ Gregg Allen
------------------------------------------
GREGG ALLEN
/s/ Tim Allen
------------------------------------------
TIM ALLEN
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<PAGE> 35
LIST OF EXHIBITS
Exhibit A - Escrow Agreement
Exhibit B - Richard D. Couron Employment Letter/Agreement
Exhibit C - Joy Armstrong Employment Letter/Agreement
Exhibit D - Alan W. Nash Employment Letter/Agreement
Exhibit E - David L. Covich Employment Letter/Agreement
Exhibit F - Covenant Not to Compete
Exhibit G - Joinder Agreement
Exhibit H - Alan W. Nash Opinion
Exhibit I - Irell & Manella Opinion
LIST OF SCHEDULES
Schedule 2.2 - Exceptions to Payments Upon Execution
Schedule 3.2 - Seller Required Consents
Schedule 3.4 - DC Systems and Seller Conflicts and Violations
Schedule 3.5 - DC Systems Liabilities and Accounting Principles
Schedule 3.6 - DC Systems Material Contracts
Schedule 3.7 - DC Systems Intellectual Property
Schedule 3.8 - DC Systems Insurance
Schedule 3.9.2 - DC Systems Employee Plans
Schedule 3.10 - DC Systems Taxes
Schedule 3.11 - DC Systems Bank Accounts
Schedule 3.12 - DC Systems Exceptions to Title
Schedule 3.14 - DC Systems Litigation
Schedule 3.15 - DC Systems Personal Property Leases
Schedule 3.16 - DC Systems Real Property Leases
Schedule 3.17 - DC Systems Permits
Schedule 3.21 - DC Systems Exceptions to Ordinary Course
Schedule 4.2.1 - Caminus Required Consents
Schedule 4.2.2 - Caminus Conflicts and Violations
Schedule 4.4 - Capitalization of Caminus
Schedule 7.4 - Shareholders Specifications
Exhibit A
Page 1
<PAGE> 1
EXHIBIT 4
COMMON STOCK COMMON STOCK
[CAM] [ ]
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP 133766 10 5
[Logo Of Caminus Corporation]
Caminus Corporation
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
This Certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $.01 PER
SHARE, OF
===========================Caminus Corporation==================================
transferable upon the books of the Corporation in person or by attorney upon
surrender of this certificate duly endorsed or assigned. This certificate and
the shares represented hereby are subject to the laws of the State of Delaware
and to the provisions of the Certificate of Incorporation and By-laws of the
Corporation, as from time to time amended or restated. This certificate is not
valid unless countersigned and registered by the Transfer Agent and Registrar.
IN WITNESS WHEREOF, Caminus Corporation has caused its facsimile
corporate seal and facsimile signatures of its duly authorized officers to be
hereunto affixed.
[SEAL OF Caminus Corporation]
/s/ Mark A. Herman /s/ David M. Stoner
- -------------------------- -------------------
CHIEF FINANCIAL OFFICER PRESIDENT AND CHIEF
AND TREASURER EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST
COMPANY
TRANSFER AGENT AND REGISTRAR
By
------------------------------------
AUTHORIZED SIGNATURE
<PAGE> 2
Caminus Corporation
The Corporation is authorized to issue more than one class of stock.
Upon written request, made by the holder of this Certificate, the Corporation
will furnish to such holder without charge a copy of the full text of the
preferences, voting powers, qualifications and special and relative rights of
the shares of each class authorized to be issued, as set forth in the
Certificate of Incorporation and the votes of the Board of Directors.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT ______Custodian_______ UNIF TRF MIN ACT _______
Custodian (until age __)
TEN ENT - as tenants by the entireties (Cust) (Minor) (Cust)
JT TEN - as joint tenants with right under Uniform Gifts to Minors _________________ under Uniform Transfers
of survivorship and not Act________________________ (Minor)
as tenants in common (State) to Minors Act__________________________
(State)
</TABLE>
Additional abbreviations may also be used though not in the
above list.
FOR VALUE RECEIVED, ___________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
_______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
_______________________________________________________________________________
______________________________________________________________________ Shares
of the capital stock is represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_____________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated _____________________________
X _____________________________
X _____________________________
Notice: THE SIGNATURE(S) TO THIS
ASSIGNMENT MUST
CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON
THE FACE OF THE
CERTIFICATE IN EVERY
PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed By: _________________________________
THE SIGNATURE(S) MUST BE
GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN
ASSOCIATIONS AND CREDIT UNIONS
WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO S.E.C.
RULE 17Ad-15.
<PAGE> 1
Exhibit 10.2
CAMINUS CORPORATION
1999 STOCK INCENTIVE PLAN
1. Purpose
The purpose of this 1999 Stock Incentive Plan (the "Plan") of Caminus
Corporation, a Delaware corporation (the "Company"), is to advance the interests
of the Company's stockholders by enhancing the Company's ability to attract,
retain and motivate persons who make (or are expected to make) important
contributions to the Company by providing such persons with equity ownership
opportunities and performance-based incentives and thereby better aligning the
interests of such persons with those of the Company's stockholders. Except where
the context otherwise requires, the term "Company" shall include any of the
Company's present or future subsidiary corporations as defined in Section 424(f)
of the Internal Revenue Code of 1986, as amended, and any regulations
promulgated thereunder (the "Code").
2. Eligibility
All of the Company's employees, officers, directors, consultants and
advisors (and any individuals who have accepted an offer for employment) are
eligible to be granted options, restricted stock awards, or other stock-based
awards (each, an "Award") under the Plan. Each person who has been granted an
Award under the Plan shall be deemed a "Participant."
3. Administration, Delegation
(a) Administration by Board of Directors. The Plan will be administered
by the Board of Directors of the Company (the "Board"). The Board shall have
authority to grant Awards and to adopt, amend and repeal such administrative
rules, guidelines and practices relating to the Plan as it shall deem advisable.
The Board may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem expedient to carry the Plan into effect and it shall be the sole and final
judge of such expediency. All decisions by the Board shall be made in the
Board's sole discretion and shall be final and binding on all persons having or
claiming any interest in the Plan or in any Award. No director or person acting
pursuant to the authority delegated by the Board shall be liable for any action
or determination relating to or under the Plan made in good faith.
(b) Delegation to Executive Officers. To the extent permitted by
applicable law, the Board may delegate to one or more executive officers of the
Company the power to make Awards and exercise such other powers under the Plan
as the Board
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<PAGE> 2
may determine, provided that the Board shall fix the maximum number of shares
subject to Awards and the maximum number of shares for any one Participant to be
made by such executive officers.
(c) Appointment of Committees. To the extent permitted by applicable
law, the Board may delegate any or all of its powers under the Plan to one or
more committees or subcommittees of the Board (a "Committee"). All references in
the Plan to the "Board" shall mean the Board or a Committee of the Board or the
executive officer referred to in Section 3(b) to the extent that the Board's
powers or authority under the Plan have been delegated to such Committee or
executive officer.
4. Stock Available for Awards
(a) Number of Shares. Subject to adjustment under Section 8, Awards may
be made under the Plan for up to 502,312 shares of common stock, $0.01 par
value per share, of the Company (the "Common Stock"). If any Award expires or is
terminated, surrendered or canceled without having been fully exercised or is
forfeited in whole or in part or results in any Common Stock not being issued,
the unused Common Stock covered by such Award shall again be available for the
grant of Awards under the Plan, subject, however, in the case of Incentive Stock
Options (as hereinafter defined), to any limitation required under the Code.
Shares issued under the Plan may consist in whole or in part of authorized but
unissued shares or treasury shares.
(b) Per-Participant Limit. Subject to adjustment under Section 8, for
Awards granted after the Common Stock is registered under the Securities
Exchange Act of 1934 (the "Exchange Act"), the maximum number of shares of
Common Stock with respect to which an Award may be granted to any Participant
under the Plan shall be 450,000 per calendar year. The per-Participant
limit described in this Section 4(b) shall be construed and applied consistently
with Section 162(m) of the Code ("Section 162(m)").
5. Stock Options
(a) General. The Board may grant options to purchase Common Stock
(each, an "Option") and determine the number of shares of Common Stock to be
covered by each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive Stock
Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option."
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<PAGE> 3
(b) Incentive Stock Options. An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) which is intended to be an
Incentive Stock Option is not an Incentive Stock Option.
(c) Exercise Price. The Board shall establish the exercise price at the
time each Option is granted and specify it in the applicable option agreement.
(d) Duration of Options. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Board may specify in the
applicable option agreement.
(e) Exercise of Option. Options may be exercised by delivery to the
Company of a written notice of exercise signed by the proper person or by any
other form of notice (including electronic notice) approved by the Board
together with payment in full as specified in Section 5(f) for the number of
shares for which the Option is exercised.
(f) Payment Upon Exercise. Common Stock purchased upon the exercise of
an Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2) except as the Board may, in its sole discretion, otherwise
provide in an option agreement, by (i) delivery of an irrevocable and
unconditional undertaking by a creditworthy broker to deliver promptly to the
Company sufficient funds to pay the exercise price or (ii) delivery by the
Participant to the Company of a copy of irrevocable and unconditional
instructions to a creditworthy broker to deliver promptly to the Company cash or
a check sufficient to pay the exercise price;
(3) when the Common Stock is registered under the Exchange
Act, by delivery of shares of Common Stock owned by the Participant valued at
their fair market value as determined by (or in a manner approved by) the Board
in good faith ("Fair Market Value"), provided (i) such method of payment is then
permitted under applicable law and (ii) such Common Stock was owned by the
Participant at least six months prior to such delivery;
(4) to the extent permitted by the Board, in its sole
discretion by (i) delivery of a promissory note of the Participant to the
Company on terms determined
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<PAGE> 4
by the Board, or (ii) payment of such other lawful consideration as the Board
may determine; or
(5) by any combination of the above permitted forms of
payment.
6. Restricted Stock
(a) Grants. The Board may grant Awards entitling recipients to acquire
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, a "Restricted Stock Award").
(b) Terms and Conditions. The Board shall determine the terms and
conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price, if any. Any stock certificates
issued in respect of a Restricted Stock Award shall be registered in the name of
the Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
7. Other Stock-Based Awards
The Board shall have the right to grant other Awards based upon the
Common Stock having such terms and conditions as the Board may determine,
including the grant of shares based upon certain conditions, the grant of
securities convertible into Common Stock and the grant of stock appreciation
rights.
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<PAGE> 5
8. Adjustments for Changes in Common Stock and Certain Other Events
(a) Changes in Capitalization. In the event of any stock split, reverse
stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off or other similar change in capitalization
or event, or any distribution to holders of Common Stock other than a normal
cash dividend, (i) the number and class of securities available under this Plan,
(ii) the per-Participant limit set forth in Section 4(b), (iii) the number and
class of securities and exercise price per share subject to each outstanding
Option, (iv) the repurchase price per share subject to each outstanding
Restricted Stock Award, and (v) the terms of each other outstanding Award shall
be appropriately adjusted by the Company (or substituted Awards may be made, if
applicable) to the extent the Board shall determine, in good faith, that such an
adjustment (or substitution) is necessary and appropriate. If this Section 8(a)
applies and Section 8(c) also applies to any event, Section 8(c) shall be
applicable to such event, and this Section 8(a) shall not be applicable.
(b) Liquidation or Dissolution. In the event of a proposed liquidation
or dissolution of the Company, the Board shall upon written notice (including
electronic notice) to the Participants provide that all then unexercised Options
will (i) become exercisable in full as of a specified time at least 10 business
days prior to the effective date of such liquidation or dissolution and (ii)
terminate effective upon such liquidation or dissolution, except to the extent
exercised before such effective date. The Board may specify the effect of a
liquidation or dissolution on any Restricted Stock Award or other Award granted
under the Plan at the time of the grant of such Award.
(c) Acquisition Events
(1) Definition. An "Acquisition Event" shall mean: (a) any
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving or acquiring entity) less than 60% of the combined voting power of the
voting securities of the Company or such surviving or acquiring entity
outstanding immediately after such merger or consolidation; (b) any sale of all
or substantially all of the assets of the Company; (c) the complete liquidation
of the Company; or (d) the acquisition of "beneficial ownership" (as defined in
Rule 13d-3 under the Exchange Act) of securities of the Company representing 60%
or more of the combined voting power of the Company's then outstanding
securities (other than through an acquisition of securities directly from the
Company) by any "person," as such term is used in Sections 13(d) and 14(d) of
the Exchange Act other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any entity owned
directly or
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<PAGE> 6
indirectly by the stockholders of the Company in substantially the same
proportion as their ownership of stock of the Company
(2) Consequences of an Acquisition Event on Options. Upon the
occurrence of an Acquisition Event, or the execution by the Company of any
agreement with respect to an Acquisition Event, the Board shall provide that all
outstanding Options shall be assumed, or equivalent options shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof). For purposes hereof, an Option shall be considered to be assumed if,
following consummation of the Acquisition Event, the Option confers the right to
purchase, for each share of Common Stock subject to the Option immediately prior
to the consummation of the Acquisition Event, the consideration (whether cash,
securities or other property) received as a result of the Acquisition Event by
holders of Common Stock for each share of Common Stock held immediately prior to
the consummation of the Acquisition Event (and if holders were offered a choice
of consideration, the type of consideration chosen by the holders of a majority
of the outstanding shares of Common Stock); provided, however, that if the
consideration received as a result of the Acquisition Event is not solely common
stock of the acquiring or succeeding corporation (or an affiliate thereof), the
Company may, with the consent of the acquiring or succeeding corporation,
provide for the consideration to be received upon the exercise of Options to
consist solely of common stock of the acquiring or succeeding corporation (or an
affiliate thereof) equivalent in fair market value to the per share
consideration received by holders of outstanding shares of Common Stock as a
result of the Acquisition Event.
Notwithstanding the foregoing, if the acquiring or succeeding
corporation (or an affiliate thereof) does not agree to assume, or substitute
for, such Options, then the Board shall, upon written notice (including
electronic notice) to the Participants, provide that all then unexercised
Options will become exercisable in full as of a specified time prior to the
Acquisition Event and will terminate immediately prior to the consummation of
such Acquisition Event, except to the extent exercised by the Participants
before the consummation of such Acquisition Event; provided, however, that in
the event of an Acquisition Event under the terms of which holders of Common
Stock will receive upon consummation thereof a cash payment for each share of
Common Stock surrendered pursuant to such Acquisition Event (the "Acquisition
Price"), then the Board may instead provide that all outstanding Options shall
terminate upon consummation of such Acquisition Event and that each Participant
shall receive, in exchange therefor, a cash payment equal to the amount (if any)
by which (A) the Acquisition Price multiplied by the number of shares of Common
Stock subject to such outstanding Options (whether or not then exercisable),
exceeds (B) the aggregate exercise price of such Options.
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<PAGE> 7
(3) Consequences of an Acquisition Event on Restricted Stock
Awards. Upon the occurrence of an Acquisition Event, the repurchase and other
rights of the Company under each outstanding Restricted Stock Award shall be
assumed or substituted by and shall inure to the benefit of the Company's
successor and shall apply to the cash, securities or other property which the
Common Stock was converted into or exchanged for pursuant to such Acquisition
Event in the same manner and to the same extent as they applied to the Common
Stock subject to such Restricted Stock Award.
(4) Consequences of an Acquisition Event on Other Awards. The
Board shall specify the effect of an Acquisition Event on any other Award
granted under the Plan at the time of the grant of such Award.
(5) Consequences of Certain Terminations After an Acquisition
Event. Each Option, Restricted Stock Award or other Award assumed or substituted
pursuant to this Section 8(c) shall include a provision to the effect that such
Option, Restricted Stock Award or other Award shall become immediately
exercisable (or vested) in full if, on or prior to the first anniversary of the
Acquisition Event, the Participant terminates his or her employment for Good
Reason or is terminated without Cause by the surviving or acquiring corporation.
"Good Reason" shall mean any significant diminution in the Participant's title,
authority or responsibilities from and after such Acquisition Event or any
reduction in the annual cash compensation payable to the Participant from and
after such Acquisition Event. "Cause" shall mean any willful misconduct by the
Participant which affects the business reputation of the Company or willful
failure by the Participant to perform his or her material responsibilities to
the Company (including, without limitation, breach by the Participant of any
provision of any employment, consulting, advisory, nondisclosure,
non-competition or other similar agreement between the Participant and the
Company). The Participant shall be considered to have been discharged for
"Cause" if the Company determines, within 30 days after the Participant's
resignation, that discharge for Cause was warranted.
9. Non-Competition
(a) Non-Competition. As a condition to the issuance of Awards and
shares of Common Stock issuable upon exercise of Awards (together with the
Awards, "Securities") 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 Participant owns Securities, the Participant will
not, without the prior written consent of the Company based upon approval from
the Board (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
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<PAGE> 8
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. "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.
(b) Non-Interference. As long as a Participant owns Securities, no
Participant 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 twelve (12) months has been, an employee of the
Company or its affiliates, whether or not for compensation and whether as an
officer, covenantor, consultant, advisor, independent sales representative,
independent contractor or participant, or (b) except as may be appropriate to
perform such Participant'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.
(c) Effect of Violation. In the event of a violation by a Participant
of the provisions of this Section 9, then all Options held by such Participant
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 shares of Common
Stock issued in connection with Option exercises or other Awards ("Award
Shares") owned by such Participant for an amount equal to the lesser of (i) the
Fair Market Value of the Award Shares repurchased as of the date of such
violation, and (ii) the price paid by the Participant for such Award Shares.
10. General Provisions Applicable to Awards
(a) Transferability of Awards. Except as the Board may otherwise
determine or provide in an Award, Awards shall not be sold, assigned,
transferred, pledged or otherwise encumbered by the person to whom they are
granted, either voluntarily or by operation of law, except by will or the laws
of descent and distribution, and, during the
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<PAGE> 9
life of the Participant, shall be exercisable only by the Participant.
References to a Participant, to the extent relevant in the context, shall
include references to authorized transferees.
(b) Documentation. Each Award shall be evidenced by a written
instrument in such form as the Board shall determine, it being understood that
an electronic form of Award shall be deemed to be a written instrument for
purposes of the Plan. Each Award may contain terms and conditions in addition to
those set forth in the Plan.
(c) Board Discretion. Except as otherwise provided by the Plan, each
Award may be made alone or in addition or in relation to any other Award. The
terms of each Award need not be identical, and the Board need not treat
Participants uniformly.
(d) Termination of Status. The Board shall determine the effect on an
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.
(e) Withholding. Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. Except as the Board may otherwise
provide in an Award, when the Common Stock is registered under the Exchange Act,
Participants may, to the extent then permitted under applicable law, satisfy
such tax obligations in whole or in part by delivery of shares of Common Stock,
including shares retained from the Award creating the tax obligation, valued at
their Fair Market Value. The Company may, to the extent permitted by law, deduct
any such tax obligations from any payment of any kind otherwise due to a
Participant.
(f) Amendment of Award. The Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.
(g) Conditions on Delivery of Stock. The Company will not be obligated
to deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the
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<PAGE> 10
Company's counsel, all other legal matters in connection with the issuance and
delivery of such shares have been satisfied, including any applicable securities
laws and any applicable stock exchange or stock market rules and regulations,
and (iii) the Participant has executed and delivered to the Company such
representations or agreements as the Company may consider appropriate to satisfy
the requirements of any applicable laws, rules or regulations.
(h) Acceleration. The Board may at any time provide that any Options
shall become immediately exercisable in full or in part, that any Restricted
Stock Awards shall be free of restrictions in full or in part or that any other
Awards may become exercisable in full or in part or free of some or all
restrictions or conditions, or otherwise realizable in full or in part, as the
case may be.
11. Miscellaneous
(a) No Right To Employment or Other Status. No person shall have any
claim or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any rights
as a stockholder with respect to any shares of Common Stock to be distributed
with respect to an Award until becoming the record holder of such shares.
Notwithstanding the foregoing, in the event the Company effects a split of the
Common Stock by means of a stock dividend and the exercise price of and the
number of shares subject to such Option are adjusted as of the date of the
distribution of the dividend (rather than as of the record date for such
dividend), then an optionee who exercises an Option between the record date and
the distribution date for such stock dividend shall be entitled to receive, on
the distribution date, the stock dividend with respect to the shares of Common
Stock acquired upon such Option exercise, notwithstanding the fact that such
shares were not outstanding as of the close of business on the record date for
such stock dividend.
(c) Effective Date and Term of Plan. The Plan shall become effective on
the date on which it is adopted by the Board, but no Award granted to a
Participant that is intended to comply with Section 162(m) shall become
exercisable, vested or realizable, as applicable to such Award, unless and until
the Plan has been approved by the Company's stockholders to the extent
stockholder approval is required by Section 162(m) in the manner required under
Section 162(m) (including the vote required under Section 162(m)). No Awards
shall be granted under the Plan after the completion of ten
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<PAGE> 11
years from the earlier of (i) the date on which the Plan was adopted by the
Board or (ii) the date the Plan was approved by the Company's stockholders, but
Awards previously granted may extend beyond that date.
(d) Amendment of Plan. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time, provided that to the extent required by
Section 162(m), no Award granted to a Participant that is intended to comply
with Section 162(m) after the date of such amendment shall become exercisable,
realizable or vested, as applicable to such Award, unless and until such
amendment shall have been approved by the Company's stockholders as required by
Section 162(m) (including the vote required under Section 162(m)).
(e) Governing Law. The provisions of the Plan and all Awards made
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law.
Approved by the Board of Directors
on September 30, 1999
Approved by the Stockholders
on September 30, 1999
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<PAGE> 12
CAMINUS CORPORATION
INCENTIVE STOCK OPTION AGREEMENT
GRANTED UNDER 1999 STOCK INCENTIVE PLAN
1. Grant of Option.
This agreement evidences the grant by Caminus Corporation, a Delaware
corporation (the "Company"), on [____________, _____] (the "Grant Date") to
[_______________], an employee of the Company (the "Participant"), of an option
to purchase, in whole or in part, on the terms provided herein and in the
Company's 1999 Stock Incentive Plan (the "Plan"), a total of [ ] shares (the
"Shares") of common stock, $0.01 par value per share, of the Company ("Common
Stock") at $[ ] per Share. Unless earlier terminated, this option shall
expire on [_______] (the "Final Exercise Date").
It is intended that the option evidenced by this agreement shall be an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended and any regulations promulgated thereunder (the "Code"). Except
as otherwise indicated by the context, the term "Participant", as used in this
option, shall be deemed to include any person who acquires the right to exercise
this option validly under its terms.
2. Vesting Schedule.
This option will become exercisable ("vest") as to 25% of the original
number of Shares on the first anniversary of the Grant Date and as to 75% of the
original number of Shares in 36 equal monthly installments on the same day of
the month as the Grant Date commencing in the 13th month following the Grant
Date.
The right of exercise shall be cumulative so that to the extent the
option is not exercised in any period to the maximum extent permissible it shall
continue to be exercisable, in whole or in part, with respect to all shares for
which it is vested until the earlier of the Final Exercise Date or the
termination of this option under Section 3 hereof or the Plan.
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<PAGE> 13
3. Exercise of Option.
(a) Form of Exercise. Each election to exercise this option shall be in
writing, signed by the Participant, and received by the Company at its principal
office, accompanied by this agreement, and payment in full in the manner
provided in the Plan. The Participant may purchase less than the number of
shares covered hereby, provided that no partial exercise of this option may be
for any fractional share or for fewer than ten whole shares.
(b) Continuous Relationship with the Company Required. Except as
otherwise provided in this Section 3, this option may not be exercised unless
the Participant, at the time he or she exercises this option, is, and has been
at all times since the Grant Date, an employee, officer or director of, or
consultant or advisor to, the Company or any parent or subsidiary of the Company
as defined in Section 424(e) or (f) of the Code (an "Eligible Participant").
(c) Termination of Relationship with the Company. If the Participant
ceases to be an Eligible Participant for any reason, then, except as provided in
paragraphs (d) and (e) below, the right to exercise this option shall terminate
30 days after such cessation (but in no event after the Final Exercise Date),
provided, that, this option shall be exercisable only to the extent that the
Participant was entitled to exercise this option on the date of such cessation.
Notwithstanding the foregoing, if the Participant, prior to the Final Exercise
Date, violates the non-competition or confidentiality provisions of the Plan or
any employment contract, confidentiality and nondisclosure agreement or other
agreement between the Participant and the Company, the right to exercise this
option shall terminate immediately upon such violation.
(d) Exercise Period Upon Death or Disability. If the Participant dies
or becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior
to the Final Exercise Date while he or she is an Eligible Participant and the
Company has not terminated such relationship for "cause" as specified in
paragraph (e) below, this option shall be exercisable, within the period of six
months following the date of death or disability of the Participant by the
Participant, provided, that, this option shall be exercisable only to the extent
that this option was exercisable by the Participant on the date of his or her
death or disability, and further provided that this option shall not be
exercisable after the Final Exercise Date.
(e) Discharge for Cause. If the Participant, prior to the Final
Exercise Date, is discharged by the Company for "cause" (as defined below), the
right to exercise this option shall terminate immediately upon the effective
date of such discharge. "Cause" shall mean, with respect to any Participant who
has entered into an employment or consulting agreement with the Company, a
material breach of such agreement by the
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<PAGE> 14
Participant, or if such agreement provides for termination for cause, the
definition of "cause" set forth in such agreement. With respect to any other
Participant, "cause" shall mean (i) conviction or pleading guilty (including a
plea of nolo contendere) 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 Board, (iii) failure of
the Participant to obey the reasonable and lawful orders of the Board or the
chief executive officer of the Company after written demand that the Participant
do so, (iv) gross negligence by the Participant in the performance of, or wilful
disregard by the Participant of, the Participant's obligations to the Company,
or (v) the breach by the Participant of any of the Participant's obligations of
confidentiality with respect to the Company. The Participant shall be considered
to have been discharged for "cause" if the Company determines, within 30 days
after the Participant's resignation, that discharge for cause was warranted.
4. Withholding.
No Shares will be issued pursuant to the exercise of this option unless
and until the Participant pays to the Company, or makes provision satisfactory
to the Company for payment of, any federal, state or local withholding taxes
required by law to be withheld in respect of this option.
5. Nontransferability of Option.
This option may not be sold, assigned, transferred, pledged or
otherwise encumbered by the Participant, either voluntarily or by operation of
law, except by will or the laws of descent and distribution, and, during the
lifetime of the Participant, this option shall be exercisable only by the
Participant.
6. Disqualifying Disposition.
If the Participant disposes of Shares acquired upon exercise of this
option within two years from the Grant Date or one year after such Shares were
acquired pursuant to exercise of this option, the Participant shall notify the
Company in writing of such disposition.
7. Provisions of the Plan.
This option is subject to the provisions of the Plan, a copy of which
is furnished to the Participant with this option.
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<PAGE> 15
IN WITNESS WHEREOF, the Company has caused this option to be executed
under its corporate seal by its duly authorized officer. This option shall take
effect as a sealed instrument.
CAMINUS CORPORATION
Dated: ___________________________________ By:_______________________________
Name:
Title:
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<PAGE> 16
PARTICIPANT'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the
terms and conditions thereof. The undersigned hereby acknowledges receipt of a
copy of the Company's 1999 Stock Incentive Plan.
PARTICIPANT:
________________________________________
Print Name:
Address: ______________________________
______________________________
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<PAGE> 17
CAMINUS CORPORATION
NONSTATUTORY STOCK OPTION AGREEMENT
GRANTED UNDER 1999 STOCK INCENTIVE PLAN
1. Grant of Option.
This agreement evidences the grant by Caminus Corporation, a Delaware
corporation (the "Company"), on [______________ , _____] (the "Grant Date") to
[________________], an [employee], [consultant], [director] of the Company (the
"Participant"), of an option to purchase, in whole or in part, on the terms
provided herein and in the Company's 1999 Stock Incentive Plan (the "Plan"), a
total of [ ] shares (the "Shares") of common stock, $0.01 par value per
share, of the Company ("Common Stock") at $[ ] per Share. Unless earlier
terminated, this option shall expire on [_______] (the "Final Exercise Date").
It is intended that the option evidenced by this agreement shall not be
an incentive stock option as defined in Section 422 of the Internal Revenue Code
of 1986, as amended and any regulations promulgated thereunder (the "Code").
Except as otherwise indicated by the context, the term "Participant", as used in
this option, shall be deemed to include any person who acquires the right to
exercise this option validly under its terms.
2. Vesting Schedule.
This option will become exercisable ("vest") as to 25% of the original
number of Shares on the first anniversary of the Grant Date and as to 75% of the
original number of Shares in 36 equal monthly installments on the same day of
the month as the Grant Date commencing in the 13th month following the Grant
Date.
The right of exercise shall be cumulative so that to the extent the
option is not exercised in any period to the maximum extent permissible it shall
continue to be exercisable, in whole or in part, with respect to all shares for
which it is vested until the earlier of the Final Exercise Date or the
termination of this option under Section 3 hereof or the Plan.
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<PAGE> 18
3. Exercise of Option.
(a) Form of Exercise. Each election to exercise this option shall be in
writing, signed by the Participant, and received by the Company at its principal
office, accompanied by this agreement, and payment in full in the manner
provided in the Plan. The Participant may purchase less than the number of
shares covered hereby, provided that no partial exercise of this option may be
for any fractional share or for fewer than ten whole shares.
(b) Continuous Relationship with the Company Required. Except as
otherwise provided in this Section 3, this option may not be exercised unless
the Participant, at the time he or she exercises this option, is, and has been
at all times since the Grant Date, an employee, officer or director of, or
consultant or advisor to, the Company or any parent or subsidiary of the Company
as defined in Section 424(e) or (f) of the Code (an "Eligible Participant").
(c) Termination of Relationship with the Company. If the Participant
ceases to be an Eligible Participant for any reason, then, except as provided in
paragraphs (d) and (e) below, the right to exercise this option shall terminate
30 days after such cessation (but in no event after the Final Exercise Date),
provided, that, this option shall be exercisable only to the extent that the
Participant was entitled to exercise this option on the date of such cessation.
Notwithstanding the foregoing, if the Participant, prior to the Final Exercise
Date, violates the non-competition or confidentiality provisions of the Plan or
any employment contract, confidentiality and nondisclosure agreement or other
agreement between the Participant and the Company, the right to exercise this
option shall terminate immediately upon such violation.
(d) Exercise Period Upon Death or Disability. If the Participant dies
or becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior
to the Final Exercise Date while he or she is an Eligible Participant and the
Company has not terminated such relationship for "cause" as specified in
paragraph (e) below, this option shall be exercisable, within the period of six
months following the date of death or disability of the Participant, by the
Participant, provided, that, this option shall be exercisable only to the extent
that this option was exercisable by the Participant on the date of his or her
death or disability, and further provided that this option shall not be
exercisable after the Final Exercise Date.
(e) Discharge for Cause. If the Participant, prior to the Final
Exercise Date, is discharged by the Company for "cause" (as defined below), the
right to exercise this option shall terminate immediately upon the effective
date of such discharge. "Cause" shall mean, with respect to any Participant who
has entered into an employment or consulting agreement with the Company, a
material breach of such agreement by the
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<PAGE> 19
Participant, or if such agreement provides for termination for cause, the
definition of "cause" set forth in such agreement. With respect to any other
Participant, "cause" shall mean (i) conviction or pleading guilty (including a
plea of nolo contendere) 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 Board, (iii) failure of
the Participant to obey the reasonable and lawful orders of the Board or the
chief executive officer of the Company after written demand that the Participant
do so, (iv) gross negligence by the Participant in the performance of, or wilful
disregard by the Participant of, the Participant's obligations to the Company,
or (v) the breach by the Participant of any of the Participant's obligations of
confidentiality with respect to the Company. The Participant shall be considered
to have been discharged for "cause" if the Company determines, within 30 days
after the Participant's resignation, that discharge for cause was warranted.
4. Withholding.
No Shares will be issued pursuant to the exercise of this option unless
and until the Participant pays to the Company, or makes provision satisfactory
to the Company for payment of, any federal, state or local withholding taxes
required by law to be withheld in respect of this option.
5. Nontransferability of Option.
This option may not be sold, assigned, transferred, pledged or
otherwise encumbered by the Participant, either voluntarily or by operation of
law, except by will or the laws of descent and distribution, and, during the
lifetime of the Participant, this option shall be exercisable only by the
Participant.
6. Provisions of the Plan.
This option is subject to the provisions of the Plan, a copy of which
is furnished to the Participant with this option.
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<PAGE> 20
IN WITNESS WHEREOF, the Company has caused this option to be executed
under its corporate seal by its duly authorized officer. This option shall take
effect as a sealed instrument.
CAMINUS CORPORATION
Dated: ________________________ By: ____________________________________
Name:
Title:
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<PAGE> 21
PARTICIPANT'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the
terms and conditions thereof. The undersigned hereby acknowledges receipt of a
copy of the Company's 1999 Stock Incentive Plan.
PARTICIPANT:
________________________________________
Print Name:
Address: ______________________________
______________________________
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<PAGE> 1
EXHIBIT 10.3
CAMINUS CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
The purpose of this Plan is to provide eligible employees of Caminus
Corporation, a Delaware corporation (the "Company"), and certain of its
subsidiaries with opportunities to purchase shares of the Company's common
stock, $0.01 par value per share (the "Common Stock"). Ninety-five thousand two
hundred thirty-eight (95,238) shares of Common Stock in the aggregate have been
approved for this purpose. This Plan is intended to qualify as an "employee
stock purchase plan" as defined in Section 423 of the Internal Revenue Code of
1986, as amended (the "Code"), and the regulations promulgated thereunder, and
shall be interpreted consistent therewith.
1. Administration. The Plan will be administered by the Board or by a
Committee appointed by the Board (the "Committee"). The Board or the Committee
has authority to make rules and regulations for the administration of the Plan
and its interpretation and decisions with regard thereto shall be final and
conclusive.
2. Eligibility. All employees of the Company, including Directors who
are employees, and all employees of any subsidiary of the Company (as defined in
Section 424(f) of the Code) designated by the Board or the Committee from time
to time (a "Designated Subsidiary"), are eligible to participate in any one or
more of the offerings of Options (as defined in Section 9) to purchase Common
Stock under the Plan provided that:
(a) they are customarily employed by the Company or a
Designated Subsidiary for more than 20 hours a week and for more than
five months in a calendar year; and
(b) they have been employed by the Company or a Designated
Subsidiary for at least three months prior to enrolling in the Plan;
and
(c) they are employees of the Company or a Designated
Subsidiary on the first day of the applicable Plan Period (as defined
below).
No employee may be granted an option hereunder if such employee,
immediately after the option is granted, owns 5% or more of the total combined
voting power or value of the stock of the Company or any subsidiary. For
purposes of the preceding sentence, the attribution rules of Section 424(d) of
the Code shall apply in
<PAGE> 2
determining the stock ownership of an employee, and all stock which the employee
has a contractual right to purchase shall be treated as stock owned by the
employee.
3. Offerings. The Company will make one or more offerings ("Offerings")
to employees to purchase stock under this Plan. Offerings will begin on such
date or dates as may be established by the Board or the Committee from time to
time (the "Offering Commencement Dates"). Each Offering Commencement Date will
begin a six-month period (a "Plan Period") during which payroll deductions will
be made and held for the purchase of Common Stock at the end of the Plan Period.
The Board or the Committee may, at its discretion, choose a different Plan
Period of twelve (12) months or less for its Offerings.
4. Participation. An employee eligible on the Offering Commencement
Date of any Offering may participate in such Offering by completing and
forwarding a payroll deduction authorization form to the employee's appropriate
payroll office at least 14 days prior to the applicable Offering Commencement
Date. The form will authorize a regular payroll deduction from the Compensation
received by the employee during the Plan Period. Unless an employee files a new
form or withdraws from the Plan, his deductions and purchases will continue at
the same rate for future Offerings under the Plan as long as the Plan remains in
effect. The term "Compensation" means the amount of money reportable on the
employee's Federal Income Tax Withholding Statement, excluding overtime, shift
premium, incentive or bonus awards, allowances and reimbursements for expenses
such as relocation allowances for travel expenses, income or gains on the
exercise of Company stock options or stock appreciation rights, and similar
items, whether or not shown on the employee's Federal Income Tax Withholding
Statement, but including, in the case of salespersons, sales commissions to the
extent determined by the Board or the Committee.
5. Deductions. The Company will maintain payroll deduction accounts for
all participating employees. With respect to any Offering made under this Plan,
an employee may authorize a payroll deduction, as set forth below, from the
Compensation he or she receives during the Plan Period or such shorter period
during which deductions from payroll are made. Payroll deductions may be at the
rate of 1%, 2%, 3%, 4%, 5%, 6%, 7%, 8%, 9% or 10% of Compensation with any
change in compensation during the Plan Period to result in an automatic
corresponding change in the dollar amount withheld.
No employee may be granted an Option (as defined in Section 9) which
permits his rights to purchase Common Stock under this Plan and any other
employee stock purchase plan (as defined in Section 423(b) of the Code) of the
Company and its subsidiaries, to accrue at a rate which exceeds $25,000 of the
fair market value of such
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<PAGE> 3
Common Stock (determined at the Offering Commencement Date of the Plan Period)
for each calendar year in which the Option is outstanding at any time.
6. Deduction Changes. An employee may decrease or discontinue his
payroll deduction once during any Plan Period, by filing a new payroll deduction
authorization form. However, an employee may not increase his payroll deduction
during a Plan Period. If an employee elects to discontinue his payroll
deductions during a Plan Period, but does not elect to withdraw his funds
pursuant to Section 8 hereof, funds deducted prior to his election to
discontinue will be applied to the purchase of Common Stock on the Exercise Date
(as defined below).
7. Interest. Interest will not be paid on any employee accounts, except
to the extent that the Board or the Committee, in its sole discretion, elects to
credit employee accounts with interest at such per annum rate as it may from
time to time determine.
8. Withdrawal of Funds. An employee may at any time prior to the close
of business on the last business day in a Plan Period and for any reason
permanently draw out the balance accumulated in the employee's account and
thereby withdraw from participation in an Offering. Partial withdrawals are not
permitted. The employee may not begin participation again during the remainder
of the Plan Period. The employee may participate in any subsequent Offering in
accordance with terms and conditions established by the Board or the Committee.
9. Purchase of Shares. On the Offering Commencement Date of each Plan
Period, the Company will grant to each eligible employee who is then a
participant in the Plan an option ("Option") to purchase on the last business
day of such Plan Period (the "Exercise Date"), at the Option Price hereinafter
provided for, the largest number of whole shares of Common Stock of the Company
as does not exceed the number of shares determined by multiplying $2,083 by the
number of full months in the Offering Period and dividing the result by the
closing price (as defined below) on the Offering Commencement Date of such Plan
Period.
The purchase price for each share purchased will be 85% of the closing
price of the Common Stock on (i) the first business day of such Plan Period or
(ii) the Exercise Date, whichever closing price shall be less. Such closing
price shall be (a) the closing price on any national securities exchange on
which the Common Stock is listed, (b) the closing price of the Common Stock on
the Nasdaq National Market or (c) the average of the closing bid and asked
prices in the over-the-counter-market, whichever is applicable, as published in
The Wall Street Journal. If no sales of Common Stock were made on such a day,
the price of the Common Stock for purposes of clauses (a) and (b) above shall be
the reported price for the next preceding day on which sales were made.
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<PAGE> 4
Each employee who continues to be a participant in the Plan on the
Exercise Date shall be deemed to have exercised his Option at the Option Price
on such date and shall be deemed to have purchased from the Company the number
of full shares of Common Stock reserved for the purpose of the Plan that his
accumulated payroll deductions on such date will pay for, but not in excess of
the maximum number determined in the manner set forth above.
Any balance remaining in an employee's payroll deduction account at the
end of a Plan Period will be automatically refunded to the employee, except that
any balance which is less than the purchase price of one share of Common Stock
will be carried forward into the employee's payroll deduction account for the
following Offering, unless the employee elects not to participate in the
following Offering under the Plan, in which case the balance in the employee's
account shall be refunded.
10. Issuance of Certificates. Certificates representing shares of
Common Stock purchased under the Plan may be issued only in the name of the
employee, in the name of the employee and another person of legal age as joint
tenants with rights of survivorship, or (in the Company's sole discretion) in
the name of a brokerage firm, bank or other nominee holder designated by the
employee. The Company may, in its sole discretion and in compliance with
applicable laws, authorize the use of book entry registration of shares in lieu
of issuing stock certificates.
11. Rights on Retirement, Death or Termination of Employment. In the
event of a participating employee's termination of employment prior to the last
business day of a Plan Period, no payroll deduction shall be taken from any pay
due and owing to an employee and the balance in the employee's account shall be
paid to the employee or, in the event of the employee's death, (a) to a
beneficiary previously designated in a revocable notice signed by the employee
(with any spousal consent required under state law) or (b) in the absence of
such a designated beneficiary, to the executor or administrator of the
employee's estate or (c) if no such executor or administrator has been appointed
to the knowledge of the Company, to such other person(s) as the Company may, in
its discretion, designate. If, prior to the last business day of the Plan
Period, the Designated Subsidiary by which an employee is employed shall cease
to be a subsidiary of the Company, or if the employee is transferred to a
subsidiary of the Company that is not a Designated Subsidiary, the employee
shall be deemed to have terminated employment for the purposes of this Plan.
12. Optionees Not Stockholders. Neither the granting of an Option to an
employee nor the deductions from his pay shall constitute such employee a
stockholder of the shares of Common Stock covered by an Option under this Plan
until such shares have been purchased by and issued to him.
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13. Transferability; Lock-up. Rights under this Plan are not
transferable by a participating employee other than by will or the laws of
descent and distribution, and are exercisable during the employee's lifetime
only by the employee. The Board or the Committee, in its sole discretion, may
provide that shares of Common Stock issuable upon the exercise of an Option may
not be sold, assigned, transferred, pledged or otherwise encumbered by the
employee for a period of up to 180 days from the Exercise Date of the applicable
Plan Period (the "Lock-up Provisions"); provided, however, that all participants
exercising Options during such Plan Period shall be subject to the same Lock-up
Provisions; and provided further, however, that the Company shall provide all
participants in such Plan Period with written notice (including electronic
notice) of the Lock-up Provisions at least 10 days prior to the Exercise Date of
such Plan Period.
14. Application of Funds. All funds received or held by the Company
under this Plan may be combined with other corporate funds and may be used for
any corporate purpose.
15. Adjustment in Case of Changes Affecting Common Stock. In the event
of a subdivision of outstanding shares of Common Stock, or the payment of a
dividend in Common Stock, the number of shares approved for this Plan, and the
share limitation set forth in Section 9, shall be increased proportionately, and
such other adjustment shall be made as may be deemed equitable by the Board or
the Committee. In the event of any other change affecting the Common Stock, such
adjustment shall be made as may be deemed equitable by the Board or the
Committee to give proper effect to such event.
16. Merger. If the Company shall at any time merge or consolidate with
another corporation and the holders of the capital stock of the Company
immediately prior to such merger or consolidation continue to hold at least 80%
by voting power of the capital stock of the surviving corporation ("Continuity
of Control"), the holder of each Option then outstanding will thereafter be
entitled to receive at the next Exercise Date upon the exercise of such Option
for each share as to which such Option shall be exercised the securities or
property which a holder of one share of the Common Stock was entitled to upon
and at the time of such merger or consolidation, and the Board or the Committee
shall take such steps in connection with such merger or consolidation as the
Board or the Committee shall deem necessary to assure that the provisions of
Section 15 shall thereafter be applicable, as nearly as reasonably may be, in
relation to the said securities or property as to which such holder of such
Option might thereafter be entitled to receive thereunder.
In the event of a merger or consolidation of the Company with or into
another corporation which does not involve Continuity of Control, or of a sale
of all or substantially all of the assets of the Company while unexercised
Options remain outstanding under the Plan, (a) subject to the provisions of
clauses (b) and (c), after the
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effective date of such transaction, each holder of an outstanding Option shall
be entitled, upon exercise of such Option, to receive in lieu of shares of
Common Stock, shares of such stock or other securities as the holders of shares
of Common Stock received pursuant to the terms of such transaction; or (b) all
outstanding Options may be cancelled by the Board or the Committee as of a date
prior to the effective date of any such transaction and all payroll deductions
shall be paid out to the participating employees; or (c) all outstanding Options
may be cancelled by the Board or the Committee as of the effective date of any
such transaction, provided that notice (including electronic notice) of such
cancellation shall be given to each holder of an Option, and each holder of an
Option shall have the right to exercise such Option in full based on payroll
deductions then credited to his account as of a date determined by the Board or
the Committee, which date shall not be less than ten (10) days preceding the
effective date of such transaction.
17. Amendment of the Plan. The Board may at any time, and from time to
time, amend this Plan in any respect, except that (a) if the approval of any
such amendment by the stockholders of the Company is required by Section 423 of
the Code, such amendment shall not be effected without such approval, and (b) in
no event may any amendment be made which would cause the Plan to fail to comply
with Section 423 of the Code.
18. Insufficient Shares. In the event that the total number of shares
of Common Stock specified in elections to be purchased under any Offering plus
the number of shares purchased under previous Offerings under this Plan exceeds
the maximum number of shares issuable under this Plan, the Board or the
Committee will allot the shares then available on a pro rata basis.
19. Termination of the Plan. This Plan may be terminated at any time by
the Board. Upon termination of this Plan all amounts in the accounts of
participating employees shall be promptly refunded.
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20. Governmental Regulations. The Company's obligation to sell and
deliver Common Stock under this Plan is subject to listing on a national stock
exchange or quotation on the Nasdaq National Market (to the extent the Common
Stock is then so listed or quoted) and the approval of all governmental
authorities required in connection with the authorization, issuance or sale of
such stock.
21. Governing Law. The Plan shall be governed by Delaware law except to
the extent that such law is preempted by federal law.
22. Issuance of Shares. Shares may be issued upon exercise of an Option
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
23. Notification upon Sale of Shares. Each employee agrees, by entering
the Plan, to promptly give the Company notice of any disposition of shares
purchased under the Plan where such disposition occurs within two years after
the date of grant of the Option pursuant to which such shares were purchased.
24. Effective Date and Approval of Shareholders. The Plan shall take
effect upon the effectiveness of the Company's registration statement under the
Securities Act of 1933, as amended, relating to the Company's initial public
offering of Common Stock, subject to approval by the stockholders of the Company
as required by Section 423 of the Code, which approval must occur within twelve
months of the adoption of the Plan by the Board.
Adopted by the Board of Directors
on September 30, 1999
Approved by the stockholders
on September 30, 1999
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Exhibit 10.4
-------------------------
LIMITED LIABILITY COMPANY AGREEMENT
OF
GFI CAMINUS LLC
-------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE I DEFINITIONS; CONSTRUCTION.............................................................................. 1
1.1 Definitions..................................................................................... 1
1.2 Directly or Indirectly.......................................................................... 6
1.3 Captions........................................................................................ 6
1.4 Interpretation.................................................................................. 6
1.5 References to this Agreement.................................................................... 6
ARTICLE II FORMATION.............................................................................................. 6
2.1 Formation....................................................................................... 6
2.2 Name............................................................................................ 6
2.3 Registered Office; Principal Office; Other Offices.............................................. 6
2.4 Agent........................................................................................... 7
2.5 Purpose; Powers................................................................................. 7
2.6 Term of the Company............................................................................. 7
ARTICLE III MEMBERS AND MEMBERSHIP INTERESTS; WARRANT AND OPTIONS................................................. 7
3.1 Initial Members; Additional Members............................................................. 7
3.2 Option Plan; GFI Option......................................................................... 7
3.3 Representations and Warranties.................................................................. 8
3.4 Voting Rights; Approval Required................................................................ 9
3.5 Meetings of Members............................................................................. 9
3.6 Disposition of Interests....................................................................... 10
3.7 Amendment of Agreement to Reflect New Members.................................................. 11
3.8 Interest in Member............................................................................. 11
</TABLE>
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<TABLE>
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3.9 No Resignation or Removal...................................................................... 11
3.10 No Liability to Third Parties.................................................................. 11
3.11 Indemnification by and of Members.............................................................. 11
3.12 Rights of Assignees............................................................................ 11
ARTICLE IV CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS; LOAN...................................................... 12
4.1 Capital Contributions.......................................................................... 12
4.2 No Return of Capital Contribution; No Interest................................................. 13
4.3 Capital Accounts............................................................................... 13
4.4 No Obligation to Restore Deficits.............................................................. 13
ARTICLE V ALLOCATIONS AND DISTRIBUTIONS.......................................................................... 14
5.1 Allocations of Net Profits and Net Losses...................................................... 14
5.2 Special Allocations............................................................................ 14
5.3 Allocation of Net Profits and Net Losses in Respect of a Transferred Interest.................. 15
5.4 Distributions.................................................................................. 15
5.5 Form of Distributions.......................................................................... 16
ARTICLE VI MANAGEMENT AND OPERATION.............................................................................. 16
6.1 Management: Limitations on Management Committee's Rights and Powers............................ 16
6.2 Managers: Management Committee................................................................. 17
6.3 Officers....................................................................................... 19
6.4 Acts of Officers as Conclusive Evidence of Authority........................................... 20
6.5 Payments to Members............................................................................ 20
6.6 Nature of Relationship......................................................................... 20
ARTICLE VII TAX MATTERS.......................................................................................... 21
7.1 Tax Returns.................................................................................... 21
</TABLE>
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<TABLE>
<S> <C>
7.2 "Tax Matters Member"........................................................................... 21
7.3 Tax Elections.................................................................................. 21
7.4 Withholding.................................................................................... 22
ARTICLE VIII BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS.......................................................... 22
8.1 Maintenance of Books........................................................................... 22
8.2 Financial Information; Budget and Operating Forecasts; Access.................................. 22
8.3 Confidentiality................................................................................ 23
8.4 Publicity...................................................................................... 23
ARTICLE IX DISSOLUTION AND WINDING UP............................................................................ 23
9.1 Conditions of Dissolution...................................................................... 23
9.2 Liquidation and Termination.................................................................... 24
9.3 Cancellation of Filings........................................................................ 25
ARTICLE X INDEMNIFICATION AND INSURANCE.......................................................................... 25
10.1 Indemnification by Company..................................................................... 25
ARTICLE XI GENERAL PROVISIONS.................................................................................... 26
11.1 Notices........................................................................................ 26
11.2 Entire Agreement; Waivers and Modifications.................................................... 26
11.3 Binding Effect; No Third-Party Beneficiaries................................................... 27
11.4 Governing Law.................................................................................. 27
11.5 Further Assurances............................................................................. 27
11.6 Waiver of Certain Rights....................................................................... 28
11.7 Multiple Counterparts; Facsimile Transmission.................................................. 28
11.8 Arbitration.................................................................................... 28
11.9 Attorney's Fees................................................................................ 28
11.10 Submission to Jurisdiction..................................................................... 28
</TABLE>
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This Limited Liability Company Agreement of GFI Caminus LLC (the
"Agreement") is made and entered into as of May 12, 1998 by and among the
Members and the Company.
For and in consideration of the mutual covenants, rights, and
obligations set forth herein, the benefits to be derived therefrom, and other
good and valuable consideration, the receipt and sufficiency of which each
Member acknowledges and confesses, the Members and the Company agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
1.1 Definitions. When used herein, the following capitalized terms
shall have the meanings indicated:
"Act" means the Delaware Limited Liability Company Act and any
successor statute, as amended from time to time.
"Adjusted Capital Account Deficit" means, with respect to any Member,
the deficit balance, if any, in such Member's Capital Account as of the end of
the relevant fiscal year, after giving effect to the following adjustments:
(i) Credit to such Capital Account any amounts that such
Member is obligated to restore pursuant to any provision of this Agreement or is
deemed to be obligated to restore pursuant to the penultimate sentences of
Treas. Reg. Sections 1.704-2(g)(1) and 1.704-2(i)(5);
(ii) Credit to such Capital Account the amount of the
deductions and losses referable to any outstanding recourse liabilities owed by
the Company to such Member for which no other Member bears any economic risk of
loss and the amount of the deductions and losses referable to such Member's
share (determined in accordance with the Member's Percentage Interest) of
outstanding recourse liabilities owed by the Company to non-members for which no
Member bears any economic risk of loss; and
(iii) Debit to such Capital Account the items described in
Treas. Reg. Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5),
1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Treas. Reg. Sections
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
"Adjusted Capital Contribution" means a Series A Adjusted Capital
Contribution, Series B Adjusted Capital Contribution or Series C Adjusted
Capital Contribution, as applicable.
"Affiliate" means as to any Person any other Person who, directly or
indirectly, through one or more intermediaries, Controls or is Controlled by or
under common Control with that Person (except that the Company shall not be
considered an Affiliate of any Member or any equity holder of any Member).
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<PAGE> 6
"Aggregate Series B Percentage Interests" means, at any time, the
aggregate Percentage Interests attributable to the Series B Membership
Interests.
"Agreement" means this Limited Liability Company Agreement, as
originally executed and, except where the context requires otherwise, as amended
from time to time as herein provided.
"Caminus" means Caminus Energy Limited, a Company organized under the
laws of England and wholly-owned by the Company.
"Caminus Options" means the options to acquire Series B Membership
Interests in the Company granted pursuant to the Purchase Agreement and as set
forth in Section 5.1 of Appendix B attached to this Agreement. In addition to
other approval rights set forth in this Agreement, the Company shall not agree
or consent to any amendment to the Caminus Options if such amendment would
adversely affect the interests of any Member (other than the holder of such
Caminus Options) in any material respect, unless each such affected Member shall
have consented to such amendment.
"Capital Account" means the capital account established and maintained
for a Member pursuant to Section 4.3. The initial Capital Accounts of the
Members, after giving effect to the transaction contemplated by the Purchase
Agreement and the License Agreement, are as reflected on Appendix A attached
hereto.
"Capital Contribution" means the cumulative sum of money, if any, and
the fair market value (net of assumed debt) of any other property contributed or
deemed contributed by a Member to the capital of the Company as provided herein.
"Capital Members" means all Members with respect to their Capital
Contributions (if any) and Adjusted Capital Contributions (if any) to the
Company.
"Certificate" or "Certificate of Formation" means the Certificate of
Formation of the Company filed on April 29, 1998 in accordance with the Act and
as amended from time to time.
"Code" means the Internal Revenue Code of 1986 and any successor
statute, as amended from time to time.
"Company" means GFI Caminus LLC, the Delaware limited liability company
formed pursuant to the Certificate.
"Company Minimum Gain" has the meaning provided in Treas. Reg. Section
1.704-2(b)(2) and Section 1.704-2(d).
"Control," or "Controls," or "Controlled" (and derivations thereof)
means as to a corporation the right to exercise, directly or indirectly, more
than 50% of the voting rights in the corporation, and as to any other Entity the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of the same.
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"Dispose", "Disposing", or "Disposition" means a sale, assignment,
transfer, exchange, mortgage, pledge, grant of a security interest, or other
disposition or encumbrance (including, without limitation, by operation of law),
or the acts thereof.
"Dissolution Event" means as to any Member the Member's resignation,
removal or withdrawal as provided in this Agreement (other than in connection
with a Disposition in accordance with the terms of this Agreement), the
voluntary filing of bankruptcy by any Member or the involuntary filing of a
bankruptcy petition against any Member which is not dismissed within sixty (60)
days after the filing thereof, or the making by any Member of an assignment for
the benefit of its creditors, or dissolution of any Member other than an
individual.
"Distributable Cash" means the amount of money on hand of the Company
and available for distribution to the Members, taking into account all accrued
debts, liabilities, and obligations of the Company and any amounts necessary or
advisable to reserve, designate, or set aside for actual or anticipated costs,
payments, liabilities, obligations, and claims with respect to the Company's
business, all as determined by the Management Committee.
"Entity" means any association, corporation, estate, limited liability
company, limited partnership, partnership, venture, or other entity.
"GAAP" means U.S. generally accepted accounting principles applied on a
consistent basis.
"GFI" means GFI Energy Ventures LLC, a limited liability company
organized under the laws of the State of California.
"GFI Option" means the option to acquire a Series C Membership Interest
in the Company as set forth in Section 5.3 of Appendix B attached to this
Agreement.
"License Agreement" means, collectively, the two separate Distributor
Agreements between the Company and SS&C dated as of the date hereof.
"Management Committee" has the meaning set forth in Article VI.
"Majority in Interest" of the Members means a Member or Members whose
aggregate Percentage Interests exceed 50% of the total Percentage Interests.
"Members" means the initial Members as provided in Section 3.1 and all
other Persons subsequently admitted as additional Members in accordance with the
terms of this Agreement, but shall not include any Person who has ceased to be a
Member pursuant to the terms of this Agreement. References to a "Member" means
any of the Members.
"Member Nonrecourse Debt" has the meaning ascribed to the term "Partner
Nonrecourse Debt" in Treas. Reg. Section 1.704-2(b)(4).
"Member Nonrecourse Debt Minimum Gain" means an amount, with respect to
each Member Nonrecourse Debt, equal to the Company Minimum Gain that would
result if such
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<PAGE> 8
member Nonrecourse Debt were treated as a Nonrecourse Liability determined in
accordance with Treas. Reg. Section 1.704-2(i)(3).
"Member Nonrecourse Deductions" means items of Company loss, deduction
or Code section 705(a)(2)(B) expenditures which are attributable to Member
Nonrecourse Debt, or as to any other loans by a Member to the Company for which
no other Member bears the economic risk of loss.
"Membership Interest" means a Member's allocable share of the Company's
Net Profits and Net Losses, the Member's allocable share of other items of
income and deductions and voting and management participation rights as
described herein and the Member's rights to receive distributions from the
Company, together with all obligations of such Member to comply with the
provisions of this Agreement. As of the effective date of this Agreement, the
Membership Interests of the Company are classified into Series A, Series B and
Series C Membership Interests.
"Net Profits" and "Net Losses" means the book income, gain loss,
deductions, and credits of the Company in the aggregate or separately stated, as
appropriate, for any relevant period (excluding special allocations in
accordance with Section 5.2).
"Nonrecourse Deductions" has the meaning set forth in Treas. Reg.
Section 1.704-2(b)(1).
"Nonrecourse Liability" has the meaning set forth in Treas. Reg.
Section 1.752-1(a)(2).
"Officer" means any Person designated as an Officer of the Company as
provided in Section 6.3.
"Option Plan" means each of (i) the Caminus Options, (ii) the SS&C
Warrant and (iii) any other equity incentive plan duly adopted by the Management
Committee of the Company and approved by the Members that provides for the
issuance of options to acquire Series B Membership Interests that may be granted
to employees or other service providers to the Company.
"Percentage Interest" means, prior to the issuance of Series B
Membership Interests pursuant to an Option Plan and the issuance of Series C
Membership Interests pursuant to the GFI Option, the percentage set forth
opposite a Member's name on Appendix A hereto as amended from time to time.
Following the issuance of any Series B Membership Interests upon the exercise of
options under an Option Plan, the "Percentage Interest" of a Series B Capital
Member shall be equal to (i) 0.00001% (subject to reduction for dilution as set
forth in Section 3.1 and any Option Plan), times (ii) the total number of Shares
(as defined in the Option Plan or as set forth in Section 5.1 (in the case of
the Caminus Options) or Section 5.2 (in the case of SS&C Warrant) of Appendix B
attached hereto) owned by such Member pursuant to the exercise of options under
the Option Plan; and the "Percentage Interest" of a Member (other than a Series
B Capital Member and a Series C Capital Member) at any time shall be equal to
(i) the percentage set forth opposite a Member's name on Appendix A hereto as
amended from time to time, times (ii) one minus the Aggregate Series B
Percentage Interests at such time. At all times, the aggregate Percentage
Interests of all of the Members shall be equal to 100%.
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"Person" means any individual or Entity.
"Purchase Agreement" means the Stock Purchase Agreement among the
Company, Caminus and the former owners of Caminus dated as of the date hereof.
"Secretary of State" means the Secretary of State of the State of
Delaware.
"Securities Act" has the meaning set forth in Section 3.3.
"Series A Adjusted Capital Contribution" means as to any Member's
Series A Membership Interest the Capital Contribution corresponding to such
Series A Membership Interest, if any, reduced by all prior distributions to such
Member in respect of such Membership Interest.
"Series B Adjusted Capital Contribution" means as to any Member's
Series B Membership Interest the Capital Contribution corresponding to such
Series B Membership Interest, if any, reduced by all prior distributions to such
Member in respect of such Membership Interest.
"Series C Adjusted Capital Contribution" means as to any Member's
Series C Membership Interest the Capital Contribution corresponding to such
Series C Membership Interest, if any, reduced by all prior distributions to such
Member in respect of such Membership Interest.
"Series A Capital Member" means a Capital Member with respect to its
Series A Membership Interest and Series A Adjusted Capital Contribution.
"Series B Capital Member" means a Capital Member with respect to its
Series B Membership Interest and Series B Adjusted Capital Contribution.
"Series C Capital Member" means a Capital Member with respect to its
Series C Membership Interest and Series C Adjusted Capital Contribution.
"SS&C" means SS&C Technologies, Inc., a Delaware corporation.
"SS&C Warrant" means the right to acquire a Series B Membership
Interest in the Company granted pursuant to the License Agreement and as set
forth in Section 5.2 of Appendix B attached to this Agreement. In addition to
other approval rights set forth in this Agreement, the Company shall not agree
or consent to any amendment to the SS&C Warrant if such amendment would
adversely affect the interests of any Member (other than the holder of such SS&C
Warrant) in any material respect, unless each such affected Member shall have
consented to such amendment.
"ZAI*NET" means ZAI*NET Software, L.P., a Delaware limited partnership
majority-owned by the Company as of the date hereof.
"ZAI*NET Conversion Right" means the right to convert the limited
partnership interests
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<PAGE> 10
in ZAI*NET into Membership Interests in the Company pursuant to the Amended and
Restated Limited Partnership Agreement of ZAI*NET (the "Partnership Agreement")
and as set forth in Section 5.5 of Appendix B attached to this Agreement. In
addition to other approval rights set forth in this Agreement, the Company shall
not agree or consent to any amendment to the ZAI*NET Conversion Right if such
amendment would adversely affect the interests of any Member, in any material
respect, unless at least 90% in interest of the Members so affected shall have
consented thereto.
1.2 Directly or Indirectly. Any provision of this Agreement which
refers to an action which many be taken by any Person, or which a Person is
prohibited from taking, shall include any such action taken directly or
indirectly by or on behalf of such Person, including by or on behalf of any
Affiliate or agent of such Person.
1.3 Captions. All captions in this Agreement are inserted for reference
only and are not to be considered in the construction or interpretation of any
provision hereof.
1.4 Interpretation. In the event any claim is made by any Person
relating to any conflict, omission or ambiguity in this Agreement, no
presumption or burden of proof or persuasion shall be implied by virtue of the
fact that this Agreement was prepared by or at the request of a particular
Person or its counsel.
1.5 References to this Agreement. References to numbered or lettered
articles, sections, and subsections refer to articles, sections, and
subsections, respectively, of this Agreement unless otherwise expressly stated.
All references to this Agreement include, whether or not expressly referenced,
the Appendices attached hereto.
ARTICLE II
FORMATION
2.1 Formation. The Company has been formed as a Delaware limited
liability company under and pursuant to the Act by the execution and filing of
the Certificate with the Secretary of State. The rights and obligations of the
Members shall be as provided in the Act, except as otherwise provided herein. In
the event of any inconsistency between any terms of this Agreement and any
provisions of the Act that are not mandatory, the terms of this Agreement shall
govern.
2.2 Name. The name of the Company is "GFI Caminus LLC". The business of
the Company shall be conducted under such name or any other name or names
selected by the Management Committee.
2.3 Registered Office; Principal Office; Other Offices. The registered
office of the Company in the State of Delaware shall be the registered office
designated in the Certificate or such other office (which need not be a place of
business of the Company) as the Management Committee may designate from time to
time in the manner provided by law. The principal office of the Company shall be
12121 Wilshire Boulevard, Suite 1375, Los Angeles, California U.S.A. 90025, or
such other office as the Management Committee may designate from time to time.
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The Company also may have such other offices as the Management Committee may
from time to time determine.
2.4 Agent. The registered agent for service of process in the State of
Delaware shall be as stated in the Certificate or as otherwise may be determined
from time to time by the Management Committee in the manner provided by law.
2.5 Purpose; Powers. The business and purpose of the Company is to own
equity ownership interests in and manage the business and affairs of Caminus and
ZAI*NET. To this end, the Company may exercise all rights, powers, privileges,
and other incidents of ownership of its properties and assets and may engage in
any activities and transactions that may be necessary, suitable, or proper to
accomplish or further the Company's business and purpose and do any and all
other acts incidental to, arising from, or connected with its business and
purpose. The Company may also conduct directly or through interests in other
Entities such other activities and businesses (including, without, limitation,
add-on businesses complimentary to the Company's business) as the Management
Committee may approve from time to time.
2.6 Term of the Company. The Company was formed on April 29, 1998 and
the Company shall continue in existence until the 30th annual anniversary of
such date, or such earlier time as specified in or pursuant to this Agreement.
ARTICLE III
MEMBERS AND MEMBERSHIP INTERESTS; WARRANT AND OPTIONS
3.1 Initial Members; Additional Members. The initial Members of the
Company are as set forth on Appendix A attached hereto. No Person may be
admitted as an additional Member of the Company (including, without limitation,
upon the exercise of an option granted pursuant to an Option Plan) except in
accordance with the provisions of this Agreement. The Company may also admit one
or more new Members with the approval of a Majority in Interest of the Members
and the approval of the Management Committee (except that no such approval shall
be required in the case of exercise of rights granted pursuant to an Option Plan
or the GFI Option). The Members acknowledge that the admission of such new
Members or the issuance of additional Membership Interests to pre-existing
Members may dilute the Percentage Interests of the Members and the Percentage
Interests represented by Membership Interests that may be acquired upon exercise
of rights granted pursuant to an Option Plan.
3.2 Option Plan; GFI Option.
3.2.1 The Members hereby consent to the future admission of
any Person satisfying the terms of each Option Plan as a Series B Capital Member
of the Company upon valid exercise of options granted pursuant to an Option
Plan. Each of the Members acknowledges that the options granted pursuant to an
Option Plan provide each of the option holders with the right to exercise its
option and upon the exercise thereof obtain an interest in the Company (in the
percentage provided for in the option). Immediately prior to the exercise of any
such option, the Company's assets shall be adjusted in accordance with Treas.
Reg. Section 1.704-1(b)(2)(iv)(g)(1) to reflect their aggregate gross fair
market value, as determined by the Management Committee in its reasonable
discretion. The Capital Account of each of the
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Members who was a Member immediately prior to the exercise of any such option
(collectively, the "Prior Members") shall be adjusted taking into account Treas.
Reg. Sections 1.704-1(b)(2)(iv)(f) and (g)(1) to reflect the amount of gain or
loss that would have been allocated to such Member if the assets of the Company
had been disposed of for an amount equal to their fair market value as of the
exercise date. Immediately thereafter, a portion of the adjusted aggregate
Capital Accounts of the Prior Members, as determined pursuant to the immediately
preceding sentence, shall be transferred to the Member exercising the option, in
an amount determined in accordance with the following formula: (i) the sum of
(A) the adjusted aggregate Capital Accounts of the Prior Members plus (B) the
exercise price paid by the exercising Member shall be multiplied by (ii) the
percentage interest in the Company acquired by the Members upon the exercise of
the option, and the resulting product shall be reduced by (iii) the exercise
price paid by the exercising Member. Each of the Prior Member's Capital Accounts
shall be reduced by such Prior Member's proportionate share of the amount so
transferred to the Capital Account of the exercising Member. In addition, upon
the exercise of any such option, the exercising Member's Capital Account shall
be credited with the exercise price paid upon the exercise of the option. The
Members hereby consent to the admission of exercising Members upon the proper
exercise of such options, subject to the other provisions of this Agreement.
3.2.2 The Members hereby consent to the future admission of
the holder of the GFI Option as a Series C Capital Member of the Company upon
valid exercise of the GFI Option. Upon exercise of the GFI Option through
payment of the applicable exercise price, the provisions of Section 3.2.1
(including, without limitation, with respect to the "booking up" of Capital
Accounts) shall be applied as if such exercise was the exercise of an option
granted under an Option Plan.
3.3 Representations and Warranties. To induce the other Members to
enter into this Agreement, each Member represents and warrants to the Company
and to the other Members that (i) it is acquiring its Membership Interest for
investment purposes for its own account and not with a view to or for resale in
connection with any distribution of all or any part of the Membership Interest;
(ii) with respect to Members residing or with a legal presence in the United
States, it (or each of its equity owners) is an "accredited investor" as defined
in Rule 501(c) promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), and as such has the financial ability to bear the economic
risk of its investment in the Company, has adequate means of providing for its
current needs and contingencies, and has no need for liquidity with respect to
its investment in the Company; (iii) it has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of an investment in the Company and has obtained, in its judgment,
sufficient information regarding the Company's business and prospects to
evaluate the merits and risks of its investment; (iv) in making its decision to
purchase its Membership Interest, it has been advised by its own business, tax,
and legal advisers and is not relying on the Company or the other Members with
respect to the business, tax or legal considerations involved in its investment;
(v) it understands and agrees that it must bear the economic risk of its
investment for an indefinite period of time because, among other reasons, the
Membership Interest has not been registered under the Securities Act or under
the securities laws of certain states and, therefore, cannot be resold,
assigned, or otherwise Disposed of unless it is subsequently registered under
the Securities Act and qualified under applicable securities laws of such states
or an exemption from such registration and qualification
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is available; (vi) if an Entity, it is duly formed, validly existing, and in
good standing under the laws of its jurisdiction of organization and is duly
qualified and in good standing in each other jurisdiction where the nature of
its business requires such qualification, except where the failure to do so
would not have a material adverse effect on it or the Company; (vii) it has full
power and authority to enter into this Agreement and to perform its obligations
hereunder and all corporate (if applicable) and other actions necessary for its
due authorization, execution, delivery, and performance of this Agreement have
been duly taken; (viii) the authorization, execution, delivery, and performance
of this Agreement by it do not and will not conflict with any other agreement or
arrangement to which it is a party or by which it is bound; and (ix) this
Agreement constitutes a valid and binding agreement, enforceable against it in
accordance with its terms.
3.4 Voting Rights; Approval Required. The Members shall not be entitled
to vote on or consent to any matter affecting the Company except as specifically
provided in this Agreement or in the Act. Except as otherwise specifically
provided in this Agreement or in the Act, the vote, consent, or approval of a
Majority in Interest of the Members shall be required as to all matters as to
which the vote, consent, or approval of the Members is required or permitted
under this Agreement or in the Act.
3.5 Meetings of Members.
3.5.1 No annual or regular meetings of the Members as such
shall be required; if convened, however, meetings of the Members may be held at
such date, time, and place as the Management Committee or as the Member or
Members who properly noticed such meeting, as the case may be, may fix from time
to time. At any meeting of the Members, the Chairman of the Management Committee
shall preside at the meeting and shall appoint another Person to act as
secretary of the meeting. The secretary of the meeting shall prepare written
minutes of the meeting, which shall be maintained in the books and records of
the Company.
3.5.2 A meeting of the Members may be called at any time by
the Management Committee, or by any Member or Members whose aggregate Percentage
Interests exceed 10% of the total Percentage Interests of the Company, for the
purpose of addressing any matter on which the vote, consent, or approval of the
Members is required or permitted under this Agreement.
3.5.3 Notice of any meeting of the Members shall be sent or
otherwise given by the Management Committee to the Members in accordance with
this Agreement not less than 10 nor more than 60 days before the date of the
meeting. The notice shall specify the place, date, and hour of the meeting and
the general nature of the business to be transacted. Except as the Members may
otherwise agree, no business other than that described in the notice may be
transacted at the meeting.
3.5.4 Attendance in person of a Member at a meeting shall
constitute a waiver of notice of that meeting, except when the Member objects,
at the beginning of the meeting, to the transaction of any business because the
meeting is not duly called or convened, and except that attendance at a meeting
is not a waiver of any right to object to the consideration of matters not
included in the notice of the meeting if that objection is expressly made at the
meeting. Neither the business to be transacted nor the purpose of any meeting of
Members need be
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specified in any written waiver of notice. The Members may participate in any
meeting of the Members by means of conference telephone or similar means as long
as all Members can hear one another. A Member so participating shall be deemed
to be present in person at the meeting.
3.5.5 Any action that can be taken at a meeting of the Members
may be taken without a meeting if a consent in writing setting forth the action
so taken is signed and delivered to the Company by Members representing not less
than the minimum Percentage Interest necessary under this Agreement to approve
the action. The Management Committee shall notify Members of all actions taken
by such consents, and all such consents shall be maintained in the books and
records of the Company.
3.6 Disposition of Interests.
3.6.1 No Member shall Dispose of all or any part of its
Membership Interest except in compliance with the provisions of this Agreement,
including, without limitation, Article II of Appendix B. Any attempted
Disposition of a Membership Interest, or any part thereof, other than in
accordance with this Section 3.6.1 shall be, and hereby is declared, null and
void ab initio. No Disposition of a Member's Membership Interest, whether
consented to or otherwise, shall result in the dissolution of the Company on
account of the Disposing Member ceasing to be a Member of the Company.
3.6.2 Provided that the requirements of this Agreement are
complied with in connection with a proposed Disposition of a Membership Interest
by a Member, and provided that the Disposing Member purports to grant the Person
to which the Membership Interest is Disposed the right to be admitted as a
Member, such Person shall have the right to be so admitted (and each of the
other Members hereby consents to such admission), provided further that the
other Members receive a document (i) executed by both the Member effecting such
Disposition and the Person to which the Membership Interest is Disposed, (ii)
including the notice and payment address and facsimile number of the Person to
be admitted to the Company as a Member and the written acceptance by such Person
of all the terms and provisions of this Agreement and an agreement by such
Person to perform and discharge timely all of the obligations and liabilities in
respect of the Membership Interest being acquired, (iii) setting forth the
respective Percentage Interests in Company allocations after the Disposition of
the Member effecting the Disposition and the Person to which the Membership
Interest is Disposed, which together shall total the Percentage Interest in
Company allocations of the Member effecting such Disposition prior thereto, (iv)
containing a representation and warranty by the Member effecting the Disposition
and the Person to which the Membership Interest is Disposed to the effect that
such Disposition was made in accordance with all laws and regulations, including
securities laws, applicable to such Member or Person, as appropriate, (v)
containing representations and warranties by the Person to which such interest
is Disposed that are substantially equivalent to those contained in Section 3.3
(it being understood that in connection with any Disposition constituting a
Permitted Transfer pursuant to Appendix B hereof that is implemented for estate
planning purposes, the transferee shall not be required to make such
representations and warranties), and (vi) setting forth the effective date of
the Disposition.
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<PAGE> 15
3.7 Amendment of Agreement to Reflect New Members. If a Person is to be
admitted to the Company as an additional member as provided in this Agreement,
the Members and the Person to be admitted as an additional member shall
negotiate in good faith to make any necessary or appropriate amendments to this
Agreement to take into account the Person's admission as a new member.
3.8 Interest in Member. Without the prior approval of all of the other
Members, no Member shall Dispose of all or any part of its Membership Interest,
or cause or permit an interest, direct or indirect, in itself to be Disposed of,
in such a manner, in either case, that after the Disposition the Company would
be considered to be a publicly traded partnership within the meaning of Section
7704 of the Code.
3.9 No Resignation or Removal. Except as otherwise specifically
provided in this Agreement, a Member does not have the right or power to resign
or withdraw from the Company as a Member and shall be entitled to do so only
with the approval of the other Members. A Member also may not be removed or
expelled as a Member, except upon the sale of the Member's entire Membership
Interest as provided in this Agreement.
3.10 No Liability to Third Parties. No Member shall have any personal
obligation for any liabilities of the Company, whether such liabilities arise in
contract, tort or otherwise, except to the extent that any such liabilities are
expressly assumed in a separate writing by the Member. No Member nor any of its
representatives on the Management Committee shall be liable to the other
Members, their respective representatives on the Management Committee or the
Company for errors in judgment or for any actions taken in connection with or
relating to the Company, including for its own simple, full, partial or
concurrent negligence, unless constituting gross negligence, bad faith, fraud,
willful misconduct or breach of the provisions of this Agreement.
3.11 Indemnification by and of Members. To the fullest extent permitted
by law, each Member shall indemnify the Company, the other Members, each
Manager, and their respective partners, members, officers, directors,
shareholders, employees, associates, agents, and Affiliates, and hold them
harmless from and against, any and all losses, costs, liabilities, damages, and
expenses (including, without limitation, costs of suit and reasonable attorneys'
fees) they may incur on account of any material breach by the Member of any
provision of this Agreement.
3.12 Rights of Assignees. In the event the Company is required to
recognize the validity of a Disposition notwithstanding the provisions of this
Article III to the contrary, the assignee of a Membership Interest who has not
been admitted as a Member of the Company in accordance with this Article III
shall be entitled only to allocations and distributions with respect to such
Membership Interest as provided in this Agreement, but shall have no right to
any information or accounting of the affairs of the Company, or to inspect the
books or records of the Company, and shall not have any right of a Member under
the Act or this Agreement.
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ARTICLE IV
CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS; LOAN
4.1 Capital Contributions.
4.1.1 Concurrently with the execution of this Agreement, each
Member's Capital Account shall be in the amount shown on Appendix A, which
amount each Member agrees represents the net fair market value of such Member's
Capital Contributions as of the date hereof. All Capital Contributions by the
Members made after the date hereof shall be made in cash, by certified check or
wire funds transfer to a bank or custodial account established for the Company
by the Management Committee, or in other property with a net fair market value
established by the Management Committee, and shall be reflected by an
appropriate entry on the Company's books and records and on Appendix A hereto.
4.1.2 The Members acknowledge that the Company's interest in
ZAI*NET was acquired pursuant to a Purchase Agreement dated as of the date
hereof, and that such agreement provides for possible additional cash payments
to ZAI*NET Software, Inc. in consideration of the purchase based upon
achievement of criteria specified therein (the "Additional Payments"). Each of
GFI, OCM Caminus Investment, Inc., RIT Capital Partners plc, Durham Enterprises
Limited, SS&C and Dr. Serena K. Hesmondhalgh ("Hesmondhalgh") (individually,
each an "Investor Member" and collectively, the "Investor Members") agrees that,
pursuant to a written call notice provided to such Investor Members at least ten
(10) days prior to a required funding date by the Management Committee or its
authorized designee, such Investor Members shall be required to make additional
Capital Contributions to the Company in order to fund such Additional Payments;
provided, however, Hesmondhalgh shall not be required to contribute an aggregate
total Capital Contribution to the Company in excess of $200,000 without her
prior written consent. The amount of each such Investor Member's mandatory
Capital Contribution shall equal such Investor Member's proportionate share of
the aggregate cash Capital Contributions made by all such Investor Members as of
the date of this Agreement multiplied by the aggregate amount of each call;
provided, however, that in the event of a default in making such additional
Capital Contribution by any Investor Member or Hesmondhalgh does not consent to
contributing in excess of $200,000, each of the nondefaulting Investor Members
shall be obligated to fund its proportionate share of such default amount. The
Management Committee shall not be required to make capital calls to fund
Additional Payments; the Management Committee shall determine to call capital
and the amount thereof in connection with the making of Additional Payments in
its sole discretion (provided, that no call shall exceed the amount of the
related Additional Payment). All of the Members acknowledge that the Capital
Accounts of the Investor Members subject to capital calls, as reflected on
Appendix A, reflect a credit for the maximum amount of potential Additional
Payments; consequently, the funding of such capital calls shall not entitle a
contributing Investor Member to any adjustment in its Capital Account. If any
Member subject to a mandatory capital call pursuant to this Section 4.1.2
defaults in its obligation to make a Capital Contribution as provided herein
(notwithstanding the funding of the default amount by the other Investor Members
as hereinabove provided), or if the mandatory capital calls are for less funds
than the maximum Additional Payments, then the Capital Account and Percentage
Interest of such Member shall be subject to adjustment as reasonably determined
by the Management Committee (provided, however, that such adjustments shall be
without
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<PAGE> 17
prejudice to the rights of the Company and the other Members arising as a result
of such failure to make a Capital Contribution by the defaulting Member). Except
as expressly provided in this Section 4.1.2, no Member shall be required to make
any additional Capital Contribution.
4.2 No Return of Capital Contribution; No Interest. Except as otherwise
specifically provided in this Agreement, a Member shall not be entitled to
demand or receive the return of all or any portion of the Member's Capital
Contribution or to be paid interest in respect of either its Capital Account or
Capital Contribution. Under circumstances permitting or requiring a return of a
Member's Capital Contribution, the Member shall have no right to receive
property other than cash. No Member shall be required to contribute or to lend
any money or property to the Company to enable the Company to return any other
Member's Capital Contribution.
4.3 Capital Accounts. The Company shall establish on its books and
maintain for each Member a separate Capital Account. The initial Capital
Accounts of the Members as of the date of this Agreement are as set forth on
Appendix A attached to this Agreement. Each Member's Capital Account (a) shall
be increased by (i) the amount of money contributed or deemed contributed by
that Member to the Company, (ii) the fair market value of property contributed
by that Member to the Company (net of liabilities secured by such contributed
property that the Company is considered to assume or take subject to under
section 752 of the Code), and (iii) allocations to that Member of Net Profit or
other items of Company book income and gain, including income and gain exempt
from tax and income and gain described in Treas. Reg. Section
1.704-1(b)(2)(iv)(g), and (b) shall be decreased by (i) the amount of money
distributed to that Member by the Company, (ii) the fair market value of
property distributed to that Member by the Company (net of liabilities secured
by the distributed property that the Member is considered to assume or take
subject to under section 752 of the Code), (iii) allocations to that Member of
expenditures of the Company described in section 705(a)(2)(B) of the Code, and
(iv) allocations of Net Loss and other items of Company book loss and deduction,
including loss and deduction described in Treas. Reg. Section
1.704-1(b)(2)(iv)(g), but excluding items described in clause (b)(iii) of this
sentence. The Capital Accounts shall also be maintained and adjusted as
permitted by the provisions of Treas. Reg. Section 1.704-1(b)(2)(iv)(f) and as
required by the other provisions of Treas. Reg. Sections 1.704-1(b)(2)(iv) and
1.704-1(b)(4). On the transfer of all or part of a Membership Interest, the
Capital Account of the transferor that is attributable to the transferred
Membership Interest or part thereof shall carry over to the transferee in
accordance with the provisions of Treas. Reg. Section 1.704-1(b)(2)(iv)(l).
4.4 No Obligation to Restore Deficits. No Member shall have any
liability or obligation to the Company, the other Members or any creditor of the
Company to restore at any time any deficit balance in such Member's Capital
Account.
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ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
5.1 Allocations of Net Profits and Net Losses. For each taxable year,
Net Profits and Net Losses shall be allocated to the Members in proportion to
their respective Percentage Interests.
5.2 Special Allocations.
5.2.1 Notwithstanding the provisions of Section 5.1, if there
is a net decrease in Company Minimum Gain during any taxable year, each Member
shall be specially allocated items of Company income and gain for such year
(and, if necessary, in subsequent years) in an amount equal to the portion of
such Member's share of the net decrease in Company Minimum Gain, which share of
such net decrease shall be determined in accordance with Treas. Reg. Section
1.704-2(g)(2). Allocations pursuant to this Section 5.2.1 shall be made in
proportion to the amounts required to be allocated to each Member pursuant
thereto. The items to be so allocated shall be determined in accordance with
Treas. Reg. Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 5.2.1
is intended to comply with the minimum gain chargeback requirement contained in
Treas. Reg. Section 1.704-2(f) and shall be interpreted consistently therewith.
5.2.2 Notwithstanding the provisions of Section 5.1, if there
is a net decrease in Member Nonrecourse Debt Minimum Gain attributable to a
Member Nonrecourse Debt during any taxable year, each Member who has a share of
Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse
Debt (which share shall be determined in accordance with Treas. Reg. Section
1.704-2(i)(5)) shall be specially allocated items of Company income and gain for
such taxable year (and, if necessary, in subsequent years) in an amount equal to
that portion of such Member's share of the net decrease in Member Nonrecourse
Debt Minimum Gain attributable to such Member Nonrecourse Debt (which share of
such net decrease shall be determined in accordance with Treas. Reg.
Section 1.704-2(i)(4)). Allocations pursuant to this Section 5.2.2 shall be made
in proportion to the amounts required to be allocated to each Member pursuant
thereto. The items to be so allocated shall be determined in accordance with
Treas. Reg. Sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section 5.2.2
is intended to comply with the minimum gain chargeback requirement contained in
Treas. Reg. Sections 1.704-2(i)(4) and shall be interpreted consistently
therewith.
5.2.3 Notwithstanding the provisions of Section 5.1, any
Nonrecourse Deductions for any taxable year or other period shall be specially
allocated to the Members in accordance with their respective Percentage
Interests.
5.2.4 Notwithstanding the provisions of Section 5.1, Member
Nonrecourse Deductions shall be specially allocated to the Member who bears the
economic risk of loss with respect to the Member Nonrecourse Debt to which such
items are attributable in accordance with Treas. Reg. Section 1.704-2(i).
5.2.5 Notwithstanding the provisions of Section 5.1, if a
Member unexpectedly receives any adjustments, allocations, or distributions
described in Treas. Reg. Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), or any
other event creates for each Member an Adjusted Capital
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Account Deficit, items of Company income and gain shall be specially allocated
to such Member in an amount and manner sufficient to eliminate such Adjusted
Capital Account Deficit as quickly as possible. Any special allocations of items
of income and gain pursuant to this Section 5.2.5 shall be taken into account in
computing subsequent allocations of income and gain pursuant to this Article V
so that the net amount of any item so allocated and the income, gain, and losses
allocated to each Member pursuant to this Article V to the extent possible,
shall be equal to the net amount that would have been allocated to each such
Member pursuant to the provisions of this Article V if such unexpected
adjustments, allocations, or distributions had not occurred.
5.2.6 Notwithstanding any other provision in this Article V,
in accordance with section 704(c) of the Code, income, gain, loss, and deduction
with respect to any property contributed to the capital of the Company shall,
solely for tax purposes, be allocated among the Members so as to take account of
any variation between the adjusted basis of such property to the Company for
federal income tax purposes and its fair market value on the date of
contribution. Allocations pursuant to this Section 5.2.5 are solely for purposes
of federal, state, and local taxes; as such, they shall not affect or in any way
be taken into account in computing a Member's Capital Account or share of Net
Profits, Net Losses, or items of distribution pursuant to any provision of this
Agreement. If the book value of Company property is adjusted in the discretion
of the Management Committee in accordance with the principles of Treas. Reg.
Section 1.702-1(b)(iv)(f), Treas. Reg. Section 1.704-1(b)(iv)(f)(4) shall apply
to items of income, gain, deduction and loss related to such property. In
applying the allocation provisions of this Agreement, unrealized items reflected
in the Capital Account adjustments required by Treas. Reg. Section
1.704-1(b)(2)(iv)(f)(2) shall be deemed to have been allocated to the Members
pursuant to such allocation provisions.
5.2.7 Notwithstanding Section 5.1, Net Loss shall not be
allocated to a Member to the extent that such allocation would create or
increase an Adjusted Capital Account Deficit for such Member. Any Net Loss that
would have been allocated to a Member pursuant to Section 5.1.4(c) but for this
Section 5.2.7 shall be allocated instead to the other Members. To the extent
that any Net Loss is allocated to the other Members rather than to an affected
Member pursuant to the preceding sentence, an equal amount of Net Profits shall
be allocated to the other Members out of the first Net Profits that would
otherwise have been allocated to the affected Member under Section 5.1.
5.3 Allocation of Net Profits and Net Losses in Respect of a
Transferred Interest.
5.3.1 If any Membership Interest is transferred, or is
increased or decreased by reason of the admission of a new Member or otherwise,
during any taxable year of the Company, each item of income, gain, loss,
deduction or credit of the Company for such taxable year shall be allocated
among the Members as determined by the Management Committee in accordance with
any method permitted by Code Section 706(d) and the regulations promulgated
thereunder in order to take account of the Members varying Percentage Interests
during the year.
5.4 Distributions. Subject to any restrictions under applicable law,
the Company may periodically distribute Distributable Cash to the Members, with
the amount and timing of such
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distributions to be determined by the Management Committee. Except as provided
in Article IX, all distributions of cash shall be made as follows:
(a) first, to the Members in respect of their issued
Membership Interests, in proportion to and to the extent of their respective
Adjusted Capital Contributions, until their respective Adjusted Capital
Contributions have been reduced to zero; and
(b) the balance to the Members in respect of their
issued Membership Interests in proportion to their Percentage Interests.
5.5 Form of Distributions. A Member has no right to demand or receive
any distribution from the Company in any form other than cash. Likewise, except
in connection with the dissolution of the Company and as provided in Section
9.2.1, no Member shall be compelled to accept from the Company a distribution of
any asset in kind.
ARTICLE VI
MANAGEMENT AND OPERATION
6.1 Management: Limitations on Management Committee's Rights and
Powers.
6.1.1 Except for matters as to which this Agreement
specifically reserves to the Members the authority to act, or to grant or
withhold their consent or approval of an action, the Management Committee shall
have full, complete, and exclusive authority to manage and control the business,
affairs, and properties of the Company, to make all decisions regarding the same
and to perform any and all other acts or activities customary or incident to the
management of the Company's business.
6.1.2 Notwithstanding any provision of this Agreement, the
Management Committee shall not have the authority under this Agreement to cause
the Company to undertake or engage in any of the following transactions without
first obtaining the approval of a Majority in Interest of the Members (which may
take the form of the approval of the requisite Members through the approval of
their representatives on the Management Committee, without the requirement of a
separate approval by the requisite vote or consent of Members):
(a) any change in the amount or character of a
Member's Capital Contribution, establishment of different classes of Members or
issuance of additional Membership Interests or other securities of the Company
after the effective date of this Agreement (except for any issuances of
Membership Interests pursuant to an exercise under the Option Plan or GFI Option
Plan);
(b) the acquisition or Disposition of material assets
or properties of the Company outside of the ordinary course of the Company's
business, except for Dispositions in connection with the orderly liquidation and
winding up of the business of the Company upon its dissolution as provided
herein;
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<PAGE> 21
(c) except in accordance with an operating budget
duly adopted by the Management Committee, any material change to the nature of
the Company's business, or in any other way do anything which is materially
inconsistent therewith;
(d) the creation or issuance of any material
mortgage, lien, encumbrance or security interest on the Company's properties or
assets, except such as arise by operation of law or are reflected in an
operating budget duly adopted by the Management Committee;
(e) the appointment (except for the reappointment of
its existing auditors) or removal of the Company's auditors;
(f) the adoption of any material new accounting
policy or practice of the Company, or any material change to any of the
Company's accounting policies and practices, except as required by law or to
comply with new accounting standards;
(g) any contract or transaction, or the making of any
payments or incurrence of any commitments of any material nature other than in
the ordinary course of the Company's business;
(h) any transaction between the Company and any
Member, or any Affiliate of such a Member, or in which a Member, or any
Affiliate of such a Member has a material financial interest separate and apart
from its interest as a Member;
(i) any loan or other borrowing (other than trade
credit on an open-account basis customarily extended in connection with the
Company's purchase of goods or services in the ordinary course of its business);
(j) any guarantee or indemnity other than in the
ordinary course of the Company's business;
(k) the commencement or settlement of any litigation
or similar proceeding involving the Company, or the confession of a judgment
against the Company;
(l) any transaction outside the ordinary course of
the Company's business; or
(m) the grant or modification of any option to
acquire a Membership Interest.
6.2 Managers: Management Committee.
6.2.1 The Company shall be "manager managed" within the
meaning of the Act. The Members hereby appoint a Management Committee of the
Company whose responsibilities shall consist of the matters specifically
described in this Agreement as requiring the consent or approval of the
Management Committee. The Management Committee shall at all times consist of one
designee of the former owners of Caminus (so long as either Dr. Nigel Evans or
Dr.
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Michael Morrison shall remain a Member), one designee of ZAI*NET Software, Inc.
(so long as it (or an assignee permitted under Section 5.1 of Appendix B to the
Partnership Agreement) shall remain a Member or retain the ZAI*NET Conversion
Right), one designee of SS&C and four (4) designees of GFI. The initial
designees to the Management Committee consist of the following individuals:
Lawrence D. Gilson (GFI)
Richard K. Landers (GFI)
Christopher S. Brothers (GFI)
Anthony H. Bloom (GFI)
Dr. Nigel L. Evans (Caminus)
Brian J. Scanlan (ZAI*NET Software, Inc.)
William C. Stone (SS&C)
Any representative on the Management Committee may resign or may be removed by
the party(ies) that designated him at any time. Such resignation shall be made
in writing and shall take effect at the time specified therein, or if no time is
specified, at the time of its receipt by the party(ies) that designated such
representative. The acceptance of a resignation shall not be necessary to make
it effective. If a vacancy should occur in a representative position (through
death, removal, resignation or otherwise), the party(ies) that designated the
former representative may fill such vacancy by designating a replacement
representative. Except with respect to a Management Committee member who is
unaffiliated with and otherwise has no financial interest in any Member, the
Company or any Affiliate thereof, the Management Committee representatives shall
not be compensated by the Company for their services.
6.2.2 At every meeting of the Management Committee, the
presence of four representatives of the Management Committee shall constitute a
quorum for the transaction of business at the meeting, and the affirmative vote
of at least four representatives shall be necessary for the adoption of any
resolution, the making of any decision, the delegation of any authority or the
taking of any action by the Management Committee.
6.2.3 Meetings of the Management Committee may be held at such
place or places and at such times as shall be determined from time to time by
resolution of the Management Committee. Notice of regular meetings established
by resolution of the Management Committee shall not be required. Special
meetings of the Management Committee may be called by any member of the
Management Committee on at least ten days prior notice to the other
representatives serving on the Management Committee. Such notice need not state
the purpose or purposes of, nor the business to be transacted at, such meeting.
At all meetings of the Management Committee, business shall be transacted in
such order as shall from time to time be determined by the Chairperson.
Attendance in person or by proxy of a Management Committee representative at a
meeting shall constitute a waiver of notice of such meeting, except where a
representative attends a meeting for the express purpose of objecting, at the
beginning of such meeting, to the transaction of any business on the ground that
the meeting is not lawfully called or convened. Minutes of all meetings of the
Management Committee shall be kept and retained in the records of the Company.
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<PAGE> 23
6.2.4 The Management Committee shall designate a Chairperson,
who initially shall be Lawrence D. Gilson. The Chairperson shall preside over
all meetings of the Management Committee and shall have such other power,
authority and responsibility as the Management Committee may, from time to time,
delegate to such Chairperson.
6.2.5 Any consent or approval reserved by this Agreement to
the Management Committee, may be taken without a meeting if a consent in
writing, setting forth the action to be taken, is signed by at least four
Management Committee representatives. Such consent shall have the same force and
effect as a unanimous vote at a duly convened meeting of the Management
Committee, and the execution of such consent shall constitute attendance or
presence in person at a meeting of the Management Committee. Subject to the
requirements of this Agreement for notices of special meetings, Management
Committee representatives may participate in and hold a meeting of the
Management Committee by means of a conference telephone or similar
communications equipment by means of which all representatives participating in
the meeting can hear each other, and participation in such meeting shall
constitute attendance and presence in person at such meeting, except where a
representative participates in the meeting for the express purpose of objecting,
at the beginning of such meeting, to the transaction of any business on the
ground that the meeting is not properly called or convened. Each of the Members
and the respective representatives of the Management Committee retroactively
ratify and authorize any and all action taken by Lawrence D. Gilson, in
connection with the filing of the Certificate, the Application for Employer
Identification Number on Form SS-4, the application and establishment of any
bank accounts and any other action necessary or incidental to the formation of
the Company, the consummation of the transactions contemplated by the Purchase
Agreement and the formation and acquisition of the business of ZAI*NET, and the
operation of the Company, prior to the date of this Agreement.
6.3 Officers.
6.3.1 Concurrently with the execution of this Agreement, each
of the following individuals is named to the indicated Officer titles:
<TABLE>
<S> <C> <C>
Lawrence D. Gilson - President
Richard K. Landers - Secretary
Ian A. Schapiro - Treasurer
</TABLE>
The Management Committee also may, from time to time designate one or more other
individuals to be Officers of the Company, with such titles as the Management
Committee may assign to such individuals. Officers so designated shall have such
authority and perform such duties as the Management Committee may, from time to
time, delegate to them. Any number of offices may be held by the same
individual.
6.3.2 Any Officer may resign as such at any time. Such
resignation shall be made in writing and shall take effect at the time specified
therein, or if no time be specified, at the time of its receipt by the
Management Committee. The acceptance of a resignation shall not be necessary to
make it effective. Any Officer may be removed as such, either with or without
cause, by the Management Committee whenever in its judgment the best interests
of the
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<PAGE> 24
Company will be served thereby. Designation of an Officer hereunder shall not of
itself create any contract rights. Any vacancy occurring in any office of the
Company may be filled by the Management Committee.
6.4 Acts of Officers as Conclusive Evidence of Authority. Any note,
mortgage, evidence of indebtedness, contract, agreement, certificate (including,
without limitation, the Certificate), statement, conveyance, or other instrument
in writing, and any assignment or endorsement thereof, executed or entered into
between the Company and any other Person, when signed by any Officer, shall not
be rendered invalid as to the Company solely by any lack of authority unless the
other Person had actual knowledge that the Officer had no authority to execute
the same. In this respect, each Officer shall be an "authorized person" within
the meaning of the Act.
6.5 Payments to Members.
6.5.1 The Company shall reimburse each of the Members and
their respective Affiliates for out-of-pocket expenses (including, without
limitation, legal and accounting fees and costs) reasonably incurred in
connection with the formation of the Company and preparation of the Certificate
and this Agreement.
6.5.2 In consideration of financial, tax and general
administrative services to be provided to the Company by GFI, the Company shall
pay GFI an annual fee, payable in monthly installments, in an amount equal to
one percent (1%) of the Members' aggregate Adjusted Capital Contributions from
time to time.
6.5.3 Except as specifically provided in this Section 6.5 or
as authorized by the Management Committee, no Member is entitled to remuneration
for services rendered to the Company.
6.6 Nature of Relationship.
6.6.1 The Management Committee and each Officer shall conduct
the affairs of the Company in the best interests of the Company and the mutual
best interests of the Members, including, without limitation, the safekeeping
and use of all Company funds and assets and the use thereof for the benefit of
the Company. Each Member and Officer at all times shall act with integrity and
in good faith and utilize all reasonable efforts in all activities relating to
the conduct of the business of the Company and in resolving conflicts of
interest arising in connection therewith. During the existence of the Company,
the members of the Management Committee shall devote such time and effort to the
Company business and operations as shall be necessary to promote fully the
interests of the Company and the mutual best interests of the Members; however,
it is specifically understood and agreed that the members of the Management
Committee shall not be required to devote full time to Company business, and
further, (i) unless otherwise restricted pursuant to contractual provisions in
favor of the Company or another Member, the Members and their respective
Affiliates at any time and from time to time may engage in and possess interests
in other business ventures of any and every type and description, independently
or with others, and (ii) no Member nor any Affiliate thereof shall have any
obligation to make any opportunity or investment with respect to any other
business venture
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<PAGE> 25
available to the Company or any other Member, or to advise the Company or any
other Member of the existence thereof.
6.6.2 Notwithstanding anything to the contrary in this
Agreement, nothing in this Agreement or any Option Plan or any options issued
thereunder shall be construed as an agreement by the Company, express or
implied, to employ an optionee or Series B Member or contract for the services
of an optionee or Series B Member, to restrict the right of the Company to
discharge an optionee or Series B Member or cease contracting for the services
of an optionee or Series B Member or to modify, extend or otherwise affect in
any manner whatsoever, the terms of any employment agreement or contract for
services which may exist between the Company and an optionee or Series B Member.
ARTICLE VII
TAX MATTERS
7.1 Tax Returns. The Company shall prepare or cause to be prepared and
filed all necessary federal, state and local income tax returns for the Company.
The Company shall furnish to each Member copies of all returns that are actually
filed and shall keep them informed of any and all pending or threatened tax
proceedings regarding the Company.
7.2 "Tax Matters Member". GFI shall be the "tax matters partner" of the
Company pursuant to section 6231(a)(7) of the Code. GFI shall take such
commercially reasonable actions as may be necessary to cause each other Member
to become a "notice partner" within the meaning of section 6231(a)(8) of the
Code, shall inform each other Member of all significant matters that may come to
its attention in its capacity as "tax matters partner," and shall forward to
each Member copies of all significant written communications it may receive in
such capacity. GFI shall not take any action contemplated by sections 6222
through 6231 of the Code without the consent of the other Members.
7.3 Tax Elections. The Company shall make the following elections on
the appropriate tax returns:
7.3.1 to adopt the calendar year as the Company's fiscal year;
7.3.2 to adopt an appropriate method of accounting and to keep
the Company's books and records on that method;
7.3.3 if (i) a distribution of Company property as described
in Section 734 of the Code occurs or (ii) a transfer of a Membership Interest as
described in Section 743 of the Code occurs, an election, in the discretion of
the Management Committee, pursuant to Section 754 of the Code, to adjust the
basis of the Company properties; and
7.3.4 any other election the Management Committee deems
appropriate and in the best interests of the Company and the Members. It is the
intent of the Members that the Company be treated as a partnership for federal
income tax purposes and, to the extent permitted by applicable law, for state
and local franchise and income tax purposes. Neither the Company nor any Member
may make an election for the Company to be excluded from the application
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of the provisions of subchapter K of chapter 1 of subtitle A of the Code or any
similar provisions of applicable state or local law, and no provision in this
Agreement shall be construed to sanction or approve such an election.
7.4 Withholding. With respect to any Member who is not a "United States
person" within the meaning of the Code, any tax required to be withheld under
section 1446 or other provisions of the Code, or under state law, shall be
treated as a distribution of cash to be charged against future distributions to
which such Member would otherwise have been entitled (or, in the discretion of
the Management Committee, as a demand loan) to such Member for all purposes of
this Agreement.
ARTICLE VIII
BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS
8.1 Maintenance of Books. The books of account for the Company shall be
maintained on an accrual basis in accordance with the terms of this Agreement,
except that Capital Accounts shall be maintained in accordance with Article IV.
The calendar year shall be the accounting year of the Company, unless the
Management Committee selects a different accounting year.
8.2 Financial Information; Budget and Operating Forecasts; Access.
8.2.1 The Company shall maintain a comparative system of
accounts in accordance with generally accepted accounting principles, keep full
and complete financial records and shall: (a) furnish to the Members within 90
days after the end of each fiscal year, beginning with the 1998 fiscal year, a
copy of the consolidated balance sheet of the Company as at the end of such
year, together with a consolidated statement of income and retained earnings
(net loss) of the Company for such year, audited and certified by independent
public accountants of recognized national standing selected by the Management
Committee, prepared in accordance with generally accepted accounting principles
and practices consistently applied; and (b) furnish to the Members within 45
days after the end of each of the first three quarters of each year commencing
with the quarter ending June 30, 1998 a consolidated unaudited balance sheet of
the Company as at the end of such quarter and a consolidated unaudited statement
of income and retained earnings (net loss) for the Company for such quarter and
for the year to date prepared in accordance with generally accepted accounting
principles (except for normal year end adjustments) and practices consistently
applied. The Company also shall prepare such other reports as the Management
Committee may reasonably request.
8.2.2 The Company shall permit, upon reasonable request and
notice and during normal business hours and without undue disruption to the
Company's business, each Member or any employees, agents or representatives
thereof, access to such information and records as set forth in and in
accordance with Section 18-305 of the Act and to examine and make copies of and
extracts from the records and books of account of, and visit and inspect the
properties of the Company, and to discuss the affairs, finances and accounts of
the Company with any of its Officers, key employees, attorneys and independent
accountants; provided, however, each
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<PAGE> 27
Member, employee, agent or representative thereof, as the case may be, agrees to
hold all information so received in accordance with Section 8.3.
8.3 Confidentiality. Unless the Members agree otherwise, each Member
shall hold in strict confidence any Proprietary Information (as hereinafter
defined) it receives regarding the Company, or any Proprietary Information
regarding the business or affairs of any other Member, whether such information
is received from the Company, another Member or Affiliate of a Member or another
Person. "Proprietary Information" means any information that derives independent
economic value, actual or potential, from not being generally known to the
public or to other Persons who can obtain economic value from its disclosure or
use, and includes information of the Company, any Member, and any Person with
whom the Company or any Member does business; provided, however, that
Proprietary Information shall not include (a) information that is or becomes
available to the public generally without breach of this Section 8.3; (b)
disclosures required to be made by applicable laws and regulations or stock
exchange requirements or requirements of the National Association of Securities
Dealers, Inc.; (c) disclosures required to be made pursuant to an order,
subpoena or legal process; (d) disclosures to members, partners, officers,
directors or Affiliates of such Member (and the members, partners, officers or
directors of such Affiliates), and to auditors, counsel, and other professional
advisors to such Persons or the Company (provided, however, that such Persons
have been informed of the confidential nature of the information, and, in any
event, the Member disclosing such information shall be liable for any failure by
such Persons to abide by the provisions of this Section 8.3), or (e) disclosures
in connection with any litigation or dispute among the Members, the General
Member, and the Company; and provided further that any disclosure pursuant to
clause (b), (c), (d) or (e) of this sentence shall be made only subject to such
procedures the Member making such disclosure determines in good faith are
reasonable and appropriate in the circumstances, taking into account the need to
maintain the confidentiality of such information and the availability, if any,
of procedures under laws, regulations, subpoenas, or other legal process. Each
Member acknowledges that disclosure of information in violation of the
provisions of this Section 8.3 may cause irreparable injury to the Company and
the Members for which monetary damages are inadequate, difficult to compute, or
both. Accordingly, each Member agrees that its obligations under this Section
8.3 may be enforced by specific performance and that breaches or prospective
breaches of this Section 8.3 may be enjoined.
8.4 Publicity. Any public announcement or disclosure relating to the
transactions contemplated by this Agreement, by the Company or subsequent
transactions of the Company, will be made by the Officers only with the approval
of the Management Committee, except to the extent such disclosure is, in the
opinion of counsel to the Company, required by law.
ARTICLE IX
DISSOLUTION AND WINDING UP
9.1 Conditions of Dissolution. The Company shall be dissolved, its
assets shall be disposed of, and its affairs wound up on the first to occur of
the following:
(a) the vote, consent or approval of all the Members at any
time prior to the date specified in Section 2.6 to dissolve the Company;
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<PAGE> 28
(b) the occurrence of a Dissolution Event, if within 90 days
after the occurrence the Members (other than the Member as to which such
Dissolution Event occurred) owning in the aggregate more than 50% of both the
profits interest and the capital interest in the Company elect to dissolve the
Company;
(c) the Disposition of all of the property and assets of the
Company;
(d) the entry of a decree of judicial dissolution under the
Act; or
(e) the expiration of the term of existence of the Company as
stated in Section 2.6.
9.2 Liquidation and Termination.
9.2.1 Upon the dissolution of the Company as provided in
Section 9.1, the Company shall continue solely for the purpose of winding up its
affairs in an orderly manner, liquidating its assets, and satisfying the claims
of its creditors. The Management Committee shall act as liquidator or may
appoint one or more other Persons to act as liquidator. The liquidator shall
oversee the winding up and liquidation of the Company, take full account of the
liabilities of the Company and assets, either cause the Company's assets to be
sold as promptly as is consistent with obtaining fair market value therefor (or,
with the consent of the Members, distributed to the Members) and, if sold, shall
cause the proceeds therefrom, to the extent sufficient therefor, to be applied
and distributed as provided in paragraph (c) below. Until final distribution,
the liquidator shall manage the Company's business and other property and assets
with all of the power and authority of the Members. The steps to be accomplished
by the liquidator are as follows:
(a) as promptly as possible after dissolution and again after
final liquidation, the liquidator shall cause a proper accounting to be made by
a recognized firm of certified public accountants of the Company's assets,
liabilities, and operations through the last day of the calendar month in which
the dissolution shall occur or the final liquidation shall be completed, as
applicable;
(b) during the period commencing on the first day of
dissolution pursuant to Section 9.1 hereof and ending on the date on which all
of the assets of the Company have been distributed to the Members in accordance
with this Section 9.2, the Members shall continue to share Net Profits, Net
Losses, and other items of Company income, gain, loss or deduction in the manner
provided in Article V, provided that no distributions shall be made pursuant to
Section 5.4;
(c) the liquidator shall pay or discharge from Company funds
all of the debts, liabilities and obligations of the Company (including, without
limitation, but subject to the provisions of applicable law, all expenses
incurred in liquidation) or otherwise make reasonably adequate provision
therefor (including, without limitation, the establishment of a cash escrow fund
for contingent liabilities in such amount and for such terms as the liquidator
may reasonably determine, or the distribution of property to the Members in kind
subject to debts, liabilities or other obligations); and
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(d) all remaining assets of the Company shall be distributed
to the Members as follows:
(i) the liquidator may sell any or all Company
property, including to Members, and any resulting gain or loss from each sale
shall be computed and allocated to the Members in accordance with Section 5.1;
(ii) with respect to any Company property that has
not been sold, the fair market value of such property shall be determined and
the Members' Capital Accounts shall be adjusted to reflect the manner in which
the unrealized gain and unrealized income, gain, loss, and deduction inherent in
that property (and that has not been reflected in the Capital Accounts
previously) would be allocated among the Members if there were a taxable
disposition of that property for the fair market value of that property on the
date of distribution; and
(iii) all liquidation proceeds, as well as any
Company property that is to be distributed to the Members, shall be distributed
in accordance with Section 5.4 of this Agreement, after taking into account all
Capital Account adjustments for the taxable year of the Company during which the
liquidation of the Company occurs (other than those made by reason of this
Section 9.2.1(d)(iii)).
9.2.2 Any distributions in kind to the Members may, in the
discretion of the liquidator, be made in the form of property subject to debts,
liabilities or obligations related to such property, which debts, liabilities or
other obligations shall be allocated to such distributee pursuant to this
Section 9.2. The distribution of cash or property to a Member in accordance with
the provisions of this Section 9.2 constitutes a complete return to the Member
of its Capital Contributions and a complete distribution to the Member of its
Membership Interest and all the Company's property and constitutes a compromise
to which all Members have agreed.
9.3 Cancellation of Filings. Upon completion of the distribution of
Company assets as provided herein, the Company is terminated, and the liquidator
shall file a certificate of cancellation with the Secretary of State and take
such other actions as may be necessary to terminate the Company.
ARTICLE X
INDEMNIFICATION AND INSURANCE
10.1 Indemnification by Company.
10.1.1 The Company shall indemnify and defend each Member or
Officer who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (a "Proceeding") by
reason of the fact that it is or was a Member, Officer, or other agent of the
Company or that, being or having been such a Member, Officer, or agent, it is or
was serving at the request of the Company as a director, officer, employee, or
other agent of another Person (each of such Persons being referred to
hereinafter as an "Agent"), to the fullest extent permitted by applicable law in
effect on the date hereof and to such greater extent as applicable law may
hereafter from time to time permit; provided, however, that no Person
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shall be entitled to indemnification hereunder for any act or omission
constituting gross negligence, wilful misconduct or material breach of this
Agreement. Furthermore, the Company may, but shall not be obligated to, upon the
approval of Members, that own, in the aggregate, not less than eighty percent
(80%) of all of the profits interests in the Company and eighty percent (80%) of
the capital interests in the Company indemnify any other Person who was or is a
party or is threatened to be made a party to, or otherwise becomes involved in,
a Proceeding by reason of the fact that such person is or was an agent to the
same extent as is provided for in the preceding sentence with respect to a
Member of Officer.
10.1.2 The indemnification provided by, or granted pursuant
to, the provisions of this Article X shall not be deemed exclusive of any other
rights to which any Person seeking indemnification may be entitled under any
agreement, vote of the Management Committee or the Members, or otherwise, both
as to action in such Person's capacity as an agent of the Company and as to
action in another capacity while serving as such an agent. All rights to
indemnification under this Article X shall be deemed to be provided by a
contract between the Company, each Member, Officer, and agent who serves in such
capacity at any time while this Agreement and relevant provisions of the Act and
other applicable law, if any, are in effect. Any repeal or modification hereof
or thereof shall not affect any such rights then existing.
ARTICLE XI
GENERAL PROVISIONS
11.1 Notices. All notices and other communications provided for or
permitted to be given under this Agreement shall be in writing and shall be
given by depositing the notice in the United states mail, addressed to the
Person to be notified, postage paid, and registered or certified with return
receipt requested, or by such notice being delivered in person or by facsimile
communication to such party. Notices given or served pursuant hereto shall be
effective upon receipt by the Person to be notified. All notices to be sent to a
Member shall be sent to or made at, and all payments hereunder shall be made at,
the address given for that member on Appendix A hereto or such other address as
that Member may specify by notice to the Company and the other Members. Any
notice to the Company or the Management Committee also shall be given to the
Management Committee representatives. The address of an Management Committee
representative shall, unless notice to the contrary is given by the Management
Committee representative to the Company and the Members, be the same as the
address of the Member that designated such Management Committee representative,
except that notices to such Management Committee member shall specify that they
are directed to the attention of such Management Committee representative.
11.2 Entire Agreement; Waivers and Modifications.
11.2.1 The Certificate and this Agreement constitute
the entire agreement of the Members and their respective Affiliates relating to
the Company and supersedes any and all prior contracts, understandings,
negotiations, and agreements with respect to the Company and the subject matter
hereof, whether oral or written.
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11.2.2 Subject to Section 11.2.3, the Certificate and this
Agreement may be amended or modified from time to time only by a written
instrument executed by Members having at least the minimum voting interests
necessary to approve such amendment as provided in this Agreement; provided,
however, that if any such amendment or modification would have a material
adverse impact on the Membership Interest of any Member that is different in
character or proportionate impact from the impact on any other Member (for the
avoidance of doubt, excluding proportionate dilution in Membership Interests as
a result of admission of new Members or other transactions contemplated by this
Agreement), then the approval of each Member so adversely affected shall also be
required.
11.2.3 In the event of an inconsistency or conflict between
the provisions of this Agreement and any resolution adopted by the Members, such
resolution shall be deemed an amendment to this Agreement and a waiver by the
Members of the inconsistent or conflicting provision of this Agreement. Any
waiver or consent, express, implied or deemed to or of any breach or default by
any Person in the performance by that Person of its obligations with respect to
the Company or any action inconsistent with this Agreement is not a consent or
waiver to or of any other breach or default in the performance by that Person of
the same or any other obligations of that Person with respect to the Company or
any other such action. Failure on the part of a Person to complain of any act of
any Person or to declare any Person in default with respect to the Company,
irrespective of how long that failure continues, does not constitute a waiver by
that Person of its rights with respect to that default until the applicable
statute-of-limitations period has run. Except with respect to the matters
described in the first sentence of this Section 11.2.3, all waivers and consents
hereunder shall be in writing and shall be delivered to the Company and the
Members in the manner set forth in Section 11.1. A Member may grant or withhold
any waiver or consent in its absolute sole discretion.
11.3 Binding Effect; No Third-Party Beneficiaries. Subject to the
restrictions on Dispositions set forth herein, this Agreement is binding on and
inures to the benefit of the Members and their respective heirs, legal
representatives, successors and assigns. Nothing in this Agreement shall provide
any benefit to any third party or entitle any third party to any claim, cause of
action, remedy or right of any kind, it being the intent of the parties that
this Agreement shall not be construed as a thirty-party beneficiary contract.
11.4 Governing Law. This Agreement is governed by and shall be
construed in accordance with the law of the State of Delaware, 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.
11.5 Further Assurances. In connection with this Agreement and the
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions.
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11.6 Waiver of Certain Rights. Each Member irrevocably waives any right
it might have to maintain any action for partition of the property of the
Company.
11.7 Multiple Counterparts; Facsimile Transmission. This Agreement may
be executed in multiple counterparts with the same effect as if the signing
parties had signed the same document. All counterparts shall be construed
together and constitute the same instrument. Delivery of an executed counterpart
of this Agreement by facsimile shall be equally as effective as delivery of a
manually executed counterpart of this Agreement. Upon the request of any party,
any party who shall have delivered an executed counterpart of this Agreement by
facsimile shall deliver a manually executed counterpart as well, but the failure
to so deliver a manually executed counterpart shall not affect the validity,
enforceability and binding effect of this Agreement.
11.8 Arbitration. The Members agree that any and all legal disputes,
controversies or claims arising out of or relating to this Agreement shall be
resolved by agreement among the Members or, if notice is given by any Member as
provided below and the matter is not settled within 30 days thereafter, by
resort to arbitration in accordance with the Commercial Arbitration Rules, as
amended from time to time, of the American Arbitration Association and the
following provisions. Each Member shall within 30 days after the giving of
notice by a Member to another Member or Members of its desire to refer the
matter in dispute to arbitration, appoint one arbitrator, and both of the
arbitrators so appointed shall within 20 days after the second of their
respective appointments appoint a third arbitrator as a neutral and impartial
arbitrator, and the three arbitrators so appointed shall constitute the
arbitration panel over which the third arbitrator shall preside. If any Member
or Members fail to appoint its or their arbitrator within said 30-day period,
the other Member or Members may petition the Chancery Court for the State of
Delaware to compel the appointment of such arbitrator. If the two arbitrators so
appointed fail to agree on a third arbitrator, either Member may petition the
Court for appointment of said third arbitrator, and the Members shall be bound
by the selection of the Court. Any such arbitration proceedings shall be held in
Wilmington, Delaware, at a location to be determined by the arbitrators. The
written decisions and conclusions of a majority of the arbitration panel with
respect to the matters referred to them pursuant hereto shall be final and
binding on the Members, and confirmation and enforcement thereof may be rendered
thereon by any court having jurisdiction upon application of any Member that is
a party to the arbitration proceeding; provided, however, that the arbitration
panel shall have no power or authority under this Agreement or otherwise to
award or provide for the award of punitive damages against any party. The costs
and expenses incurred in the course of such arbitration shall be borne by the
Member or Members against whose favor the decisions and conclusions of the
arbitration panel are rendered or apportioned between or among the Members, as
provided in the arbitrators' decision.
11.9 Attorney's Fees. Subject to Section 11.8, in the event of any
arbitration, 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 arbitrator or other adjudicator.
11.10 Submission to Jurisdiction. Each of the Members hereby consents
to the jurisdiction of any state or federal court located within the State of
Delaware, and, subject to the provisions of Section 11.8, irrevocably agrees
that all actions or proceedings relating to this
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Agreement shall be instituted and heard by the courts of such jurisdiction. Each
Member 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
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.
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IN WITNESS WHEREOF, the parties hereto executed this Agreement
effective as of the date first above written.
COMPANY:
GFI Caminus LLC
By: /s/ Lawrence D. Gilson
-----------------------------------------
Name: Lawrence D. Gilson
Its: President
MEMBERS:
GFI Energy Ventures LLC
By: /s/ Lawrence D. Gilson
-----------------------------------------
Name: Lawrence D. Gilson
Its: President
OCM Caminus Investment, Inc.
By: /s/ Stephen A. Kaplan
-----------------------------------------
Name: Stephen A. Kaplan
Its: President
By: /s/ Christopher S. Brothers
-----------------------------------------
Name: Christopher S. Brothers
Its: Vice President
RIT Capital Partners plc
By: /s/ Anthony H. Bloom
-----------------------------------------
Name: Anthony H. Bloom
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<PAGE> 35
Its: Authorized Signatory
Durham Enterprises Limited
By: /s/ Christopher P.M. Harris
-----------------------------------------
Name: Christopher P.M. Harris
Its: Director
/s/ Dr. Nigel L. Evans
------------------------------------------
Dr. Nigel L. Evans
/s/ Dr. Michael B. Morrison
------------------------------------------
Dr. Michael B. Morrison
/s/ Dr. Serena K. Hesmondhalgh
------------------------------------------
Dr. Serena K. Hesmondhalgh
SS&C Technologies, Inc.
By: /s/ William C. Stone
-----------------------------------------
Name: William C. Stone
Its: Chief Executive Officer
-31-
<PAGE> 36
APPENDIX A
(PRIOR TO DILUTION)
<TABLE>
<CAPTION>
SCHEDULE OF MEMBERS PERCENTAGE INTERESTS
----------------------------------------
NAME AND ADDRESS CAPITAL SERIES A SERIES B SERIES C
OF MEMBER ACCOUNT PERCENT. INTEREST(1) PERCENT. INTEREST(2) PERCENT. INTEREST
<S> <C> <C> <C> <C>
GFI Energy Ventures LLC $ 500,000 2.20% -- --
12121 Wilshire Blvd
Suite 1375
Los Angeles, CA 90025
(310) 442-0542
OCM Caminus Investment, Inc. $11,050,000 48.57% -- --
550 So. Hope St., 22nd Floor
Los Angeles, CA 90071
(213) 614-0900
RIT Capital Partners plc $ 2,000,000 8.79% -- --
Spencer House
27 St. James' Place
London, SW1A1NR
United Kingdom
011 44 171 493 8111
Durham Enterprises Limited $ 500,000 2.20% -- --
Spencer Harris & Partners
Oak Walk St. Peter
Jersey JE37EF
Channel Islands
United Kingdom
011 44 153 444 291
Dr. Nigel L. Evans $ 1,800,000 7.91% -- --
c/o Caminus Energy Limited
Caminus House, Castle Park
Cambridge CB3 0RA
United Kingdom
011-44-1223-322-736
</TABLE>
A-1
<PAGE> 37
<TABLE>
<CAPTION>
SCHEDULE OF MEMBERS PERCENTAGE INTERESTS
----------------------------------------
NAME AND ADDRESS CAPITAL SERIES A SERIES B SERIES C
OF MEMBER ACCOUNT PERCENT. INTEREST(1) PERCENT. INTEREST(2) PERCENT. INTEREST
<S> <C> <C> <C> <C>
Dr. Michael B. Morrison $ 1,200,000 5.28% -- --
c/o Caminus Energy Limited
Caminus House, Castle Park
Cambridge CB3 0RA
United Kingdom
011-44-1223-322-736
SS&C Technologies, Inc. $ 5,500,000 24.18% -- --
705 Bloomfield Avenue
Bloomfield, CT 06002
(800) 234-0556
Dr. Serena Hesmondhalgh $ 200,000 0.88% -- --
c/o Caminus Energy Limited
Caminus House, Castle Park
Cambridge CB3 0RA
United Kingdom
011-44-1223-322-736........
--------------------------------------------------------------------------
$22,750,000 100% -- --
</TABLE>
(1) Percentages not adjusted to reflect dilution from exercise of Caminus
Options, SS&C Warrant and GFI Option.
(2) Percentages not adjusted to reflect dilution from exercise of GFI Option.
A-2
<PAGE> 38
APPENDIX A-1
(FULLY DILUTED WITH CAMINUS OPTIONS,
SS&C WARRANT AND GFI OPTION)
<TABLE>
<CAPTION>
SCHEDULE OF MEMBERS PERCENTAGE INTERESTS
----------------------------------------
NAME AND ADDRESS CAPITAL SERIES A SERIES B SERIES C
OF MEMBER ACCOUNT PERCENT. INTEREST PERCENT. INTEREST PERCENT. INTEREST
--------- ------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
GFI Energy Ventures LLC $ 500,000(1) 1.68%
12121 Wilshire Blvd. -- 10.00%
Suite 1375
Los Angeles, CA 90025
(310) 442-0542
OCM Caminus Investment, Inc. $11,050,000 37.18% -- --
550 So. Hope St., 22nd Floor
Los Angeles, CA 90071
(213) 614-0900
RIT Capital Partners plc $ 2,000,000 6.73% -- --
Spencer House
27 St. James' Place
London, SW1A1NR
011 44 171 493 8111
Durham Enterprises Limited $ 500,000 1.68% -- --
Spencer Harris & Partners
Oak Walk St. Peter
Jersey JE37EF
Channel Islands
011 44 153 444 291
Dr. Nigel L. Evans $ 1,800,000(2) 6.06% 3.03%(2) --
c/o Caminus Energy Limited
Caminus House, Castle Park
Cambridge CB3 0RA
United Kingdom
011-44-1223-322-736
Dr. Michael B. Morrison $ 1,200,000(2) 4.04% 2.02%(2) --
c/o Caminus Energy Limited
Caminus House, Castle Park
Cambridge CB3 0RA
United Kingdom
011-44-1223-322-736
</TABLE>
A-1-1
<PAGE> 39
<TABLE>
<CAPTION>
SCHEDULE OF MEMBERS PERCENTAGE INTERESTS
----------------------------------------
NAME AND ADDRESS CAPITAL SERIES A SERIES B SERIES C
OF MEMBER ACCOUNT PERCENT. INTEREST PERCENT. INTEREST PERCENT. INTEREST
--------- ------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
SS&C Technologies, Inc. $ 5,500,000 18.50% 8.41% --
705 Bloomfield Avenue
Bloomfield, CT 06002
(800) 234-0556
Dr. Serena Hesmondhalgh $ 200,000 0.67% -- --
c/o Caminus Energy Limited
Caminus House, Castle Park
Cambridge CB3 0RA
United Kingdom
011-44-1223-322-736
==================================================================================
$22,750,000 (1),(2) 76.54% + 13.46% + 10.00% = 100%
</TABLE>
(1) Capital Account will be credited upon exercise of GFI Option in amount
equal to exercise price paid.
(2) Capital Accounts will be credited upon exercise of Caminus Options in
amount(s) equal to exercise price paid.
A-1-2
<PAGE> 40
APPENDIX B
ADDITIONAL PROVISIONS
ARTICLE I
DEFINITIONS
Section 1.1 General. This Appendix B is attached to and made part of
the Limited Liability Company Agreement dated as of May 12, 1998 (the
"Agreement") of GFI Caminus LLC, a Delaware limited liability company (the
"Company"), and sets forth additional provisions governing the ownership of
Membership Interests and other agreements between or among the Members. All
references to the Company in this Appendix B shall include any successor Entity
to the Company (including, without limitation, any successor Entity organized in
preparation for a Qualified Public Offering).
Section 1.2 Terms Not Defined. Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to them in the Agreement.
Section 1.3 Defined Terms. The following capitalized terms, as used in
this Agreement, shall have the meanings set forth below.
(a) "Appraised Value" means, with respect to the Company and
as of any applicable valuation date, the equity valuation (computed on a fully
diluted basis) of the Company valued as a going concern and without minority or
liquidity discount, as determined by an Independent Financial Expert selected by
the Management Committee. The Company shall cooperate with and shall make
available to the Independent Financial Expert all information reasonably
requested by it to determine Appraised Value. Notwithstanding the foregoing, the
Company and the beneficiary of any payment to be based upon Appraised Value may
determine the Appraised Value by mutual agreement and without retaining any
Independent Financial Expert. Such mutual agreement or the determination of
Appraised Value by the Independent Financial Expert shall be conclusive and
binding upon the Company, all other interested parties and the respective
Affiliates of the foregoing for all purposes of the Agreement.
(b) "Independent Financial Expert" means any reputable
national investment bank, accounting firm, or appraiser that (i) is experienced
in making determinations such as the Appraised Value, (ii) does not (and whose
directors, officers, employees, Affiliates and shareholders do not) have a
material direct or indirect financial interest in any of the Members or members
of the Management Committee or any of their respective Affiliates, (iii) has not
been, and at the time it is called upon to give independent financial advice or
determine valuation pursuant to this Appendix B, is not (and all of whose
directors, officers, employees, Affiliates and shareholders are not) a promoter,
director, or officer of any of the Members, members of the Management Committee
or any of their respective Affiliates, or an equity investor in any Member and
(iv) does not at the time of its engagement hereunder (and did not at any time
in the one hundred eighty (180) days preceding the date of such engagement)
provide any advice or opinions or other financial services to any of the Members
or members of the Management Committee or any Affiliates thereof, except
pursuant to this Appendix B as an Independent Financial Expert.
B-1
<PAGE> 41
(c) "Permitted Transfer" means (i) a Disposition by any Member
to any equity holder of such Member as of the date of the Agreement (which shall
include any optionholders of such a Member as of the date of the Agreement), or
by any Member or any such equity holder to any Affiliate of such Member or such
equity holder (collectively, "Equity Holders"); (ii) a Disposition by a Member
or an Equity Holder to a trust established by such Person for the benefit of
such Person during his lifetime and/or for the benefit of such Person's spouse
and descendants, provided that such Person is the sole trustee of such trust
during his lifetime with sole power of Disposition of securities held by the
trust; (iii) a Disposition by an Equity Holder of a Member as of the date of the
Agreement to another Equity Holder of the same Member of an interest in the
Company or in a Member; and (iv) any Dispositions to the Company or any designee
or assignee thereof that is a Member of the Company.
(d) "Pro Rata Part" means, in any particular instance pursuant
to the right of first refusal provisions of Section 2.2, the tag-along
provisions of Section 2.3 or the preemptive right provisions of Article III
hereof, the proportion which the amount of Securities or New Securities, as the
case may be, owned by a Securityholder eligible to purchase Securities or New
Securities pursuant to the right of first refusal or preemptive rights, or sell
Securities pursuant to the tag-along rights bears to the aggregate amount of
Securities owned by all Securityholders which are eligible to purchase
Securities or New Securities pursuant to the right of first refusal or the
preemptive rights or sell Securities pursuant to the tag-along rights, as the
case may be. All computations to calculate each Securityholder's Pro Rata Part
shall be made on a fully diluted basis.
(e) "Qualified Public Offering" means an underwritten public
offering of Company equity securities pursuant to an effective registration
statement under the Securities Act.
(f) "Sale" means (i) a transfer, sale, lease or other
Disposition, whether directly or indirectly, of all or substantially all of the
assets of the Company and its subsidiaries taken as a whole to any "person" or
"group" (as such terms are used under Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), whether or not
applicable), excluding any such Disposition to or among the Company and/or one
or more of its subsidiaries, or (ii) that any "person" or "group" (as such terms
are used under Sections 13(d) and 14(d) of the Exchange Act, whether or not
applicable), excluding OCM Caminus Investment, Inc., GFI, RIT Capital Partners
plc, Durham Enterprises Limited and their respective Affiliates, is or becomes,
whether by means of any issuance or direct or indirect transfer of securities,
merger, consolidation, liquidation, dissolution or otherwise, the "beneficial
owner" (as that term is used under Rules 13d and 13d-5 under the Exchange Act,
whether or not applicable), directly or indirectly through one or more
intermediaries, of 50% or more of the total voting power represented by all of
the voting securities of the Company.
(g) "Securities" means the Membership Interests and all
interests or other securities of any class resulting from the reclassification,
split, combination or other change thereof, dividends of securities paid thereon
and securities of any other issuer received in exchange for such Membership
Interests in connection with any merger, consolidation,
B-2
<PAGE> 42
reorganization or acquisition involving the Company (including, without
limitation, such a reorganization preceding a Qualified Public Offering).
(h) "Securityholders" means the holders of Securities as of
the date hereof, as well as, in accordance with the terms of the Agreement and
this Appendix B, their respective successors and assigns.
ARTICLE II
DISPOSITIONS OF SECURITIES; RIGHT OF FIRST
REFUSAL; TAG-ALONG PROVISIONS AND PURCHASE OPTION
Section 2.1 Dispositions of Securities. Except for Permitted Transfers,
no Securityholder shall be permitted to Dispose of all or any portion of the
Securities now owned or hereafter acquired by it until the date that is two (2)
years after the date of the Agreement (the "Transfer Blockage Date"). Following
the Transfer Blockage Date, Dispositions shall be permitted but must strictly
comply with the terms and provisions of the Agreement (including this Appendix
B).
Section 2.2 Right of First Refusal. Excluding Permitted Transfers, in
the event that any of the Securityholders, including any of their transferees
permitted pursuant to the terms of the Agreement (the "Offeror"), proposes,
following the Transfer Blockage Date, to Dispose of all or any portion of the
Securities held by such Securityholder (the offer pursuant to which such
Disposition is to take place is hereinafter called the "Transaction Offer") to
any Person, such Securityholder may, subject to the provisions of Section 2.3
hereof, Dispose of such Securities pursuant to and in accordance with the
following provisions of this Section 2.2. Any Securityholder may Dispose of its
interest in Securities in a transaction qualifying as a Permitted Transfer,
subject only to compliance with Section 3.6 of the Agreement. No such
Disposition may be made except as provided in the preceding sentence or unless
such Disposition is proposed to be made to a bona fide, unrelated third party
for cash, cash equivalents (to the extent approved by the Management Committee)
or securities traded on a national securities exchange or national automated
quotation system, provided that such securities, in the determination of the
Management Committee, have a liquid trading market sufficient to provide a
readily determinable fair market value, in which case such Disposition shall be
subject to the balance of this Article II. Each of the Members and the Company
shall reasonably cooperate to structure any exercise of the right of first
refusal described herein to achieve the most efficient tax and ownership
structure that is practicable under the circumstances.
(a) Transfer Notice. If, upon compliance with the provisions
set forth in this Agreement, a Securityholder or such Securityholder's estate or
other legal representative or transferee (the "Selling Securityholder") proposes
to make any Disposition (excluding Permitted Transfers) of all or any portion of
its Securities pursuant to a bona fide third party cash offer, such Selling
Securityholder shall so inform the other Members (each, a "Remaining
Securityholder") by notice in writing (the "Transfer Notice") stating the amount
of Securities that are the subject of such proposed Disposition (the "Offered
Securities"), the name and address of the proposed transferee and all other
terms and conditions of such proposed Disposition, including the cash amount
proposed to be received for the Offered Securities. By giving the
B-3
<PAGE> 43
Transfer Notice, the Selling Securityholder shall be deemed to have granted to
the Remaining Securityholders an option to purchase the Offered Securities if
such Disposition is pursuant to a bona-fide third party offer, for the same cash
amount (or the equivalent amount in cash, if the Transaction Offer is for
consideration other than cash) and on the same payment terms as are set forth in
the Transfer Notice.
(b) Intention to Exercise by the Remaining Securityholders.
Within fifteen (15) days of receipt of any Transfer Notice, each Remaining
Securityholder shall have the right to purchase any Offered Securities, in
accordance with each such Remaining Securityholder's Pro Rata Part (including a
right of over subscription by each electing Remaining Securityholder, allocated
in the same manner, to the extent that one or more Remaining Securityholders
elect to purchase less than their Pro Rata Parts). The Remaining Securityholders
shall notify the Selling Securityholder of the amount of the Offered Securities
that such Remaining Securityholder desires to purchase on the terms set forth in
the Transfer Notice. The failure of any Remaining Securityholder to submit any
notice within the applicable period shall constitute an election on the part of
such Remaining Securityholder not to purchase any of the Offered Securities to
which the requisite Transfer Notice pertained. In the event that electing
Remaining Securityholders elect to purchase all or more than all of the Offered
Securities, then the Offered Securities shall be allocated to the electing
Remaining Securityholders on the same basis as their Pro Rata Parts, or as
otherwise agreed among the electing Remaining Securityholders.
(c) Requirement to Purchase All Offered Securities.
Notwithstanding any other provision of this Section 2.2, in no event shall any
Selling Securityholder be required to sell any of the Offered Securities to the
Remaining Securityholders unless, within the period provided, the Selling
Securityholder has been notified that all the Offered Securities will be
purchased by the Remaining Securityholders.
(d) Closing. The closing of the purchase and sale of
Securities that are being purchased and sold under this Section 2.2 shall take
place at the Company's principal executive offices on the 10th day following the
last notification from a Remaining Securityholder pursuant to Section 2.2(b) (or
if such date is a Saturday, Sunday or legal holiday in the state where such
offices are located, the first day thereafter that is not a Saturday, Sunday or
legal holiday) at 10:00 a.m., local time. At the closing, the parties shall take
all action necessary to convey such Securities to be transferred in accordance
with this Agreement, free of all liens and encumbrances.
(e) Failure to Exercise. If the Remaining Securityholders do
not elect to purchase all of the Offered Securities within the fifteen (15) day
period provided, then all of such Offered Securities may be disposed of by the
Selling Securityholder (subject to the provisions of Section 2.3) to the
proposed transferee named in the Transfer Notice, for the price and on the terms
and conditions no more favorable to the proposed transferee than those set forth
in the Transfer Notice, at any time within one hundred twenty (120) days after
the expiration of the period provided for in the notice of the Remaining
Securityholders to be delivered pursuant to Section 2.2(b) herein. Any
Securities not so disposed of within such one hundred twenty (120) day period
shall remain subject to all of the provisions of this Agreement.
B-4
<PAGE> 44
Section 2.3 Tag-Along Rights. Excluding any Disposition qualifying as a
Permitted Transfer, in the event that any Selling Securityholder receives a
Transaction Offer, such Selling Securityholder may proceed with such Disposition
only pursuant to and in accordance with the following provisions of this Section
2.3.
(a) Each Remaining Securityholder shall have the right to
participate in the Transaction Offer on the terms and conditions herein stated,
which right shall be exercisable upon written notice to the Selling
Securityholder and the Company within ten (10) days after delivery to it of the
Transfer Notice.
(b) Each of the Remaining Securityholders shall have the right
to sell a portion of its Securities pursuant to the Transaction Offer which is
equal to the product obtained by multiplying (i) the total amount of Securities
subject to the Transaction Offer by (ii) a fraction, the numerator of which is
the total amount of Securities held by such Remaining Securityholder (calculated
on a fully diluted basis) on the date of the Transfer Notice, and the
denominator of which is the total amount of Securities then held by all
Remaining Securityholders and the Selling Securityholder (calculated on a fully
diluted basis) on the date of the Transfer Notice. To the extent one or more
Remaining Securityholders elect not to sell, or fail to exercise their right to
sell, the full amount of such Securities which they are entitled to sell
pursuant to this Section 2.3, the other Remaining Securityholders' rights to
sell Securities shall be increased proportionately (in accordance with their Pro
Rata Parts) and the other Remaining Securityholders shall have an additional ten
(10) days from the date upon which they are notified of such election or failure
to exercise in which to increase the amount of Securities to be sold by them
hereunder.
(c) Within fifteen (15) days after the date by which the
Remaining Securityholders were first required to notify the Selling
Securityholder of their intent to participate, the Company shall notify each
participating Remaining Securityholder of the amount of Securities held by such
Remaining Securityholder that will be included in the sale and the date on which
the Transaction Offer will be consummated, which shall be no later than the
later of (i) thirty (30) days after the date by which the Remaining
Securityholders were required to notify the Company of their intent to
participate and (ii) the satisfaction of any governmental approval or filing
requirements, if any.
(d) Each of the participating Remaining Securityholders may
effect its participation in any Transaction Offer hereunder by delivering to the
Selling Securityholder for delivery to the Offeror, of one or more instruments
or certificates, properly endorsed for transfer, representing the Securities it
elects to sell therein (which may be in the form of an amended Agreement). At
the time of consummation of the Transaction Offer, the Offeror shall remit
directly to each Remaining Securityholder that portion of the sale proceeds to
which each Remaining Securityholder is entitled by reason of its participation
therein (less any adjustments due to the conversion of any convertible
securities or the exercise of any exercisable securities).
(e) In the event that the Transaction Offer is not consummated
within the period required by subsection (c) hereof or the Offeror fails timely
to remit to each participating Remaining Securityholder its portion of the sale
proceeds, the Transaction Offer shall be deemed
B-5
<PAGE> 45
to lapse, and any Dispositions of Securities pursuant to such Transaction Offer
shall be deemed to be in violation of the provisions of this Agreement unless
the Selling Securityholder once again complies with the provisions of Section
2.2 and this Section 2.3 hereof with respect to such Transaction Offer.
Section 2.4 Purchase Option. Excluding any Disposition qualifying as a
Permitted Transfer, in the event of the death of a Securityholder that is a
natural person prior to the completion of a Qualified Public Offering, the
Company shall have the right and option, in the discretion of the Management
Committee of the Company, to give notice of an election to purchase (the
"Purchase Option"), at any time during the ninety (90) days following the later
of the occurrence of the death of such Securityholder or notice of such event
being provided to the Management Committee, all of the Securities then owned by
the Securityholder, including such Securities acquired by any other Person
pursuant to a Permitted Transfer and including any legal representative, estate,
executor, administrator or trustee of the Securityholder (the "Representative").
The price to exercise the Purchase Option shall be determined as the applicable
percentage of the Appraised Value of all of the equity interests in the Company
(calculated on a fully diluted basis). The exercise of such Purchase Option
shall be by means of a written notice of exercise (the "Purchase Notice")
delivered by the Company to the Representative. Payment for such Securities
shall be made in cash in three (3) equal installment, with the first installment
payable on the closing date of the exercise of the Purchase Option, which date
shall be no later than thirty (30) days following the Purchase Notice or such
longer period as may be reasonably necessary to determine the Appraised Value,
and the two (2) subsequent 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.
Section 2.5 Prohibited Transfers. If any Disposition is made or
attempted contrary to the provisions of the Agreement, such purported
Disposition shall be void ab initio; the Company, or the Securityholders, as
appropriate, shall have, in addition to any other legal or equitable remedies
which they may have, the right to enforce the provisions of the Agreement by
actions for specific performance (to the extent permitted by law), and the
Company shall have the right to refuse to recognize any transferee as one of its
Securityholders for any purpose.
Section 2.6 Termination. The rights and obligations of the
Securityholders under this Article II shall terminate immediately prior to the
effectiveness of a Qualified Public Offering but such termination shall be
expressly conditioned on the consummation of the Qualified Public Offering.
Section 2.7 Assignment of Rights. Each Securityholder may assign and
delegate its rights and obligations under this Article II to a transferee
permitted pursuant to the terms of the Agreement (including this Appendix B).
ARTICLE III
PREEMPTIVE RIGHTS
B-6
<PAGE> 46
Section 3.1 The Preemptive Right. The Company shall not issue, sell or
exchange, agree or obligate itself to issue, sell or exchange, or reserve or set
aside for issuance, sale or exchange (herein collectively referred to as a
"Sale"), any New Securities, unless in each case the Company shall have first
offered to sell such securities (the "Offered New Securities") to the
Securityholders. For purposes of this Article III, "New Securities" shall mean
(i) any Membership Interests; (ii) any shares of any other equity security of
the Company, including without limitation, shares of any securities of any type
that are convertible into or exchangeable for equity securities of the Company,
or (iii) any option, warrant or other right to subscribe for, purchase or
otherwise acquire any such equity security of the Company; provided, however,
that "New Securities" does not include (a) securities issued in connection with
an acquisition by the Company of another Entity or merger with another Entity,
(b) securities issued, or options or rights to purchase such securities granted
to employees, consultants, agents, managers or officers of the Company pursuant
to any Option Plan or the GFI Option, (c) common equity securities issued in
connection with a Qualified Public Offering, (d) securities issued as a result
of any split, dividend, reclassification or reorganization of the Company's
equity securities, distributable on a pro rata basis to all holders of such
equity securities or (e) securities issued pursuant to a capital call in
accordance with Section 4.1.2 of the Agreement.
(a) The Offer and Sale. The Offer shall have been specified by
the Company in writing and delivered to the Securityholders (the "Offer"), which
Offer by its terms shall remain open and irrevocable for a period of twenty (20)
days from receipt of the Offer. The Offer shall include (i) the amount and type
of Offered New Securities, (ii) the name and address of the Person to which the
Company wishes to sell the Offered New Securities, (iii) the price of the
Offered New Securities and (iv) any other material terms and conditions of the
proposed Sale.
Section 3.2 Notice of Acceptance. Notice of each Securityholder's
intention to accept, in whole or in part, any Offer made pursuant to Section 3.1
shall be evidenced by a writing signed by such Securityholder and delivered to
the Company prior to the end of the twenty (20) day period of such Offer,
setting forth the amount that such Securityholder elects to purchase (the
"Notice of Acceptance"). If the amounts subscribed for by all Securityholders
are more than the total Offered New Securities, the Offered New Securities shall
be allocated to the Securityholders on the basis of their respective Pro Rata
Parts.
Section 3.3 Permitted Sales of Refused Securities. In the event that
Notices of Acceptance are not given by the Securityholders in respect of all the
Offered New Securities, the Company shall have sixty (60) days from the
expiration of the period set forth in Section 3.1 to sell all or any part of
such Offered New Securities as to which a Notice of Acceptance has not been
given by the Securityholders (the "Refused Securities") to the Person or Persons
specified in the Offer, but only for cash and otherwise in all respects upon
terms and conditions, including, without limitation, unit price and interest
rates, which are no more favorable, in the aggregate, to such other Person or
Persons or less favorable to the Company than those set forth in the Offer.
Section 3.4 Further Sale. In each case, any Offered New Securities not
purchased by the Securityholders or other Person or Persons in accordance with
Section 3.3 may not be sold or otherwise disposed of until they are again
offered to the Securityholders under the procedures specified in Sections 3.1,
3.2 and 3.3.
B-7
<PAGE> 47
Section 3.5 Termination of Preemptive Right. The rights and obligations
of the Securityholders under this Article III shall terminate immediately prior
to the effectiveness of a Qualified Public Offering but such termination shall
be expressly conditioned on the consummation of the Qualified Public Offering.
Section 3.6 Assignment of Rights. Each Securityholder may assign and
delegate its rights and obligations under this Article III to a transferee
permitted pursuant to the terms of the Agreement (including this Appendix B).
ARTICLE IV
REGISTRATION RIGHTS
Section 4.1 Reorganization. The Members acknowledge that, prior to a
Qualified Public Offering, the Company will be reorganized into a different form
of Entity. In addition, the Management Committee may determine, in connection
with a Qualified Public Offering or otherwise, that reorganization is in the
best interests of the Company and its Members, including their Affiliates.
Consequently, each of the Members agrees to reasonably cooperate, and cause its
Affiliates to reasonably cooperate, to take such actions and execute such
documents as the Management Committee may reasonably request, in order to
consummate any proposed reorganization in the most tax efficient and
organizationally efficient manner as is practicable under the circumstances;
provided, however, that the relative percentage interests of the Members shall
not be affected by such reorganization and no Member shall be required to assume
any liability or obligation as a result of such reorganization that is different
or disproportionate from any other Member. This Agreement (other than the
provisions of Article IV, which shall survive) shall terminate upon the closing
of a Qualified Public Offering.
Section 4.2 Piggy-Back Registration Rights. If the Company (herein
sometimes referred to as the "Public Entity") proposes to register any units of
common equity securities (referred to in this Article IV as "Common Shares")
under the Securities Act whether for its own account or for the account of other
security holders or both on any form other than S-8, S-4 (or form S-3 if such
registration covers an offering of the type contemplated by Form S-8) or any
successor forms, the Company will give prompt written notice (a "Registration
Notice") to all Securityholders of its intention so to register such shares of
Common Shares. Securityholders may, within thirty (30) days after the receipt of
the Registration Notice, notify the Company in writing of the number of shares
of Common Shares, if any, that each such Securityholder desires to have included
in such registration, and the Company shall use its best efforts to cause such
shares of Common Shares to be included in such registration. The Company shall
not be required to include such shares of Common Shares in any such registration
if and to the extent that, in the opinion of the managing underwriter for such
offering, the inclusion of such shares of Common Shares would adversely affect
the marketing of such proposed offering or if the Securityholders have not
agreed to enter into an underwriting agreement in customary form with the
underwriters and to refrain from selling any additional shares of Common Shares
for such reasonable period following the effective date of the offering as such
managing underwriter may request. If the number of shares of Common Shares to be
offered by the Securityholders is so reduced (but the Securityholders are
permitted to include some shares of Common Shares in such registration), then
the shares that may be included by the Securityholders shall be allocated pro
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<PAGE> 48
rata based on each Securityholder's ownership of Common Shares, as nearly as
practicable. In connection with any such reduction, all Securityholders
(regardless of management positions or other factors) shall be treated equally.
The Public Entity shall not grant any piggy-back or demand registration rights
to any other party after the date hereof that are superior in right or priority
of registration to those set forth herein.
Section 4.3 Registration Procedures.
(1) If and whenever the Public Entity is required by the
provisions of Section 4.2 to effect the registration of Common Shares
(hereinafter referred to as "Registrable Securities") under the Securities Act,
the Public Entity will:
(a) prepare and file with the Securities and Exchange
Commission a registration statement with respect to the Registrable Securities,
and use its best efforts to cause such registration statement to become and
remain effective as promptly as practicable for such period as may be reasonably
necessary to effect the sale of such Registrable Securities, not to exceed six
months;
(b) prepare and file with the Securities and Exchange
Commission such amendments to such registration statement and supplements to the
prospectus contained therein as may be necessary to keep such registration
statement effective for such period as may be reasonably necessary to effect the
sale of the Registrable Securities, not to exceed six months;
(c) furnish to the securityholders participating in
such registration such reasonable number of copies of the registration
statement, preliminary prospectus, final prospectus and such other documents as
such holders may reasonably request in order to facilitate the public offering
of such securities;
(d) use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such holders may reasonably
request in writing within twenty (20) days following the original filing of such
registration statement, except that the Public Entity shall not for any purpose
be required to execute a general consent to service of process or to qualify to
do business as a foreign corporation in any jurisdiction wherein it is not so
qualified;
(e) notify the securityholders participating in such
registration, promptly after it shall receive notice thereof, of the time when
such registration statement has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed;
(f) notify such holders promptly of any request by
the Securities and Exchange Commission for the amending or supplementing of such
registration statement or prospectus or for additional information;
(g) prepare and file with the Securities and Exchange
Commission, any amendments or supplements to such registration statement or
prospectus which is required
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<PAGE> 49
under the Securities Act or the rules and regulations thereunder in connection
with the distribution of the Registrable Securities by such holders;
(h) prepare and promptly file with the Securities and
Exchange Commission and promptly notify such holders of the filing of such
amendment or supplement to such registration statement or prospectus as may be
necessary to correct any statements or omissions, if any, at the time when a
prospectus relating to such Registrable Securities is required to be delivered
under the Securities Act, any event shall have occurred as the result of which
any such prospectus or any other prospectuses then in effect would include an
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances in which they
were made, not misleading; and
(i) advise such holders, promptly and after it shall
receive notice or obtain knowledge thereof, of the issuance of any stop order by
the Securities Exchange Commission suspending the effectiveness of such
registration statement or the initiation or threatening of any proceeding for
that purpose and promptly use its best efforts to prevent the issuance of any
stop order or to obtain its withdrawal if such stop order should be issued.
(2) Expenses. All fees, costs and expenses of and incidental
to the registration of Registrable Securities (excluding underwriters' discounts
and commissions) in connection with a registration hereunder shall be borne by
the Public Entity. The fees, costs and expense of registration to be borne by
the Public Entity shall include, without limitation, all registration, filing
and NASD fees, printing expenses, fees and disbursements of counsel and
accountants for the Public Entity, and all legal fees and disbursements and
other expenses of complying with state securities or blue sky laws of any
jurisdictions in which the securities to be offered are to be registered and
qualified. Fees and disbursements of one special counsel and accountants for the
selling securityholders shall be borne in all cases by the Public Entity.
(3) Indemnification.
(a) The Public Entity will indemnify and hold
harmless each holder of Registrable Securities which are included in a
registration statement pursuant to the provisions of this Section 4.3, its
directors and officers, and any underwriter (as defined in the Securities Act)
for such holder and each person, if any, who controls such holder or such
underwriter within the meaning of the Securities Act, from and against, any and
all loss, damage, liability, cost and expense to which such holder or any such
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, damages, liabilities, costs or expenses are
caused by any untrue statement or alleged untrue statement of any material fact
contained in such registration statement, any prospectus contained therein or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however, that
the Public Entity will not be liable in any case to the extent that any such
loss, damage, liability, cost or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished in writing by such holder, such
underwriter or such controlling person for use in the preparation thereof.
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(b) Each holder of Registrable Securities included in
a registration pursuant to the provisions of this Section 4.3 will indemnify and
hold harmless the Public Entity, its directors and officers, any controlling
person and any underwriter from and against, any and all loss, damage,
liability, cost or expense to which the Public Entity or any controlling person
and/or any underwriter may become subject under the Securities Act or otherwise,
insofar as such losses, damages, liabilities, costs or expenses are caused by
any untrue statement or alleged untrue statement of any material fact contained
in such registration statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statement therein, in light of the
circumstances in which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was so made in reliance upon
information furnished in writing by or on behalf of such holder for use in the
preparation thereof.
(c) Promptly after receipt by an indemnified party
pursuant to the provisions of this Section 4.3 of notice of the commencement of
any action involving the subject matter of the foregoing indemnity provisions
such indemnified party will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of this Section 4.3, promptly
notify the indemnifying party of the commencement thereof, but the omission to
so notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise hereunder. In case such action is
brought against any indemnified party and it notifies the indemnifying party of
the commencement thereof, the indemnifying party shall have the right to
participate in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party, provided, however, if
the defendants in any action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or in addition to those available to the
indemnifying party, or if there is a conflict of interest which would prevent
counsel for the indemnifying party from also representing the indemnified party,
the indemnified party or parties have the right to select separate counsel to
participate in the defense of such action on behalf of such indemnified party or
parties at the Public Entity's reasonable expense. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party pursuant to the provisions of this Section 4.3 for any legal or other
expense subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation, unless (i) the
indemnified party shall have employed counsel in accordance with the provisions
of the preceding sentence, (ii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after the notice of commencement of the action, or
(iii) the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party.
Section 4.4 Duties of Securityholders in Connection with Registration.
It shall be a condition precedent to the obligation of the Company or Public
Entity to take any action pursuant to this Agreement in respect of the
securities which are to be registered at the request of any Securityholder that
such Securityholder shall furnish to the Company or Public Entity such
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<PAGE> 51
information regarding the securities held by such Securityholder and the
intended method of disposition thereof as the Company or Public Entity shall
reasonably request and as shall be required in connection with the action taken
by the Company.
Section 4.5 Holdback Agreements. If any registration pursuant to this
Agreement shall be in connection with an underwritten offering, the
Securityholders agree, if so requested in writing by the Company, not to effect
any sale or distribution, including any private placement or any sale pursuant
to Rule 144, or any successor provision, under the Securities Act, of any equity
security of the Company or of any security convertible into or exchangeable or
exercisable for any equity security of the Company (in each case, other than as
part of such underwritten offering) during the seven (7) days prior to, and
during the ninety (90) day period which begins on, the effective date of such
registration statement (except as part of such registration).
Section 4.6 Current Information. The Public Entity agrees to timely
file all forms, reports and documents with the Securities and Exchange
Commission required to be filed by it under the Securities Exchange Act of 1934,
as amended, so as to permit sales of the Common Shares pursuant to Rule 144
promulgated under the Securities Act.
Section 4.7 Assignment of Rights. Each Securityholder may assign and
delegate its rights and obligations under this Article IV to a transferee
permitted pursuant to the terms of the Agreement (including this Appendix B).
ARTICLE V
OPTIONS; WARRANT; CONVERSION RIGHTS; ANTIDILUTION
Section 5.1 Caminus Options.
(a) On the date hereof, the Company grants to the person set
forth in Schedule 5.1 attached hereto, the Caminus Options with respect to the
number of units of Series B Membership Interests ("Shares") set forth on
Schedule 5.1 attached hereto. No interest in the Caminus Options may be
transferred or otherwise Disposed of except pursuant to a Permitted Transfer.
(b) The Caminus Options shall vest and become exercisable only
in connection with a Sale or Qualified Public Offering of the Company (the date
of closing of such a transaction is referred to as the "Exercise Date").
Further, each Caminus Option shall vest and become exercisable on the Exercise
Date only (x) if each of Dr. Nigel L. Evans and Dr. Michael B. Morrison shall
have duly honored his initial Service Agreement with Caminus dated as of even
date herewith as the same be amended, supplemented or superseded, for all
period(s) covered by such service agreement(s) through the Exercise Date
(regardless whether such individuals remain in the employment of the Caminus as
of the Exercise Date), and (y) to the extent indicated in clause (c) below. The
extent of vesting and exercisability of the Caminus Options shall be tested at
the time of the first applicable Sale or Qualified Public Offering transaction
involving the Company; no subsequent event or change in circumstances shall be
considered.
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<PAGE> 52
(c) The Caminus Options shall vest and become exercisable
(subject to the other provisions of clause (b) above) as to the full number of
Shares if the IRR (as hereinafter defined) is 25% or more. If the IRR is at
least 20% but less than 25%, then the Caminus Options shall vest and become
exercisable (subject to such other provisions) as to the number of Shares
determined by multiplying the full amount thereof by a fraction, the numerator
of which is the actual IRR minus 20% and the denominator of which is 5%. "IRR"
means the post-dilution internal rate of return realized by the Members who have
made cash Capital Contributions to the capital of the Company as of the date of
this Agreement, measured from the date of this Agreement through and including
the Exercise Date; provided, however, that for this purpose "realized" includes
unrealized appreciation in the value of securities held by such Members as
measured by the (implied or explicit) value of the Company's securities in the
Sale or Qualified Public Offering. The calculation of IRR shall be performed
using assumptions and methods customarily employed for rate-of-return
calculations by financial professionals. In the event of a Sale that does not
involve the Disposition of all of the equity interests in the Company, IRR shall
be calculated on a pro forma basis as if all such equity interests were Disposed
of at the price reflected for the equity of the Company in the Sale transaction.
(d) The exercise price per Share of Caminus Options shall
initially be $1,500,000 (U.S.) divided by the number of Shares subject to the
Caminus Options (regardless of the number of Shares that actually vest and
become exercisable). Such exercise price (i) shall be reduced in the event of
each distribution by the Company of cash or property to the Members (in an
amount equal to the Percentage Interests of the holders of the Caminus Options
in such distribution, calculated as if the Caminus Options and all other then
outstanding rights to acquire Membership Interests in the Company, whether or
not then exercisable (but excluding any Caminus Options or other rights to
acquire Membership Interests that have expired or are cancelled), were exercised
immediately prior to the date of such distribution), but excluding from the
foregoing any such distribution designated by the Management Committee as a "tax
distribution", and (ii) shall increase at an annually compounded rate of nine
percent (9.0%) (prorated on a daily basis for any partial years) from the date
of the Agreement through and including the Exercise Date on the amount of the
exercise price as adjusted from time to time pursuant to clause (i) of this
sentence.
(e) The exercise of the Caminus Options shall be made by
written notice to that effect given at least ten (10) days prior to the Exercise
Date (provided that any such option shall be conditioned upon the closing of the
Sale or Qualified Public Offering, as applicable, on the Exercise Date). Not
later than the Exercise Date, the exercising holder shall pay to the Company the
exercise price in cash or by delivery of such other property as the Management
Committee may approve; provided, however, that (i) in the event of a Sale for
cash, the Company agrees to offset the exercise price payable by such holder to
the Company against the amounts payable to such holder from the cash proceeds of
the Sale, and (ii) in the event of a Qualified Public Offering, the Company
agrees that the exercise price may be payable by such holder (at such holder's
election) on a deferred basis evidenced by a promissory note secured by the
Membership Interests (or successor Securities) granted pursuant to the exercise
of the Caminus Options. Such promissory note shall have a maturity date of three
(3) years (subject to customary events of acceleration) and shall accrue
interest at the rate of eight percent (8%) per annum, with principal and
interest payable quarterly. Each Caminus Option must be exercised, if at all, in
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connection with the first applicable Sale or Qualified Public Offering;
thereafter, the Caminus Options shall be null and void. In connection with each
exercise, the Company shall be entitled to require that the exercising holder
pay the amount of withholding and other taxes required by law to be paid or
withheld by the Company in connection therewith.
Section 5.2 SS&C Warrant.
(a) The SS&C Warrant is held by SS&C and with respect to the
number of units of Series B Membership Interests ("Shares") set forth on
Schedule 5.2 attached hereto. No interest in the SS&C Warrant may be transferred
or otherwise Disposed of except pursuant to a Permitted Transfer.
(b) The SS&C Warrant shall vest and become exercisable, and
shall be exercised, to the extent otherwise earned pursuant to the terms hereof,
upon the earlier to occur of (x) the date that is thirty-nine months after the
date of the Agreement and (y) a Sale or Qualified Public Offering (the
applicable date is referred to as the "Exercise Date"). The extent to which the
SS&C Warrant shall vest and become exercisable shall be determined as follows:
(i) If Incremental License Revenues (as
hereinafter defined) from the date of the
Agreement through the date that is
thirty-six months after the date of the
Agreement (the "Measurement Date") are at
least $10,000,000 (U.S.), then the full
number of Shares shall vest and become
exercisable.
(ii) If Incremental License Revenues from the
date of this Agreement through the
Measurement Date are at least $5,000,000
(U.S.) but less than $10,000,000 (U.S.),
then the number of Shares that shall vest
and become exercisable shall be determined
by multiplying the full number of Shares by
a fraction, (a) the numerator of which is
the amount of actual Incremental License
Revenues minus $5,000,000 (U.S.), and
(b) the denominator of which is $5,000,000
(U.S.)(such fraction is referred to as the
"Earned Percentage"). If Incremental License
Revenues from the date of this Agreement
through the Measurement Date are less than
$5,000,000 (U.S.), then none of the Shares
shall vest or become exercisable.
(iii) "Incremental License Revenues" means,
consistent with the memo from SS&C to GFI
dated March 9, 1998 (a copy of which is
attached hereto as Exhibit "A") describing
the various products and services to be
provided by SS&C, gross revenues received by
the Company (including any subsidiaries
thereof) from the sale or license of (a)
CAMRA 2000 software products for financial
investment management and energy asset
management as described in the License
Agreement, (b) Finesse 2000 software
products as described in the License
Agreement, (c) Antares software products as
described in the License Agreement, (d)
other
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<PAGE> 54
software products developed by SS&C and
accepted by the Management Committee of the
Company from time to time as qualifying for
Incremental License Revenue credit, and (e)
other products and services of the Company
(including its subsidiaries), to the extent
such sales or licenses are procured from
customers of SS&C in the financial
investment management industry substantially
as a result of utilizing sales and
distribution personnel of SS&C.
In the event of a Sale or Qualified Public Offering of the Company prior to
December 31, 2000, the foregoing criteria (i.e., clauses (i)-(iii)) shall be
adjusted on a pro rata, daily basis, based upon the period from the date of the
Agreement through the closing of such transaction, and the extent of vesting of
the SS&C Warrant shall thereupon be determined in accordance with the revised
criteria and based upon Incremental License Revenues through such date. The
extent of vesting and exercisability of the SS&C Warrant shall be determined as
of the first applicable vesting date; no subsequent event or change in
circumstances shall be considered.
(c) The exercise price for all of the Shares subject to the
SS&C Warrant shall be one cent ($.01).
(d) The SS&C Warrant shall be exercised as to the full number
of Shares subject thereto, and not in part. The exercise shall be made by
written notice to that effect given at least ten (10) days prior to the Exercise
Date (provided that any such exercise in connection with vesting under Section
5.2(b)(y) above shall be conditioned upon the closing of the Sale or Qualified
Public Offering, as applicable, on the Exercise Date). In connection with
exercise, the Company shall be entitled to require that the exercising holder
pay the amount of withholding and other taxes, if any, required by law to be
paid or withheld by the Company in connection therewith.
Section 5.3 Series C Membership Interest.
(a) The GFI Option is held by GFI. No interest in the GFI
Option may be transferred or otherwise Disposed of except pursuant to a
Permitted Transfer.
(b) The GFI Option represents the right to acquire a Series C
Membership Interest in the Company entitled to a ten percent (10.0%) Percentage
Interest; such Percentage Interest shall not be subject to dilution as a result
of the issuance of additional Membership Interests in the Company.
(c) The exercise price for the GFI Option shall equal the sum
of (i) $1,837,500 minus (ii) ten percent (10.0%) of the amount of each
distribution by the Company of cash or property to the Members (but excluding
any distributions designated by the Management Committee as a "tax
distribution") plus (iii) ten percent (10.0%) of the amount of additional cash
Capital Contributions or contributions of property (with a net fair market value
established by the Management Committee) to the Company from its Members,
excluding any such Capital Contributions resulting from the exercise of any
right or option under an Option Plan but
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<PAGE> 55
including any such Capital Contributions resulting from the exercise of
conversion rights as described in Section 5.5 below.
(d) The GFI Option shall be exercised as to the full amount
thereof, and not in part. The exercise shall be made by written notice to that
effect given at least ten (10) days prior to the desired date of exercise. Not
later than the desired date of exercise, the exercising holder shall pay to the
Company the exercise price in cash or by delivery of such other property as the
Management Committee may approve. The GFI Option must be exercised, if at all,
not later than ten (10) years following the date of the Agreement; thereafter,
the GFI Option shall be null and void. In connection with exercise, the Company
shall be entitled to require that the exercising holder pay the amount of
withholding and other taxes, if any, required by law to be paid or withheld by
the Company in connection therewith.
Section 5.4 No Rights as a Member Prior to Exercise. No holder of a
Caminus Option, SS&C Warrant, GFI Option or any other right or option granted
pursuant to an Option Plan shall have any rights (including, without limitation,
any Percentage Interest in Net Profits or distributions) as a Member of the
Company until such time as such right or option has been properly exercised in
accordance with the Agreement, including this Appendix B.
Section 5.5 ZAI*NET Conversion Rights. The Members acknowledge that the
former owner of ZAI*NET (including its equity holders and certain assignees
thereof) have certain conversion rights to acquire Membership Interests in the
Company in exchange for limited partnership interests in ZAI*NET, as detailed in
the Amended and Restated Limited Partnership Agreement of ZAI*NET dated as of
the date hereof. The Members agree that the holders of such conversion rights
shall have the right to be admitted as Members of the Company upon the proper
exercise thereof.
Section 5.6 Antidilution Protection. The Members acknowledge and agree
that in the event that the Company effects a numerical subdivision of the
outstanding Membership Interests into a greater number, the number of Series B
Membership Interests that are issuable upon the exercise of the Caminus Options
and the SS&C Warrant shall be proportionately increased, and, conversely, in the
event that the Company effects a numerical combination of the outstanding
Membership Interests into a smaller number, the number of Series B Membership
Interests that are issuable upon the exercise of the Caminus Options and the
SS&C Warrants shall be proportionately reduced, each such increase or reduction,
as the case may be, to become effective immediately upon such subdivision or
combination. A corresponding adjustment changing the exercise price per Caminus
Option allocated to the unexercised Caminus Options shall be likewise made. Each
adjustment described in this Section 5.6 shall be made in the Management
Committee's reasonable discretion and shall be conclusive and binding on all
parties.
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SCHEDULE 5.1
CAMINUS OPTIONS
<TABLE>
<CAPTION>
Option Holder Shares Percentage Interest(1)
- ------------- ------ --------------------
<S> <C> <C>
Dr. Nigel Evans 303,000 3.03%
Dr. Michael Morrison 202,000 2.02%
</TABLE>
(1) If vested Shares reduced pursuant to Section 5.1(c), then Percentage
Interest to be reduced pro rata. Percentage Interests are based on a
fully diluted scenario set forth in Appendix A-1 in the Agreement.
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<PAGE> 57
SCHEDULE 5.2
SS&C WARRANT
<TABLE>
<CAPTION>
Holder Shares Percentage Interest(2)
- ------ ------ --------------------
<S> <C> <C>
SS&C 841,000 8.41%
</TABLE>
(2) If vested Shares reduced pursuant to Section 5.2(b), then Percentage
Interest to be reduced pro rata. Percentage Interest is based on a
fully diluted scenario set forth in Appendix A-1 in the Agreement.
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<PAGE> 58
EXHIBIT "A"
SS&C Memo
To: L. Gilson, R. Landers, I. Schapiro
From: W. Stone, D. Stoner
Date: 03/09/98
Re: SS&C's Value Proposition to EIH
- --------------------------------------------------------------------------------
SS&C contribution to EIH will provide significant value to the partnership. This
memo discusses the value of SS&C in three categories, two of which invite a
degree of financial forecasting.
1. SS&C's unique strengths and capabilities above and beyond the
freely contributed expertise, experience, and support we bring
to the partnership along with GFI and Caminus.
2. The ability for EIH to be SS&C's exclusive distributor in the
energy utility sector.
3. The ability for EIH to use SS&C as its distribution channel
into the financial market.
1. SS&C's unique capabilities
We acknowledge that SS&C senior management, along with GFI and Caminus, will
freely contribute significant expertise, advice, and support to EIH as a basic
shareholder responsibility.
However, SS&C brings a worldwide software organization to EIH that neither of
the other partners can provide which deserves consideration as much as a
financial investment in EIH.
Access to our technology and the expertise of our people
- Distributed On-line Transaction Processing (OLTP) and On-line
Analytical Processing (OLAP).
- Dynamic date exchange and Active X technology.
- Telecommunications, messaging, queuing, and the requirements
associated with passing critical event-based information on a
reliable real-time basis.
- Integration of third party data feeds from multiple sources on
a global basis.
- Highly performant open database capable of efficiently
processing huge volumes of data.
- Straight through processing systems that accommodate any
financial asset type, regardless of complexity.
Access to our worldwide organization
- Currently 370 (soon 470) software professionals in marketing,
sales, services, and
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development operating in all major business geographies.
Access to our customers
- 400 of the largest financial asset managers spanning all
important financial market sectors and geographies.
Access to our partners
- Major enterprise software vendors like Peoplesoft, SAP, etc.
- Major consulting organizations like Price Waterhouse, Coopers
& Lybrand, etc.
- Technology leaders like Microsoft, Hewlett Packard, IBM, etc.
- Major information providers like Bloomberg, Reuters, etc.
2. EIH distribution of SS&C products
EIH would receive exclusive distribution rights to SS&C products for the energy
market bringing:
- Immediate product for incremental revenue/margin.
- The ability to leverage EIH's distribution channel which it
must build to be successful.
- More entry points into the enterprise.
- Support of the single focused vendor, one-stop shopping
strategy of EIH.
- The strength of SS&C's name and reputation in the financial
market.
Initial products would be:
- CAMRA 2000, as is, for financial investment management.
- Finesse 2000, modified for energy utilities.
- CAMRA 2000, modified to manage energy assets.
CAMRA 2000 for financial investment management is a recently released 32 it
version of the complete asset management and reporting system. CAMRA 2000 and
its predecessors have over 300 man years of effort and represent conservatively,
a $50 million investment. CAMRA 2000:
- Has proven successful by SS&C through past sales with minimal
marketing to the energy sector.
- Can start immediately in Europe with SS&C EMEA/Caminus
effort.
- While not the strategic focus of EIH, it offers near term
incremental revenue/margins.
Finesse 2000 is a dynamic financial analysis tool which SS&C has invested over
$3 million in to date. Finesse is stochastic and has both a graphical palette
and a virtual general ledger. Finesse 2000:
- Requires a very modest effort to build an Excel front-end for
energy utilities.
- Can be marketed quickly by Caminus for near term incremental
revenue/margins.
- Provides a strategic, high level market entry point supporting
EIH's strategy.
- Provides major incremental consulting revenue/margins for
Caminus, etc.
CAMRA 2000 for energy asset management
- We believe it can become the mid/back office engine for energy
investment management.
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<PAGE> 60
- Could be integrated with Zai*Net, possibly future EIH
products.
- Basis for straight through processing systems to this market.
- Will require development, possible customer funded.
3. SS&C distribution of EIH products to the financial markets
SS&C can use it's worldwide channel into the financial markets to distribute EIH
products.
- We have no immediate capability to provide a complete
distribution channel, except product expertise, for Zai*Net in
North America, Europe, and Asia.
- This would provide the potential for immediate incremental
revenue/profit.
- We have over 400 customers, many who are involved in the
energy market.
- We are growing our customer base at over a 50% compounded
growth rate.
- We are rapidly expanding our channels and have the financial
strength to do so.
- We are becoming increasingly known as "the dominant vendor" to
this market.
Estimating the economic value of SS&C's non-cash contribution
There is no way to accurately estimate our total value to EIH because item 1.
above cannot be monetarily valued, and any forecast for items 2. and 3. depend
upon EIH developing an effective channel to the energy market. Nevertheless, the
discussion below is intended to give some basis for GFI to estimate the value
of:
- An exclusive distributorship of SS&C products to the energy
market.
- The revenue/profit potential of selling SS&C products into the
energy market.
- The revenue/profit potential of SS&C of SS&C selling EIH
products into the financial markets.
- Other revenue/profit opportunities generated by the above.
The value of an SS&C exclusive distribution franchise to the energy market
Normally SS&C would require some form of up-front payment to grant a market
exclusive distributorship for its products. Typical industry methods include:
- An up-front, cash fee for the franchise right and/or,
- Prepaid royalties for a number of years (typically one to
three) and/or,
- A guaranteed investment in channel building.
SS&C would receive royalties on license fees in the range of 50% to 60%
depending upon the size and difficulty to enter a new market.
EIH would receive this franchise at no cost and not pay a license royalty to
SS&C.
As EIH builds its distribution channel in this market, it should realize
operating margins on license fees in the 60% to 65% range which is typical of
direct software sales margins. Another way to look at it: if EIH finds
sub-distributors in the market, EIH should receive up to a 50% to 60% royalty if
the sub does all the selling, therefore achieving margins in the same range.
Other revenue/profit sources driven by SS&C license sales:
- Finesse consulting revenue for EIH/Caminus is estimated to be
at least two to three times license revenue.
- CAMRA 2000 consulting revenue is estimated at one-half license
revenue. SS&C
B-21
<PAGE> 61
would probably provide this for the financial version, EIH for
the energy version.
- It's assumed that SS&C would provide maintenance and receive
the revenue for the financial version of CAMRA 2000.
Maintenance support and revenue for the energy version might
be shared.
The value of SS&C distributing other vendor products to the financial market
Normally SS&C would require a share of license revenue based upon the "degree"
of sales responsibility it undertakes in the range of:
- 5% to 10% for providing lead generation, prospecting, and
cooperative selling.
- 10% to 25% for the above plus managing the sales cycle, and
providing all except product expertise.
- 40% to 50% for providing everything including product
expertise.
We assume we would initially provide the first level described above for the
Zai*Net product, and we would provide this at no charge to EIH.
Most of the license revenue would be partly incremental to Zai*Net and would
drive additional consulting and maintenance revenue.
Incremental license revenue forecast
The following is a one way to estimate "ballpark" potential incremental license
revenue due to SS&C products and channels. The logic builds incremental licenses
from Zai*Net's plan only. Incremental consulting revenue can be estimated from
the assumptions above.
B-22
<PAGE> 62
<TABLE>
<CAPTION>
Plan Plan Plan Extend Extend 5 Year
Zai*Net License Revenue Plan 98 99 00 01 02 Total
- ---------------------------- -- -- -- -- -- -----
<S> <C> <C> <C> <C> <C> <C>
License revenue 8,088 12,670 19,112 28,757 37,460 104,085
Growth rate 57% 51% 40% 40%
Ave. unit sale 250 275 300 325 350
Number of units 32 46 64 82 107
SS&C Assumptions
- ----------------------------
Average sale
CAMRA financial 250 250 250 250 250
CAMRA energy 0 250 250 250 250
Finesse 100 250 250 250 250
Incremental units per Zai*Net sale
CAMRA2000 for financial 5% 10% 10% 10% 10%
CAMRA2000 for energy 0% 5% 10% 15% 20%
Finesse2000 10% 15% 20% 20% 20%
Zai*Net to financial mkt by SS&C 5% 10% 10% 10% 10%
Incremental Units
- ----------------------------
CAMRA2000 for financial 2 5 6 8 11 32
CAMRA2000 for energy 0 2 6 12 21 42
Finesse2000 3 7 13 16 21 61
Zai*Net to financial mkt by SS&C 2 5 6 8 11 32
--- ----- ----- ----- ----- ------
6 18 32 45 64 166
Incremental License Revenue
- ----------------------------
CAMRA2000 for financial 404 1152 1,593 2,058 2,676 7,883
CAMRA2000 for energy 0 576 1,593 3,087 5,351 10,507
Finesse2000 324 1,728 3,185 4,116 5,351 14,704
Zai*Net to financial mkt by SS&C 404 1,267 1,911 2,656 3,746 10,004
--- ----- ----- ----- ----- ------
Incremental License Revenues 1,132 4,122 8,282 11,938 17,124 43,199
</TABLE>
B-
<PAGE> 1
Exhibit 10.5
ASSIGNMENT AND ASSUMPTION AGREEMENT
This ASSIGNMENT AND ASSUMPTION AGREEMENT (this "AGREEMENT") is entered
into as of the 12th day of May, 1998, by and among ZAI*NET Software, Inc., a
Delaware corporation ("ASSIGNOR"), ZAI*NET Software, L.P., a Delaware limited
partnership ("ASSIGNEE") and Brian J. Scanlan, an individual and stockholder of
Assignor ("GENERAL PARTNER"). Any capitalized terms not otherwise defined herein
shall have the respective definitions as set forth in the Purchase Agreement (as
hereinafter defined).
WITNESSETH
WHEREAS, Assignor desires to contribute, transfer, convey, assign
and deliver to Assignee, and Assignee desires to receive and accept,
substantially all of Assignor's assets, including those set forth on EXHIBIT A
hereto (the "ASSIGNMENT");
WHEREAS, as consideration for the Assignment, Assignee desires to
issue, transfer and convey (i) to Assignor a ninety-nine percent (99%) limited
partnership interest in Assignee and (ii) to General Partner the one percent
(1%) general partnership interest in Assignee;
WHEREAS, as additional consideration for the Assignment, Assignee
has agreed to assume from Assignor certain Assumed Liabilities of Assignor,
consisting of those obligations and liabilities set forth on EXHIBIT B hereto
(the "ASSUMED LIABILITIES");
NOW, THEREFORE, in consideration of the premises and the
respective agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows.
1. DEFINITIONS. For the purposes of this Agreement, the following terms
shall have the following meanings:
"Assets" shall mean all of Assignor's assets and properties
(excluding (a) an amount of cash equal to $600,000 and (b) title to the
1993 Toyota Camry), including, without limitation, those set forth on
EXHIBIT A hereto.
"Purchase Agreement" shall mean that certain Purchase Agreement
dated as of the date hereof, by and among Assignor, Assignee, General
Partner and GFI Caminus LLC, a Delaware limited liability company.
<PAGE> 2
2. ASSIGNMENT. The Assignor does hereby contribute, transfer, convey,
assign, and deliver to Assignee all of the rights, title and interests of the
Assignors in and to the Assets free and clear of any and all Liens (as defined
in the Purchase Agreement) whatsoever, except for Permitted Liens (as defined in
and disclosed on Schedule 3.14 to the Purchase Agreement).
3. ACCEPTANCE AND ASSUMPTION. Assignee hereby receives, accepts and
acquires from Assignor the Assets and hereby covenants and agrees to faithfully
observe, keep, perform and fulfill all of the terms, covenants, conditions and
obligations required to be observed, kept, performed and fulfilled by the
Assignor arising from and with respect to the Assets. In addition, Assignee,
without any further responsibility or liability of or recourse to Assignor or
any of Assignor's stockholders, officers, directors, employees, agents,
successors or assigns, hereby absolutely and irrevocably assumes and covenants
and agrees with Assignor to pay, perform and be liable and responsible for, any
and all Assumed Liabilities.
4. TRANSFER OF PARTNERSHIP INTERESTS. As consideration for the
Assignment, Assignee hereby issues, conveys, assigns and transfers (i) a
ninety-nine percent (99%) limited partnership interest to Assignor, and (ii) a
one percent (1%) general partnership interest to General Partner.
5. SUCCESSORS AND ASSIGNS. This Agreement shall 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
parties hereto.
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. FURTHER ASSURANCES. Each of Assignee, Assignor and General Partner
agrees to (a) cooperate fully with the other party, (b) execute such further
instruments, documents and agreements, and (c) give such further written
assurances as may be reasonably requested by Assignee, Assignor or General
Partner, as the case may be, to evidence and reflect the transactions described
herein and contemplated hereby and to carry into effect the intents and purposes
of this Agreement.
8. 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.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
ZAI*NET Software, L.P., a Delaware ZAI*NET Software Inc., a Delaware
limited partnership corporation
By: /s/ Brian J. Scanlan By: /s/ Brian J. Scanlan
-------------------------------- ---------------------------------
Name: Brian J. Scanlan Name: Brian J. Scanlan
Its: General Partner Its: President
Brian J. Scanlan
/s/ Brian J. Scanlan
- -----------------------------------
-3-
<PAGE> 4
EXHIBIT A
The "Assets" of Assignor include all of the rights, title and interest
in the following as they exist on the date hereof:
(A) ACCOUNTS, ETC. All rights of Assignor to payment for goods sold or
leased, or to be sold or leased and for services rendered or to be rendered,
whether or not such rights to payment have been earned by performance, and all
security interests in the property of others.
(B) RIGHTS UNDER CONTRACTS. All rights of Assignor under contracts,
agreements and undertakings with third parties, including, without limitation,
the material contracts identified on Schedule 3.7 to the Purchase Agreement, the
Personal Property Leases identified on Schedule 3.17 to the Purchase Agreement
and the Real Property Leases identified on Schedule 3.18 to the Purchase
Agreement.
(C) EQUIPMENT. All machinery, electrical and electronic components,
equipment, furniture, office machinery, appliances, implements and other
tangible personal property of every kind and description used or useful in its
business, and all goods of like kind or type hereafter acquired by Assignor in
substitution or replacement thereof, and all additions and accessions thereto,
including without limitation, the tangible assets identified on Schedule 3.13 to
the Purchase Agreement.
(D) GENERAL INTANGIBLES. All personal property of Assignor (including
things in action) and general intangibles of Assignor. General intangibles
includes, without limitation, all computer software, inventions, processes,
formulae, licenses, patents, patent rights, copyrights, copyright rights,
trademarks, trademark rights, service marks, service mark rights, trade names,
trade name rights, and other like business property rights, including to the
extent such assignment is permitted by law all permits, licenses and entitlement
necessary for operation of equipment, and all applications to acquire any such
rights, on file or for which application may at any time have been made in the
past by Assignor, including without limitation, the Intellectual Property
identified on Schedule 3.8 to the Purchase Agreement.
(E) INSTRUMENTS. All drafts, checks, certificates of deposit, notes,
bills of exchange and other writings which evidence a right to the payment of
money.
(F) INVENTORY. All goods owned or held by or for the account of Assignor
for sale or lease, or for furnishing under a contract of service, or as raw
materials, work in process or materials incorporated in or consumed in the
production of any of the foregoing, in each case wherever the same shall be
located.
A-1
<PAGE> 5
(G) FIXTURES. All goods owned by Assignor so related to real property
owned by Assignor that Assignor shall have acquired an interest in such goods
under real estate law.
(H) BALANCE SHEET ITEMS. All other assets and properties reflected in
the balance sheet prepared in connection with the Closing Audit (as defined in
the Purchase Agreement).
(I) PROCEEDS. All proceeds, products, additions and excisions of any and
all of the foregoing Assets and, to the extent not otherwise included, all
payments under insurance, or any indemnity, warranty or guaranty, payable by
reason of loss of damage to or otherwise with respect to any of the foregoing
Assets.
A-2
<PAGE> 6
EXHIBIT B
"ASSUMED LIABILITIES" shall mean the following:
(A) All trade accounts payable, accrued expenses and accrued liabilities
for goods delivered or to be delivered to Assignor and for services performed or
to be performed by Assignor in connection with its business, in each case to the
extent (excluding any payables, expenses, liabilities or obligations in
connection with the 1993 Toyota Camry) (i) reflected as liabilities on the
balance sheet prepared in connection with the Closing Audit, (ii) of a de
minimis amount and incurred in the ordinary course of business and consistent
with past practices and (iii) incurred in connection with and for the benefit of
the business of the Assignee from and after the Closing (as defined in the
Purchase Agreement).
(B) All obligations of Assignor under contracts, agreements and
undertakings with third parties pursuant to contracts identified on Schedule 3.6
to the Purchase Agreement under the Personal Property Leases identified on
Schedule 3.17 to the Purchase Agreement under the Real Property Leases
identified on Schedule 3.18 to the Purchase Agreement, and all other nonmonetary
obligations arising from items reasonably identifiable on the schedules to the
Purchase Agreement and incurred in the ordinary course of business and
consistent with past practices, excluding, in each case, any liability or
obligation for a breach or default thereunder or other liability or obligation
accrued with respect to the period prior to the date hereof, unless such
liability or obligation is covered by the preceding paragraph (A).
B-1
<PAGE> 1
Exhibit 10.6
ASSIGNMENT AND ASSUMPTION AGREEMENT
This ASSIGNMENT AND ASSUMPTION AGREEMENT (this "AGREEMENT") is
entered into as of the 12th day of May, 1998, by and among ZAI*NET Software,
Inc., a Delaware corporation ("ASSIGNOR") and Rooney Software, L.L.C., a
Delaware limited liability company ("ASSIGNEE").
W I T N E S S E T H
WHEREAS, Assignor desires to contribute, transfer, convey, assign
and deliver to Assignee, and Assignee desires to receive and accept, Assignor's
entire partnership interest, which consists of an aggregate twenty-nine percent
(29%) limited partnership interest (the "Partnership Interest"), in Zai*Net
Software, L.P., a Delaware limited partnership (the "Partnership") (the
"ASSIGNMENT");
WHEREAS, as consideration for the Assignment, Assignee desires to
issue, transfer and convey to Assignor a limited liability company interest in
Assignee.
WHEREAS, as additional consideration for the Assignment, Assignee
has agreed to assume from Assignor all of those obligations and liabilities of
Assignor arising solely with respect to the Partnership Interest (the "ASSUMED
LIABILITIES");
NOW, THEREFORE, in consideration of the premises and the
respective agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows.
1. ASSIGNMENT. The Assignor does hereby contribute, transfer, convey,
assign, and deliver to Assignee all of the rights, title and interests of the
Assignor in and to the Partnership Interest.
2. ACCEPTANCE AND ASSUMPTION. Assignee hereby receives, accepts and
acquires from Assignor the Partnership Interest and hereby covenants and agrees
to faithfully observe, keep, perform and fulfill all of the terms, covenants,
conditions and obligations required to be observed, kept, performed and
fulfilled by the Assignor arising from and with respect to the Partnership
Interest. In addition, Assignee, without any further responsibility or liability
of or recourse to Assignor or any of Assignor's stockholders, officers,
directors, employees, agents, successors or assigns, hereby absolutely and
irrevocably assumes and covenants and agrees with Assignor to pay, perform and
be liable and responsible for, any and all Assumed Liabilities.
3. TRANSFER OF LIMITED LIABILITY COMPANY INTERESTS. As consideration for
the Assignment, Assignee hereby issues, conveys, assigns and transfers a limited
liability company interest in Assignee to Assignor.
<PAGE> 2
4. SUCCESSORS AND ASSIGNS. This Agreement shall 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
parties hereto and in accordance with the provisions of the Amended and Restated
Limited Partnership Agreement, dated the date hereof, of the Partnership.
5. 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. FURTHER ASSURANCES. Each of Assignee and Assignor agrees to (a)
cooperate fully with the other party, (b) execute such further instruments,
documents and agreements, and (c) give such further written assurances as may be
reasonably requested by Assignee or Assignor, as the case may be, to evidence
and reflect the transactions described herein and contemplated hereby and to
carry into effect the intents and purposes of this Agreement.
7. 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.
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
Rooney Software, L.L.C., a Delaware ZAI*NET Software, Inc., a
limited liability company Delaware corporation
By: /s/ Brian Scanlan By: /s/ Brian Scanlan
------------------------------- ---------------------------------
Its: President Its: President
------------------------------- ---------------------------------
<PAGE> 4
EXHIBIT A
The "Assets" of Assignor include all of the rights, title and interest
in the following as they exist on the date hereof:
(A) ACCOUNTS, ETC. All rights of Assignor to payment for goods sold or
leased, or to be sold or leased and for services rendered or to be rendered,
whether or not such rights to payment have been earned by performance, and all
security interests in the property of others.
(B) RIGHTS UNDER CONTRACTS. All rights of Assignor under contracts,
agreements and undertakings with third parties, including, without limitation,
the material contracts identified on Schedule 3.7 to the Purchase Agreement, the
Personal Property Leases identified on Schedule to 3.17 to the Purchase
Agreement and the Real Property Leases identified on Section 3.18 to the
Purchase Agreement.
(C) EQUIPMENT. All machinery, electrical and electronic components,
equipment, furniture, office machinery, appliances, implements and other
tangible personal property of every kind and description used or useful in its
business, and all goods of like kind or type hereafter acquired by Assignor in
substitution or replacement thereof, and all additions and accessions thereto,
including without limitation, the tangible assets identified on Schedule 3.13 to
the Purchase Agreement.
(D) GENERAL INTANGIBLES. All personal property of Assignor (including
things in action ) and general intangibles of Assignor. General intangibles
includes, without limitation, all computer software, inventions, processes,
formulae, licenses, patents, patent rights, copyrights, copyright rights,
trademarks, trademark rights, service marks, service mark rights, trade names,
trade name rights, and other like business property rights, including to the
extent such assignment is permitted by law all permits, licenses and
entitlements necessary for operation of equipment and all applications to
acquire any such rights, on file or for which application may at any time have
been made in the past by Assignor, including without limitation, the
Intellectual Property identified on Schedule 3.8 to the Purchase Agreement.
(E) INSTRUMENTS. All drafts, checks, certificates of deposit, notes
bills of exchange and other writings which evidence a right to the payment of
money.
(F) INVENTORY. All goods owned or held by or for the account of Assignor
for sale or lease, or for furnishing under a contract of service, or as raw
materials, work in process or materials incorporated in or consumed in the
production of any of the foregoing, in each case wherever the same shall be
located.
(G) FIXTURES. All goods owned by Assignor so related to real property
owned by Assignor that Assignor shall have acquired an interest in such goods
under real estate law.
<PAGE> 5
(H) BALANCE SHEET ITEMS. All other assets and properties reflected in
the balance sheet prepared in connection with the Closing Audit (as defined in
the Purchase Agreement).
(I) PROCEEDS. All proceeds, products, additions and excisions of any and
all of the foregoing Assets and, to the extent not otherwise included, all
payments under insurance, or any indemnity, warranty or guaranty, payable by
reason of loss of damage to or otherwise with respect to any of the foregoing
Assets.
<PAGE> 6
EXHIBIT B
"ASSUMED LIABILITIES" shall mean the following:
(A) All trade accounts payable, accrued expenses and accrued liabilities
for goods delivered or to be delivered to Assignor and for services performed or
to be performed by Assignor in connection with its business, in each case to the
extent (i) reflected as liabilities on the balance sheet prepared in connection
with the Closing Audit, and (ii) incurred in connection with and for the benefit
of the business of the Assignee from and after the Closing (as defined in the
Purchase Agreement).
(B) All obligations of Assignor under contracts, agreements and
undertakings with third parties pursuant to contracts identified on Schedule 3.6
to the Purchase Agreement, under the Personal Property Leases identified on
Schedule 3.17 to the Purchase Agreement and under the Real Property Leases
identified on Schedule 3.18 to the Purchase Agreement, excluding, in each case,
any liability or obligation for a breach or default thereunder or other
liability or obligation accrued with respect to the period prior to the date
hereof, unless such liability or obligation is covered by the preceding
paragraph (A).
<PAGE> 1
EXHIBIT 10.9
CAMINUS LLC
CREDIT AGREEMENT
JUNE 23, 1999
$5,000,000
FLEET BANK, N.A.
LENDER
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01. Defined Terms........................................................................... 1
Section 1.02. Other Definitional Provisions........................................................... 23
Section 1.03. Types and Classes of Loans.............................................................. 23
ARTICLE II.
LOANS
Section 2.01. Loans................................................................................... 24
Section 2.02. Use of Proceeds......................................................................... 24
Section 2.03. Procedures for Borrowings and Disbursements............................................. 25
Section 2.04. Notes................................................................................... 25
ARTICLE III.
GENERAL PROVISIONS
Section 3.01. Fees.................................................................................... 26
Section 3.02. Interest................................................................................ 26
Section 3.03. Principal Payments; Reduction of Commitments; and Termination of Commitments............ 27
Section 3.04. Optional and Mandatory Prepayments...................................................... 28
Section 3.05. Late Charges and Default Interest....................................................... 30
Section 3.06. Requirements of Law..................................................................... 30
Section 3.07. Illegality.............................................................................. 31
Section 3.08. Limitation on Types of Loans............................................................ 31
Section 3.09. Compensation............................................................................ 32
Section 3.10. Taxes................................................................................... 32
Section 3.11. Computations............................................................................ 33
Section 3.12. Payments................................................................................ 33
Section 3.13. Lending Offices......................................................................... 34
Section 3.14. Set-Offs, Etc........................................................................... 34
ARTICLE IV.
CONDITIONS PRECEDENT
Section 4.01. Conditions Precedent to the Revolving Loan.............................................. 35
Section 4.02. Conditions Precedent to all Loans....................................................... 39
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
Section 5.01. Financial Condition..................................................................... 40
Section 5.02. No Change............................................................................... 41
Section 5.03. Compliance with Law..................................................................... 41
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 5.04. Necessary Action; Consent; Enforceable Obligations...................................... 41
Section 5.05. No Legal Bar............................................................................ 42
Section 5.06. No Material Litigation.................................................................. 42
Section 5.07. No Default.............................................................................. 42
Section 5.08. Ownership of Property; Liens............................................................ 43
Section 5.09. Indebtedness and Liens.................................................................. 43
Section 5.10. Intellectual Property, Material Authorizations and Capitalization Documents............. 43
Section 5.11. No Burdensome Restrictions.............................................................. 44
Section 5.12. Taxes................................................................................... 44
Section 5.13. Insurance............................................................................... 44
Section 5.14. ERISA................................................................................... 44
Section 5.15. Capitalization of Company............................................................... 44
Section 5.16. Subsidiaries............................................................................ 44
Section 5.17. Investment Company Act.................................................................. 45
Section 5.18. Holding Company Act..................................................................... 45
Section 5.19. Name Change............................................................................. 45
Section 5.20. Brokers................................................................................. 45
Section 5.21. Environmental Matters................................................................... 45
Section 5.22. Accuracy and Completeness of Information................................................ 46
Section 5.23. Labor Relations......................................................................... 47
Section 5.24. Year 2000 Problem....................................................................... 47
ARTICLE VI.
AFFIRMATIVE COVENANTS
Section 6.01. Maintenance of Existence................................................................ 47
Section 6.02. Maintenance of Financial Records........................................................ 47
Section 6.03. Maintenance of Properties............................................................... 48
Section 6.04. Maintenance of Insurance................................................................ 48
Section 6.05. Compliance with Laws.................................................................... 48
Section 6.06. Right of Inspection..................................................................... 48
Section 6.07. Reporting Requirements and Notices...................................................... 49
Section 6.08. Additional Collateral................................................................... 52
Section 6.09. Environmental Covenants................................................................. 52
Section 6.10. Certain Obligations Regarding Subsidiaries; Further Assurances Covenants................ 54
Section 6.11. Additional Capital Contributions........................................................ 55
Section 6.12. Post-Closing Obligations................................................................ 55
ARTICLE VII.
NEGATIVE COVENANTS
Section 7.01. Liens................................................................................... 55
Section 7.02. Indebtedness............................................................................ 56
Section 7.03. Disposition of Assets................................................................... 57
Section 7.04. Consolidations, Mergers, etc............................................................ 57
Section 7.05. Investments and Permitted Acquisitions.................................................. 57
Section 7.06. Restricted Payments..................................................................... 59
Section 7.07. Guarantee Obligations................................................................... 59
Section 7.08. Transaction With Affiliates............................................................. 59
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
Section 7.09. Lines of Business....................................................................... 60
Section 7.10. Use of Proceeds......................................................................... 60
Section 7.11. Issuance and Sale of Securities......................................................... 60
Section 7.12. Negative Pledge Clauses................................................................. 60
Section 7.13. Accounting Changes...................................................................... 60
Section 7.14. Financial Covenants..................................................................... 60
Section 7.15. Modification of Certain Documents....................................................... 61
Section 7.16. Optional Payments....................................................................... 61
ARTICLE VIII.
EVENTS OF DEFAULT AND REMEDIES
Section 8.01. Events of Default....................................................................... 61
Section 8.02. Remedies on Event of Default............................................................ 64
ARTICLE IX.
MISCELLANEOUS
Section 9.01. Notices, Etc............................................................................ 64
Section 9.02. No Waiver; Remedies..................................................................... 65
Section 9.03. Amendments, Etc......................................................................... 65
Section 9.04. Successors and Assigns.................................................................. 65
Section 9.05. Assignments and Participation........................................................... 66
Section 9.06. Expenses; Indemnity; Damage Waiver...................................................... 66
Section 9.07. SUBMISSION TO JURISDICTION.............................................................. 68
Section 9.08. WAIVER OF JURY TRIAL.................................................................... 68
Section 9.09. GOVERNING LAW........................................................................... 68
Section 9.10. Survival................................................................................ 69
Section 9.11. Captions................................................................................ 69
Section 9.12. Severability of Provisions.............................................................. 69
Section 9.13. Entire Agreement........................................................................ 69
Section 9.14. Usury Limitations....................................................................... 69
Section 9.15. Interpretation and Construction......................................................... 69
Section 9.16. Counterparts............................................................................ 70
Section 9.17. Confidentiality......................................................................... 70
</TABLE>
iii
<PAGE> 5
SCHEDULES
Schedule A Commitments
Schedule 1(A) Capitalization
Schedule 1(B) Subsidiaries
Schedule 2 Intellectual Property, Material Authorizations,
Capitalization Documents and Other Material
Agreements
Schedule 3 Disclosures
Schedule 4 Existing Indebtedness and Liens
Schedule 5 Real Property Interests
EXHIBITS
Exhibit A-1 Form of Revolving Note
Exhibit A-2 Form of Working Capital Note
Exhibit B-1 Borrowing Notice
Exhibit B-2 Eurodollar Notice
Exhibit B-3 Borrowing Base Certificate
Exhibit C-1 Company Security Agreement
Exhibit C-2 Subsidiary Security Agreement
Exhibit D UK Security Agreement
Exhibit E Subsidiary Guarantee
Exhibit F-1 Company Pledge Agreement
Exhibit F-2 Subsidiary Pledge Agreement
Exhibit G-1 Quarterly Compliance Certificate
Exhibit G-2 Annual Compliance Certificate
Exhibit H Perfection Certificate
Exhibit I-1 Opinion of principal counsel
Exhibit I-2 Opinion of UK counsel
Exhibit J Management Subordination Agreement
iv
<PAGE> 6
CREDIT AGREEMENT
CREDIT AGREEMENT, dated as of June 23, 1999, between CAMINUS LLC
(formerly known as GFI Caminus LLC and Caminus Energy Ventures LLC), a Delaware
limited liability company (the "Company"), and FLEET BANK, N.A., a national
banking association organized under the laws of the United States (the
"Lender").
P R E L I M I N A R Y S T A T E M E N T S:
WHEREAS, the Company and its Subsidiaries are engaged in the business
of developing, installing and maintaining software products and related
equipment and systems for use primarily in the energy industry and for the
trading of energy-related assets, providing strategic consulting services in the
foregoing areas, and engaging in substantially related activities and services
and extensions thereof (collectively, the "Company Business");
WHEREAS, the Company has requested the Lender to extend to the Company
senior secured credit facilities in an aggregate principal sum of up to
$5,000,000 to be used for, among other things, the refinancing of certain
indebtedness of the Company and for certain other purposes, all as more
specifically identified below; and
WHEREAS, the Lender has agreed to the request of the Company, subject
to the terms and conditions of this Agreement.
NOW, THEREFORE, the parties to this Agreement hereby agree as follows:
ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. DEFINED TERMS. As used in this Agreement, the following
terms have the following meanings:
"Account" or "Accounts Receivable" means any right to payment for goods
sold or leased or for services, including but not limited to "accounts" as
defined in Section 9-106 of the UCC in effect as of the date hereof in the State
of New York, whether or not such right is evidenced by notes, instruments or
chattel paper and whether or not it has been earned by performance.
"Acquisition" means, with respect to the Company or any Subsidiary, (i)
the acquisition of the Capital Stock of another Person who is incorporated or
organized under the laws of any state of the United States, and/or (ii) the
acquisition of all or substantially all of the assets of another Person or of a
separate operating unit or division of another Person.
"Acquisition Agreements" means, collectively, with respect to each
Acquisition, the respective purchase and sale and similar and related agreements
which set forth the terms and conditions of such Acquisition, subject to Section
7.15 hereof, as amended, supplemented or modified from time to time.
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<PAGE> 7
"Adjusted Eurodollar Rate" means a per-annum rate equal to the
Eurodollar Rate plus the Applicable Margin for Eurodollar Loans.
"Affiliate" means, as to any Person, any other Person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with, such Person. For purposes of this definition, "control" of a Person means
the power, directly or indirectly, either to (i) vote five percent (5%) or more
of the securities having ordinary voting power for the election of directors (or
similar governing body) of such Person, or (ii) direct or cause the direction of
the management and policies of such Person, whether by contract or otherwise.
"Aggregate Outstanding Revolving Extensions of Credit" means, as to the
Lender at any time during the Revolving Loan Commitment Period, an amount equal
to the aggregate principal amount of all Revolving Loans then outstanding.
"Agreement" means this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"Applicable Lending Office" means, for the Lender and for each Type of
Loan, the "Lending Office" of the Lender (or of an affiliate of the Lender)
designated for such Type of Loan on the signature pages hereof or such other
office of the Lender (or of an affiliate of the Lender) as the Lender may from
time to time specify to the Lender and the Company as the office by which its
Loans of such Type are to be made and maintained.
"Applicable Margin" means the percentages applicable to Eurodollar
Loans based on the Consolidated Senior Funded Leverage Ratio as follows:
<TABLE>
<CAPTION>
Consolidated Senior Funded Applicable Margin
Leverage Ratio Eurodollar Loans
-------------- ----------------
<S> <C>
Equal to or greater than 3.00 3.00%
Less than 3.00 but equal to or
greater than 2.00 2.75%
Less than 2.00 2.50%
</TABLE>
The Consolidated Senior Funded Leverage Ratio shall be calculated by
the Company as of the end of each Fiscal Quarter and shall be reported to the
Lender pursuant to the Quarterly Compliance Certificate referred to in Section
6.07(d)(2) hereof and delivered with the Company's financial statements for such
Fiscal Quarter referred to in Section 6.07(b) hereof. The Applicable Margin
shall in each case be based upon the Consolidated Senior Funded Leverage Ratio
as of the end of the Company's most recently ended Fiscal Quarter and shall be
adjusted, if necessary, effective as of the first day of the calendar month
immediately following the delivery of each of the Quarterly Compliance
Certificate and the financial statements referenced above for such Fiscal
Quarter; provided that, in the event that the financial statements and the
Quarterly Compliance Certificate required to be delivered pursuant to Section
6.07(b) and Section 6.07(d)(2), as applicable, are not delivered when due, then
during the period from
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<PAGE> 8
the date such financial statements and Quarterly Compliance Certificate were due
until the date five Business Days after the date upon which they are actually
delivered to the Lender, the Applicable Margin shall be the maximum amount set
forth in the table above. Notwithstanding the foregoing, the initial Applicable
Margin shall be 3.00% per annum, and shall not be adjusted based on the
Consolidated Senior Funded Leverage Ratio determined for any Fiscal Quarter
ending prior (or nearest) to September 30, 1999.
"Available Revolving Loan Commitment" means, as to the Lender at any
time during the Revolving Loan Commitment Period, the excess, if any, of (i)
such Lender's Revolving Loan Commitment, over (ii) the Aggregate Outstanding
Revolving Extensions of Credit.
"Available Working Capital Loan Commitment" means, as to the Lender at
any time during the Working Capital Loan Commitment Period, the excess, if any,
of (i) such Lender's Maximum Working Capital Borrowing Commitment, over (ii) the
aggregate principal amount of all Working Capital Loans made by such Lender then
outstanding.
"Base Rate" means the variable per annum rate of interest from time to
time announced by the Lender at the Principal Office as its prime commercial
lending rate (it being acknowledged by the Company that such rate is a reference
rate only and does not necessarily represent the lowest or best rate actually
charged to any customer on commercial borrowings). Each change in any interest
rate provided for herein based upon the Base Rate resulting from a change in the
Base Rate shall take effect at the time of such change in the Base Rate and the
Lender agrees to provide written notice to the Company of each change in the
Base Rate.
"Base Rate Loans" means Loans that bear interest at rates based upon
the Base Rate.
"Borrowing Base" means, at any time, an amount equal to 85% of all
Eligible Accounts outstanding at such time, minus the lesser of (i) $500,000 and
(ii) the Aggregate Outstanding Revolving Extensions of Credit.
"Borrowing Base Certificate" means a certificate executed by a
Responsible Officer of the Company in substantially the form of Exhibit B-3
hereto.
"Borrowing Date" means any Business Day specified in a Borrowing Notice
pursuant to Section 2.03(a) hereof as a date on which the Company requests the
Lender to make Loans hereunder; provided that the Borrowing Date with respect to
the Revolving Loans shall be the Closing Date.
"Borrowing Notice" means a loan request and certificate executed by a
Responsible Officer of the Company in substantially the form of Exhibit B-1
hereto.
"Business Day" means (i) any day other than a Saturday, Sunday or other
day on which banks in New York City, New York, are authorized or required by law
or other governmental action to be closed, and (ii) if such day relates to a
borrowing of, a payment or prepayment of principal of or interest on, or a
Continuation of or Conversion into, a Eurodollar Loan or a notice by the Company
with respect to any such borrowing, payment, prepayment, Continuation or
Conversion, any day which is a Business Day described in clause (i) and which is
also a day on which dealings in Dollar deposits are carried out in the London
interbank market.
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<PAGE> 9
"Caminus Acquisition" means the acquisition of Caminus Energy Limited
by the Company from the Caminus Sellers pursuant to the Caminus Acquisition
Documents.
"Caminus Acquisition Documents" means, collectively, any and all
purchase and sale agreements, promissory notes and related documents and
instruments, in each case heretofore delivered by the Company and/or any
Subsidiary Guarantor to or for the benefit of the Caminus Sellers in connection
with the Caminus Acquisition, and listed on Schedule 2 hereto.
"Caminus Repurchase" means the repurchase by the Company of all of its
Capital Stock held by SS&C in accordance with the terms and conditions of the
SS&C Documents.
"Caminus Sellers" means, collectively, Dr. Nigel L. Evans, Ph.D. and
Dr. Michael B. Morrison, Ph.D.
"Capital Lease" means any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on the balance sheet of the lessee.
"Capital Lease Obligations" means, with respect to any Person as at any
date of determination, the aggregate liability of such Person under Capital
Leases which liability is (or is required to be) reflected on the balance sheet
of such Person under GAAP.
"Capital Stock" means any and all shares, interests, participation or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants or options to purchase any of the foregoing.
"Capitalization Documents" means, collectively, each of the
subscription agreements, stockholders' agreements, shareholder agreements, stock
purchase agreements, certificates of designation, operating agreements,
partnership agreements, employment agreements, services agreements and other
agreements, including, without limitation, the Operating Agreement, governing
the issuance or setting forth the terms of any Capital Stock issued or to be
issued by the Company or any Subsidiary.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States Government or any agency or
instrumentality thereof having maturities of not more than 90 days from the date
of acquisition; (ii) time deposits and certificates of deposit of the Lender or
any other domestic commercial bank having capital and surplus in excess of
$200,000,000 having maturities of not more than 90 days from the date of
acquisition; (iii) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (i) and (ii)
entered into with the Lender or other bank meeting the qualifications specified
in clause (ii) above; and (iv) commercial paper rated at least A-1 or the
equivalent thereof by Standard & Poor's Ratings Group or P-1 or the equivalent
thereof by Moody's Investors Service, Inc. and in either case maturing within
ninety days after the date of acquisition.
"Class" has the meaning assigned to such term in Section 1.03 hereof.
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<PAGE> 10
"Closing Date" means the Business Day on which the initial Loans are
made hereunder.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, together with the regulations thereunder.
"Collateral" means, collectively, all properties (and all interests
therein) of the Loan Parties, now owned or hereinafter acquired, upon which a
Lien is purported to be created by any of the Security Documents.
"Commitments" means, collectively, the Revolving Loan Commitment and
the Working Capital Loan Commitment.
"Company" has the meaning assigned to such term in the preamble to this
Agreement.
"Company Account" means the Company's demand deposit, or checking,
non-interest bearing account maintained from time to time with the Lender (which
account on the Closing Date is identified by account # 9427718303).
"Company Business" has the meaning assigned to such term in the
PRELIMINARY STATEMENTS, above.
"Company Pledge Agreements" means, collectively, the Pledge Agreement
from each Company Pledgor to the Lender with respect to the Capital Stock of the
Company in substantially the form of Exhibit F-1 hereto, as amended,
supplemented or modified from time to time.
"Company Pledgors" means, collectively, the beneficial and record
owners of the Capital Stock of the Company, representing at least 75% of the
from time to time issued outstanding Capital Stock of the Company, and their
successors, transferees, heirs and assigns.
"Company Security Agreement" means the Security Agreement between the
Company and the Lender in substantially the form of Exhibit C-1 hereto, as
amended, supplemented or modified from time to time.
"Consent" means, with respect to each Material Authorization, such
third party consent in form and substance satisfactory to the Lender which the
Lender shall reasonably require in connection with the collateral assignment of
such Material Authorization pursuant to the applicable Security Documents.
"Consolidated Capital Expenditures" means, with respect to the Company
and its Subsidiaries and for any specified period, the aggregate amount of all
expenditures (whether paid in cash or accrued as liabilities and including,
without limitation, Capital Lease Obligations and research and development costs
incurred in such period) made by the Company and its Subsidiaries that, in
conformity with GAAP, are (or are required to be) included as additions for such
period to "property, plant or equipment" on the consolidated balance sheet of
the Company and its Subsidiaries.
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<PAGE> 11
"Consolidated EBITDA" means, with respect to the Company and its
Subsidiaries and for any specified period, the total of the following (in each
case determined in accordance with GAAP on a consolidated basis and without
duplication):
(a) Consolidated Net Income for such period,
plus
(b) to the extent deducted in computing Consolidated Net
Income, the sum of (i) consolidated income tax expense of the
Company and its Subsidiaries, (ii) Consolidated Interest
Expense, (iii) consolidated depreciation and amortization
expense of the Company and its Subsidiaries, (including,
without limitation, the write-off of in-process research and
development in connection with the Caminus Acquisition and the
acquisition of the business formerly conducted by ZAI*Net),
(iv) any non-recurring extraordinary non-cash gains (or minus
non-recurring extraordinary non-cash losses), (v) any
non-recurring extraordinary cash gains (or minus non-recurring
extraordinary cash losses) agreed to by the Lender, (vi)
transaction costs and expenses incurred in connection with the
Caminus Acquisition and the acquisitions of the businesses
formerly conducted by ZAI*Net and Positron Energy Consulting,
(vii) transaction costs and expenses incurred in connection
with any Permitted Acquisition and agreed to by the Lender,
and (viii) transaction costs and expenses incurred in
connection with the negotiation, documentation and
consummation of the transactions contemplated by this
Agreement, including without limitation the Origination Fee
and legal fees and expenses, all as listed in the schedule to
be delivered pursuant to Section 4.01(k)(2) hereof,
minus
(c) to the extent added in computing Consolidated Net Income,
(i) any interest income and (ii) any Tax Reimbursement
Distribution.
Notwithstanding the foregoing, if during any period for which
Consolidated EBITDA is being determined the Company or any of its Subsidiaries
shall have consummated any Permitted Acquisition, for all purposes of this
Agreement (other than for purposes of determining the Applicable Margin),
Consolidated EBITDA shall be determined on a pro-forma basis as if such
Permitted Acquisition had been consummated on the first day of such period.
"Consolidated Fixed Charges" means, with respect to the Company and its
Subsidiaries for any specified period, the sum of the following (in each case
determined in accordance with GAAP on a consolidated basis and without
duplication): (i) all regularly scheduled payments of principal of Indebtedness
of the Company and its Subsidiaries for such period (including, without
limitation, scheduled principal payments in respect of the Revolving Loans and
the principal component of any scheduled payments in respect of Capital Leases),
plus (ii) all Consolidated Interest Expense payable in cash for such period
(whether or not actually paid), plus (iii) income and franchise taxes paid in
cash for such period, plus (iv) the aggregate amount of Tax Reimbursement
Distributions made during such period.
6
<PAGE> 12
"Consolidated Fixed Charges Ratio" means, as at any date of
determination thereof, the ratio of (i) Consolidated EBITDA for the four (4)
consecutive Fiscal Quarters ending on, or most recently ended prior to, such
date of determination, to (ii) Consolidated Fixed Charges for the same period of
four (4) consecutive Fiscal Quarters.
"Consolidated Funded Debt" means, as at any date of determination
thereof, the aggregate Indebtedness for borrowed money of the Company and its
Subsidiaries (on a consolidated basis) outstanding on such date, plus the
aggregate Capital Lease Obligations of the Company and its Subsidiaries on the
same date.
"Consolidated Intangibles" means, as at any date of determination
thereof, all assets of the Company and its Subsidiaries, determined on a
consolidated basis at such date, that would be classified as intangible assets
in accordance with GAAP, but in any event including, without limitation,
unamortized debt discount and expense, unamortized organization and
reorganization expense, costs in excess of the net asset value of acquired
companies, patents, trade or service marks, franchises, trade names, goodwill
and the amount of any write-up in the book value of any assets resulting from
any revaluation (other than reevaluations arising out of foreign currency
valuations in accordance with GAAP).
"Consolidated Interest Expense" means, with respect to the Company and
its Subsidiaries and for any specified period, the sum (in each case determined
in accordance with GAAP on a consolidated basis and without duplication), of all
interest in respect of Indebtedness of the Company and its Subsidiaries accrued
or capitalized for such period (whether or not actually paid during such period)
which, in accordance with the terms thereof, shall be capitalized or the payment
in respect of which shall be deferred to a later date).
"Consolidated Leverage Ratio" means, as at any date of determination
thereof, (i) Consolidated Funded Debt as at such date of determination, to (ii)
Consolidated EBITDA for the four (4) consecutive Fiscal Quarters ending on, or
most recently ended prior to, such date of determination.
"Consolidated Net Income" means, with respect to the Company and its
Subsidiaries and for any specified period, the consolidated net income (or
deficit) of the Company and its Subsidiaries for such period, as determined in
accordance with GAAP on a consolidated basis and without duplication; provided
that there shall be excluded (i) the income (or deficit) of any Person accrued
prior to the date it becomes a Subsidiary or is merged into or consolidated with
the Company or any Subsidiary, (ii) the income (or deficit) of any Person (other
than a Subsidiary) in which the Company or any Subsidiary has an ownership
interest, except to the extent that any such income has been actually received
by the Company or such Subsidiary in the form of a cash dividend or similar cash
distribution, (iii) the undistributed earnings of any Subsidiary to the extent
that the declaration or payment of dividends or similar distributions by such
Subsidiary is not at the time permitted by operation of the terms of its charter
or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Subsidiary, (iv) any restoration to
income of any contingency reserve, except to the extent that provision for such
reserve was made out of accrued income, (v) any aggregate net gain (but not any
aggregate net loss) during such period arising from the sale, exchange or other
disposition of capital assets (such term to include all fixed assets, whether
tangible or
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<PAGE> 13
intangible, all inventory sold in conjunction with the disposition of fixed
assets and all securities), (vi) any write-up of any asset, (vii) any net gain
from the collection of the proceeds of life insurance policies, (viii) any gain
arising from the acquisition of any securities, or the extinguishment, under
GAAP, of any Indebtedness, of the Company or any Subsidiary, (ix) in the case of
a successor to the Company by consolidation or merger or as a transferee of its
assets, any earnings of the successor corporation prior to such consolidation,
merger or transfer of assets, (x) any deferred credit representing the excess of
equity in any Subsidiary at the date of acquisition over the cost of the
investment in such Subsidiary, and (xi) income and expenses arising out of
barter transactions (if any) in connection with the Company Business.
"Consolidated Senior Funded Debt" means, as at any date of
determination thereof, the aggregate principal amount of the Notes outstanding
on such date.
"Consolidated Senior Leverage Ratio" means, as at any date of
determination thereof, the ratio of (i) Consolidated Senior Funded Debt as at
such date of determination, to (ii) Consolidated EBITDA for the four (4)
consecutive Fiscal Quarters ending on, or most recently ended prior to, such
date of determination.
"Continue", "Continuation" and "Continued" refers to the continuation
pursuant to Section 3.02(c) hereof of a Eurodollar Loan from one Interest Period
to the next Interest Period.
"Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
properties is bound (including without limitation the Capitalization Documents).
"Convert", "Conversion" and "Converted" refers to a conversion pursuant
to Section 3.02(c) hereof of one Type of Loans into another Type of Loans, which
may be accompanied by the transfer by a Lender (at its sole discretion) of a
Loan from one Applicable Lending Office to another.
"Default" means any of the events specified in Section 8.01 hereof,
whether or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"Default Rate" means a rate per annum equal to four percent (4.00%)
plus the Base Rate in effect from time to time.
"Deferred Earn-Out Amount" shall mean the earn-out amount of
approximately $2,200,000, which amount was contributed by the Investor Group to
the Company for payment to Rooney as required in accordance with the terms of
the ZAI*Net Acquisition Documents, but which was used by the Company, with
Rooney's consent, as partial payment for the Caminus Repurchase.
"Disposal" has the meaning assigned to such term in the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act (42
U.S.C. Section 6901 et seq.).
"Dollars" and "$" mean lawful money of the United States of America.
8
<PAGE> 14
"Eligible Accounts" means, as to the Company and the Subsidiary
Guarantors, at a particular date, the aggregate face amount of the Accounts of
the Company and the Subsidiary Guarantors, in each case less (without
duplication) the aggregate amount of all general reserves, limits and deductions
with respect to such Accounts and less the aggregate amount of all returns,
discounts, claims, rebates, offsets, credits, charges and allowances (whether
issued, owing, granted or outstanding); provided that, no individual Account
shall be deemed to be an Eligible Account if:
(a) the Company or any Subsidiary does not have legal and
valid title to the Account; or
(b) the Account is not the valid, binding and legally
enforceable obligation of the account debtor (subject, as to
enforceability, only to (i) applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws at the time in
effect affecting the enforceability of creditors' rights
generally, and (ii) judicial discretion in connection with the
remedy of specific performance and other equitable remedies);
or
(c) the Account arises out of a sale made or service rendered
by the Company or any Subsidiary to an Affiliate of the
Company or such Subsidiary; or
(d) the Account or any portion thereof is unpaid more than 120
days after the original invoice date; or
(e) such Account, when aggregated with all other Accounts of
the same account debtor (or any Affiliate thereof), exceeds
50% in face value of all Accounts of the Company and its
Subsidiaries then outstanding, to the extent of such excess;
or
(f)(i) the account debtor for such Account is also a creditor
of the Company or any Subsidiary, to the extent of the amount
owed by the Company or such Subsidiary to the account debtor,
(ii) the Account is subject to any claim on the part of the
account debtor disputing liability under such Account in whole
or in part, to the extent of the amount of such dispute, or
(iii) the Account otherwise is (or is reasonably likely to
become) subject to any right of setoff or any counterclaim,
claim or defense by the account debtor, to the extent of the
amount of such setoff or counterclaim, claim or defense; or
(g) the account debtor for such Account has commenced a
voluntary case under the federal bankruptcy laws, as now
constituted or hereafter amended, or made an assignment for
the benefit of creditors or if a decree or order for relief
has been entered by a court having jurisdiction in the
premises in respect of the account debtor in an involuntary
case under the federal bankruptcy laws, as now constituted or
hereafter amended, or if any other petition or other
application for relief under the federal bankruptcy laws has
been filed by or against the account debtor, or if the account
debtor has failed, suspended business, ceased to be
9
<PAGE> 15
solvent, or consented to or suffered a receiver, trustee,
liquidator or custodian to be appointed for it or for all or a
significant portion of its assets or affairs; or
(h) the Administrative Agent does not have a valid and
perfected first priority security interest in such Account
(subject only to the Liens, if any, permitted by Section 7.01
hereof); or
(i) the sale to the account debtor for such Account is on a
consignment, sale on approval, guaranteed sale or
sale-and-return basis or pursuant to any written agreement
requiring repurchase or return (other than return arrangements
in the ordinary course of business consistent with the past
business practices of the Company); or
(j) such Account is from an account debtor (or any Affiliate
thereof) and fifty percent (50%) or more, in face amount, of
other Accounts from either such account debtor or any
Affiliate thereof are due or unpaid for more than 120 days
after the original invoice date; or
(k) fifty percent (50%) or more, in face amount, of other
Accounts from the same account debtor for such Account are not
deemed Eligible Accounts Receivable hereunder; or
(l) the account debtor for such Account is a foreign
Governmental Authority; or
(m) such Account is an Account a security interest in which
would be subject to the Federal Assignment of Claims Act of
1940, as amended (31 U.S.C. Section 3727 et seq.) [unless (i)
such Account, together with all other Eligible Accounts a
security interest in which would be subject to such Act, does
not exceed [5%] in face value of all Eligible Accounts of the
Company and its Subsidiaries then outstanding, or (ii) the
Company has assigned the Account to the Administrative Agent
in compliance with the provisions of such Act]; or
(n) the account debtor for such Account is outside the United
States or incorporated in or conducting substantially all of
its business in any jurisdiction located outside the United
States, unless the sale is (i) on letter of credit or sight
draft, guaranty or acceptance terms, consistent with past
business practices of the Company, not to exceed 5% in face
value of all Eligible Accounts of the Company and its
Subsidiaries then outstanding or (ii) such Account is
otherwise approved by and reasonably acceptable to the
Administrative Agent; or
(o) the Administrative Agent determines in good faith in
accordance with its internal credit policies that such Account
may not be paid by reason of the account debtor's financial
inability to pay; or
(p) the goods giving rise to such Account have not been
shipped or the services giving rise to such Account have not
been performed by the Company or any Subsidiary or the Account
otherwise does not represent a final sale; or
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<PAGE> 16
(q) such Account does not comply in all material respects with
all applicable legal requirements, including, where
applicable, the Federal Consumer Credit Protection Act, the
Federal Truth in Lending Act and Regulation Z of the Board of
Governors of the Federal Reserve System, in each case as
amended.
"Environment" means any water or water vapor, any land, including land
surface or subsurface, air, fish, wildlife, flora, fauna, biota and all other
natural resources.
"Environmental Condition" means any state of facts that exist at any
time at, on, in or under the Collateral and/or Real Estate which relates to or
affects the compliance of the Collateral and/or Real Estate with all
Environmental Permits and Environmental Laws.
"Environmental Laws" means in respect of any jurisdiction, U.S. or
foreign, all environmental, land use, zoning, health, chemical use, safety and
sanitation laws, statutes, ordinances and codes relating to the protection,
preservation or remediation of the Environment and/or governing the use,
storage, treatment, generation, transportation, processing, handling, production
or disposal of Hazardous Substances and the rules, regulations, written and
published policies, guidelines, decisions, orders and directives of federal,
state and local governmental agencies and authorities with respect thereto.
"Environmental Liability" means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Company or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Substances, (c) exposure to any Hazardous Substances,
(d) the release or threatened release of any Hazardous Substances into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"Environmental Permits" means all permits, licenses, approvals,
authorizations, consents or registrations required by any applicable
Environmental Law in connection with the ownership, construction, equipping, use
and/or operation of the Collateral and/or the Real Estate regarding the
management, storage, treatment, generation, transportation, processing,
handling, production or disposal of Hazardous Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and the rulings
issued thereunder.
"ERISA Affiliate" means any corporation or trade or business which is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Company or is a trade or business (whether or
not incorporated) which is under common control (within the meaning of Section
414(c) of the Code) with the Company.
"Estimated Tax Amount" means for any Fiscal Year, the Company's Tax
Amount for such Fiscal Year, as reasonably estimated from time to time by the
Company's management committee taking into account amounts shown on IRS Form
1065 filed by the Company and similar state or local forms filed by the Company
for the preceding Fiscal Year and such other adjustments as in the judgment of
the management committee of the Company are necessary or
11
<PAGE> 17
appropriate (including, without limitation, the seasonality of the Companys'
business) to reflect the estimated operations of the Company for the applicable
Fiscal Year.
"Eurocurrency Reserve Requirements" means, for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as
a decimal fraction) of reserve requirements in effect on such day (including,
without limitation, basic, supplemental, marginal and emergency reserves under
any regulations of the Board of Governors of the Federal Reserve System or other
Governmental Authority having jurisdiction with respect thereto) dealing with
reserve requirements prescribed for eurocurrency funding (currently referred to
as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a
member bank of such System.
"Eurodollar Base Rate" means, with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum (rounded
upward, if necessary, to the nearest 1/32 of one percent) as determined on the
basis of the offered rates for deposits in U.S. dollars, for a period of time
comparable to such Eurodollar Loan, which appears on the Telerate Page 3750 as
of 11:00 a.m. London time on the day that is two Business Days preceding the
first day of such Eurodollar Loan; provided, however, if the rate described
above does not appear on the Telerate System on any applicable interest
determination date, the Eurodollar Base Rate shall be the rate (rounded upwards
as described above, if necessary) for deposits in Dollars for a period
substantially equal to the Interest Period on the Reuters Page "LIBOR" (or such
other page as may replace the LIBOR Page on that service for the purpose of
displaying such rates), as of 11:00 a.m. (London Time), on the day that is two
(2) Business Days prior to the beginning of such Interest Period. If both the
Telerate and Reuters system are unavailable, then the rate of that date will be
determined on the basis of the offered rates for deposits in U.S. Dollars for a
period of time comparable to such Eurodollar Loan which are offered by four
major banks in the London interbank market at approximately 11:00 a.m. London
time, on the day that is two (2) Business Days preceding the first day of such
Eurodollar Loan as selected by the Lender. The principal London office of each
of the four major London banks will be requested to provide a quotation of its
U.S. Dollar deposit offered rate. If at least two such quotations are provided,
the rate for that date will be the arithmetic mean of the quotations. If fewer
than two quotations are provided as requested, the rate for that date will be
determined on the basis of the rates quoted for loans in U.S. Dollars to leading
European banks for a period of time comparable to such Eurodollar Loan offered
by major banks in New York City at approximately 11:00 a.m. New York City time,
on the day that is two Business Days preceding the first day of such Eurodollar
Loan.
"Eurodollar Loans" means Loans the interest rates on which are
determined on the basis of rates referred to in the definition of "Eurodollar
Rate" in this Section 1.01.
"Eurodollar Notice" means a request for Conversion into and/or
Continuation of Eurodollar Loans executed by a Responsible Officer of the
Company and in substantially the form of Exhibit B-2 hereto.
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<PAGE> 18
"Eurodollar Rate" means, with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for such day
in accordance with the following formula (rounded upward, if necessary, to the
nearest 1/32nd of 1%):
Eurodollar Base Rate
-----------------------------
1.00 - Eurocurrency Reserve
Requirements
"Eurodollar Tranche" means, collectively, the Eurodollar Loans Interest
Periods with respect to all of which begin on the same date and end on the same
later date (whether or not such Eurodollar Loans shall originally have been made
on the same day).
"Event of Default" means any of the events specified in Section 8.01
hereof, provided that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Fiscal Quarter" means a three-month period ending on (or nearest to)
the last day of March, June, September and December of each year.
"Fiscal Year" means a twelve-month period ending on (or nearest to)
December 31 of each year.
"GAAP" means consistently applied generally accepted accounting
principles in the United States of America in effect from time to time (as set
forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, or in such other
statements by such other entities as may be in general use by significant
segments of the accounting profession, which are applicable to the circumstances
as of the date of determination.
"GFI" means GFI Two LLC (formerly known as GFI Energy Ventures LLC), a
California limited liability company, and its successors.
"Governmental Authority" means any nation or government, any province,
state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including without limitation, all applicable federal,
provincial and municipal agencies, ministries, departments, inspectors and
officials, and any corporation or other entity owned or controlled (through
stock or capital ownership or otherwise) by any of the foregoing, whether
domestic or foreign.
"Guarantee Obligations" means, as to any Person (without duplication)
any obligation of such Person guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations ("primary obligations") of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (A) for
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<PAGE> 19
the purchase or payment of any such primary obligation or (B) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor, (iii) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (iv) otherwise to assure or hold harmless
the owner of such primary obligation against loss in respect thereof; provided,
however, that the term Guarantee Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business and
amounts that are permitted by Section 7.07 hereof. The amount of any Guarantee
Obligation shall be deemed to be an amount equal to the maximum amount that such
Person may be obligated to expend pursuant to the terms of such Guarantee
Obligation or, if such Guarantee Obligation is not so limited, the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such Person is required to
perform thereunder) as determined by such Person in good faith.
"Hazardous Substance" means any containment, pollutant or hazardous
substance likely to cause harm or degradation to the environment or risk to
human health or safety, and without restricting the generality of the foregoing,
includes without limitation, any pollutant, containment, waste, hazardous waste,
toxic substance or dangerous good which is defined or identified in any
Environmental Law or Industry Standard, or which is present in the environment
in such quantity or state that it contravenes any Environmental Law.
"Indebtedness" means, as to any Person, (i) indebtedness, liabilities
or obligations for borrowed money or for the deferred purchase price of property
or services (excluding accounts payable incurred in the ordinary course of
business); (ii) obligations as lessee under Capital Leases; (iii) current
liabilities in respect of unfunded vested benefits under any Plan or
Multi-Employer Plan; (iv) reimbursement obligations and other liabilities under
letters of credit or similar instruments issued for the account of such Person;
(v) obligations, indebtedness or other liabilities of others secured by any Lien
on property owned by such Person, whether or not such obligations, indebtedness
or other liabilities have been assumed by, or are a personal liability of, such
Person; and (vi) Guarantee Obligations of such Person.
"Intellectual Property" means, collectively, all copyrights, patents,
trademarks, trade names, service marks, processes, inventions and formulae
applied for, issued or licensed to or owned by the Company and/or any
Subsidiary, including without limitation those listed in Schedule 2 hereto.
"Interest Period" means, with respect to any Eurodollar Loan, each
period commencing on the date such Eurodollar Loan is made or Converted from a
Base Rate Loan or, in the case of a Continuation, on the last day of the next
preceding Interest Period for such Eurodollar Loan and, in each case, ending on
the numerically corresponding day in the first, second, third or sixth calendar
month thereafter, as the Company may select as provided in Section 3.02(c)
hereof or, with respect to a borrowing of such Eurodollar Loan, as the Company
has selected pursuant to Section 2.03(a) hereof, except that each Interest
Period that commences on the last Business Day of a calendar month (or on any
day for which there is no numerically corresponding day in the appropriate
subsequent calendar month) shall end on the last Business Day of the appropriate
subsequent calendar month. Notwithstanding anything in the foregoing or
otherwise in this
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<PAGE> 20
Agreement to the contrary, (i) no Interest Period for any Eurodollar Loan may
end after the stated maturity date of the applicable Note; (ii) no Interest
Period for any Revolving Loan may commence before and end after any Revolving
Loan Termination Date unless, after giving effect thereto, the aggregate
principal amount of the Revolving Loans having Interest Periods that end after
such Revolving Loan Termination Date shall be equal to or less than the
aggregate principal amount of the Revolving Loans scheduled to be outstanding
after giving effect to the payments of principal required to be made on such
Revolving Loan Termination Date; (iii) no Interest Period for any Working
Capital Loan may commence before and end after any Working Capital Loan
Termination Date unless, after giving effect thereto, the aggregate principal
amount of the Working Capital Loans having Interest Periods that end after such
Working Capital Loan Termination Date shall be equal to or less than the
aggregate principal amount of the Working Capital Loans scheduled to be
outstanding after giving effect to the payments of principal required to be made
on such Working Capital Loan Termination Date; (iv) each Interest Period that
would otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day (or, if such next succeeding Business Day falls in the
next succeeding calendar month, on the next preceding Business Day); (v)
notwithstanding clauses (i), (ii) and (iii) above, no Interest Period shall have
a duration of less than one month and, if the Interest Period for any Eurodollar
Loan would otherwise be a shorter period, such Eurodollar Loan shall not be
available hereunder for such period; (vi) the Company shall select Interest
Periods so as not to require a payment or prepayment of any Eurodollar Loan
during an Interest Period for such Loan; and (vii) all borrowings, Conversions
and Continuations and all selections of Interest Periods under this Agreement
shall be made pursuant to such elections so that, after giving effect thereto,
no more than five different Eurodollar Tranches shall be in effect at any one
time.
"Investment" has the meaning assigned to such term in Section 7.05
hereof.
"Investor Group" shall mean, collectively, GFI, OCM Caminus Investment,
Inc., RIT Capital Partners plc, Durham Cam, Inc. and Serena Hesmondhalgh.
"Leases" means any now existing or hereafter acquired leases or
subleases, easements, grants or similar instruments under which the Company or
any Subsidiary has the right to use Real Estate, including without limitation
those listed on Schedule 5 hereto.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment (including, without limitation, easements, rights of
way, zoning restrictions, restrictive covenants and the like), deposit
arrangement intended as a collateral device, encumbrance, lien (statutory or
other, including without limitation environmental superliens), or other security
agreement or charge or encumbrance or preferential arrangement of any kind or
nature whatsoever (including, without limitation, any conditional sale or other
title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of any financing
statement under the UCC or comparable law of any jurisdiction to evidence any of
the foregoing).
"Loan Documents" means, collectively, this Agreement, the Notes, the
Security Documents, the Subsidiary Guarantees, the Management Subordination
Agreement and each Consent.
15
<PAGE> 21
"Loan Parties" means, collectively, the Company and the Subsidiary
Guarantors.
"Loans" means, collectively, the Revolving Loans and the Working
Capital Loans.
"Management Fees" means all fees and other amounts paid (or payable) to
GFI pursuant to Section 6.5.2 of the Operating Agreement.
"Management Subordination Agreement" means the Subordination Agreement
among the Management Company, the Company and the Administrative Agent, in
substantially the form of Exhibit J hereto, as amended, supplemented or modified
from time to time.
"Margin Stock" means "margin stock" within the meaning of Regulations U
and X.
"Material Adverse Effect" means a material adverse effect on (i) the
business, operations, property, condition (financial or otherwise) or prospects
of the Company and its Subsidiaries, (ii) the ability of the Company and its
Subsidiaries to perform their obligations under this Agreement, any of the other
Loan Documents or any of the Capitalization Documents, or (iii) the validity or
enforceability of this Agreement or any of the other Loan Documents or the
rights or remedies of the Lender or the Lender hereunder or thereunder.
"Material Authorization" means, collectively, all licenses, permits and
authorizations of the Company and/or any of its Subsidiaries (other than the
Intellectual Property) which are material to the conduct of the Company
Business, including without limitation those listed in Part A of Schedule 2
hereto and in existence on the date hereof.
"Maximum Working Capital Borrowing Commitment" means at any time the
lesser of (i) the Lender's Working Capital Loan Commitment in effect at such
time or (ii) the Borrowing Base.
"Mortgages" means, collectively, with respect to any Real Estate of the
Company or any Subsidiary and designated by the Lender, a mortgage, deed of
trust, leasehold mortgage, assignment or similar security agreement from the
Company or such Subsidiary in favor of the Lender, in form and substance
satisfactory to the Lender, and appropriate for the jurisdiction in which such
Real Estate is located, each as amended, supplemented or modified from time to
time.
"Multi-Employer Plan" means a Plan which is a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA with respect to which any Loan Party or
any of their respective ERISA Affiliates is or has been required to contribute
or otherwise may have liability.
16
<PAGE> 22
"Net Proceeds" means the following:
(a) with respect to the sale or other disposition of any asset
by the Company or any of its Subsidiaries (including, without
limitation, in connection with any sale-leaseback or as a
result of any casualty or condemnation), the excess, if any,
of (i) the aggregate amount received in cash (including any
cash received by way of deferred payment pursuant to a note
receivable, other non-cash consideration or otherwise, but
only as and when such cash is so received) in connection with
such sale or other disposition over (ii) the sum of (A) the
principal amount of any Indebtedness which is secured by any
such asset (other than Indebtedness assumed by the purchaser
of such asset) or which is required to be, and is, repaid in
connection with the sale or other disposition thereof (other
than Indebtedness outstanding hereunder), (B) the reasonable
fees, commissions and other out-of-pocket expenses incurred by
the Company or such Subsidiary in connection with such sale or
other disposition, and (C) federal and state taxes incurred in
connection with such sale or other disposition;
(b) with respect to the sale or other disposition of any
Capital Stock by the Company or any of its Subsidiaries, the
excess of (i) the aggregate amount received in cash (including
any cash received by way of deferred payment pursuant to a
note receivable, other non-cash consideration or otherwise,
but only as and when such cash is so received) in connection
with such sale or other disposition over (ii) the reasonable
fees, commissions and other out-of-pocket expenses incurred by
the Company or such Subsidiary in connection with such sale or
other disposition; and
(c) with respect to the incurrence of any additional
Indebtedness by the Company or any of its Subsidiaries (other
than Indebtedness permitted pursuant to Section 7.02 hereof),
the excess of (i) the aggregate amount of such Indebtedness
over (ii) the reasonable fees, commissions and other
out-of-pocket expenses incurred by the Company or such
Subsidiary in connection with incurring such Indebtedness.
"Non-Excluded Taxes" has the meaning assigned to such term in Section
3.10(a) hereof.
"Notes" means, collectively, the Revolving Note and the Working Capital
Note.
"Obligations" means the unpaid principal amount of, and interest
(including, without limitation, interest accruing after the maturity of the
Loans and interest accruing after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding, relating
to the Company, whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding) on the Notes and all other obligations and
liabilities of the Company to the Lender, whether direct or indirect, absolute
or contingent, due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, this Agreement, the Notes,
the Subsidiary Guarantees, the Security Documents, and any other Loan Document
and any other document made, delivered or given in connection therewith or
herewith, whether on account of principal, interest, reimbursement obligations,
fees, indemnities, costs, expenses (including, without limitation, all fees and
disbursements of counsel to the
17
<PAGE> 23
Lender, or to the Lender and affiliates of the Lender, that are required to be
paid by the Company pursuant to the terms of this Agreement) or otherwise.
"Operating Agreement" means the Limited Liability Company Agreement of
the Company, dated as of May 12, 1998, among the Company and the members from
time to time party thereto, subject to Section 7.15 hereof, as amended,
supplemented or modified from time to time.
"Origination Fee" has the meaning assigned to such term in Section 3.01
hereof.
"Participant" has the meaning assigned to such term in Section 10.05(c)
hereof.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Perfection Certificate" has the meaning assigned to such term in
Section 4.01(b) hereof.
"Permitted Acquisition" has the meaning assigned to such term in
Section 7.05 hereof.
"Person" means an individual, partnership, corporation, business trust,
limited liability company, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority, or other entity of whatever
nature.
"Plan" means any defined benefit pension plan covered by Title IV of
ERISA, the funding requirements of which: (i) were the responsibility of the
Company or an ERISA Affiliate at any time within the five years immediately
preceding the date hereof, (ii) are currently the responsibility of the Company
or an ERISA Affiliate, or (iii) hereafter become the responsibility of the
Company or an ERISA Affiliate, including any such plans as may have been, or may
hereafter be, terminated for whatever reason.
"Pledge Agreements" means, collectively, the Company Pledge
Agreement[s] and the Subsidiary Pledge Agreements.
"Principal Office" means the principal office of the Lender located, on
the date hereof, at 1185 Avenue of the Americas, New York, New York 10036.
"Pro Forma Balance Sheet" has the meaning assigned to such term in
Section 5.01(b) hereof.
"Projections" has the meaning assigned to such term in Section 5.01(c)
hereof.
"Public Offering" shall mean a firm underwritten public offering of
common stock registered on form S-1, S-2, or S-3 under the Securities Act
of 1933, as amended, by a nationally recognized investment banking firm and
after giving effect to which the issuer shall be qualified for listing on the
NASDAQ National Market, the American Stock Exchange or the New York Stock
Exchange.
"Quarterly Compliance Certificate" has the meaning assigned thereto in
Section 6.07(d)(2) hereof.
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<PAGE> 24
"Quarterly Dates" means the last Business Day of March, June, September
and December in each year, the first of which shall be the first such day after
the Closing Date.
"Quarterly Estimated Tax Amount" means for any Fiscal Quarter of a
Fiscal Year of the Company, the product of (A) 1/4 in the case of the first
Fiscal Quarter of a Fiscal Year, 1/2 in the case of the second Fiscal Quarter
of a Fiscal Year, 3/4 in the case of the third Fiscal Quarter of a Fiscal Year
and 1 in the case of the fourth Fiscal Quarter of a Fiscal Year and (B) the
aggregate Estimated Tax Amount for such Fiscal Year.
"Real Estate" means the real estate now owned or leased or hereafter
acquired or leased by the Company or any of its Subsidiaries, all easements and
similar rights, all fixtures and personal property used in conjunction therewith
and the rights of Company or such Subsidiary to leases, rents and profits with
respect thereto, including without limitation the Real Estate listed on Schedule
5 hereto.
"Refinanced Lender" means OCM Principal Opportunities Fund L.P., a
limited partnership organized under the laws of Delaware, and its successors.
"Refinanced Loan Amount" means, collectively, all amounts of any nature
whatsoever (including, without limitation, principal, interest, fees, contingent
fees and reimbursable expenses) owed by the Company and/or any Subsidiary
Guarantor to the Refinanced Lender on the Closing Date (but immediately before
giving effect to the initial Loans hereunder) pursuant to the Refinanced Loan
Documents, whether or not such amounts then shall be due; provided that the
Refinanced Loan Amount on the Closing Date shall not exceed $1,300,000.
"Refinanced Loan Documents" means, collectively, any and all loan
agreements, promissory notes, debentures, security agreements, guarantees,
pledge agreements, mortgages, assignments, warrants, capital appreciation rights
and related documents and instruments, in each case heretofore delivered by the
Company and/or any Subsidiary Guarantor to or for the benefit of the Refinanced
Lender.
"Related Parties" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"Reportable Event" has the meaning set forth in Section 4043(b) of
ERISA (other than a Reportable Event as to which the provision of 30 days'
notice to the PBGC is waived under applicable regulations), or is the occurrence
of any of the events described in Section 4068(f) or 4063(a) or ERISA.
"Requirement of Law" means, as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
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<PAGE> 25
"Responsible Officer" means the president, or with respect to financial
matters, the chief financial officer of any Person and, in each case, any other
individual or entity possessing, directly or indirectly, similar authority and
power by law or otherwise.
"Revolving Loans" means, collectively, the revolving credit loans
referred to in Section 2.01(a) hereof, which may be Base Rate Loans and/or
Eurodollar Loans.
"Revolving Loan Commitment" means the obligation of the Lender to make
Revolving Loans in an aggregate amount at any one time outstanding up to (but
not exceeding) the amount set forth opposite the name of the Lender on Schedule
A hereto under the caption "Revolving Loan Commitment", as such amount may be
reduced from time to time pursuant to Section 3.03 and/or Section 3.04 hereof.
The aggregate principal amount of all Revolving Loan Commitments is Two Million
Five Hundred Thousand Dollars ($2,500,000).
"Revolving Loan Commitment Period" means the period from (and
including) the Closing Date to (but excluding) the Revolving Loan Termination
Date.
"Revolving Note" has the meaning assigned to such term in Section
2.04(a) hereof.
"Revolving Loan Termination Date" means May 31, 2001 or such earlier
date on which the Revolving Loan Commitments shall terminate as provided herein.
"Rooney" means Rooney Software, L.L.C., a Delaware limited liability
company, and its successors.
"Scheduled Earn-Out Payment" means the earn-out payment in the amount
of approximately $2,200,000 required to be made to Rooney by the Company, in
accordance with the terms of the Zai*Net Acquisition Documents.
"Security Agreements" means, collectively, the Company Security
Agreement and the Subsidiary Security Agreements.
"Security Documents" means, collectively, the Security Agreements, the
Subsidiary Guarantees, the Pledge Agreements and the Mortgages.
"Seller" means the owner of the Capital Stock to be acquired, or the
entity the assets and properties of which are to be acquired, by the Company or
any Subsidiary in connection with a Permitted Acquisition.
"SS&C" means SS&C Technologies, Inc., a Delaware corporation, and its
successors and assigns.
"SS&C Documents" means, collectively, each purchase and option
agreement, distributor agreement, license agreement, letter agreements and
letter amendments to any of the foregoing, including without limitation the
Purchase and Option Agreement, dated December 31, 1998, between the Company and
SS&C, each Distributor Agreement, dated May 12, 1998, between the Company and
SS&C, the Distributor Agreement, dated December 31, 1998, between the Company
and SS&C, the Letter Amendment dated March 29, 1999, between the Company and
20
<PAGE> 26
SS&C relating to the December 31, 1998 Distributor Agreement and the Letter
Amendment dated March 29, 1999, between the Company and SS&C relating to the
December 31, 1998 Purchase and Option Agreement, in each case heretofore
delivered by the Company to or for the benefit of SS&C in connection with the
SS&C Transactions, and listed or Schedule 2 hereto, in each case as amended,
supplemented or modified from time to time (subject to Section 7.15 hereof).
"SS&C Option" means, the option granted by the Company to SS&C to
purchase shares of Series B Membership Interests in the Company pursuant to the
SS&C Documents.
"SS&C Transactions" means the various transactions contemplated by and
between the Company and SS&C pursuant to the SS&C Documents.
"Subsidiary" means, for any Person, any corporation, partnership,
limited liability company or other entity of which at least a majority of the
securities or other ownership interests having by the terms thereof ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions of such corporation, partnership, limited liability
company or other entity (irrespective of whether or not at the time securities
or other ownership interests of any other class or classes of such corporation,
partnership, limited liability company or other entity shall have or might have
voting power by reason of the happening of any contingency) is at the time
directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person. Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a direct or indirect Subsidiary
or Subsidiaries of the Company (including without limitation the Subsidiary
Guarantors).
"Subsidiary Guarantees" means, collectively, the Guarantee from each
Subsidiary Guarantor of the Company in favor of the Lender in substantially the
form of Exhibit E-2 hereto, as amended, supplemented or modified from time to
time.
"Subsidiary Guarantors" means, collectively, Caminus Energy Limited, an
English corporation, and (ii) each Subsidiary of the Company that becomes a
"Subsidiary Guarantor" after the date hereof pursuant to Section 6.10(a) hereof,
and their respective successors and assigns.
"Subsidiary Pledge Agreement" means, collectively, each Pledge
Agreement to the Lender with respect to the Capital Stock of each Subsidiary
Guarantor, in substantially the form of Exhibit F-2 hereto (or such other form
as may be required under the laws of a foreign jurisdiction), as amended,
supplemented or modified from time to time.
"Subsidiary Security Agreements" means, collectively, the Security
Agreement between each Subsidiary Guarantor and the Lender in substantially the
form of Exhibit C-2 hereto (or such other form as may be required under the laws
of a foreign jurisdiction), as amended, supplemented or modified from time to
time.
"Tax Amount" means for any Fiscal Year, the federal, state, and local
income taxes which would be payable by the Company if the Company were taxed for
such taxable year at the lesser of (a) 50% or (b) the highest marginal federal,
state and local income tax rate applicable to
21
<PAGE> 27
any member (or the direct or indirect owners of any member that is a
flow-through entity for federal income tax purposes), or such other rate as the
management committee of the Company shall determine in its reasonable
discretion, on the Company's taxable income for the Fiscal Year (computed as if
the Company had elected to carry forward all loss and credit carryovers and
taking into account the character of any loss and credit carry forward as a
capital or ordinary loss). The amounts in respect of tax withholding on payments
to or from the Company for which the members (or owners directly or indirectly
of such members) are credited under applicable tax law shall be credited against
payments of the Tax Amount to such members. The Company's Tax Amount shall be
determined initially on the basis of figures set forth on IRS Form 1065 filed by
the Company and the similar state or local forms filed by the Company but shall
be subject to subsequent adjustment pursuant to audit, litigation, settlement,
amended return or the like, and accordingly, subsequent Quarterly Estimated Tax
Amounts payable to the members shall be increased or decreased accordingly.
"Tax Reimbursement Distributions" has the meaning assigned to such term
in Section 7.06 hereof.
"Termination Event" means (i) a Reportable Event, or (ii) the
initiation of any action by the Company, any ERISA Affiliate or any Plan
fiduciary to terminate a Plan or the treatment of an amendment to an ERISA Plan
as a termination under ERISA if the termination resulting from such action would
be other than a standard termination, or (iii) the institution of proceedings by
the PBGC under Section 4042 of ERISA to terminate a Plan or to appoint a trustee
to administer any Plan if the termination resulting from such action would be
other than a standard termination.
"UCC" means the Uniform Commercial Code, as in effect in any applicable
United States jurisdiction.
"Unfunded Benefit Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the present value of all benefit
liabilities under such Plan as defined in Section 4001(a)(16) of ERISA, exceeds
(ii) the fair market value of all Plan assets allocable to such benefits, all
determined as of the then most recent valuation date for such Plan (on the basis
of reasonable assumptions under such Plan).
"Wholly-Owned Subsidiary" means, with respect to any Person, any
corporation, partnership or other entity of which all of the equity securities
or other ownership interests (other than, in the case of a corporation,
directors' qualifying shares) are directly or indirectly owned or controlled by
such Person or one or more Wholly-Owned Subsidiaries of such Person or by such
Person and one or more Subsidiaries of such Person.
"Working Capital Loans" means, collectively, the working capital loans
referred to in Section 2.01(b) hereof, which may be Base Rate Loans and/or
Eurodollar Loans.
"Working Capital Loan Commitment" means the obligation of the Lender to
make Working Capital Loans in an aggregate amount at any one time outstanding up
to (but not exceeding) the amount set forth opposite the name of the Lender on
Schedule A hereto under the caption "Working Capital Loan Commitment", as such
amount may be reduced from time to
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time pursuant to Section 3.03 and/or Section 3.04 hereof. The aggregate
principal amount of all Working Capital Loan Commitments is Two Million Five
Hundred Thousand Dollars ($2,500,000).
"Working Capital Loan Commitment Period" means the period from (and
including) the Closing Date to (but excluding) the Working Capital Loan
Termination Date.
"Working Capital Loan Termination Date" means the date immediately
preceding the first anniversary of the Closing Date or such earlier date on
which the Working Capital Loan Commitments shall terminate as provided herein,
provided, that, in the event the Lender shall, at its sole and absolute
discretion, extend the Working Capital Loan Termination Date for an additional
period of one year, not to exceed May 31, 2001 in any case, Working Capital Loan
Termination Date shall be deemed to mean the last day of such extended one year
period.
"Working Capital Notes" has the meaning assigned to such term in
Section 2.04(a) hereof.
"Zai*Net" means Zai*Net Software L.P., a Delaware limited partnership
that was merged with and into the Company on March 2, 1999.
"Zai*Net Acquisition Documents" means, collectively, any and all
purchase and sale agreements, promissory notes and related documents and
instruments, including, without limitation, documents and agreement relating to
earn-out payments to be made by the Company to Rooney, and the merger of Zai*Net
with and into the Company, in each case heretofore delivered by the Company to
or for the benefit of Zai*Net, and listed on Schedule 2 hereto, in each case as
amended, supplemented or modified from time to time (subject to Section 7.15
hereof).
SECTION 1.02. OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise
specified therein, all terms defined in this Agreement shall have the defined
meanings when used in the Notes or any certificate or other document made or
delivered pursuant hereto.
(b) As used herein and in the Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to the
Company and the Subsidiaries not defined in Section 1.01 and accounting terms
partly defined in Section 1.01, to the extent not defined, shall have the
respective meanings given to them under GAAP.
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section, schedule and
exhibit references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 1.03. TYPES AND CLASSES OF LOANS. Loans hereunder are
distinguished by "Class" and by "Type". The "Class" of a Loan (or of a
Commitment to make a Loan) refers to whether such Loan is a Revolving Loan or a
Working Capital Loan, each of which constitutes a
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Class. The "Type" of a Loan refers to whether such Loan is a Base Rate Loan or a
Eurodollar Loan, each of which constitutes a Type. Loans may be identified by
both Class and Type.
ARTICLE II.
LOANS
SECTION 2.01. LOANS. (a) Revolving Loans. Subject to the terms and
conditions of this Agreement, the Lender hereby agrees to make revolving credit
loans (collectively, the "Revolving Loans", and each a "Revolving Loan") to the
Company during the Revolving Loan Commitment Period in an aggregate principal
amount at any one time outstanding which does not exceed the amount of the
Lender's Revolving Loan Commitment as in effect from time to time. Subject to
the terms and conditions of this Agreement, during the Revolving Loan Commitment
Period the Company may (x) borrow, repay and reborrow Revolving Loans by means
of Base Rate Loans and/or Eurodollar Loans, and (y) in accordance with (but
subject to the conditions of) Section 3.02(c) hereof, Convert Revolving Loans of
one Type into Revolving Loans of another Type or Continue Revolving Loans of one
Type as Revolving Loans of the same Type.
(b) Working Capital Loans. Subject to the terms and conditions of this
Agreement, the Lender hereby agrees to make working capital loans (collectively,
the "Working Capital Loans", and each a "Working Capital Loan") to the Company
during the Working Capital Loan Commitment Period in an aggregate principal
amount at any one time outstanding which does not exceed the lesser of (i) the
amount of the Company's Borrowing Base then in effect and (ii) the amount of the
Lender's Working Capital Loan Commitment. Subject to the terms and conditions of
this Agreement, during the Working Capital Loan Commitment Period the Company
may (x) borrow, repay and reborrow Working Capital Loans by means of Base Rate
Loans and/or Eurodollar Loans, and (y) in accordance with (but subject to the
conditions of) Section 3.02(c) hereof, Convert Working Capital Loans of one Type
into Working Capital Loans of another Type or Continue Working Capital Loans of
one Type as Working Capital Loans of the same Type. For purposes of calculating
the Borrowing Base to determine the maximum amount of Working Capital Loans
which at any time may be borrowed hereunder, the Borrowing Base shall be
calculated based on the most recent Borrowing Base Certificate provided to the
Lender pursuant to Section 4.02(b) or 6.07(d)(1) hereof.
SECTION 2.02. USE OF PROCEEDS. (a) Revolving Loans. The proceeds of the
initial Revolving Loans to be made hereunder may be used by the Company only for
the complete repayment and discharge in full on the Closing Date of the Deferred
Earn-Out Amount and repayment of a portion of the Refinanced Loan Amount.
(b) Working Capital Loans. The proceeds of the Working Capital Loans to
be made hereunder may be used by the Company only for (i) the complete repayment
and discharge in full on the Closing Date of the remaining portion of the
Refinanced Loan Amount (after the application of the Revolving Loan proceeds),
and (ii) general working capital purposes in connection with the Company
Business.
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SECTION 2.03. PROCEDURES FOR BORROWINGS AND DISBURSEMENTS. (a) Whenever
the Company desires that the Lender make Loans pursuant to Section 2.01 hereof,
the Company shall give the Lender a Borrowing Notice (which shall have been duly
completed, as appropriate, and executed by a Responsible Officer of the Company
and, upon delivery thereof to the Lender, shall be deemed irrevocable and
binding on the Company), in the case of a proposed Eurodollar Loan, at or before
10:00 a.m. New York time at least three (3) Business Days or, in the case of a
proposed Base Rate Loan, at or before 10:00 a.m. New York time at least one (1)
Business Day prior to the proposed Borrowing Date specifying (i) the proposed
Borrowing Date and the aggregate amount of the respective Loans requested to be
borrowed, (ii) the use of the proceeds of the respective Loans, (iii) the
respective amounts of the respective Loans to be borrowed as Base Rate Loans and
Eurodollar Loans (which amount, as to Eurodollar Loans of each Class, shall be
at least equal to $100,000 or in multiples of $50,000 in excess thereof), and
(iv) in the case of Eurodollar Loans, the duration of the first Interest
Period(s) applicable thereto. The giving of each Borrowing Notice by the Company
shall be deemed a representation and warranty by the Company that the applicable
conditions set forth in Sections, 4.01 and 4.02 hereof are satisfied as of the
date of such notice. The Company shall be permitted to borrow Loans hereunder no
more frequently than four times in any calendar month.
(b) Subject to the terms and conditions hereof, not later than 12:00
noon New York time on the proposed Borrowing Date specified in each Borrowing
Notice pursuant to Section 2.03(a) hereof, the Lender shall make available the
amount of the Loan(s) to the Company by depositing the same, in immediately
available funds, to the Company Account.
SECTION 2.04. NOTES. (a) The Revolving Loan to be made by the Lender
shall be evidenced by a single promissory note of the Company in substantially
the form of Exhibit A-1 annexed hereto, duly completed, dated the Closing Date
and payable to the Lender and in a principal amount equal to the Revolving Loan
Commitment of the Lender (collectively, with all promissory notes delivered in
substitution or exchange therefor and as the same shall be amended, supplemented
or modified from time to time, the "Revolving Note").
(b) The Working Capital Loans to be made by the Lender shall be
evidenced by a single promissory note of the Company in substantially the form
of Exhibit A-2 annexed hereto, duly completed, dated the Closing Date and
payable to the Lender and in a principal amount equal to the Working Capital
Loan Commitment of the Lender (collectively, with all promissory notes delivered
in substitution or exchange therefor and as the same shall be amended,
supplemented or modified from time to time, the "Working Capital Note").
(c) Each Lender is hereby authorized to record the date, Type and
amount of each Loan made by the Lender, each continuation thereof, each
conversion of all or a portion thereof to another Type, the date and amount of
each payment or prepayment of principal thereof and, in the case of Eurodollar
Loans, the length of each Interest Period and Eurodollar Rate with respect
thereto, on its internal books and records and/or on the schedule annexed to and
constituting a part of each Note of the Lender, and any such recordation on such
schedule shall constitute prima facie evidence of the accuracy of the
information so recorded; provided that the failure by the Lender to make any
such recordation shall not affect the obligations of the Company under this
Agreement or the Notes.
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(d) Upon receipt of an affidavit of an officer of the Lender as to the
loss, theft, destruction or mutilation of any Note, certificate evidencing any
Pledged Stock or any other Security Document which is not of public record, and,
in the case of any such loss, theft, destruction or mutilation, upon
cancellation of such Notes, certificate evidencing any Pledged Stock or other
Security Document, the Company will issue, in lieu thereof, replacement notes,
stock certificates or other Security Documents in the same principal amount
thereof and otherwise of like tenor.
ARTICLE III.
GENERAL PROVISIONS
SECTION 3.01. FEES. As a condition to the making of the Loans
hereunder, the Company promises to pay to the Lender, on the Closing Date, a
non-refundable, fully-earned fee in the amount of $75,000.00, less $25,000 paid
in advance by the Company to the Lender prior to the Closing Date (the
"Origination Fee").
SECTION 3.02. INTEREST. (a) Subject to Section 3.05 hereof, the Company
hereby promises to pay to the Lender interest on the unpaid principal amount of
each Loan made by the Lender for the period from and including the date of such
Loan to, but excluding, the date such Loan shall be paid in full, at the
following rates per annum:
(i) during such periods as such Loan is a Base Rate
Loan, the Base Rate (as in effect from time to time)
applicable to such Base Rate Loan; and
(ii) during such periods as such Loan is a Eurodollar
Loan, for each Interest Period relating thereto, the
Adjusted Eurodollar Rate applicable to such
Eurodollar Loan.
(b) All interest accrued on each Loan as specified in Section 3.02(a)
hereof shall be payable in arrears as follows:
(i) in the case of a Base Rate Loan, on the last day
of each calendar month;
(ii) in the case of a Eurodollar Loan, on the last
day of each Interest Period therefor, provided that
if such Interest Period is longer than three months,
then interest on such Eurodollar Loan shall be
payable on each day which is one month after the
first day of such Interest Period and with a final
interest payment on the last day of such Interest
Period; and
(iii) in the case of any Loan, upon the payment or
prepayment thereof or the Conversion of such Loan
into a Loan of another Type (but only on the
principal amount so paid, prepaid or Converted).
(c) Subject to Sections 3.06, 3.07 and 3.08 hereof, the Company shall
have the right to Convert Loans of one Type into Loans of another Type or
Continue Eurodollar Loans as such,
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at any time or from time to time, subject to receipt by the Lender of Eurodollar
Notice from the Company, duly executed by a Responsible Officer thereof, not
later than 10 a.m. New York time at least three (3) Business Days (in case of
Conversion into or Continuation of Eurodollar Loans) or at least one (1)
Business Day (in case of Conversion into Base Rate Loans) prior to the date of
such Conversion or Continuation, which notice shall be irrevocable and shall
specify (i) the amount, Class and Type of each Loan to be Converted or
Continued, (ii) the date of Conversion or Continuation (which shall be a
Business Day), (iii) in case of Conversion into or Continuation of a Eurodollar
Loan, the duration of the Interest Period and the Loans to which such Interest
Period is to relate. Notwithstanding the foregoing to the contrary, (A) a
Eurodollar Loan may be Converted into a Base Rate Loan and Continued as a
Eurodollar Loan only on the last day of the then applicable Interest Period for
such Eurodollar Loan, (B) each Conversion shall be in an amount at least equal
to $100,000 or in multiples of $50,000 in excess thereof (Conversions into Loans
of different Types or, in the case of Eurodollar Loans, having different
Interest Periods at the same time hereunder shall be deemed separate Conversions
for purposes of the foregoing, one for each Type or Interest Period), and (C)
without limiting the rights and remedies of the Lender under Article VIII
hereof, in the event that a Default shall have occurred and be continuing, the
Lender may (and at the request of the Lender shall) suspend the right of the
Company to Convert any Base Rate Loan into a Eurodollar Loan, or to Continue any
Eurodollar Loan as such, in which event all Eurodollar Loans shall be Converted
(on the last day(s) of the respective Interest Periods therefor) into Base Rate
Loans. In the event that the Company fails to (x) submit timely notice to the
Lender prior to the expiration of an Interest Period for a Eurodollar Loan as
provided in this Section 3.02(c), such Eurodollar Loan will be automatically
Converted into a Base Rate Loan on the last day of the then current Interest
Period for such Eurodollar Loan, or (y) select the Class and Type of Loan or the
duration of any Interest Period for any Eurodollar Loan within the time period
and otherwise as provided in this Section 3.02(c), such Loan, if outstanding as
a Eurodollar Loan, will be automatically Converted into a Base Rate Loan on the
last day of the then current Interest Period for such Eurodollar Loan or, if
outstanding as a Base Rate Loan, will remain as a Base Rate Loan.
SECTION 3.03. PRINCIPAL PAYMENTS; REDUCTION OF COMMITMENTS; AND
TERMINATION OF COMMITMENTS. (a) The aggregate amount of the Revolving Loan
Commitments shall be automatically reduced on each Quarterly Date (commencing on
December 31, 1999) by an amount equal to $250,000; provided that the principal
installment due on the Revolving Loan Termination Date shall in any event be in
an amount equal to the then aggregate outstanding principal amount of the
Revolving Loans. Without limiting any other rights of the Lender or any
obligations of the Company under this Agreement or the other Loan Documents, in
the event that the aggregate outstanding amount of all Revolving Loans at any
time during the Revolving Loan Commitment Period shall exceed the Lender's
Revolving Loan Commitment, such excess shall be paid to the Lender as mandatory
prepayments as provided in Section 3.04(e) hereof.
(b) The Company hereby promises to pay to the Lender the principal of
the Working Capital Notes on the Working Capital Loan Termination Date. Without
limiting any other rights of the Lender or any obligations of the Company under
this Agreement or the other Loan Documents, in the event that the aggregate
outstanding amount of all Working Capital Loans at any time during the Working
Capital Loan Commitment Period shall exceed (i) the lesser of (i) the Working
Capital Loan Commitment of the Lender, or (ii) the Borrowing Base, such excess
shall be paid to the Lender as mandatory prepayments pursuant to Section 3.04(d)
hereof.
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(c) The Company shall have the right at any time or from time to time
to reduce all Revolving Loan Commitments and/or all Working Capital Loans
subject to receipt by the Lender of a written notice from the Company not later
than 10:00 a.m. New York time at least three (3) Business days prior to the date
of such reduction, which notice shall be irrevocable and shall specify the
applicable Commitments and the amount of such reduction (such amount to be at
least equal to $100,000) and the effective date of such reduction. The
Commitments once reduced may not be reinstated.
(d) The Company shall have the right, at any time or from time to time,
so long as no Revolving Loans are outstanding, to terminate all Revolving Loan
Commitments, subject to receipt by the Lender of a written notice from the
Company not later than 10:00 a.m. New York time at least five (5) Business days
prior to the date of such termination, which notice shall be irrevocable and
shall specify the effective date of such termination. The Revolving Loan
Commitments once terminated may not be reinstated.
(e) The Company shall have the right, at any time or from time to time,
so long as no Working Capital Loans are outstanding, to terminate all Working
Capital Loan Commitments, subject to receipt by the Lender of a written notice
from the Company not later than 10:00 a.m. New York time at least five (5)
Business days prior to the date of such termination, which notice shall be
irrevocable and shall specify the effective date of such termination. The
Working Capital Loan Commitments once terminated may not be reinstated.
SECTION 3.04. OPTIONAL AND MANDATORY PREPAYMENTS. (a) Subject to
Section 3.09 hereof, the Company shall have the right to prepay Loans from time
to time, without premium or penalty, subject to receipt by the Lender of written
notice from the Company not later than 10 a.m. New York time at least three (3)
Business Days prior to the date of such prepayment, which notice shall be
irrevocable and shall specify (i) the amount, Class and Type of each Loan to be
prepaid, and (ii) the date of such prepayment which shall be a Business Day (and
the amount so specified shall then become due and payable hereunder on such
date, together with all interest accrued thereon to, but excluding, such date).
Notwithstanding the foregoing to the contrary, (A) a Eurodollar Loan may be
prepaid only on the last day of the then applicable Interest Period for such
Eurodollar Loan, (B) each partial prepayment of the Loans shall be in an amount
at least equal to $100,000 or in multiples of $100,000 in excess thereof
(prepayments of Loans of different Classes or Types or, in the case of
Eurodollar Loans, having different Interest Periods at the same time hereunder
shall be deemed separate prepayments for purposes of the foregoing, one for each
Class, Type or Interest Period), and (C) each prepayment shall be applied
against the Loans as provided in Section 3.04(e) hereof.
(b) If any Capital Stock of the Company is sold by the Company in a
Public Offering, then concurrently with the receipt by the Company of Net
Proceeds from such Public Offering, the Company shall be required to prepay the
Loans in full.
(c) Concurrently with the receipt by the Company or any Subsidiary of
Net Proceeds from any of the transactions described below (to the extent
permitted by the Lender), the Company shall make a prepayment of the Loans as
follows (in each case, to be applied against the Loans as provided in Section
3.04(e) hereof):
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(i) If such Net Proceeds arise from the sale, lease,
assignment, exchange or other disposition of any assets of the
Company or any Subsidiary (including, without limitation, as a
result of any casualty or condemnation but not including sales
or dispositions of assets permitted pursuant to Section
7.03(ii) hereof), the Company shall make a prepayment of the
Loans in an amount equal to 50% of the amount of such Net
Proceeds.
(ii) If such Net Proceeds arise from the issuance and sale of
any Capital Stock of the Company or any Subsidiary (other than
in connection with a Permitted Acquisition or the exercise by
SS&C of the SS&C Option), the Company shall make a prepayment
of the Loans in an amount equal to 50% of the amount of such
Net Proceeds.
(iii) If such Net Proceeds arise from the sale of the
Company's Capital Stock to SS&C as a result of SS&C exercising
its SS&C Option, the Company shall make a prepayment of the
Loans in an amount equal to 50% of the amount of such Net
Proceeds.
(iv) If such Net Proceeds arise from the incurrence of any
Indebtedness by the Company or any Subsidiary (other than
Indebtedness permitted pursuant to Section 7.02 hereof), the
Company shall make a prepayment of the Loans in an amount
equal to 50% of the amount of such Net Proceeds.
Notwithstanding the foregoing, nothing contained in this Section
3.04(c) shall be deemed to limit the Company's obligation to obtain the consent
of the Lender, or to imply the Lender's consent to any of the transactions not
permitted hereunder.
(d) If at any time the aggregate outstanding amount of Working Capital
Loans exceeds the lesser of the Working Capital Loan Commitment or the Borrowing
Base at such time, the Company shall be obligated to prepay the Working Capital
Loans to the extent of such excess, together with accrued interest thereon, and
such prepayment shall be applied against the Working Capital Loans as specified
in Section 3.04(e) hereof. Any such required prepayment shall be made within
three (3) Business Days after demand therefor by the Lender.
(e) Each prepayment pursuant to Section 3.04(c) hereof shall be applied
first against the Revolving Loans until paid in full, and second against the
Working Capital Loans until paid in full, and the Revolving Loan Commitments and
Working Capital Loan Commitments (in the case of prepayment prior to the Working
Capital Loan Termination Date), as the case may be, shall automatically and
concurrently with such prepayment be reduced by an amount equal to the principal
amount so applied against the applicable Loans. Each prepayment of the Revolving
Loans and Working Capital Loans shall be applied ratably against the applicable
Commitments held by the Lender. Each prepayment of any Loan pursuant to Section
3.04(a) hereof shall be applied against the Class and Type as selected by the
Company (subject to any restrictions herein) and without reduction of the
applicable Commitments (unless otherwise notified by the Company pursuant to
Section 3.03(d) hereof). Each prepayment pursuant to Sections 3.04(c) and/or
3.04(d) hereof, unless the Lender has received written instructions from the
Company to the contrary, shall be applied first ratably against the applicable
Class of Loans outstanding on
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such date of prepayment as Base Rate Loans, and second ratably against the
applicable Class of Loans then outstanding as Eurodollar Loans.
SECTION 3.05. LATE CHARGES AND DEFAULT INTEREST. (a) Notwithstanding
anything in Section 3.02 to the contrary, the Company hereby promises to pay to
the Lender a "late charge" at a rate per annum equal to the Default Rate on any
amount of principal of, or interest on, any Loan made by the Lender and on any
fee or other amount payable by the Company hereunder to the Lender which shall
not be paid in full when due (whether at stated maturity, by acceleration,
prepayment or otherwise), for the period from (and including) the due date
thereof to (but excluding) the date the same is paid in full; provided that no
amounts shall accrue under this Section 3.05(a) for any period during which the
Default Rate is in effect pursuant to Section 3.05(b) hereof. Any late charges
pursuant to this Section 3.05(a) shall be payable upon demand.
(b) Notwithstanding anything in Section 3.02 to the contrary, if an
Event of Default shall occur, then, for so long as such Event of Default shall
continue, upon notice from the Lender to the Company, the Company shall pay to
the Lender interest at the Default Rate on the principal amount of all of the
Loans hereunder for the period from (and including) the date on which such
notice shall be given to (but excluding) the date on which such Event of Default
shall have been cured or waived (it being acknowledged by the Company that (i)
any such cure shall be to the satisfaction of the Lender, (ii) the Lender shall
be under no obligation to waive such Event of Default, and (iii) the imposition
of the Default Rate shall not be construed as a waiver or limitation of any
rights or remedies of the Lender arising out of the Event of Default). Any
additional interest pursuant to this Section 3.05(b) shall be payable upon
demand.
(c) If the amount of any principal of, or interest on, any Loan made by
the Lender is not paid in full within ten (10) days after the same is due, the
Company shall pay to the Lender a late fee equal to five percent (5%) of the
required payment.
(d) The Company agrees that any additional interest and late charges
referred to in this Section 3.05 may be deducted from any amounts paid to the
Lender before such amounts are applied to interest on or principal of the Notes.
SECTION 3.06. REQUIREMENTS OF LAW. (a) If the adoption of or any change
in any Requirement of Law or in the interpretation or application thereof or
compliance by the Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof (i) shall subject the Lender to any tax of any
kind whatsoever with respect to this Agreement, any Note, any Eurodollar Loan
made by the Lender, or change the basis of taxation of payments to the Lender in
respect thereof (except for Non-Excluded Taxes covered by Section 3.10 and
changes in the rate of tax on the overall net income of the Lender); (ii) shall
impose, modify or hold applicable any reserve, special deposit, compulsory loan
or similar requirement (not already included in the calculation of the
Eurodollar Rate) against assets held by, deposits or other liabilities in or for
the account of, advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of the Lender which is not otherwise
included in the determination of the Eurodollar Rate hereunder; or (iii) shall
impose on the Lender any other condition; and the result of any of the foregoing
is to increase the cost to the Lender of making, Converting into, Continuing or
maintaining Eurodollar Loans or to reduce any amount receivable hereunder in
respect thereof,
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then, in any such case, the Company shall promptly pay the Lender (as the case
may be) such additional amount or amounts as will compensate the Lender for such
increased cost or reduced amount receivable.
(b) If the Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by the Lender or any
corporation controlling the Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on the Lender's or such corporation's capital as a
consequence of its obligations hereunder to a level below that which the Lender
or such corporation could have achieved but for such adoption, change or
compliance (taking into consideration the Lender's or such corporation's
policies with respect to capital adequacy), then from time to time, the Company
shall promptly pay to the Lender such additional amount or amounts as will
compensate the Lender for such reduction.
(c) If the Lender becomes entitled to claim any additional amounts
pursuant to this Section 3.06, it shall, no later than 360 days after acquiring
knowledge thereof, notify the Company of the event by reason of which it has
become so entitled. A certificate setting forth in reasonable detail any
additional amounts payable pursuant to this Section 3.06 submitted by the Lender
to the Company shall be conclusive in the absence of manifest error.
(d) The agreements in this Section 3.06 shall survive the termination
of this Agreement and the payment of the Loans and all other amounts payable
hereunder.
SECTION 3.07. ILLEGALITY. Notwithstanding any other provision herein,
if the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful for the Lender to
make or maintain Eurodollar Loans as contemplated by this Agreement, (i) the
commitment of the Lender hereunder to make Eurodollar Loans, Continue Eurodollar
Loans as such and Convert Base Rate Loans to Eurodollar Loans shall forthwith be
canceled (without affecting the Lender's obligations to make Base Rate Loans
hereunder) and (ii) the Lender loans then outstanding as Eurodollar Loans, if
any, shall be Converted automatically to Base Rate Loans on the respective last
days of the then current Interest Periods with respect to such Loans or within
such earlier period as required by law, and any Borrowing Notice given pursuant
to Section 2.03 thereafter shall automatically be deemed a Borrowing Notice for
Base Rate Loans. If any such Conversion of a Eurodollar Loan occurs on a day
which is not the last day of the then current Interest Period with respect
thereto, the Company shall pay to the Lender such amounts, if any, as may be
required pursuant to Section 3.09 hereof.
SECTION 3.08. LIMITATION ON TYPES OF LOANS. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any Eurodollar
Rate for any Interest Period, (i) the Lender determines, which determination
shall be conclusive absent manifest error, that quotations or offerings of
interest rates for the relevant deposits referred to in the definition of
"Eurodollar Rate" in Section 1.01 hereof are not being offered or made available
in the relevant amounts or for the relevant maturities for purposes of
determining rates of interest for Eurodollar Loans as provided herein, or (ii)
the Lender determines (which determination shall be conclusive absent manifest
error) that the relevant rates of interest referred to in the definition of
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"Eurodollar Rate" in Section 1.01 hereof upon the basis of which the rate of
interest for Eurodollar Loans for such Interest Period is to be determined, are
not likely to cover adequately the cost to the Lender of making or maintaining
Eurodollar Loans for such Interest Period, then the Lender shall give telecopy
or telephonic notice thereof to the Company as soon as practicable thereafter.
If such notice is given (A) any Eurodollar Loans, as the case may be, requested
to be made on the first day of such Interest Period shall be made as Base Rate
Loans and (B) any Loans that were to have been Converted to or Continued as
Eurodollar Loans on the first day of such Interest Period shall be Converted to
or Continued as Base Rate Loans. Until such notice has been withdrawn by the
Lender, no further Eurodollar Loans, as the case may be, shall be made or
continued as such, nor shall the Company have the right to convert Loans to
Eurodollar Loans, as the case may be.
SECTION 3.09. COMPENSATION. The Company shall pay to the Lender, upon
request of the Lender, such amount or amounts as shall be sufficient (in the
reasonable opinion of the Lender) to compensate it for any loss, cost, or
expense incurred as a result of: (i) any payment of a Eurodollar Loan on a date
other than the last day of the Interest Period for such Loan; (ii) any failure
by the Company to borrow a Eurodollar Loan on the date specified by the
Borrowing Notice; (iii) any failure by the Company to pay a Eurodollar Loan on
the date for payment specified in any Company's written notice. Without limiting
the foregoing, the Company shall pay to Lender a "yield maintenance fee" in an
amount computed as follows: The current rate for United States Treasury
securities (bills on a discounted basis shall be converted to a bond equivalent)
with a maturity date closest to the term chosen pursuant to the Fixed Rate
Election (as defined below) as to which the prepayment is made, shall be
subtracted from the Eurodollar Rate in effect at the time of prepayment. If the
result is zero or a negative number, there shall be no yield maintenance fee. If
the result is a positive number, then the resulting percentage shall be
multiplied by the amount of the principal balance being prepaid. The resulting
amount shall be divided by 360 and multiplied by the number of days remaining in
the term chosen pursuant to the Fixed Rate Election as to which the prepayment
is made. Said amount shall be reduced to present value calculated by using the
above referenced United States Treasury securities rate and the number of days
remaining in the term chosen pursuant to the Fixed Rate Election as to which
prepayment is made. The resulting amount shall be the yield maintenance fee due
to the Lender upon the payment of a Eurodollar Loan. Each reference in this
paragraph to "Fixed Rate Election" shall mean the election by the Company of the
Eurodollar Rate. If by reason of an Event of Default, Lender elects to declare
the Notes to be immediately due and payable, then any yield maintenance fee with
respect to a Eurodollar Loan shall become due and payable in the same manner as
though the Company had exercised such right of prepayment. This covenant shall
survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder, and a Lender's determination of compensation
hereunder shall, absent manifest error, be final, conclusive and binding on the
Company.
SECTION 3.10. TAXES. [(a)] All payments made by the Company under this
Agreement and any Notes shall be made free and clear of, and without deduction
or withholding for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties, charges, fees, deductions or withholdings,
now or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority excluding net income taxes and franchise taxes (imposed
in lieu of net income taxes) imposed on the Lender as a result of a present or
former connection between the Lender and the jurisdiction of the Governmental
Authority imposing
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such tax or any political subdivision or taxing authority thereof or therein
(other than any such connection arising solely from the Lender having executed,
delivered or performed its obligations or received a payment under, or enforced,
this Agreement or any Note). If any such non-excluded taxes, levies, imposts,
duties, charges, fees deductions or withholdings ("Non-Excluded Taxes") are
required to be withheld from any amounts payable to the Lender hereunder or
under any Note, the amounts so payable to the Lender shall be increased to the
extent necessary to yield to the Lender (after payment of all Non-Excluded
Taxes) interest or any such other amounts payable hereunder at the rates or in
the amounts specified in this Agreement. Whenever any Non-Excluded Taxes are
payable by the Company, as promptly as possible thereafter the Company shall
send to the Lender for its own account a certified copy of an original official
receipt received by the Company showing payment thereof. If the Company fails to
pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails
to remit to the Lender the required receipts or other required documentary
evidence, the Company shall indemnify the Lender for any incremental taxes,
interest or penalties that may become payable by the Lender as a result of any
such failure. The agreements in this Section 3.10(a) shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
(b) The Lender agrees (to the extent consistent with its internal
policies and legal and regulatory restrictions) to designate a different
Applicable Lending Office if such designation would avoid or reduce the amount
of Non-Excluded Taxes; provided, however, that such designation need not be made
if it would result in any additional costs, expenses or risks to the Lender (as
determined by the Lender in its sole discretion) that are not reimbursed by the
Company pursuant hereto or would, in the Lender's sole judgment, be otherwise
materially disadvantageous to the Lender.
SECTION 3.11. COMPUTATIONS. Interest on all Eurodollar Loans shall be
computed on the basis of a year of 360 days and actual days elapsed, and
interest on all Base Rate Loans and the Revolving Loan Commitment Fee and
Working Capital Loan Commitment Fee shall be computed on the basis of a year of
365 or 366 days (as the case may be), in each case including any time extended
by reason of payments falling due on Saturdays, Sundays or holidays. Any change
in the interest rate on the Notes resulting from a change in the Base Rate shall
become effective as of the opening of business on the day on which such change
in the Base Rate shall become effective.
SECTION 3.12. PAYMENTS. (a) Except to the extent otherwise provided
herein, all payments of principal, interest and other amounts to be made by the
Company under this Agreement and the Notes, and, except to the extent otherwise
provided therein, all payments to be made or deposited by the Company under any
other Loan Document, shall be made or deposited in Dollars, in immediately
available funds, without deduction, set-off or counterclaim, to the Company
Account, not later than 12:00 noon New York time on the date on which such
payment shall become due (each such payment made after such time on such due
date to be deemed to have been made on the next succeeding Business Day), and
the Company hereby irrevocably grants to the Lender the right to debit such
Company Account for all payments to be made by the Company under this Agreement,
the Notes and the other Loan Documents.
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(b) The Company hereby irrevocably authorizes the Lender (but the
Lender shall not be obligated) to charge, when due, the amount of any principal,
interest or other amount payable by the Company hereunder against funds in any
deposit or checking account of the Company with the Lender (including, without
limitation the Company Account), without the requirement of prior notice to the
Company or the Lender (provided that the Lender agrees to submit a statement to
the Company reflecting each such charge within fifteen (15) days thereafter).
(c) [Intentionally Omitted]
(d) Each payment made to the Lender under this Agreement or any Note
shall be remitted in immediately available funds for the account of the Lender's
Applicable Lending Office for the Loan or other obligation in respect of which
such payment is made.
(e) If the due date of any payment under this Agreement or any Note
would otherwise fall on a day that is not a Business Day, such due date shall be
extended to the next succeeding Business Day, and interest shall be payable on
any principal so extended for the period of such extension.
SECTION 3.13. LENDING OFFICES. The Loans of each Type made by the
Lender shall be made and maintained at the Lender's Applicable Lending Office
for Loans of such Type.
SECTION 3.14. SET-OFFS, ETC. The Company hereby grants to the Lender, a
lien, security interest and right of setoff as security for all liabilities and
obligations to the Lender, whether now existing or hereafter arising, upon and
against all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of the Lender or any entity under
the control of Fleet Financial Group, Inc., or in transit to any of them. At any
time, without demand or notice, the Lender may set off the same or any part
thereof and apply the same to any liability or obligation of the Company and any
Subsidiary Guarantor even though unmatured and regardless of the adequacy of any
other Collateral securing the Loans. ANY AND ALL RIGHTS TO REQUIRE THE LENDER TO
EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE LOANS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH
DEPOSITS, CREDITS OR OTHER PROPERTY OF THE COMPANY OR ANY SUBSIDIARY GUARANTOR,
ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
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ARTICLE IV.
CONDITIONS PRECEDENT
SECTION 4.01. CONDITIONS PRECEDENT TO THE REVOLVING LOAN. The obligation of the
Lender to make the Revolving Loan hereunder is subject to the receipt by the
Lender of the following (in case of documentation, such documentation to be in
form and substance satisfactory to the Lender, and in such number of original
copies as the Lender shall have requested):
(a) Loan Documents.
(a)(1) Revolving Note. The Revolving Note, duly completed, executed and
delivered.
(a)(2) Working Capital Note. The Working Capital Note, duly completed,
executed and delivered.
(a)(3) Company Security Agreement. The Company Security Agreement, duly
executed and delivered by the Company. In addition, the Company shall have taken
such other action (including delivering to the Lender, for filing, appropriately
completed and duly executed UCC financing statements and forms to be filed with
the United States Patent and Trademark Office and such other statements or forms
which may be necessary or required under any other applicable statute or
regulation outside of the United States) as may be necessary or, in the opinion
of the Lender, desirable to perfect the security interests purported to be
executed by the Company Security Agreement.
(a)(4) Subsidiary Security Agreements. The Subsidiary Security
Agreement, duly executed and delivered by each Subsidiary Guarantor. In
addition, each Subsidiary Guarantor shall have taken such other action
(including delivering to the Lender, for filing, appropriately completed and
duly executed UCC financing statements and forms to be filed with the United
States Patent and Trademark Office and such other statements or forms which may
be necessary or required under any other applicable statute or regulation
outside of the United States) as may be necessary or, in the opinion of the
Lender, desirable to perfect the security interests purported to be created by
the Subsidiary Security Agreement.
(a)(5) Subsidiary Guarantee. The Subsidiary Guarantee, duly executed
and delivered by each Subsidiary Guarantor.
(a)(6) Company Pledge Agreements. The Company Pledge Agreements, duly
executed and delivered by the Company Pledgors holding at least a majority of
the issued and outstanding Capital Stock of the Company.
(a)(7) Subsidiary Pledge Agreements. The Subsidiary Pledge
Agreement[s], duly executed and delivered by the Company and its Subsidiaries,
as the case may be, together with stock certificates in respect of the Pledged
Stock (as defined in the respective Subsidiary Pledge Agreement[s]), and undated
stock powers executed in blank.
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(a)(8) Management Subordination Agreement. The Subordination Agreement,
duly executed and delivered by GFI.
(b) Perfection Certificate. A certificate of the Company, dated the
Closing Date, substantially in the form of Exhibit H, with appropriate
insertions and attachments (the "Perfection Certificate"), executed by the
President or any Vice President and the Secretary or any Assistant Secretary of
the Company.
(c) Legal Opinions. An opinion of (i) Irell & Manella LLP in
substantially the form of Exhibit I-1 hereto, and (ii) Pinsent Curtis, special
U.K. counsel to the Lender, in substantially the form of Exhibit I-2 hereto.
(d) Corporate Action.
(d)(1) Company. Certified copies of the articles of organization and
operating agreement of the Company and certified copies of the resolutions of
its management committee and members authorizing the execution, delivery and
performance of the Loan Documents and the Capitalization Documents to which it
is, or shall become, a party, all certified by its Secretary.
(d)(2) Subsidiary Guarantors. Certified copies of the articles of
incorporation and by-laws of each Subsidiary Guarantor and certified copies of
the resolutions of its board of directors and shareholders authorizing the
execution, delivery and performance of the Loan Documents and the Capitalization
Documents to which it is, or shall become, a party, all certified by its
Secretary.
(e) Incumbency. A certificate from a Responsible Officer of each Person
in (d)(1) and (d)(2) above certifying the incumbency and specimen signature of
each officer of such Person authorized to execute the Loan Documents to which
such Person is, or shall become, a party.
(f) Insurance. Certificates of insurance evidencing the existence of
all insurance required to be maintained pursuant to Section 6.04 hereof,
together with certified copies of the applicable insurance policies, and the
designation of the Lender as loss payee and additional insured thereunder.
(g) Lien Searches and Good Standing Certificates.
(g)(1) Lien Searches. Appropriate UCC, tax and judgment and other lien
and title searches of public records with respect to the Loan Parties.
(g)(2) Certificates of Good Standing. A good standing certificate from
each jurisdiction in which each Loan Party conducts business, maintains property
or otherwise is licensed or authorized to do business.
(h) Solvency Certificate. A certificate of a Responsible Officer of the
Company, to the effect that, as of the Closing Date and after giving effect to
the consummation of the extension of the Revolving Loan and the initial Working
Capital Loans hereunder, if any, and the other transactions contemplated hereby,
(i) the aggregate value of all assets of the Company and
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its Subsidiaries at their present fair saleable value (i.e., the amount which
may be realized within a reasonable time, considered to be six months to one
year, either through collection or sale at the regular market value, conceiving
the latter as the amount which could be obtained for the property in question,
as part of a going concern, within such period by a capable and diligent
businessman from an interested buyer who is willing to purchase under ordinary
selling conditions), exceeds the amount of all the debts and liabilities
(including contingent, subordinated, unmatured and unliquidated liabilities,
valuing contingent or unliquidated liabilities at their reasonable probable
value) of the Company and its Subsidiaries, (ii) the Company and its
Subsidiaries will not have an unreasonably small capital with which to conduct
their business as contemplated to be conducted, and (iii) the Company and its
Subsidiaries will have sufficient cash flow to enable them to pay their debts as
they mature. Such certificate shall in addition state that the conclusions
specified in clauses (i), (ii) and (iii) above, and that the financial
projections and underlying assumptions contained in such analyses were at the
time made, and on the Closing Date are, fair and reasonable and accurately
computed in all material respects.
(i) Financial Matters.
(i)(1) Pro Forma Balance Sheet. The Pro Forma Balance Sheet of the
Company and its Subsidiaries as at the date specified in Section 5.01(b) hereof.
(i)(2) Projections. The Projections of the Company and its Subsidiaries
for the respective periods specified in Section 5.01(c) hereof.
(i)(3) Financial Statements - Company. The financial statements
(including all reports, letters and certificates) of the Company and its
Subsidiaries specified in Section 5.01(a) hereof.
(j) No Judgment and Litigation. Evidence that (i) there exists no
judgment, order, injunction or other restraint issued or filed which prohibits
the entering by any Loan Party into any of the Loan Documents or the
Capitalization Documents to which it is, or will be, a party, and (ii) no
action, suit, litigation or similar proceeding at law or in equity by or before
any court or Governmental Authority exists or is threatened with respect to the
transactions contemplated hereby, by the other Loan Documents or the
Capitalization Documents.
(k) Fees, Expenses, etc.
(k)(1) Origination Fee. Evidence that the Company shall have paid to
the Lender the Origination Fee.
(k)(2) Other Transaction Expenses & Itemization. An itemization of all
transaction expenses (to the extent known or, if not known, as can at the time
best be estimated) to be incurred by the Company and its Subsidiaries on or
about the Closing Date in respect of the Loans and the other transactions
contemplated hereby, including, without limitation, all brokers' commissions,
lawyers', accountants' and consultants' fees and expenses, all investment
advisory and placement fees, and any other nonrecurring expenses incurred in
connection with the transactions contemplated hereby (but specifically excluding
the Origination Fee) and evidence that the Company shall have paid the
reasonable fees and expenses of counsel to the Lender and all filing and
recordation fees, taxes, appraisal fees, title insurance and title review fees
and
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expenses and other expenses incurred by the Lender in connection with the
transactions contemplated hereby.
(l) Discharge of Debt
(l)(1) Discharge of Refinanced Loan Amount. Evidence that, concurrently
with the making of the Revolving Loan and any initial Working Capital Loans
hereunder, the Refinanced Loan Amount shall have been repaid and discharged in
full and all commitments under the Refinanced Loan Documents shall have been
terminated. In addition, the Lender shall have received (i) copies of all
releases, termination and payoff letters and/or agreements from the Refinanced
Lender in favor of the Company, and (ii) such termination statements, mortgage
releases and other instruments, in each case in proper form for recording, as
the Lender shall deem necessary to release and terminate of record all Liens
securing such Refinanced Loan Amount.
(l)(2) Discharge of Deferred Earn-Out Amount. Evidence that,
concurrently with the making of the Revolving Loan and any initial Working
Capital Loans hereunder, the Deferred Earn-Out Amount shall have been repaid and
discharged in full. In addition, the Lender shall have received such instruments
and certificates as it deems necessary as evidence of the discharge of the
Deferred Earn-Out Amount.
(m) Funding Instructions.
(m)(1) Borrowing Notice. A Borrowing Notice with respect to the Loans.
(m)(2) Payment Instructions. Irrevocable written instructions from the
Company to disburse from the Company Account, upon receipt of the proceeds of
the Loans to be made by the Lender on the Closing Date, such amounts to such
Persons for the purpose of discharging the Refinanced Loan Amount and the
Deferred Earn-Out Amount which are payable on the Closing Date.
(n) No Change. There shall not have occurred any change, or development
or event involving a prospective change, which in either case in the opinion of
the Lender could reasonably be expected to have a Material Adverse Effect.
(o) No Adverse Information. The Lender shall not have become aware of
any previously undisclosed materially adverse information with respect to (i)
the business, assets, operations, condition (financial or otherwise) or
prospects of the Company or any of its Subsidiaries, (ii) the ability of any
Loan Party to perform its obligations under the Loan Documents, or (iii) the
rights and remedies of the Lender.
(p) Filings. All filings and other actions required to create and
perfect a first priority security interest to the Lender, pursuant to the
Security Documents shall have been duly made or taken.
(q) No Default; Representations and Warranties; Bring Down Certificate.
Immediately before and after giving effect to the making of the Revolving Loan
(i) no Default hereunder shall have occurred and be continuing; and (ii) the
representations and warranties
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made by the Company in Article V hereof shall be true in all respects on and as
of the date of the making of the Revolving Loan with the same force and effect
as if made on and as of such date (or, if any such representation or warranty is
expressly stated to have been made as of a specific date, as of such specific
date); and the Lender shall have received a certificate of a Responsible Officer
of the Company certifying as to the accuracy of the foregoing.
(r) Caminus Acquisition Documents; Zai*Net Acquisition Documents.
Certified copies of the Caminus Acquisition Documents, and the Zai*Net
Acquisition Documents.
(s) Refinanced Loan Documents; SS&C Documents. Certified copies of the
Refinanced Loan Documents and the SS&C Documents.
(t) Scheduled Earn-Out Payment. Evidence satisfactory to the Lender
that the Scheduled Earn-Out Payment is the irrevocable and unconditional
obligation of the Investor Group, and that the Investor Group shall have no
recourse against the Company for such Scheduled Earn-Out Payment.
(u) Consolidated Leverage Ratio. Evidence that the Consolidated
Leverage Ratio of the Company and its Subsidiaries for the four (4) consecutive
Fiscal Quarters of the Company ending on, or most recently ended prior to,
December 31, 1998 is not in excess of 2.50 to 1.00.
(v) Other Assurances. Such other certificates, opinions or other
assurances as the Lender or special New York counsel to the Lender may
reasonably request.
SECTION 4.02. CONDITIONS PRECEDENT TO ALL LOANS. The obligation of the
Lender to make any Loan to the Company hereunder is subject to the following
conditions precedent:
(a) Compliance with Section 4.01. With respect to the initial Revolving
Credit Loan and Working Capital Loan to be made hereunder on the Closing Date,
if any, the Company shall have satisfied (or caused to be satisfied) all of the
conditions precedent in Section 4.01 hereof.
(b) Borrowing Notice and Borrowing Base Certificate. The Lender shall
have received a Borrowing Notice as required pursuant to Section 2.03(a) hereof
and, with respect to a Working Capital Loan, a Borrowing Base Certificate
setting forth the computation of the Borrowing Base and delivered in compliance
with Section 6.07(d)(1) hereof; provided that no Working Capital Loan to be made
on the Closing Date shall be made to the Company until such time as the Lender
shall have completed to its satisfaction its field exam and audit of the
Company's books and records.
(c) No Default; Representations and Warranties. Immediately before and
after giving effect to the making of each Loan (i) no Default hereunder shall
have occurred and be continuing; and (ii) the representations and warranties
made by the Company in Article V hereof shall be true in all material respects
on and as of the date of the making of such Loan (as the case may be) with the
same force and effect as if made on and as of such date (or, if any such
representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date).
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ARTICLE V.
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Lender as follows:
SECTION 5.01. FINANCIAL CONDITION. (a) The consolidated balance sheet
of the Company and its consolidated Subsidiaries as at December 31, 1998, and
the related consolidated statements of income and consolidated statement of cash
flows for the fiscal year ended on such date, reported on by
PricewaterhouseCoopers, copies of which have heretofore been furnished to the
Lender, are complete and correct and present fairly the consolidated financial
condition of the Company and its consolidated Subsidiaries as at such date, and
the consolidated results of their operations and their consolidated cash flows
for the fiscal year then ended. The unaudited consolidated balance sheet of the
Company and its consolidated Subsidiaries as at March 31, 1999 and the related
unaudited consolidated statements of income and consolidated statement of cash
flows for the 3-month period ended on such date, copies of which have heretofore
been furnished to the Lender, are complete and correct and present fairly the
consolidated financial condition of the Company and its consolidated
Subsidiaries as at such date, and the consolidated results of their operations
and their consolidated cash flows for the 3-month period then ended (subject to
normal year-end audit adjustments). All such financial statements, including the
related schedules and notes thereto, have been prepared in accordance with GAAP
applied consistently throughout the periods involved (except as approved by such
accountants or Responsible Officer, as the case may be, and as disclosed
therein). Neither the Company nor any of its consolidated Subsidiaries had, as
at December 31, 1998, any material Guarantee Obligation, contingent liability or
liability for taxes, long-term lease or unusual forward or long-term commitment,
including, without limitation, any interest rate or foreign currency swap or
exchange transaction, which is not reflected in the foregoing statements or in
the notes thereto. During the period from December 31, 1998 to and including the
Closing Date, there has not been and will not have been any sale, transfer or
other disposition by the Company or any of its consolidated Subsidiaries of any
material part of its business or property, and no purchase or other acquisition
of any business or property (including any capital stock of any other Person)
material in relation to the consolidated financial condition of the Company or
any of its consolidated Subsidiaries at December 31, 1998. The Company's
independent accountants have not issued any management letter commenting on the
Company's internal controls or otherwise.
(b) The pro forma consolidated balance sheet of the Company and its
consolidated Subsidiaries as at March 31, 1999, certified by a Responsible
Officer (the "Pro Forma Balance Sheet"), a copy of which has been provided to
the Lender, is the unaudited consolidated balance sheet of the Company and its
consolidated Subsidiaries adjusted to give effect (as if such events had
occurred on such date) to (i) the making of the Revolving Loan, (ii) the making
of any Working Capital Loans to be made on the Closing Date, (iii) the
application of the proceeds of the foregoing in accordance with the terms of the
Loan Documents, and (iv) the payment of all fees and expenses related to the
foregoing transactions, as estimated in good faith as of the date of the Pro
Forma Balance Sheet. The Pro Forma Balance Sheet, together with the notes
thereto, presents fairly, on a pro forma basis, the consolidated and
consolidating financial position of the Company and its Subsidiaries as at March
31, 1999, assuming that the events specified in the
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preceding sentence had actually occurred on such date, based upon the Company's
good faith estimates.
(c) The operating forecast, balance sheets and cash flow projections of
the Company and its consolidated Subsidiaries for the period June 1, 1999
through December 31, 1999 (including monthly forecasts for the period June 1,
1999 through December 31, 1999), copies of which have heretofore been furnished
to the Lender, have been prepared in good faith under the direction of a
Responsible Officer of the Company (as amended from time to time, the
"Projections"). The Company has no reason to believe that, as of the date of
delivery thereof, the Projections are incorrect or misleading in any material
respect, or omit to state any fact which would render them misleading in any
material respect.
SECTION 5.02. NO CHANGE. Since December 31, 1998, except as set forth
on Schedule 3 hereto, (i) there has been no development or event nor any
prospective development or event, which has had or could reasonably be expected
to have a Material Adverse Effect, and (ii) no dividends or other distributions
have been declared, paid or made upon any shares of Capital Stock of the
Company, nor have any shares of Capital Stock of the Company been redeemed,
retired, purchased or otherwise acquired for value by the Company or any of the
Subsidiaries.
SECTION 5.03. COMPLIANCE WITH LAW. Each of the Company and the
Subsidiary Guarantors (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its formation or incorporation,
(b) has the power and authority, and the legal right, to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
entity and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification and (d) is in compliance with all Requirements of
Law, except, with respect to the preceding clauses (c) and (d), to the extent
that the failure to be so qualified and in good standing or to comply therewith
could not, in the aggregate, reasonably be expected to have a Material Adverse
Effect.
SECTION 5.04. NECESSARY ACTION; CONSENT; ENFORCEABLE OBLIGATIONS. (a)
Each Loan Party has the power and authority and the legal right to make, deliver
and perform the Loan Documents to which it is or will be a party, in the case of
the Company to borrow hereunder, and to grant Liens pursuant to the Security
Documents to which it is or will be a party and has taken all necessary action
to authorize, in the case of the Company the borrowings on the terms and
conditions of this Agreement and the Notes, the granting of Liens pursuant to
the Security Documents to which it is or will be a party and the execution,
delivery and performance of the Loan Documents to which it is or will be a
party. Each Loan Party, as the case may be, has the power and authority and the
legal right to make, deliver and perform each Capitalization Document to which
it is or will be a party and has taken all necessary action to authorize the
execution, delivery and performance of the Capitalization Documents to which it
is or will be a party.
(b) No consent or authorization of, filing with or other act by or in
respect of any Governmental Authority or any other Person is required in
connection with the borrowings hereunder or with the execution, delivery,
performance, validity or enforceability of the Loan Documents to which a Loan
Party is or will be a party, and no consent or authorization of, filing
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with or other act by or in respect of, any Governmental Authority or any other
Person is required in connection the execution, delivery, performance, validity
or enforceability of the Capitalization Documents to which a Loan Party is or
will be a party, except in each case for consents, authorizations and filings
which have been obtained or made, as the case may be, and are in full force and
effect.
(c) This Agreement, each Note and each other Loan Document to which a
Loan Party is or will be a party, have been (or on the Closing Date will be)
duly executed and delivered on behalf of such Loan Party, and this Agreement,
and each Note and each other Loan Document to which it is or will be a party
constitutes a legal, valid and binding obligation of the Loan Party thereto,
enforceable against such Loan Party in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law). Each Capitalization
Document to which a Loan Party is or will be a party has been duly executed and
delivered on behalf of such Loan Party, and each such Capitalization Document
constitutes a legal, valid and binding obligation of the Loan Party or
Subsidiary party thereto, enforceable against such Loan Party or Subsidiary in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
SECTION 5.05. NO LEGAL BAR. The execution, delivery and performance by
the Company of this Agreement and the Notes and by each Loan Party of the other
Loan Documents to which it is or will be a party, the borrowings hereunder and
the use of the proceeds hereof and the granting of Liens pursuant to the
Security Documents, do not and will not violate any Requirement of Law or any
Contractual Obligation of a Loan Party, and do not or will not result in, or
require, the creation or imposition of any Lien on any of its or their
respective properties or revenues pursuant to any such Requirement of Law or
Contractual Obligation (other than the Liens created by the Security Documents
in favor of the Lender). The execution, delivery and performance by each Loan
Party of the Capitalization Documents to which it is or will be a party do not
and will not violate any Requirement of Law or any Contractual Obligation of
such Loan Party and will not result in, or require, the creation or imposition
of any Lien on any of its or their respective properties or revenues pursuant to
any such Requirement of Law or Contractual Obligation (other than the Liens
created by the Security Documents in favor of the Lender).
SECTION 5.06. NO MATERIAL LITIGATION. Except as disclosed on Schedule 3
hereto, no litigation, investigation or proceeding of or before any arbitrator
or Governmental Authority is pending or, to the best knowledge of each Loan
Party, threatened, by or against any Loan Party or against any of its or their
respective properties or revenues (i) with respect to this Agreement, the Notes,
the other Loan Documents or the Capitalization Documents or any of the
transactions contemplated hereby or thereby, or (ii) which could reasonably be
expected to have a Material Adverse Effect.
SECTION 5.07. NO DEFAULT. No Loan Party is in default under or with
respect to any Contractual Obligation in any respect which could reasonably be
expected to have a Material Adverse Effect. No Default or Event of Default has
occurred and is continuing.
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SECTION 5.08. OWNERSHIP OF PROPERTY; LIENS. Each Loan Party has valid
leasehold interests in all its real property, and good title to or valid
leasehold interests in, all of its property, and none of such property is
subject to any Lien, except as permitted in Section 7.01 hereof. Schedule 5
hereto contains a true and correct list of all interests of the Company in Real
Estate, owned or leased.
SECTION 5.09. INDEBTEDNESS AND LIENS. (a) Part A of Schedule 4 hereto
is a complete and correct list of each credit agreement, loan agreement,
indenture, guarantee, letter of credit or other arrangement providing for or
otherwise relating to any Indebtedness (other than Indebtedness hereunder) to,
or guaranteed by, the Company or any of its Subsidiaries outstanding on the
Closing Date (after giving effect to the making of the Revolving Loan and
initial Working Capital Loans hereunder), and the aggregate principal or face
amount outstanding (or that may become outstanding) under each such arrangement
is correctly described in Part A of said Schedule 4.
(b) Part B of Schedule 4 hereto is a complete and correct list, as of
the Closing Date (after giving effect to the making of the Revolving Loan and
any initial Working Capital Loans hereunder), of each Lien securing Indebtedness
(other than Indebtedness incurred hereunder) of any Person covering any property
of the Company or any of its Subsidiaries, and the aggregate Indebtedness
secured (or which may be secured) by each such Lien and the property covered by
each such Lien is correctly described in Part B of said Schedule 4.
SECTION 5.10. INTELLECTUAL PROPERTY, MATERIAL AUTHORIZATIONS AND
CAPITALIZATION DOCUMENTS. (a) Each Loan Party owns, or is licensed to use, all
Intellectual Property. No claim is pending or has been asserted by any Person
challenging or questioning the use of any such Intellectual Property (other than
any such assertion that has been conclusively resolved in favor of the Loan
Party). The use by a Loan Party of such Intellectual Property does not infringe
on the valid intellectual property rights of any Person, except for such claims
and infringements that, in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
(b) Schedule 2 hereto accurately and completely lists all (i)
Intellectual Property, (ii) Capitalization Documents, (iii) employment contracts
with executive employees of any Loan Party, and (iv) all Material
Authorizations, each as in effect on the Closing Date.
(c) In addition to the Intellectual Property, each Loan Party has
obtained and possesses all material permits, governmental authorizations,
franchises and licenses believed to be necessary for the conduct of its business
as currently conducted except for those the failure to own or license which
could not reasonably be expected to have a Material Adverse Effect, and each of
the foregoing is in full force and effect and no event has occurred which
permits, or after passage of time or giving of notice or both would permit,
revocation or termination of any of the foregoing so as to have a Material
Adverse Effect; except that the Loan Parties have informed the Lender that the
Company has certain "take or pay" license obligations to SS&C under the
Distributor Agreement dated as of December 31, 1998 (as amended by the letter
agreement dated as of March 29, 1999), which are applicable regardless of the
Company's ability to obtain customers for or otherwise sublicense the related
software products.
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SECTION 5.11. NO BURDENSOME RESTRICTIONS. No Contractual Obligation of
a Loan Party and no Requirement of Law could reasonably be expected to have a
Material Adverse Effect.
SECTION 5.12. TAXES. Each Loan Party has filed or caused to be filed
all tax returns which are required to be filed and has paid all taxes shown to
be due and payable on said returns or on any assessments made against it or any
of its property and all other taxes, fees or other charges imposed on it or any
of its property by any Governmental Authority (other than those the amount or
validity of which is currently being contested in good faith by appropriate
proceedings, with respect to which reserves in conformity with GAAP have been
provided on the books of such Loan Party, as the case may be, and which, if such
contest were adversely determined, could not reasonably be expected to have a
Material Adverse Effect); and no tax liens have been filed and, to the best
knowledge of each Loan Party, no claims are being asserted with respect to any
such taxes, fees or other charges.
SECTION 5.13. INSURANCE. Each of the Company and the Subsidiaries has
insurance with respect to its properties, assets and business against all losses
or damages or risks of the kinds customarily insured against by companies
similarly situated, of the type and manner described in Section 6.04 hereof.
SECTION 5.14. ERISA. No accumulated funding deficiency (as defined in
Section 412 of the Code or Section 302 of ERISA) or Reportable Event has
occurred with respect to any Plan and there are no Unfunded Benefit Liabilities
under any Plan. Neither of the Company nor any ERISA Affiliate has any
obligation to contribute to a Multiemployer Plan. No material liability to the
PBGC (other than required premium payments), the Internal Revenue Service, any
Plan (other than contribution obligations expressly contemplated under the
Company's pension plan) or any trust established under Title IV of ERISA has
been, or is expected by the Company or any ERISA Affiliate to be, incurred by
the Company or any ERISA Affiliate. No lien under Section 412(n) of the Code or
Section 302(f) of ERISA or requirement to provide security under Section
401(a)(29) of the Code or Section 307 of ERISA has been or is reasonably
expected by the Company or any ERISA Affiliate to be imposed on the assets of
the Company or any ERISA Affiliate.
SECTION 5.15. CAPITALIZATION OF COMPANY. (a) All membership interests
of the Company are set forth in Part A of Schedule 1(A) hereto, have been duly
authorized and validly issued and are owned by all the members of the Company.
(b) Except as otherwise described in Part B of Schedule 1(A) hereto,
there are no outstanding subscriptions, options, warrants, calls, rights
(including, without limitation, preemptive rights) or other agreements or
commitments of any nature to which the Company or any of its Subsidiaries is a
party relating to the issuance of any Capital Stock by the Company to a Person
other than the Lender.
SECTION 5.16. SUBSIDIARIES. Schedule 1(B) hereto accurately and
completely lists all Subsidiaries of the Company as of the date hereof, together
with, for each such Subsidiary, (i) the jurisdiction of organization of such
Subsidiary, (ii) each Person holding ownership interests in such Subsidiary, and
(iii) the nature of the ownership interests held by each such Person and the
percentage of ownership of such Subsidiary represented by such ownership
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interests. Except as disclosed in Schedule 1(B) hereto, (A) each of the Company
and its Subsidiaries owns, free and clear of Liens (other than Liens created
pursuant to the Security Documents), and has the unencumbered right to vote, all
outstanding ownership interests in each Person shown to be held by it on
Schedule 1(B) hereto, (B) all of the issued and outstanding capital stock of
each such Person organized as a corporation is validly issued, fully paid and
nonassessable, and (C) there are no outstanding subscriptions, options,
warrants, calls, rights (including, without limitation, preemptive rights) or
other agreements or commitments of any nature to which any Subsidiary is a party
relating to the issuance of any Capital Stock by such Subsidiary to any Person.
SECTION 5.17. INVESTMENT COMPANY ACT. The Company is not an "investment
company", or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
SECTION 5.18. HOLDING COMPANY ACT. The Company is not a "holding
company," or a "subsidiary company" of a "holding company," or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company," as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended.
SECTION 5.19. NAME CHANGE. The Company or any of its Subsidiaries has
not at any time been the surviving entity of a merger or consolidation and has
not changed its name (except that (i) the Company, which was originally named
"GFI Caminus LLC" changed its name to "Caminus Energy Ventures LLC" and then to
"Caminus LLC", (ii) Zai*Net was merged with and into the Company following the
conversion of the minority interest in Zai*Net into an equity interest in the
Company, and (iii) [insert details of U.K. merger - details to come]).
SECTION 5.20. BROKERS. Neither the Company nor any other Person acting
on its behalf has dealt with any broker or finder in connection with the
financing contemplated by this Agreement.
SECTION 5.21. ENVIRONMENTAL MATTERS. Except as disclosed on Schedule 3
hereto, (i) neither the Collateral, the Real Estate nor, to the Company's
knowledge, any property adjacent to or within the immediate vicinity of the
Collateral or the Real Estate is being or has been used in violation of any
applicable Environmental Law for the management, storage, treatment, generation,
transportation, processing, handling, production or disposal of any Hazardous
Substance, or as a landfill, or other waste management or disposal site, or for
the storage of petroleum or petroleum based products, (ii) underground storage
tanks are not and have not been located on the Collateral and the Real Estate,
(iii) the soil, subsoil, bedrock, surface water and groundwater of the
Collateral and the Real Estate are free of Hazardous Substances (other than any
such substances that occur naturally), (iv) there has been no release or threat
of a release of any Hazardous Substance on, at or from the Collateral or the
Real Estate or, to the Company's actual knowledge (without independent
investigation), from any property adjacent to or within the immediate vicinity
of the Collateral and/or the Real Estate which through soil, subsoil, bedrock,
surface water or groundwater migration could come to be located on or at the
Collateral and/or the Real Estate, and the Company or any of its Subsidiaries
has not received any form of written notice or inquiry from any federal, state
or local governmental agency or authority, any operator, tenant, subtenant,
licensee or occupant of the Collateral and/or the Real Estate or, to the
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Company's actual knowledge (without independent investigation), from any
property adjacent to or within the immediate vicinity of the Collateral and/or
the Real Estate or any other Person with regard to a release or the threat of a
release of any Hazardous Substance on, at or from the Collateral and/or the Real
Estate or, to the Company's knowledge, from any property adjacent to or within
the immediate vicinity of the Collateral and/or the Real Estate, (v) all
Environmental Permits necessary for the construction, equipping, ownership, use
or operation of the Collateral and/or the Real Estate have been obtained and are
in full force and effect, (vi) no event has occurred with respect to the
Collateral and/or the Real Estate which, with the passage of time or the giving
of notice, or both, would constitute a violation of or non-compliance with, any
applicable Environmental Law or Environmental Permit, (vii) there are no
agreements, consent orders, decrees, judgments, license or permit conditions or
other orders or directives of any federal, state or local court, governmental
agency or authority relating to the past, present or future construction,
equipping, ownership, use, operation, sale, transfer or conveyance of the
Collateral and/or the Real Estate which require any change in the present
condition of the Collateral and/or the Real Estate or any work, repairs,
construction, containment, clean up, investigations, studies, removal or
remedial action or capital expenditures in order for the Collateral and/or the
Real Estate to be in compliance with any applicable Environmental Law or
Environmental Permit, (viii) there are no actions, suits, claims or proceedings,
pending or (to the Company's knowledge) threatened, which could cause the
incurrence of expenses or costs of any name or description or which seek money
damages, injunctive relief, remedial action or remedy that arise out of, relate
to or result from (A) environmental conditions at, on or in the vicinity of the
Collateral or the Real Estate, (B) a violation or alleged violation of any
applicable Environmental Law or non-compliance or alleged non-compliance or
alleged non-compliance with any Environmental Permit, (C) the presence of any
Hazardous Substance or a Release or the threat of a Release of any Hazardous
Substance on, at or from the Collateral and/or the Real Estate or, to the
Company's knowledge, from any property adjacent to or within the immediate
vicinity of the Collateral and/or the Real Estate, or (D) human exposure to any
Hazardous Substance, noises, vibrations or nuisances of whatever kind to the
extent the same arise from the condition of the Collateral and/or the Real
Estate or the acquisition, construction, equipping, ownership, use, operation,
sale, transfer or conveyance thereof.
SECTION 5.22. ACCURACY AND COMPLETENESS OF INFORMATION. (a) All factual
information, reports and other papers and data with respect to the Loan Parties
and their Subsidiaries (other than projections) furnished, and all factual
statements and representations made, to the Lender or the Lender by a Loan
Party, or on behalf of a Loan Party, were, at the time the same were so
furnished or made, when taken together with all such other factual information,
reports and other papers and data previously so furnished and all such other
factual statements and representations previously so made, complete and correct
in all material respects, to the extent necessary to give the Lender true and
accurate knowledge of the subject matter thereof in all material respects, and
did not, as of the date so furnished or made, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements contained therein not misleading in light of the circumstances in
which the same were made.
(b) All projections with respect to the Loan Parties furnished by or on
behalf of a Loan Party to the Lender were prepared and presented in good faith
by or on behalf of such Loan Party. No fact is known to a Loan Party or any of
the Subsidiaries which materially and
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adversely affects or in the future is reasonably likely (so far as such Loan
Party or the Subsidiaries can reasonably foresee) to have a Material Adverse
Effect which has not been set forth in the financial statements referred to in
Section 5.01 hereof or in such information, reports, papers and data or
otherwise disclosed in writing to the Lender prior to the Closing Date.
SECTION 5.23. LABOR RELATIONS. No Loan Party nor any of the
Subsidiaries is engaged in any unfair labor practice which could reasonably be
expected to have a Material Adverse Effect. There is (i) no unfair labor
practice compliant pending or, to the best knowledge of each Loan Party and each
of the Subsidiaries, threatened against a Loan Party or any of the Subsidiaries
which could reasonably be expected to have a Material Adverse Effect and no
grievance or arbitration proceeding arising out of or under a collective
bargaining agreement is so pending or threatened; (ii) no strike, labor dispute,
slowdown or stoppage pending or, to the best knowledge of each Loan Party and
each of the Subsidiaries, threatened against a Loan Party or any of the
Subsidiaries; and (iii) to the knowledge of each Loan Party and each of the
Subsidiaries, no union representation question existing with respect to the
employees of a Loan Party or any of the Subsidiaries and no union organizing
activities are taking place with respect to any thereof.
SECTION 5.24. YEAR 2000 PROBLEM. Any reprogramming required to permit
the proper functioning, in and following the year 2000, of (i) the Company's and
its Subsidiaries' computer systems and (ii) equipment containing embedded
microchips (including systems and equipment supplied by others or with which
Company's or its Subsidiaries' systems interface) and the testing of all such
systems and equipment, as so reprogrammed, will be completed by September 30,
1999. The cost to the Company and its Subsidiaries of such reprogramming and
testing of the reasonably foreseeable consequences of year 2000 to the Company
and its Subsidiaries (including, without limitation, reprogramming errors and
the failure of others' systems or equipment) will not result in a Default or a
Material Adverse Effect. Except for such of the reprogramming referred to in the
preceding sentence as may be necessary, the computer and management information
systems of the Company and its Subsidiaries are and, with ordinary course
upgrading and maintenance, will continue for the term of this Agreement to be,
sufficient to permit the Company to conduct its business without Material
Adverse Effect.
ARTICLE VI.
AFFIRMATIVE COVENANTS
So long as any Commitment or Loan is outstanding and until payment in
full of all amounts payable by the Company hereunder or under the Notes, the
Company covenants and agrees with the Lender as follows:
SECTION 6.01. MAINTENANCE OF EXISTENCE. Each of the Company and its
Subsidiaries will preserve and maintain its existence and good standing in the
jurisdiction of its formation, and qualify and remain qualified to do business
and remain in good standing in each jurisdiction in which such qualification is
required.
SECTION 6.02. MAINTENANCE OF FINANCIAL RECORDS. Each of the Company and
its Subsidiaries will keep adequate records and books of account, in which
complete entries will be
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made in accordance with GAAP consistently applied, reflecting all financial
transactions of the Company.
SECTION 6.03. MAINTENANCE OF PROPERTIES. Each of the Company and its
Subsidiaries will maintain, keep, and preserve all of its properties (tangible
and intangible) necessary in the proper conduct of the Company Business in
reasonably good working order and condition, ordinary wear and tear excepted.
SECTION 6.04. MAINTENANCE OF INSURANCE. Each of the Company and its
Subsidiaries will maintain insurance with financially sound and reputable
insurers against all losses or damages or risks of the kinds customarily insured
against by companies similarly situated, including, but not limited to, business
interruption insurance, unemployment insurance, workmen's compensation insurance
for the employees of the Company and its Subsidiaries, public liability,
property damage, fire and extended coverage and comprehensive general liability
insurance, all of which insurance shall (i) be in amounts and issued by
companies acceptable to Lender, (ii) contain an endorsement in form and
substance satisfactory to the Lender that names the Lender for the benefit of
the Lender as loss payee of all casualty insurance policies and as an additional
insured in all other insurance maintained by the Company and its Subsidiaries,
and (iii) each policy of insurance required under this Section 6.04 shall
provide that such policy may not be amended, canceled or otherwise terminated
without at least thirty (30) days' prior written notice to the Lender and shall
permit the Lender to pay any premium therefor within ten (10) days after receipt
of any notice stating that such premium has not been paid when due. The policy
or policies of such insurance, together with certificates of insurance
evidencing the required coverage shall be delivered to the Lender. If the
Company, at any time or times hereafter, shall fail to obtain or maintain any of
the policies of insurance required in this Section 6.04 or to pay any premium in
whole or in part relating thereto, the Lender, on behalf of the Lender, without
waiving or releasing any Default or Event of Default by the Company hereunder or
under any of the other Loan Documents, may at any time or times thereafter (but
shall be under no obligation to do so) obtain and maintain such policies of
insurance and pay such premiums and take any other action with respect thereto
that the Lender deems advisable. All sums so disbursed by the Lender, including,
without limitation, premiums, reasonable attorneys' fees, costs, expenses and
other charges relating thereto, shall by payable, on demand, by the Company.
SECTION 6.05. COMPLIANCE WITH LAWS. Each of the Company and its
Subsidiaries will comply with all applicable laws, rules, regulations, policies
and orders of Governmental Authorities, such compliance to include, without
limitation, paying, before the same become delinquent, all taxes, assessments,
and governmental charges imposed upon it or upon its property (other than those
the amount or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which adequate reserves have been
provided in accordance with GAAP).
SECTION 6.06. RIGHT OF INSPECTION. During normal business hours, the
Company shall permit the Lender or any agent or representative thereof, upon two
(2) Business Days' prior notice, to examine and make copies of and abstracts
from the records and books of accounts of, and visit the properties of, the
Company or any of its Subsidiaries; and to discuss the affairs,
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finances, and accounts of the Company and its Subsidiaries with their executive
officers, representatives and independent accountants.
SECTION 6.07. REPORTING REQUIREMENTS AND NOTICES. The Company shall
deliver to the Lender:
(a) [Intentionally Omitted]
(b) Quarterly Financial Statements. As soon as available and in any
event within forty-five (45) days after the end of each of the first three
Fiscal Quarters of each Fiscal Year (beginning with the Fiscal Quarter in which
the Closing Date occurs), consolidated and consolidating balance sheets of the
Company and its Subsidiaries as of the end of such Fiscal Quarter and related
consolidated and consolidating statements of income and retained earnings and of
cash flows for (i) such Fiscal Quarter, and (ii) the period beginning on the
first day of the then current Fiscal Year and ending on the last day of such
Fiscal Quarter, all in reasonable detail and, commencing with the Fiscal Quarter
ending March 31, 2000 and thereafter, stating in comparative form the respective
figures (x) for the same periods in the preceding Fiscal Year, and (ii) from the
Projections for the current Fiscal Year, prepared in accordance with GAAP
consistently applied and accompanied by the certificate of a Responsible Officer
of the Company referred to in Section 6.07(d)(3) below.
(c) Annual Financial Statements. As soon as available and in any event
within ninety (90) days after the end of each Fiscal Year, consolidated and
consolidating balance sheets of the Company and its Subsidiaries as of the end
of such Fiscal Year and related consolidated and consolidating statements of
income and retained earnings and of cash flows for such Fiscal Year, setting
forth in comparative form the respective figures for the preceding Fiscal Year,
and all prepared in accordance with GAAP consistently applied and accompanied by
the opinion and certifications referred to in Section 6.07(d)(3) and Section
6.07(e) below.
(d) Officer's Certificates & Other Information.
(1) Monthly Borrowing Base Certificates. As soon as available
and in any event within twenty (20) days after the last day of
each calendar month (beginning with the calendar month in
which the Closing Date occurs), a Borrowing Base Certificate,
duly completed and certified by a Responsible Officer of the
Company as at such last Business Day.
(2) Quarterly Compliance Certificate. With the Company's
financial statements described in Section 6.07(b) hereof, (i)
a certificate of a Responsible Officer of the Company in the
form of Exhibit G-1 hereto, duly dated, completed and executed
(herein, a "Quarterly Compliance Certificate") pursuant to
which, among other things, such Responsible Officer shall
certify (x) that said financial statements fairly present the
consolidated and consolidating financial condition and results
of operations, as the case may be, of the Company and its
Subsidiaries in accordance with GAAP consistently applied, as
at the end of, and for, the applicable periods (subject to
normal year-end audit adjustments), (y) to the best of his or
her knowledge, that no Default has occurred and is continuing
as at the
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end of the applicable Fiscal Quarter or as at the date of such
certificate (or if a Default has occurred and is continuing, a
statement as to the nature thereof and the action which is
proposed to be taken with respect thereto), and (z) compliance
with the covenants contained in Section 7.14 hereof (and
demonstrating the same in reasonable detail), and, commencing
with the Fiscal Quarter ending March 31, 2000 and thereafter,
(ii) a management report of the Company describing (x) the
operational and financial condition of the Company and its
Subsidiaries for such Fiscal Quarter and the portion of the
Fiscal Year then elapsed, and (y) discussing the reasons for
any significant variations from the Projections for the
current Fiscal Year.
(3) Annual Compliance Certificate. With the financial
statements described in Sections 6.07(c) hereof, a certificate
of a Responsible Officer of the Company in the form of Exhibit
G-2 hereto, duly dated, completed and executed (herein, an
"Annual Compliance Certificate") certifying that (A) said
financial statements fairly present the consolidated and
consolidating financial condition and results of operations,
as the case may be, of the Company and its Subsidiaries in
accordance with GAAP consistently applied, as at the end of,
and for, the applicable period, and (B) to the best of his or
her knowledge, no Default has occurred and is continuing as at
the end of the applicable period or as at the date of such
certificate (or if a Default has occurred and is continuing, a
statement as to the nature thereof and the action which is
proposed to be taken with respect thereto).
(4) Accounts Receivable Aging Report. On or before the tenth
(10th) day of each month, a detailed aging report setting
forth amounts due and owing on Accounts Receivable on the
Company's books as of the close of the preceding month.
(e) Accountants' Opinion and Certificate. With the financial statements
described in Section 6.07(c) above, (i) an opinion of PricewaterhouseCoopers or
other independent certified public accountants of recognized national standing
selected by the Company and satisfactory to the Lender to the effect that those
financial statements fairly present the consolidated and consolidating financial
condition and results of operations of the Company and its Subsidiaries as at
the end of, and for, the applicable Fiscal Year in accordance with GAAP
consistently applied, and (ii) a written statement of such independent certified
public accountants to the effect that during the course of their audit of the
operations of the Company and its Subsidiaries and their condition as at the end
of the relevant Fiscal Year, nothing has come to their attention which would
indicate that a Default or an Event of Default has occurred, or, if such cannot
be certified, specifying in reasonable detail the exceptions, if any, to such
statement.
(f) Accountants' Report. Promptly upon receipt thereof, copies of all
significant reports submitted to the Company by its independent certified public
accountants in connection with each annual, interim or special audit of the
financial statements of the Company made by such accountants, including without
limitation the comment letter (if any) submitted by such accountants to the
Company's management in connection with their annual audit.
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(g) Projections & Budget. As soon as available and in any event no
later than the last day of each Fiscal Quarter (commencing with the Fiscal
Quarter ending December 31, 1999), projections and budgets of the Company and
its Subsidiaries for the forthcoming Fiscal Quarter, which shall include, on a
quarterly basis, operating and capital budget, income and cash flow statements
and balance sheets, and the analysis and discussion of management of such
projections, all certified by a Responsible Officer of the Company as being
prepared based on the assumptions and assessments believed by the Company to be
reasonable and appropriate both as of the date of such projections and as of the
date of submission thereof to the Lender.
(h) Governmental Reports. Promptly upon their becoming available,
copies of any and all periodic or special reports filed by, or on behalf of, the
Company or any of its Subsidiaries with any Governmental Authority, if such
reports indicate any material change in the business, operations, affairs or
conditions of the Company or any of its Subsidiaries or if copies thereof are
requested by the Lender, and copies of any and all material notices and other
material communications from any Governmental Authority with respect to the
Company or any of its Subsidiaries.
(i) Securities Reports and Filings. Promptly upon their becoming
available, copies of all registration statements and regular periodic reports,
if any, which the Company or any of its Subsidiaries shall have filed with the
Securities and Exchange Commission (or any Governmental Authority substituted
therefor) or any national securities exchange.
(j) Notices. Promptly give notice to the Lender of any of the
following:
(1) Default. The occurrence of any Default or Event of
Default.
(2) Contractual Obligations. (i) Default or event of
default under any Contractual Obligation relating to
Indebtedness of the Company or any of its
Subsidiaries (other than hereunder), and (ii) default
or event of default of the Company or any of its
Subsidiaries under any other Contractual Obligation
which, if not cured, could reasonably be expected to
have a Material Adverse Effect.
(3) Litigation etc. Any litigation, investigation or
proceeding affecting the Company or any Subsidiary
Guarantor (i) in which the amount involved is
$100,000 or more and not covered by insurance, (ii)
in which injunctive or similar relief is sought, or
(iii) which, if adversely determined, could
reasonably be expected to have a Material Adverse
Effect.
(4) Additional Collateral. The acquisition by any Loan
Party of any property or interest in property
(including, without limitation, Real Estate), that is
not subject to a perfected Lien in favor of the
Lender pursuant to the Security Documents.
(5) ERISA. (i) Any Termination Event with respect to a
Plan has occurred or will occur, or (ii) any
condition exists with respect to a Plan which
presents a material risk of termination of the Plan
or imposition of an excise tax or other liability on
the Company or any ERISA Affiliate, or
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(iii) there exists an accumulated funding deficiency
within the meaning of Section 412 of the Code or
Section 302 of ERISA with respect to any Plan
maintained by the Company or an ERISA Affiliate, or
the Company or any ERISA Affiliate has applied for a
waiver of the minimum funding standard under Section
412 of the Code or Section 302 of ERISA, or (iv) the
aggregate Unfunded Benefit Liabilities under all
Plans that are not Multiemployer Plans has in any
year increased by $100,000 or to an amount in excess
of $200,000, or (v) any condition exists with respect
to a Multiemployer Plan which presents a material
risk of a partial or complete withdrawal (as
described in Sections 4203 or 4205 of ERISA) by the
Company or any ERISA Affiliate from a Multiemployer
Plan, or (vi) the Company or any ERISA Affiliate is
in "default" (as defined in Section 4219(c)(5) of
ERISA) with respect to withdrawal liability payments
to a Multiemployer Plan, or (vii) the withdrawal
liability (as determined in accordance with Title IV
of ERISA) of the Company and the ERISA Affiliates
with respect to all Multiemployer Plans has in any
year increased by $200,000 or to an amount in excess
of $400,000, a certificate of a Responsible Officer
of the Company setting forth the details of each of
the events described in clauses (i) through (vii)
above as applicable and the action which the Company
or the applicable ERISA Affiliate proposes to take
with respect thereto, together with a copy of any
notice or filing from the PBGC, any notice of
withdrawal from a Multiemployer Plan, or any notice
or filing with or from the IRS that relates to such
events.
(6) Material Adverse Change. A material adverse change in
the business, operations, property or financial or
other condition or prospects of the Company or any of
the Subsidiaries.
(k) Other Information. With reasonable promptness, such other
information and data with respect to the Company and which the Lender may
reasonably request from time to time.
SECTION 6.08. ADDITIONAL COLLATERAL. In the event that any Loan Party
acquires any property or interest in property (including, without limitation,
Real Estate) other than property made subject to a Lien permitted under Section
7.01 hereof, that is not subject to a perfected Lien in favor of the Lender
pursuant to the Security Documents, such Loan Party shall take such action as
the Lender shall request in order to promptly create and/or perfect a Lien in
favor of the Lender on such property (including, without limitation, the
preparation and filing of mortgages or deeds of trust in form and substance
satisfactory to the Lender and a lender's policy of title or leasehold
insurance, in such amount as shall be reasonably satisfactory to the Lender).
SECTION 6.09. ENVIRONMENTAL COVENANTS. (a) The Company shall, and shall
cause its Subsidiaries to, (i) construct, equip, use, operate and manage the
Collateral and/or the Real Estate, in accordance with all applicable
Environmental Laws and Environmental permits, and shall use reasonable efforts
to cause all operators, tenants, subtenants, licensees and occupants of the Real
Estate to construct, equip, use, operate and manage, in accordance with any
applicable Environmental Laws and Environmental Permits, and shall not cause,
allow or permit the Collateral and/or the Real Estate or any part thereof to be
operated or used for the storage,
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treatment, generation, transportation, processing, handling, production,
management or disposal of any Hazardous Substances other than in accordance with
all applicable Environmental Laws and Environmental Permits, (ii) use reasonable
efforts to cause all operators, tenants, subtenants, licensees and occupants of
the Collateral and/or the Real Estate to obtain, comply with, and shall cause
all operators, tenants, subtenants, licensees and occupants of the Collateral
and/or the Real Estate to obtain and comply with, all Environmental Permits,
(iii) not cause or permit any change to be made in the present or intended
construction, equipping, use or operation of the Collateral and/or the Real
Estate which would (A) involve the storage, treatment, generation,
transportation, processing, handling, management, production or disposal of any
Hazardous Substance other than in accordance with any applicable Environmental
Law, or the construction, equipping, use or operation of the Collateral and/or
the Real Estate as a landfill or waste management or disposal site or for
manufacturing or industrial purposes or for the storage of petroleum or
petroleum based products other than in accordance with any applicable
Environmental Law, (B) violate any applicable Environmental Law, (C) constitute
a violation or non-compliance with any Environmental Permit, or (D) increase the
risk of a release of any Hazardous Substance, (iv) promptly provide the Lender
with a copy of all written notifications which it gives or receives with respect
to Environmental Conditions at or in the vicinity of the Collateral and/or the
Real Estate, any past or present release or the threat of a release of any
Hazardous Substance on, at or from the Collateral and/or the Real Estate or any
property adjacent to or within the immediate vicinity of the Collateral and/or
the Real Estate (and if the Company receives or becomes aware of any such
notification which is not in writing or otherwise capable of being copied, the
Company shall promptly advise the Lender of such verbal, telephonic or
electronic notification and confirm such notice in writing), (v) undertake and
complete all investigations, studies, sampling and testing and all removal or
remedial actions necessary to contain, remove and clean up all Hazardous
Substances that are present at the Collateral and/or the Real Estate and are
required to be removed and/or remediated by the Company in accordance with all
applicable Environmental Laws and all Environmental Permits, (vi) allow the
Lender and its officers, members, employees, agents, representatives,
contractors and subcontractors reasonable access to the Collateral and/or the
Real Estate during regular business hours of the Company for the purposes of
ascertaining the Environmental Conditions at, on or in the vicinity of the
Collateral and/or the Real Estate, including, but not limited to, subsurface
conditions.
(b) If at any time the Company obtains any notice or information that
the Company or any of its Subsidiaries or the Collateral and/or the Real Estate
or the construction, equipping, use or operation of the Collateral and the Real
Estate may be in violation of any Environmental Law or in non-compliance with
any Environmental permit or standard, the Lender may require that a full or
supplemental environmental assessment inspection and audit report with respect
to the Collateral and/or the Real Estate of a scope and level of detail
reasonably satisfactory to the Lender be prepared by a professional
environmental engineer or other qualified environmental scientist acceptable to
the Lender, at the Company's sole cost and expense. Said audit may, but is not
required to or limited to, include a physical inspection of the Collateral
and/or the Real Estate, a records search, a visual inspection of any property
adjacent to or within the immediate vicinity of the Collateral and/or the Real
Estate, personnel interviews, review of all Environmental Permits and the
conduct of a scientific testing. If necessary to determine whether a violation
of an Environmental Law exists, such inspection shall also include subsurface
testing for the presence of Hazardous Substances in the soil, subsoil, bedrock,
surface water and/or
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<PAGE> 59
groundwater. If said report indicates the presence of any Hazardous Substance or
a Release or Disposal or the threat of a Release or Disposal of any Hazardous
Substance on, at or from the Collateral and/or the Real Estate, the Company at
its own cost and expense shall promptly undertake and diligently pursue to
completion all necessary, appropriate investigative, containment, removal, clean
up and other remedial actions required of the Company by any Environmental Law,
using methods recommended by the professional engineer or other environmental
scientist who prepared said audit report and acceptable to the appropriate
federal, state and local agencies or authorities.
SECTION 6.10. CERTAIN OBLIGATIONS REGARDING SUBSIDIARIES; FURTHER
ASSURANCES COVENANTS. (a) The Company shall take such action, and will cause
each of its Subsidiaries to take such action, from time to time as shall be
necessary to ensure that all Subsidiaries of the Company are "Subsidiary
Guarantors" hereunder. Without limiting the generality of the foregoing, in the
event that the Company or any of its Subsidiaries shall acquire or form any new
Subsidiary after the date hereof, the Company or the respective Subsidiary will
cause such new Subsidiary to (i) become a "Subsidiary Guarantor" by its
execution and delivery to the Lender of a Subsidiary Guarantee, a Subsidiary
Security Agreement and the taking of such other action (including delivering
such shares of stock, executing and delivering such financing statements) as
shall be necessary to create and perfect valid and enforceable first priority
Liens on substantially all of the property of such new Subsidiary as collateral
security for the Obligations of such new Subsidiary hereunder, and (ii) deliver
such proof of corporate action, incumbency of officers, opinions of counsel and
other documents as the Lender shall have reasonably requested. In connection
with the foregoing, the Company will execute and deliver (or will cause to be
executed and delivered) a Subsidiary Pledge Agreement pursuant to which all of
the shares of such Subsidiary will be pledged to the Lender as collateral
security for the Obligations. The Company has advised that Caminus Consultants
Limited is a dormant indirect Subsidiary of the Company. Accordingly, in
connection with such Subsidiary, the Company will cause to be executed and
delivered a Subsidiary Pledge Agreement pursuant to which 65% of the shares of
such Subsidiary will be pledged to the Lender as collateral security for the
Obligations. In the event that Caminus Consultants Limited becomes an operating
company, the Company shall cause such Subsidiary to become a "Subsidiary
Guarantor" by its execution and delivery to the Lender of a Subsidiary
Guarantee, a Subsidiary Security Agreement and the taking of such other action
as shall be necessary to create and perfect valid and enforceable first priority
Liens on substantially all of the property of such Subsidiary as collateral
security for the Obligations of such Subsidiary hereunder.
(b) The Company will, and will cause each of its Subsidiaries to, take
such action from time to time as shall be necessary to ensure that each of its
Subsidiaries is a Wholly-Owned Subsidiary. In the event that any additional
shares of stock shall be issued by any Subsidiary, the respective Loan Party
agrees forthwith to deliver to the Lender pursuant to the applicable Security
Documents the certificates evidencing such shares of stock, accompanied by
undated stock powers executed in blank and to take such other action as the
Lender shall request to perfect the security interest created therein pursuant
to such Security Documents.
(c) The Company shall cause the Company Pledgors or any other member of
the Company to pledge additional membership interests to the Company so that the
Company shall maintain at all times a first and prior security interest in and
Lien on at least 75% of the Capital
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<PAGE> 60
Stock of the Company, and the Company shall provide Lender, as requested from
time to time, with a copy of its membership interest register to confirm the
total issued and outstanding Capital Stock of the Company, that the Lender has a
security interest in and Lien on at least 75% of the Capital Stock of the
Company and that the Lender is properly reflected on such register as having a
first and prior security interest in and Lien on the membership interests of the
Company Pledgors.
(d) The Company will, and will cause each of the other Loan Parties to,
take such action from time to time as shall reasonably be requested by the
Lender to effectuate the purposes and objectives of the parties to this
Agreement and the other Loan Documents, including without limitation filing
appropriate financing statements and executing and delivering such assignments,
security agreements and other instruments in favor of the Lender.
SECTION 6.11. ADDITIONAL CAPITAL CONTRIBUTIONS. At such time that the
Company shall be required to make the Scheduled Earn-Out Payment to Rooney
pursuant to the Zai*Net Acquisition Documents, the Company shall make a written
call notice to the Investor Group in accordance with the terms of the Operating
Agreement so that such Investor Group shall make its required additional capital
contribution to the Company to fund the Scheduled Earn-Out Payment.
SECTION 6.12. POST-CLOSING OBLIGATIONS. (a) Within 20 days after the
Closing Date, the Company shall cause such additional Company Pledgors to pledge
and grant a first and prior security interest in and Lien on their respective
membership interest in the Company, and to execute and deliver a Company Pledge
Agreement (together with appropriate UCC financing statements), so that the
Company shall have a first and prior security interest in and lien on at least
75% of the Capital Stock of the Company.
(b) Within 20 days after the Closing Date, the Company will promptly,
and will cause each of the Loan Parties to promptly, take such action as may be
required in connection with the execution, delivery and performance Loan
Documents pertaining to Caminus Energy Limited, and any other subsidiaries that
may be located in the United Kingdom in accordance with the laws, rules,
regulations and customs of the United Kingdom.
ARTICLE VII.
NEGATIVE COVENANTS
So long as any Commitment or Loan is outstanding and until payment in
full of all amounts payable by the Company hereunder or under the Notes, the
Company covenants and agrees with the Lender that it, or any of its
Subsidiaries, will not:
SECTION 7.01. LIENS. Create, incur, assume, or suffer to exist, any
Lien, upon or with respect to any of its properties, assets or revenues, whether
now owned or hereafter acquired, except:
(a) Liens created pursuant to the Security Documents;
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<PAGE> 61
(b) Liens in existence on the date hereof and listed in Part B of
Schedule 4 hereto; provided that no such permitted Liens are spread to cover any
additional property after the Closing Date and that the amount of Indebtedness
secured thereby is not increased;
(c) Liens imposed by any Governmental Authority for taxes, assessments
or other charges or levies (i) not yet due and payable, or (ii) which are being
contested in good faith by appropriate proceedings for which appropriate
reserves are maintained on the books of the Company and its Subsidiaries in
accordance with GAAP;
(d) Liens imposed by law, such as mechanics', materialmen's,
landlords', warehousemen's, and carriers' Liens, and other similar Liens,
securing obligations incurred in the ordinary course of business which are not
past due for more than sixty (60) days or which are being contested in good
faith by appropriate proceedings and for which appropriate reserves are
maintained on the books of the Company and its Subsidiaries in accordance with
GAAP;
(e) Pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(f) Liens, deposits or pledges to secure the performance of bids,
tenders, trade contracts (other than contracts for the payment of money),
leases, public or statutory obligations, surety, stay, appeal, indemnity,
performance or other similar bonds, or other similar obligations arising in the
ordinary course of business;
(g) Judgment and other similar Liens arising in connection with court
proceedings, provided the execution or other enforcement of such Liens is
effectively stayed and the claims secured thereby are being actively contested
in good faith and by appropriate proceedings;
(h) Easements, rights-of-way, restrictions and other similar
encumbrances which, in the aggregate, do not interfere with the occupation, use,
and enjoyment by the Company or any of its Subsidiaries of the property or
assets encumbered thereby in the normal course of its business or materially
impair the value of the property subject thereto;
(i) Liens securing Indebtedness of the Company and its Subsidiaries
permitted by Section 7.02(c) hereof which are incurred to finance the
acquisition of fixed or capital assets used or useful in the Company Business;
provided that (i) such Liens shall be created substantially simultaneously with
the acquisition of such fixed or capital assets, (ii) such Liens do not at any
time encumber any property other than the property financed by such
Indebtedness, (iii) the amount of Indebtedness secured thereby is not increased,
and (iv) the principal amount of Indebtedness secured by any such Lien shall at
no time exceed 100% of the original purchase price of such property of such
property at the time it was acquired.
SECTION 7.02. INDEBTEDNESS. Create, incur, assume, or suffer to exist,
any Indebtedness, except:
(a) Indebtedness of (i) the Company under this Agreement, and (ii) the
Subsidiaries under the Subsidiary Guarantees;
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(b) Indebtedness of the Company to any Subsidiary Guarantor up to an
aggregate amount of $500,000 at any one time outstanding, and of any Guarantor
Subsidiary to the Company or any other Subsidiary Guarantor;
(c) Indebtedness of the Company and any of its Subsidiaries incurred to
finance the acquisition of fixed or capital assets (whether pursuant to a loan,
a Capital Lease or otherwise) in an aggregate principal amount not exceeding, as
to the Company and its Subsidiaries, $400,000 at any time outstanding;
(d) Indebtedness outstanding on the date hereof and listed in Part A of
Schedule 4 hereto, and any refinancing, refundings, renewals or extensions (but
no increase) thereof (excluding, however, immediately upon making the Loans
hereunder, the Refinanced Loan Amount and the Deferred Earn-Out Amount to be
repaid on the Closing Date);
(e) Guarantee Obligations of the Company or any of its Subsidiaries but
only to the extent permitted pursuant to Section 7.07 hereof;
(f) Indebtedness of the Company to SS&C pursuant to the SS&C Documents;
and
(g) Additional Indebtedness of the Company or any of its Subsidiaries
not exceeding $100,000 in the aggregate principal amount at any one time
outstanding.
SECTION 7.03. DISPOSITION OF ASSETS. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired, except (i) property not material to the conduct
of the Company Business which is disposed of in the ordinary course of business
(provided that the Net Proceeds of such transaction are applied to the
prepayment of the Loans as provided in Section 3.04(c) hereof), (ii) the sale of
inventory in the ordinary course of the Company Business, and (iii) as otherwise
permitted by the Security Documents.
SECTION 7.04. CONSOLIDATIONS, MERGERS, ETC. Liquidate or dissolve,
consolidate with, or merge into or with, any other Person, or purchase or
otherwise acquire all or any substantial part of the assets of any Person (or of
any division thereof) except (i) any Subsidiary may liquidate or dissolve
voluntarily into, and may merge with and into, the Company or any Wholly-Owned
Subsidiary of the Company, and the assets or Capital Stock of any theretofore
existing Subsidiary may be purchased or otherwise acquired by the Company or any
other Wholly-Owned Subsidiary (with the Company or such Wholly-Owned Subsidiary
to be the surviving corporation in any such transaction), and (ii) Permitted
Acquisitions pursuant to Section 7.05 hereof.
SECTION 7.05. INVESTMENTS AND PERMITTED ACQUISITIONS. Make any loan,
advance or extension of credit to any Person, or enter into any arrangement for
the purpose of providing funds or credit to any Person, or purchase or otherwise
acquire any capital stock, asset, obligation or other security of, make any
capital contribution to, or acquire all or substantially all of the assets or
securities of, or otherwise invest or acquire any interest in, any Person (any
of the foregoing, an "Investment"), except for (i) Investments in Cash
Equivalents; and (ii) Acquisitions on and subject to the following terms and
conditions satisfactory to the Lender (each Acquisition
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which satisfies each of the following conditions to the satisfaction of the
Lender, a "Permitted Acquisition"):
(A) Such Acquisition and all transactions related thereto
shall be consummated in accordance with applicable
Requirements of Law.
(B) The Seller or the division the assets of which are the
subject of the Acquisition shall be in engaged in a line of
business similar to the Company Business, and all of the
operations of such Seller or such division shall be conducted,
and all of the related properties shall be located, in the
United States.
(C) The Company shall have delivered evidence reasonably
satisfactory to the Lender that, after giving effect to such
Acquisition, the Company and its Subsidiaries are in pro forma
compliance with the financial covenants set forth in Section
7.14 hereof, calculated as if the Acquisition had been
consummated on the first day of the most recently ended period
of four Fiscal Quarters of the Company with respect to which
period the Company shall have delivered the financial
information required pursuant to Section 6.07(b) hereof.
(D) If such Acquisition involves the purchase of stock or
other ownership interests, the same shall be effected in such
a manner as to assure that the acquired entity becomes a
Subsidiary of the Company and that the Company shall own,
directly or indirectly, not less than one hundred percent
(100%) of all such stock or other ownership interests.
(E) All other assets and properties acquired in connection
with any such Acquisition shall be free and clear of any
liens, charges and other encumbrances other than permitted
under Section 7.01 hereof.
(F) Such Acquisition is consummated without the use of any
Loan proceeds.
(G) Immediately before and after giving effect thereto, no
Event of Default shall have occurred and be continuing.
With respect to each Permitted Acquisition, (1) the Company shall have
delivered updated financial projections for the Company and its Subsidiaries
giving effect to such Acquisition that are reasonably satisfactory to the
Lender, (2) the Company shall have delivered copies to the Lender of the
applicable Seller's most recent annual income statement and balance sheet,
together with the audit opinion thereon, if any, of the applicable Seller's
independent accountants, together with available interim financial statements,
(3) the Lender shall have been afforded not less than 20 days to complete to
their satisfaction the due diligence review with respect to the proposed
Acquisition, including without limitation a field examination of all books and
records of the applicable Seller, its accounts and facilities, (4) no later than
fourteen (14) days (or such shorter period as may be reasonably practicable, if
approved by the Lender) prior to the consummation of any such Acquisition or, if
earlier, ten (10) days after the execution and delivery of the related
Acquisition Agreement, the Company shall have delivered to the Lender copies of
executed counterparts of such Acquisition Agreement, together with all schedules
thereto, the forms of any additional agreements or instruments to be executed at
the closing
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thereunder (to the extent available), (5) the Company shall have executed and
caused to be executed all UCC financing statements and additional Loan
Documents, as applicable (including, without limitation, Subsidiary Guarantees,
Subsidiary Security Agreements, Subsidiary Pledge Agreements, Mortgages,
Landlord's Waiver and amendments or joinders thereto), and provided certified
copies of the resolutions of the Board of Directors of the Company or the Board
of Directors, partners or board of directors of the applicable Subsidiary
authorizing such Permitted Acquisition, evidence of insurance, legal opinions
and such other certificates and documents as shall be reasonable requested by
the Lender.
SECTION 7.06. RESTRICTED PAYMENTS. Make any dividends (in cash,
property or obligations) on, or other payments or distributions on account of,
or the setting apart of money for a sinking or other analogous fund for, or the
purchase, redemption, retirement or other acquisition of, any Capital Stock of
stock of the Company, or make any payment to any Person, such as "phantom stock"
payments, where the amount thereof is calculated with reference to the fair
market or equity value of the Company; except (i) in connection with Section
7.11(iv) hereof and (ii) that the foregoing shall not restrict the Company from
declaring and making cash dividends to its members (the "Tax Reimbursement
Distribution") in respect of the operations of the Company and ZAI*Net for
Fiscal Year 1998, in an amount not exceeding their pro-rata share of the Tax
Amount corresponding thereto, and in addition the Company may (A) from time to
time declare and make a cash dividend to its members in an amount equal to the
Quarterly Estimated Tax Amount for the Fiscal Quarter of the Company's Fiscal
Year with respect to which such dividend is being made, and (B) if the aggregate
amount of such cash dividends with respect to a Fiscal Year is less than the
aggregate Tax Amount of the Company for such Fiscal Year, the Company may at any
time following the end of such Fiscal Year declare and make cash dividends to
its members in an amount equal to the balance of such aggregate Tax Amount, but
in all cases only to the extent that (i) there is cash on hand in the Company,
after the Company, in its reasonable discretion sets aside reserves for
operations and contingencies, (ii) at the time of such Tax Reimbursement
Distribution, the Company shall have made all scheduled loan payments required
under this Agreement, (iii) the Company, for such Fiscal Year, is not treated
for federal income tax purposes as a corporation required to file its own
federal income tax return, and (iv) immediately before and after giving effect
to such Tax Reimbursement Distribution, no Default is in existence or would
occur.
SECTION 7.07. GUARANTEE OBLIGATIONS. Incur, or suffer to exist, or
assume any Guarantee Obligations, except the Subsidiary Guarantees.
SECTION 7.08. TRANSACTION WITH AFFILIATES. Enter into any transaction
(including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service) with any Affiliate, except that (i) any Affiliate
who is an individual may serve as a director, officer, employee or consultant of
the Company or any of its Subsidiaries and receive reasonable compensation for
his or her services in such capacity, and (ii) the Company and its Subsidiaries
may enter into transactions (other than extensions of credit by the Company or
any of its Subsidiaries to an Affiliate) providing for the leasing of property,
the rendering or receipt of services or the purchase or sale of inventory and
other property in the ordinary course of business if the monetary or business
consideration arising therefrom would be substantially as advantageous to the
Company and its Subsidiaries as the monetary or business consideration which
would obtain in a comparable transaction with a Person not an Affiliate, (iii)
the Company
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shall be permitted to perform its obligations under the SS&C Documents,
including without limitation the sale of Series B Membership Interests to SS&C
upon the exercise of the SS&C Option pursuant to the SS&C Documents, (iv) the
Company shall be permitted to pay Management Fees (subject to the terms and
conditions of the Management Subordination Agreement) and (v) the Company shall
be permitted to make intercompany transfers to its Subsidiaries, provided that
any transfer in excess of $100,000 (either on an individual basis or in the
aggregate at any time outstanding) shall be made as a loan from the Company to
the Subsidiary, evidenced by a promissory note on arm's length terms and
conditions and which promissory note is collaterally pledged by the Company to
the Lender.
SECTION 7.09. LINES OF BUSINESS. Engage in any line or lines of
business activity other than the Company Business.
SECTION 7.10. USE OF PROCEEDS. Use the proceeds of the Loans hereunder
for any other purpose than as specified in Section 2.02 hereof.
SECTION 7.11. ISSUANCE AND SALE OF SECURITIES. Issue, distribute,
redeem, repurchase, acquire or sell any Capital Stock or securities convertible
into or exercisable for any such Capital Stock, except (i) in connection with
any Permitted Acquisition, (ii) for the sale of Series B Membership Interests to
SS&C upon the exercise of the SS&C Option, (iii) in connection with any employee
option plans in existence on the date hereof, (iv) for the repurchase of Capital
Stock from departing employees up to an aggregate amount of $100,000 at any
time, and (v) for the issuance of Capital Stock of a Subsidiary to the Company,
provided that such Subsidiary is a Wholly-Owned Subsidiary and a Subsidiary
Guarantor and that such Capital Stock is subject to a Subsidiary Pledge
Agreement.
SECTION 7.12. NEGATIVE PLEDGE CLAUSES. Enter into any agreement other
than this Agreement and the other Loan Documents which prohibits or limits the
ability of the Company or any of the Subsidiaries to create, incur, assume or
suffer to exist any Lien upon any of its property, assets or revenues, whether
now owned or hereafter acquired, other than Financing Leases and similar
arrangements otherwise permitted hereunder solely to the extent of the property
subject thereto.
SECTION 7.13. ACCOUNTING CHANGES. Change its Fiscal Year end or make
any material change in its accounting practices, except as otherwise required by
GAAP.
SECTION 7.14. FINANCIAL COVENANTS (a) Consolidated Fixed Charges Ratio.
Permit the Consolidated Fixed Charges Ratio, determined as at the last day of
each Fiscal Quarter in each of the following periods, to be less than the
applicable ratio for such period as follows:
<TABLE>
<S> <C>
Closing Date through September 30, 1999 1.00 to 1.00
December 31, 1999 1.50 to 1.00
March 31, 2000 and thereafter 2.00 to 1.00
</TABLE>
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(b) Consolidated Senior Leverage Ratio. Permit the Consolidated Senior
Leverage Ratio at the end of each Fiscal Quarter to be less than 2.50 to 1.00.
(c) Capital Expenditures. Make or commit to make any Consolidated
Capital Expenditures (whether paid in cash or accrued as liabilities), except
for (i) Permitted Acquisitions, (ii) any asset acquired in connection with
normal replacement and maintenance programs properly expensed to current
operations and (iii) expenditures in the ordinary course of business not
exceeding $3,000,000, in the aggregate for the Company and its Subsidiaries,
during each Fiscal Year.
SECTION 7.15. MODIFICATION OF CERTAIN DOCUMENTS. (a) Amend, modify or
change, or consent or agree to any amendment, modification or change to, any of
the terms of the Capitalization Documents, the Operating Agreement, the SS&C
Documents, the Caminus Acquisition Documents, the Zai*Net Acquisition Documents
and the Refinanced Loan Documents, in any manner that might reasonably be
expected to be adverse to the interests of the Lender, and in any case, upon
prior written notice to the Lender.
(b) The Company shall not, without the Lender's consent, delete or
otherwise modify or change the notice on the Company's membership interest
register regarding the Lender's security interest in and Lien on the membership
interests of certain members reflected on such register.
SECTION 7.16. OPTIONAL PAYMENTS. Make any optional payment or
prepayment on, or redemption or repurchase of, or the setting aside of any
sinking fund for or the making of any contribution for the payment of, any
Indebtedness of the Company or its Subsidiaries except for the Indebtedness
hereunder.
ARTICLE VIII.
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.01. EVENTS OF DEFAULT. If one or more of the following events
("Events of Default") shall occur:
(a) The Company shall fail to pay any principal amount of any Note as
and when due and payable (whether at stated maturity or upon mandatory or
optional prepayment), or the Company shall fail to pay interest on any Note or
any other amount payable under this Agreement or any of the other Loan Documents
within three (3) Business Days after such interest or other amount is due and
payable;
(b) Any representation or warranty made or deemed made by any Loan
Party in any of the Loan Documents or in any certificate, document, financial or
other statement furnished at any time under or in connection with any of the
Loan Documents shall prove to have been false or misleading in any material
respect on or as of the date made or deemed made or furnished;
(c) The Company shall default in the performance of any term, covenant
or agreement contained in Section 6.07(d)(1), Section 6.07(j)(1), or in Article
VII hereof;
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(d) The Company shall default in the performance of any term, covenant
or agreement (other than those specified in Section 8.01(c) hereof) contained in
any of the Loan Documents to which it is a party, and such default shall
continue unremedied for a period of thirty (30) days after notice thereof to the
Company by the Lender;
(e) Any Loan Party (other than the Company) shall default in the
performance of any term, covenant or agreement contained in any of the Loan
Documents to which it is a party, and such default shall continue unremedied for
a period of thirty (30) days after notice thereof to such Loan Party by the
Lender;
(f) The Company or any of the Guarantors shall (i) default in the
payment, when due (which default remains uncured after expiration of applicable
cure or notice periods), of any amount payable in respect of any Indebtedness of
the Company or such Guarantor, whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise (provided that "Indebtedness" for
purposes of this Section 8.01(f) shall (A) mean Indebtedness of the Company or
any Guarantor which is in excess of $50,000, in the aggregate, and (B) exclude
Indebtedness relating to accounts payable (other than for borrowed money) of the
Company or any Guarantor; or (ii) fail to perform or observe any other term,
covenant or condition on their part to be performed or observed under any
agreement or instrument relating to any such Indebtedness (as limited in clause
(i) of this Section 8.01(f)), when required to be performed or observed, if,
with the giving of any notice or the lapse of time or both, the effect of such
failure to perform or observe is to permit the holder of such Indebtedness (or a
trustee or agent on behalf of such holder) to accelerate the maturity thereof or
to have caused any such Indebtedness to be declared due and payable or required
to be prepaid prior to the stated maturity thereof; provided, however, that
nothing in this Section 8.01(f) shall affect the provisions of Sections 8.01(a),
8.01(g) or 8.01(h) hereof;
(g) Any of the Company or the Guarantors (i) shall generally not, or
shall be unable to, or shall admit in writing its inability to pay its debts as
such debts become due; or (ii) shall make a general assignment for the benefit
of creditors, petition or apply to any tribunal for the appointment of a
custodian, receiver, trustee or other similar official for it or a substantial
part of its assets; or (iii) shall commence any proceeding under any bankruptcy,
reorganization, arrangement, readjustment of debt, dissolution, or liquidation
law or statute of any jurisdiction, whether now or hereafter in effect; or (iv)
shall have any such petition or application filed or any such proceeding
commenced against it, in which an order for relief is entered or adjudication or
appointment is made and which remains undismissed for a period of sixty (60)
days or more; or (v) by any act or omission shall indicate its consent to,
approval of, or acquiescence in any such petition, application, or proceeding,
or order for relief, or the appointment of a custodian, receiver, trustee or
other similar official for all or any substantial part of its properties; or
(vi) shall suffer any such custodianship, receivership, or trusteeship to
continue undischarged for a period of sixty (60) days or more;
(h) One or more judgments, decrees or orders for the payment of money
in excess of $50,000 in the aggregate shall be rendered against the Company
and/or any Guarantor and such judgments, decrees or orders shall continue
unsatisfied and in effect for a period of thirty (30) consecutive days without
being vacated, discharged, satisfied, or stayed or bonded pending appeal;
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<PAGE> 68
(i) Any of the Security Documents shall at any time after its execution
and delivery and for any reason cease (other than by reason of the actions or
omissions of the Lender), to create a valid and perfected first priority
security interest in and to the property purported to be subject to such
Security Document, subject to any exceptions permitted hereunder and thereunder;
or any of the Loan Documents shall at any time after its execution and delivery
for any reason cease to be in full force and effect (other than in accordance
with its terms) or shall be declared null or void; or the validity or
enforceability of any of the Loan Documents shall be contested by any party
thereto (other than the Lender);
(j) (i) Any Termination Event shall occur, or (ii) any Plan shall incur
an accumulated funding deficiency (as defined in Section 412 of the Code or
Section 302 of ERISA), whether or not waived, in excess of $100,000, or (iii)
the Company or any ERISA Affiliate shall fail to pay when due an amount which it
shall have become liable to pay to the PBGC, any Plan or a trust established
under Title IV of ERISA, or (iv) a condition shall exist by reason of which the
PBGC would be entitled to obtain a decree adjudicating that a Plan must be
terminated or have a trustee appointed to administer any Plan, or (v) the
Company or an ERISA Affiliate suffers a partial or complete withdrawal from a
Multiemployer Plan or is in "default" (as defined in Section 4219 (c)(5) of
ERISA) with respect to payments to a Multiemployer Plan;
(k) There shall have been asserted against the Company or any of its
Subsidiaries claims or liabilities, whether accrued, absolute or contingent,
based on or arising from the generation, storage, transport, handling or
disposal of Hazardous Materials by the Company, such Subsidiary or any
predecessor in interest of the Company or such Subsidiary, or relating to any
site or facility owned, operated or leased by the Company or such Subsidiary,
which claims or liabilities (insofar as they are payable by the Company or such
Subsidiary, but after deducting any portion thereof which is reasonably expected
to be paid by other credit worthy Persons jointly and severally liable
therefor), in the reasonable judgment of the Lender are reasonably likely to be
determined adversely to the Company or such Subsidiary, and the amount thereof
is, singly or in the aggregate, reasonably likely to have a Material Adverse
Effect;
(l) The Investor Group together with Brian Scanlan shall cease to own
or control, in the aggregate, at least 60% of the Capital Stock of the Company;
(m) Either GFI or OCM Caminus Investment, Inc. shall sell, transfer,
assign or convey in any manner whatsoever any portion of their membership
interest in the Company (other than to their Affiliates; provided that
concurrently with such transfer such Affiliate collaterally pledges to the
Lender the membership interest received, pursuant to a pledge agreement
substantially in the form of the Company Pledge Agreement);
(n) The Investor Group shall default in the payment, when due, of the
additional capital contribution to the Company pursuant to the Operating
Agreement for purposes of the Company's obligation to make the Scheduled
Earn-Out Payment; or
(o) The Company shall fail to ensure that the Lender shall at all times
have a first and prior security interest in and Lien on at least 75% of the
Capital Stock of the Company.
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THEN, and in any such event, the Lender may, by notice to the Company,
(i) terminate the Commitments, whereupon the same shall forthwith terminate; and
(ii) declare the aggregate outstanding principal amount of the Notes, all
interest thereon, and all other amounts payable under this Agreement (including
without limitation all amounts payable pursuant to Section 3.09) and the other
Loan Documents to be forthwith due and payable, whereupon the aggregate
principal amount of the Notes, all such interest, and all such other amounts
shall become and be forthwith due and payable, without presentment, demand,
protest, or further notice of any kind, all of which are hereby expressly waived
by the Company; provided, however, that if there shall be an Event of Default
under subsection 8.01(g) hereof, the Commitments shall immediately be deemed
terminated and the aggregate outstanding principal amount of the Notes, all
interest thereon, and all other amounts payable under this Agreement and the
other Loan Documents shall be immediately due and payable, without notice,
declaration, presentment, demand, protest or notice of any kind, all of which
are hereby expressly waived by the Company.
SECTION 8.02. REMEDIES ON EVENT OF DEFAULT. If any of the Company's
obligations hereunder or under the Notes have been, or are deemed to be,
accelerated pursuant to Section 8.01, the Lender may:
(i) enforce the rights and remedies granted to the Lender
under the Security Documents in accordance with their
respective terms; and
(ii) enforce any of the rights or remedies granted to the
Lender under any of the other Loan Documents and any other
rights or remedies accorded to the Lender at equity or law, by
virtue of statute or otherwise.
ARTICLE IX.
MISCELLANEOUS
SECTION 9.01. NOTICES, ETC. All notices, communications, requests and
demands to or upon the respective parties hereto to be effective shall be in
writing and, unless otherwise expressly provided herein, shall be deemed to have
been duly given or made when delivered by hand, or five (5) days after deposited
in the mail, air postage prepaid, or in the case of notice by telecopier (fax),
when sent, or in the case of overnight courier service, one Business Day after
delivery to a nationally recognized overnight courier service, addressed as
follows or to such other address as may be hereafter notified by the respective
parties to this Agreement and any future holders of the Notes:
If to the Company:
Caminus LLC
747 Third Avenue
New York, New York 10017
Tel. No.: 212-888-3600/3603
Fax No.: 212-888-0691 or 212-893-8747
Attention: Mr. Mark Herman
Chief Financial Officer
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with a copy (except for routine
communications) to:
Anthony Iler, Esq.
Irell & Manella
333 South Hope Street
Suite 3300
Los Angeles, California 90071
Tel No.: (213) 229-0516
Fax No.: (213) 229-0514/15
If to the Lender:
Fleet Bank, N.A.
1185 Avenue of the Americas
New York, New York 10036
Tel. No.: (212) 819-5767
Fax No. : (212) 819-4114
Attention: Ms. Kathleen A. McEntee
Vice President
with a copy (except for routine
communications) to:
Bart Pisella, Esq.
Nixon, Hargrave, Devans & Doyle LLP
437 Madison Avenue
New York, New York 10022
Tel No.: (212) 940-3000
Fax No.: (212) 940-3111
SECTION 9.02. NO WAIVER; REMEDIES. No failure on the part of the Lender
to exercise, and no delay in exercising, and no course of dealing with respect
to, any right, power, or remedy hereunder or under any of the Loan Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder or under any of the other Loan Documents preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege. The remedies provided herein and in the other Loan Documents are
cumulative and not exclusive of any remedies provided by law.
SECTION 9.03. AMENDMENTS, ETC. Except as otherwise expressly provided
in this Agreement, any provision of this Agreement may be modified or
supplemented only by an instrument in writing signed by the Company and the
Lender, and any provision of this Agreement may be waived by the Lender only by
an instrument in writing signed by the Lender.
SECTION 9.04. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, except
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that the Company may not transfer or assign any of its rights or obligations
hereunder or under the Notes without the prior written consent of the Lender.
SECTION 9.05. ASSIGNMENTS AND PARTICIPATION. (a) The Lender shall have
the unrestricted right at any time or from time to time, and without the
Company's or any Subsidiary Guarantor's consent, to assign all or any portion of
its rights and obligations hereunder to one or more Lenders or other financial
institutions (each, a "Purchasing Lender"), and the Company and each Subsidiary
Guarantor agrees that it shall execute, or cause to be executed, such documents,
including without limitation, amendments to this Agreement and to any other Loan
Documents executed in connection herewith as the Lender shall deem necessary to
effect the foregoing. In addition, at the request of the Lender and any such
Purchasing Lender, the Company shall issue one or more new promissory notes, as
applicable, to any such Purchasing Lender and, if the Lender has retained any of
its rights and obligations hereunder following such assignment, to the Lender,
which new promissory notes shall be issued in replacement of, but not in
discharge of, the liability evidenced by the Notes held by the Lender prior to
such assignment and shall reflect the amount of the respective Commitments and
Loans held by such Purchasing Lender and the Lender after giving effect to such
assignment. Upon the execution and delivery of appropriate assignment
documentation, amendments and any other documentation required by the Lender in
connection with such assignment, and the payment by Purchasing Lender of the
purchase price agreed to by the Lender, and such Purchasing Lender, such
Purchasing Lender shall be a party to this Agreement and shall have all of the
rights and obligations of the Lender hereunder (and under any and all other Loan
Documents in connection herewith) to the extent that such rights and obligations
have been assigned by the Lender pursuant to the assignment documentation
between the Lender and such Purchasing Lender, and the Lender shall be released
from its obligations hereunder and thereunder to a corresponding extent.
(b) The Lender shall have the unrestricted right at any time and from
time to time, and without the consent of or notice to the Company or any
Subsidiary Guarantor, to grant to one or more lenders or other financial
institutions (each, a "Participant") participating interests in any Loans owing
to the Lender, any Notes held by the Lender, any Commitment of the Lender or any
other interest of the Lender hereunder and under the other Loan Documents. In
the event of any such grant by the Lender of a participating interest to a
Participant, whether or not upon notice to the Company, the Lender shall remain
responsible for the performance of its obligations hereunder and the Company
shall continue to deal solely and directly with the Lender in connection with
the Lender's rights and obligations hereunder. The Lender may furnish any
information concerning the Company in its possession from time to time to
prospective Participants, provided that the Lender shall require any such
prospective Participant to agree in writing to maintain the confidentiality of
such information.
(c) Nothing herein shall prohibit the Lender from pledging or assigning
any Note to any Federal Reserve Bank in accordance with applicable law. No such
assignment shall release the assigning Lender from its obligations hereunder.
SECTION 9.06. EXPENSES; INDEMNITY; DAMAGE WAIVER. (a) Without
limitation of the Company's obligations pursuant to Section 9.06(b) hereof, the
Company agrees to pay or reimburse promptly the Lender for (i) all reasonable
out-of-pocket costs and expenses of the Lender (including, without limitation,
the reasonable fees and expenses of Nixon, Hargrave,
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Devans & Doyle LLP, special New York counsel to the Lender, and such local
counsel retained by the Lender or by special New York counsel in connection with
(A) the negotiation, preparation, execution and delivery of this Agreement and
the other Loan Documents and extensions of credit hereunder, (B) title insurance
and title insurance review, (C) any modification, supplement or waiver of any of
the terms of this Agreement or any of the other Loan Documents, and (D) the
Company's termination of this Agreement and voluntary prepayment in full of the
Loans hereunder; (ii) all reasonable out-of-pocket costs and expenses of the
Lender (including, without limitation, reasonable actual attorneys' fees and
expenses) in connection with (A) any Default and any enforcement or collection
proceedings resulting therefrom or in connection with the negotiation of any
restructuring or "work-out" (whether or not consummated) of the obligations of
the Company hereunder, and (B) the enforcement of this Section 9.06; (iii) all
transfer, stamp, documentary or other similar taxes, assessments or charges
levied by any Governmental Authority in respect of this Agreement or any of the
other Loan Documents or any other document referred to herein or therein and all
costs, expenses, taxes, assessments and other charges incurred in connection
with any filing, registration, recording or perfection of any security interest
contemplated by any of the Loan Documents or any other document referred to
herein or therein; and (iv) all costs, expenses and other charges in respect of
title insurance procured with respect to the Liens created pursuant to the
Mortgages.
(b) The Company hereby agrees to indemnify the Lender, and each Related
Party of any of the foregoing Persons (each such Person being called an
"Indemnitee") against, and hold each Indemnitee harmless from, any and all
losses, claims, damages, liabilities and related expenses, including the fees,
charges and disbursements of any counsel for any Indemnitee, incurred by or
asserted against any Indemnitee arising out of, in connection with, or as a
result of (i) the execution or delivery of any Loan Document or any other
agreement or instrument contemplated hereby, the performance by the parties to
the Loan Documents of their respective obligations thereunder or the
consummation of the transactions contemplated hereby, (ii) any Loan or the use
of the proceeds therefrom, (iii) any actual or alleged presence or release of
Hazardous Materials on or from any Real Property or any other property owned or
operated by the Company or any of its Subsidiaries, or any Environmental
Liability related in any way to the Company or any of its Subsidiaries, or (iv)
any actual or prospective claim, litigation, investigation or proceeding
relating to any of the foregoing, whether based on contract, tort or any other
theory and regardless of whether any Indemnitee is a party thereto; provided
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee.
(c) To the extent that the Company fails to pay any amount required to
be paid by it to the Lender under Section 1.06(a) or (b), the Lender severally
agrees to pay to the Lender, as the case may be, the Lender's pro rata share
(determined as of the time that the applicable unreimbursed expense or indemnity
payment is sought) of such unpaid amount; provided that the unreimbursed expense
or indemnified loss, claim, damage, liability or related expense, as the case
may be, was incurred by or asserted against the Lender in its capacity as such.
(d) To the extent permitted by applicable law, the Company shall not
assert, and each hereby waives, any claim against any Indemnitee, on any theory
of liability, for special, indirect,
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consequential or punitive damages (as opposed to direct or actual damages)
arising out of, in connection with, or as a result of, this Agreement or any
agreement or instrument contemplated hereby, the transactions hereunder, any
Loan or the use of the proceeds thereof.
(e) All amounts due under this Section 9.06 shall be payable promptly
after written demand therefor.
SECTION 9.07. SUBMISSION TO JURISDICTION. THE COMPANY HEREBY
IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE JURISDICTION AND VENUE OF ANY STATE OR
FEDERAL COURT SITTING IN NEW YORK COUNTY OVER ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES, ANY OF THE SECURITY DOCUMENTS
TO WHICH IT IS PARTY AND OTHERWISE ARISING OUT OF RELATING TO THE TRANSACTIONS
CONTEMPLATED HEREBY, AND THE COMPANY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS
IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH
STATE OR FEDERAL COURT. THE COMPANY WAIVES ANY OBJECTION TO ANY ACTION OR
PROCEEDING IN ANY STATE OR FEDERAL COURT SITTING IN NEW YORK COUNTY ON THE BASIS
OF FORUM NON CONVENIENS. THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF ANY
PROCESS IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING AND AGREES THAT THE
SERVICE THEREOF MAY BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO THE
COMPANY AT THE ADDRESS SET FORTH IN SECTION 9.01 HEREOF. THE COMPANY AGREES THAT
A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW. THE COMPANY FURTHER AGREES THAT ANY ACTION OR PROCEEDING
BROUGHT AGAINST THE LENDER SHALL BE BROUGHT ONLY IN ANY STATE OR FEDERAL COURT
SITTING IN NEW YORK COUNTY. THE COMPANY FURTHER AGREES THAT, AT THE DISCRETION
OF THE LENDER, THE LENDER MAY SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW AND MAY BRING ANY ACTION OR PROCEEDING AGAINST THE COMPANY OR ITS
PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 9.08. WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND THE LENDER
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, WHETHER ARISING IN
CONTRACT, TORT OR OTHERWISE.
SECTION 9.09. GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
WITHOUT REGARD TO ANY CHOICE OF LAW RULES WHICH WOULD REQUIRE THE APPLICATION OF
THE LAWS OF ANY OTHER JURISDICTION.
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SECTION 9.10. SURVIVAL. The obligations of the Company under Sections
3.06, 3.09, 3.10 and 9.06 hereof and the obligations of the Lender under Section
9.05 hereof shall survive the repayment of the Loans and the termination of the
Commitments.
SECTION 9.11. CAPTIONS. The table of contents and captions, article and
section headings appearing herein are included solely for convenience of
reference and are not intended to affect the interpretation of any provision of
this Agreement.
SECTION 9.12. SEVERABILITY OF PROVISIONS. If any provision hereof shall
be held to be invalid, illegal or unenforceable in any jurisdiction, then, to
the fullest extent permitted by law, (i) the other provisions hereof shall
remain in full force and effect in such jurisdiction, and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.
SECTION 9.13. ENTIRE AGREEMENT. This Agreement, the Notes, each of the
other Loan Documents to which the Company is a party represent the entire
agreement among the Company, the Lender with respect to the subject matter
hereof, and this Agreement, the Notes, each of the other Loan Documents to which
the Company is a party supersede any and all prior discussions, commitments and
agreements among the Company, the Lender, the Lender with respect to such
subject matter, including without limitation that certain letter and preliminary
term sheet from the Lender to the Company, dated May 19, 1999.
SECTION 9.14. USURY LIMITATIONS. All Loan Documents are hereby
expressly limited so that in no contingency or event whatsoever, whether by
reason of acceleration of maturity of the Indebtedness evidenced hereby or
otherwise, shall the amount paid or agreed to be paid to the Lender for the use
or the forbearance of the Indebtedness evidenced hereby exceed the maximum
permissible under applicable law. As used herein, the term "applicable law"
shall mean the law in effect as of the date hereof provided, however, that in
the event there is a change in the law which results in a higher permissible
rate of interest, then such new law shall govern as of its effective date. In
this regard, it is expressly agreed that it is the intent of the Company and the
Lender in the execution, delivery and acceptance of this Agreement and the Notes
to contract in strict compliance with the laws of the State of New York from
time to time in effect. If, under or from any circumstances whatsoever,
fulfillment of any provision hereof or of any of the Loan Documents at the time
of performance of such provision shall be due, shall involve transcending the
limit of such validity prescribed by applicable law, then the obligation to be
fulfilled shall automatically be reduced to the limits of such validity, and if
under or from circumstances whatsoever the Lender should ever receive as
interest an amount which would exceed the highest lawful rate, such amount which
would be excessive interest shall be applied to the reduction of the principal
balance evidenced hereby and not to the payment of interest.
SECTION 9.15. INTERPRETATION AND CONSTRUCTION. The parties hereto
acknowledge and agree that (i) each party and its counsel reviewed and
negotiated the terms and provisions of this Agreement and the other Loan
Documents and have contributed to their revision; (ii) the rule of construction
to the effect that any ambiguities are resolved against the drafting party shall
not be employed in the interpretation of this Agreement and the other Loan
Documents; and (iii) the terms and provisions of this Agreement and the other
Loan Documents shall be construed fairly
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as to all parties hereto and thereto, regardless of which party was generally
responsible for the preparation of this Agreement and the other Loan Documents.
SECTION 9.16. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which, when taken together, shall constitute one
and the same instrument, and any party hereto may execute this Agreement by
signing any such counterpart.
SECTION 9.17. CONFIDENTIALITY. The Lender shall hold all non-public
information obtained pursuant to the requirements of this Agreement which has
been identified as such by the Company in accordance with its customary
procedures for handling confidential information of this nature and in
accordance with safe and sound lending practices and may, subject to Section
9.05(b), make disclosure reasonably required by a bona fide transferee or
participant in connection with the contemplated transfer of any Note or
participation therein or as required or requested by any Governmental Authority
or representative thereof or pursuant to legal process.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in New York, New York by their proper and duly
authorized officers as of the day and year first above written.
COMPANY:
CAMINUS LLC
By: /s/ Mark A. Herman
--------------------------------
Name: Mark Herman
Title: Chief Financial Officer
LENDER:
FLEET BANK, N.A.
By: /s/ Kathleen A. McEntee
--------------------------------
Name: Kathleen A. McEntee
Title: Vice President
Lending Office for Base Rate Loans
and Eurodollar Loans:
FLEET BANK, N.A.
1185 Avenue of the Americas
New York, New York 10036
Address for Notices:
FLEET BANK, N.A.
1185 Avenue of the Americas
New York, New York 10036
Telephone No.: 212-819-5400
Telecopier No.: 212-819-4114
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Schedule A
COMMITMENTS
<TABLE>
<CAPTION>
NAME OF LENDER REVOLVING LOAN WORKING CAPITAL LOAN TOTAL
COMMITMENT COMMITMENT
-------------------- -------------- -------------------- -----------
<S> <C> <C> <C>
Fleet Bank, N.A.
$2,500,000 $2,500,000 $5,000,000
TOTAL: $2,500,000 $2,500,000 $5,000,000
--------- --------- ---------
</TABLE>
<PAGE> 78
Schedule 1(A)
CAPITALIZATION
PART A - MEMBERSHIP INTERESTS
See Attachment A for a list of outstanding Series A Membership
Interests.
PART B - OUTSTANDING SUBSCRIPTIONS, OPTIONS, WARRANTS, ETC.
See Attachment B and Attachment C for a list of outstanding Caminus
Options (exercisable for Series B Membership Interests), GFI Options
(exercisable for Series C Membership Interests) and outstanding incentive
options (exercisable for Series B Membership Interests) granted to employees and
other service providers.
<PAGE> 79
Schedule 1(B)
SUBSIDIARIES
<TABLE>
<CAPTION>
SUBSIDIARY JURISDICTION OF REGISTERED OWNER NUMBER OF SHARES(1)
INCORPORATION
-------------------- --------------- ---------------- ------------------
<S> <C> <C> <C>
Caminus Energy Limited England Caminus Limited 99 ordinary
Nigel Evans 1 ordinary
Caminus Limited England Caminus LLC 950 ordinary
Zai Net Software Limited England Caminus Limited 100 ordinary
Caminus Consultants
Limited England Caminus Limited 100 ordinary
</TABLE>
- ----------------------------
(1) Unless otherwise indicated, for each Subsidiary, number of shares owned
by the identified registered owner represents 100% of the issued and
outstanding capital stock of such subsidiary.
<PAGE> 80
Schedule 2
INTELLECTUAL PROPERTY, MATERIAL AUTHORIZATIONS,
CAPITALIZATION DOCUMENTS, OTHER MATERIAL AGREEMENTS
Intellectual Property: See Attachment 2A for list of Intellectual Property.
Material Authorizations: None.
Capitalization Documents/Employment Agreements:
Company Operating Agreement dated as of May 12, 1998 (including, without
limitation, Appendix B thereto).
Service Agreement dated September 1, 1998 with Nicholas E.V. Perry and related
materials.
Employment Agreement dated October 21, 1998 with David Stoner and related
materials.
Service Agreements dated May 12, 1998 between Caminus Energy Ltd. and each of
Dr. Nigel L. Evans, Dr. Michael Morrison and Dr. Serena K. B. Hesmondhalgh.
Employment Agreement dated May 12, 1998 with Brian Scanlan.
Employment Agreement dated May 12, 1998 with Simon Young.
Employment Agreement dated November 13, 1998 with Corwin Joy.
Letter agreement dated November 13, 1998 with Paul Addison LaMar.
Employee Equity Ownership Agreement dated November 13, 1998 with Paul Addison
LaMar.
Letter agreement dated November 13, 1998 with Richard A. Langham.
Employee Equity Ownership Agreement dated November 13, 1998 with Richard A.
Langham.
Purchase and Option Agreement dated as of December 31, 1998 with SS&C
Technologies, Inc. (as amended by letter agreement dated March 29, 1999).
Distributorship Agreements dated as of May 12, 1998 with SS&C Technologies, Inc.
(as amended by letter agreement dated March 29, 1999).
Purchase Agreement dated May 12, 1998 among Zai*Net Software, Inc. GFI Caminus
LLC (now Caminus LLC) and the other parties thereto (together with ancillary
documents included in closing binder previously supplied to Lender's counsel).
<PAGE> 81
Stock Purchase Agreement dated May 12, 1998 among GFI Caminus LLC (now Caminus
LLC), Caminus Energy Ltd. and the other parties thereto (together with ancillary
documents included in closing binder previously supplied to Lender's counsel).
Purchase Agreement dated November 13, 1998 between ZAI*NET Software, L.P. (now
Caminus LLC) and Corwin Joy, dba Positron Energy Consulting (together with
ancillary documents included in closing binder previously supplied to Lender's
counsel).
Conversion Agreement and Amendment of Purchase Agreement dated December 31, 1998
among Caminus Energy Ventures LLC (now Caminus LLC), Rooney Software, L.L.C. and
the other parties thereto.
ZAI*NET Software, L.P. was merged with and into Caminus LLC pursuant to a
Certificate of Merger filed with the Secretary of State of the State of Delaware
on March 2, 1999.
See lists of issued and outstanding options and warrants included as part of
Schedule 1(A) above.
Company has employment letters with most employees. Except as indicated in
agreements listed above, employment status is indicated to be at will.
Other:
Pursuant to March 29, 1999 letter agreement with SS&C Technologies, the amount
of the option previously granted to SS&C on Series B Membership Interests was
reduced from 3,636,309 notional shares to 2,909,047 notional shares.
<PAGE> 82
Attachment 2A
TRADEMARKS:
<TABLE>
<CAPTION>
Description Reg. No. Issue Date Title Holder
- ----------- -------- ---------- ------------
<S> <C> <C> <C>
1. Zai*Net Design Only 2,094,226 9/9/97 Caminus LLC
2. Zai*Net and Design 2,076,995 7/8/97 Caminus LLC
3. Zai*Net 1,782,466 7/20/93 Caminus LLC
4. Weather Delta pending pending Caminus LLC
</TABLE>
COPYRIGHTS:
<TABLE>
<CAPTION>
Description Reg. No. Issue Date Title Holder
- ----------- -------- ---------- ------------
<S> <C> <C> <C>
Zai*Net Foreign Tx-2382109 6/8/92 Caminus LLC
Exchange (jx) Trading
System User Guide
</TABLE>
<PAGE> 83
Schedule 3
DISCLOSURES
None.
<PAGE> 84
Schedule 4
EXISTING INDEBTEDNESS AND LIENS
Part A
Promissory Note dated March 31, 1999 in the original principal amount of
$1,250,000 issued to OCM Principal Opportunities Fund, L.P.
Earn-out payments due to former owners of ZAI*NET Software, Inc. pursuant to
Purchase Agreement dated May 12, 1998. $2,187,500 will be paid from initial
draw-down under Credit Agreement; additional payment of $2,187,500 due on April
15, 2000 (of which approximately $1,800,000 required to be funded by certain
members of the Company as additional capital contribution).
Contingent purchase price payments may be owed pursuant to provisions of the
Purchase Agreement dated November 13, 1998 between ZAI*NET Software, L.P. (now
Caminus LLC) and Corwin Joy, dba Positron Energy Consulting.
Distibutor Agreement with SS&C Technologies, Inc. dated December 31, 1998 (as
amended by letter agreement dated March 29, 1999) (mandatory take or pay license
fees).
Part B
For list of liens securing Indebtedness, please refer to UCC search attached
hereto as Attachment 4A.
<PAGE> 85
Schedule 5
REAL ESTATE
747 Third Avenue
New York, New York 10017
5444 Westheimer Road
Houston, Texas 77056
3 America Square
London, England EC3
65-66 Queen Street
London, England EC4R 0RA
Caminus House Castle Park
Cambridge, England CB3 0RA
<PAGE> 1
Exhibit 10.10
SECURITY AGREEMENT
(Caminus)
THIS SECURITY AGREEMENT, dated as of June 23, 1999 (the
"Agreement" or the "Security Agreement"), is between Caminus LLC, a Delaware
limited liability company, as debtor (the "Debtor"), and Fleet Bank, N.A., a
national banking association organized under the laws of the United States, as
lender (hereinafter, in such capacity, together with its successors in such
capacity, the "Lender") under, the Credit Agreement referred to below.
Concurrently herewith, the Debtor and the Lender are entering
into a Credit Agreement dated as of June 23, 1999 (such Credit Agreement, as the
same may be amended or supplemented from time to time is referred to herein as
the "Credit Agreement") providing, subject to the terms and conditions thereof,
for extensions of credit to be made by the Lenders to the Company in an
aggregate principal amount not exceeding $5,000,000.00 (the "Loans"). The Loans
made or to be made by the Lender to the Debtor shall be evidenced by certain
promissory notes (as exchanged, replaced, amended, supplemented or modified from
time to time, the "Notes") in substantially the form of Exhibits A-1 and A-2
attached to the Credit Agreement.
For other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Debtor has agreed to execute
and deliver this Agreement.
As used herein, "UCC" shall mean the Uniform Commercial Code of
the State of New York (except as otherwise defined in Section 7 hereof) as
amended and in effect as of the date hereof. All other capitalized terms, unless
defined herein or in the Schedules attached hereto and made a part hereof, shall
have the meanings set forth in the Credit Agreement.
SECTION 1. Security Interest.
1(a) As security for the prompt and complete payment, performance
and observance of all indebtedness, obligations, liabilities and agreements of
the Debtor to the Lender pursuant to, under or arising out of the Credit
Agreement, the Notes, the other Loan Documents and any amendments, extensions,
renewals, increases, refundings or modifications thereto or of any part thereof,
whether now existing or hereafter incurred, matured or unmatured, direct or
contingent, together with interest and costs of enforcement and collection
thereof and of this Security Agreement, including all reasonable actual
attorneys' fees and disbursements incurred by the Lenders (collectively, the
"Liabilities"), the Debtor hereby grants to the Lender, a continuing security
interest of first priority in, and the Debtor hereby assigns and pledges to the
Lender, all of the Debtor's right, title and interest in the property described
on Schedule A-1 attached hereto, whether now owned by the Debtor or hereafter
coming into existence, and wherever located (all being collectively referred to
herein as the "Collateral").
1(b) The Debtor irrevocably appoints the Lender as its lawful
attorney and agent to execute financing statements and amendments thereto (to
the extent permitted by applicable law), notices of any assignments of any of
the Collateral on the Debtor's behalf, and
<PAGE> 2
on its behalf to file financing statements and amendments thereto in any
appropriate public office.
1(c) This Security Agreement is in addition to and without
limitation of any right of the Lender and/or any of the other Lender under any
other security agreement, pledge or leasehold assignment, mortgage or guarantee
granted by the Debtor or any third party to the Lender.
1(d) Except as otherwise herein provided, this Security Agreement
is absolute and without any conditions. The Lender can enforce its rights in the
Collateral immediately upon an Event of Default without having first to attempt
any collection from the Debtor.
SECTION 2. Collection.
Upon the occurrence and continuation of an Event of Default
pursuant to Section 9(a) hereof, the Lender shall have the following rights and
powers in addition to those specified in Section 9(b) hereof:
2(a) The Lender shall have the right to notify the parties
obligated on any or all of the Debtor's Accounts, Contracts, Chattel Paper,
Instruments, Insurance, Documents or General Intangibles to make payment thereof
directly to the Lender, and the Lender may take control of all proceeds of any
of the Accounts, Contracts, Chattel Paper, Instruments, Insurance or General
Intangibles. The costs of collection and enforcement, including reasonable
attorney's fees and reasonable out-of-pocket expenses, shall be borne solely by
the Debtor, whether the same are incurred by the Lender or the Debtor. The
Debtor will not thereafter without the Lender's written consent make any
adjustment, extend or renew, compromise, compound or settle any of the Accounts,
Contracts, Chattel Paper, Instruments, Insurance or General Intangibles, or
release, wholly or partly, any person liable for payment thereof.
2(b) The Debtor hereby irrevocably appoints the Lender to be the
Debtor's true and lawful attorney, with full power of substitution, in the
Lender's name or the Debtor's name or otherwise for the Lender's sole use and
benefit, but at the Debtor's cost and expense, to exercise at any time all or
any of the following powers with respect to all or any of the Collateral:
(i) to demand, sue for, collect, receive and give acquittance
for any and all moneys due or to become due upon or by
virtue thereof;
(ii) to receive, take, sign, endorse, assign and deliver any
and all checks, notes, drafts, acceptances, invoices,
freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments,
verifications, notices and other negotiable and
non-negotiable instruments and documents taken or received
by the Lender in connection therewith;
(iii) to receive, open and dispose of all mail addressed to the
Debtor and to notify the post office authorities to change
the address for delivery of mail addressed to the Debtor
to such address as the Lender may designate;
- 2 -
<PAGE> 3
(iv) to sign the name of the Debtor on any Document, on
invoices relating to any Account or Contract, drafts
against and notices to account debtors or obligors of the
Debtor, on financing statements and other public records
and on notices to customers;
(v) to execute endorsements, assignments or other instruments
of conveyance or transfer and proofs of claim and loss and
to adjust and compromise any claims under insurance
policies or otherwise;
(vi) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto;
(vii) to sell, transfer, assign or otherwise deal in or with the
same or the proceeds thereof and to apply for and obtain
any required consents of governmental authority for any
sale or other disposition of the Collateral, as full and
effectually as if the Lender were the absolute owner
thereof; and
(viii) to apply any or all amounts then in, or thereafter
deposited in, the Company Account in the manner provided
in Section 9(b)(iii) hereof; and
(ix) to make any allowances and other adjustments with
reference thereto and to take all other actions necessary
or advisable in the sole discretion of the Lender to carry
out and enforce this Security Agreement or the
Liabilities.
All acts done under the foregoing authorization are hereby
ratified and approved by the Debtor and neither the Lender nor any designee or
agent of the Lender shall be liable for any acts of commission or omission
(other than acts committed or omitted through gross negligence or willful
misconduct), for any error of judgment or for any mistake of fact or law. The
foregoing power of attorney being coupled with an interest is irrevocable while
any Liabilities shall remain unpaid. The foregoing authorization shall not be
construed in limitation of any other similar authorization to the Lender under
the Credit Agreement or otherwise.
2(c) The Debtor will immediately deliver to the Lender all
proceeds of the Collateral and all original evidence of Accounts, Contracts,
Chattel Paper, Instruments, Insurance, Documents, Patents, Trademarks, Records
or General Intangibles, including without limitation all notes or other
instruments or contracts for the payment of money, appropriately endorsed to the
Lender's order and, regardless of the form of such endorsement, the Debtor
hereby waives presentment, demand, notice of dishonor, protest and notice of
protest and all other notices with respect thereto; and the Debtor hereby
appoints the Lender as the Debtor's agent and attorney-in-fact to make such
endorsement on behalf of and in the name of the Debtor.
2(d) The exercise by the Lender of or failure to so exercise any
authority granted hereinabove shall in no manner affect the Debtor's liability
to the Lender, and provided, further, that the Lender shall be under no
obligation or duty to exercise any of the powers hereby conferred upon it and it
shall be without liability for any act or failure to act in connection with the
collection of, or the preservation of any rights under any of, the Collateral.
- 3 -
<PAGE> 4
SECTION 3. General Representations and Warranties.
In addition to the Debtor's representations made in the other
Loan Documents, the Debtor represents and warrants to the Lender, which
representations and warranties shall survive execution and delivery of this
Agreement, as follows:
3(a) All filings, registrations and recordings necessary or
appropriate to create, preserve, protect and perfect the security interest
granted by the Debtor to the Lender hereby in respect to the Collateral have
been accomplished and the security interest granted to the Lender pursuant to
this Agreement in and to the Collateral constitutes a perfected security
interest therein superior and prior to the rights of all other Persons therein
(except for Liens permitted under the Credit Agreement) and subject to no other
Liens (except for Liens permitted under the Credit Agreement), and is entitled
to all the rights, priorities and benefits afforded by the UCC or other relevant
laws as enacted in any relevant jurisdiction to perfected security interests.
3(b) The Debtor is, and as to Collateral acquired by it from time
to time after the date hereof the Debtor will be, the owner of all Collateral
free from any Lien, security interest, encumbrance or other right, title or
interest of any Person (other than Liens permitted under the Credit Agreement),
and the Debtor shall defend its Collateral against all claims and demands of all
Persons at any time claiming the same or any interest therein adverse to the
Lender.
3(c) There is no financing statement (or similar statement or
instrument of registration under the law of any jurisdiction) covering or
purporting to cover any interest of any kind in the Collateral except for
filings and recordings permitted under the Credit Agreement and filings and
recordings in favor of the Lender created or provided for herein, and so long as
any of the Liabilities remain unpaid the Debtor will not execute or authorize to
be filed in any public office any financing statement (or similar statement or
instrument of registration under the law of any jurisdiction) or statements
relating to the Collateral, except (i) financing statements filed or to be filed
in respect of and covering the security interests granted hereby by the Debtor,
and (ii) financing statements to be filed in connection with the creation of
Liens permitted under the Credit Agreement.
3(d) The office location(s) of the Debtor set forth on Schedule B
attached hereto as the Debtor's principal place of business and chief executive
office and all other places of business are true and correct.
3(e) Schedule B attached hereto contains a true and complete
listing of all of the locations of all the Collateral. In the case of Inventory,
Schedule B also sets forth each Warehouseman (as defined in the Uniform
Commercial Code as in effect in the state in which the warehouse owned or
operated by such Person is located) that from time to time holds Inventory of
the Debtor and the Permitted Inventory Location (as defined herein) at which
such Inventory is so held. In the case of such Inventory, the Debtor further
represents and warrants that none of the Inventory is subject to a negotiable
warehouse receipt (as defined in the Uniform Commercial Code as in effect in the
state in which such Inventory is located).
3(f) The Debtor further represents and warrants, as to any
Inventory, that all such Inventory, other than Inventory in transit in the
normal course of business, is held at a
- 4 -
<PAGE> 5
Permitted Inventory Location (as defined herein). "Permitted Inventory Location"
is defined herein to mean (i) a warehouse or other storage facility owned or
leased by the Debtor, or (ii) a warehouse or other storage facility owned,
leased or operated by a Warehouseman from whom the Lender has received a
warehouse bailment agreement in form and substance satisfactory to the Lender
with respect to Inventory there held, and, in either case, in jurisdictions
where appropriate UCC financing statements shall have liens filed against the
Debtor for the benefit of the Lender and the other Lender.
SECTION 4. Special Provisions Concerning Accounts.
4(a) As of the time when each of its Accounts arises, the Debtor
shall be deemed to have represented and warranted that such Accounts and all
records, papers and documents relating thereto (if any) are genuine and in all
respects what they purport to be, and that all papers and documents (if any)
relating thereto (i) will represent the genuine, legal, valid and binding
obligation of the account debtor evidencing indebtedness unpaid and owed by such
account debtor arising out of the performance of labor or services or the sale
or lease and delivery of the merchandise listed therein, or both, (ii) will be
the only original writings evidencing and embodying such obligation of the
account debtor named therein (other than copies created for purposes other than
general accounting purposes), (iii) will evidence true and valid obligations,
enforceable in accordance with their respective terms, not subject to the
fulfillment of any contract or condition whatsoever or to any defenses, set offs
or counterclaims (except with respect to refunds, returns and allowances in the
ordinary course of business), or stamp or other taxes, and (iv) will be in
compliance and will conform with all applicable federal, state and local laws
and applicable laws of any relevant foreign jurisdiction.
4(b) The Debtor will keep and maintain at its own cost and
expense satisfactory and complete records of its Accounts, including, but not
limited to, records of all payments received, credits granted thereon, all
merchandise returned and all other dealings therewith, and the Debtor will make
the same available to the Lender for inspection, at the Debtor's own cost and
expense, at any and all reasonable times upon demand.
4(c) The Debtor shall endeavor to cause to be collected from the
account debtor named in each of its Accounts, as and when due (including,
without limitation, Accounts which are delinquent, such Accounts to be collected
in accordance with generally accepted lawful collection procedures), any and all
amounts owing under or on account of such Accounts, and apply forthwith upon
receipt thereof all such amounts as are so collected to the outstanding balance
of such Accounts, except that, so long as no Event of Default exists and is
continuing, the Debtor may allow in the ordinary course of business as
adjustments to amounts owing under its Accounts an extension or renewal of the
time or times of payment, or settlement for less than the total unpaid balance,
which the Debtor finds appropriate in accordance with sound business judgment.
The costs and expenses (including, without limitation, attorneys' fees and
expenses) of collection, whether incurred by the Debtor or the Lender, shall be
borne by the Debtor.
4(d) If any of the Accounts becomes evidenced by an Instrument,
the Debtor will within ten (10) days notify the Lender thereof, and upon request
by the Lender promptly deliver such Instrument to the Lender appropriately
endorsed to the order of the Lender as further security hereunder.
- 5 -
<PAGE> 6
4(e) The Debtor will, at its own expense, make, execute, endorse,
acknowledge, file and/or deliver to the Lender from time to time such vouchers,
invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, reports and
other assurances or instruments and take such further steps relating to its
Accounts and other property or rights covered by the security interest hereby
granted, as the Lender may reasonably require which are consistent with the
terms hereunder.
SECTION 5. Special Provisions Concerning Contracts.
5(a) The Debtor represents and warrants that no consent of any
party (other than the Debtor) to any Contract is required, or purports to be
required, in connection with the execution, delivery and performance of this
Security Agreement. Each Contract is in full force and effect and is enforceable
in accordance with its respective terms and there is no default under any of the
terms thereof. The Debtor does hereby further represent and warrant that it has
not assigned or pledged, and hereby covenants that it will not assign or pledge,
except as permitted under the Credit Agreement, the whole or any part of the
rights hereby assigned to anyone other than the Lender, its successors or
assigns so long as this Security Agreement shall remain in effect. The Debtor
also covenants and agrees that it will not take any action or fail to take any
action or institute any proceedings the taking or omission of which might result
in the material alteration or impairment of this Security Agreement or any of
the material rights created by any of the Contracts or this Security Agreement.
Except as specified by a detailed notation corresponding to the applicable
Contract on Schedule A-2, the Debtor hereby further represents and warrants that
no consent or authorization of, filing with or other act by or in respect of any
Governmental Authority is required in connection with the execution, delivery,
performance, validity or enforceability of any of the Contracts by any party
thereto other than those which have been duly obtained, made or performed, are
in full force and effect and do not subject the scope of any such Contract to
any material adverse limitations, either specific or general in nature. The
right, title and interest of the Debtor in, to and under each Contract are not
subject to any defense, offset, counterclaim or claim which could reasonably be
expected to have a Material Adverse Effect, nor, as of the date of this Security
Agreement and to the best of the Debtor's knowledge, have any of the foregoing
been asserted or alleged against the Debtor as to any Contract. The Debtor has
delivered to the Lender a complete and correct copy of each Contract, including
all amendments, supplements and other modifications thereto. No amount payable
to the Debtor under or in connection with any Contract is evidenced by any
Instrument or Chattel Paper which has not been delivered to the Lender.
The Debtor agrees that, so long as this Security Agreement is in
effect, it will not, without the prior written consent of the Lender, amend,
modify or permit to be amended or modified any of the Contracts or waive or
permit to be waived any material provisions of any of the Contracts, or exercise
any right to terminate or cancel any of the Contracts or consent or agree to, or
suffer or permit, the termination thereof whether or not on account of any
default therein specified if any such amendment, modification or waiver,
termination or cancellation could have a Material Adverse Effect.
SECTION 6. Rights and Obligations Concerning Accounts and
Contracts.
- 6 -
<PAGE> 7
6(a) Anything herein to the contrary notwithstanding, the Debtor
shall remain liable under each of the Accounts and Contracts to observe and
perform all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise to
each such Account and in accordance with and pursuant to the terms and
provisions of each such Contract. The Lender shall have no obligation or
liability under any Account (or any agreement giving rise thereto) or under any
Contract by reason of or arising out of this Security Agreement or the receipt
by the Lender of any payment relating to such Account or Contract pursuant
hereto, nor shall the Lender be obligated in any manner to perform any of the
obligations of the Debtor under or pursuant to any Account (or any agreement
giving rise thereto) or under or pursuant to any Contract, to make any payment,
to make any inquiry as to the nature or the sufficiency of any payment received
by it or as to the sufficiency of any performance by any party under any Account
(or any agreement giving rise thereto) or under any Contract, to present or file
any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times.
6(b) The Debtor hereby agrees that no liability shall be asserted
or enforced against the Lender in the exercise of the rights and powers granted
to the Lender hereunder, all such liability being hereby expressly waived and
released by the Debtor. Without limiting the application of Section 11(a)
hereof, the Debtor hereby agrees to indemnify and hold the Lender harmless for
and against any and all liability, expense, cost, loss or damage which the
Lender may incur by reason of any act or omission of the Debtor under any of the
Contracts ("Losses"), except to such extent such Losses arise by reason of the
gross negligence or willful misconduct of the Lender. Should the Lender incur
any liability, expense, cost, loss, or damage, (i) under the Contracts for which
it is to be indemnified by the Debtor as aforesaid, or (ii) by reason of the
exercise of the Lender's rights hereunder, the amount thereof, including costs,
expenses and reasonable actual attorney's fees and expenses, shall be secured
hereby and shall be immediately due and payable by the Debtor to the Lender.
6(c) The Lender has the right to make test verifications of the
Accounts in any manner and through any medium that it reasonably considers
advisable, and the Debtor shall furnish all such assistance and information as
the Lender may require in connection therewith. At any time and from time to
time, upon the Lender's request and at the expense of the Debtor, the Debtor
shall cause independent public accountants or others satisfactory to the Lender
to furnish to the Lender reports showing reconciliations, aging and test
verifications of, and trial balances, for, the Accounts. The Lender may in its
own name or in the name of others communicate with account debtors on the
Accounts and parties to the Contracts to verify with them to its satisfaction
the existence, amount and terms of any Accounts or Contracts, provided that, so
long as no Event of Default has occurred and is continuing, the Lender agrees to
provide the Debtor notice prior to initiating such verification.
6(d) The Debtor shall promptly notify the Lender of, and provide
to the Lender copies of, any default notices under any of the Contracts.
SECTION 7. Special Provisions Concerning Patents and Trademarks.
- 7 -
<PAGE> 8
7(a) The Debtor represents and warrants that it is the true and
lawful exclusive owner of the entire and unencumbered right, title and interest
in and to each of the Trademarks listed on Schedule A-3 and the Patents listed
on Schedule A-4 attached hereto, free and clear of all liens and encumbrances
(including, without limitation, any covenant not to sue a third party); that the
Trademarks and Patents are subsisting, valid, enforceable, and have not been
adjudged invalid or unenforceable, in whole or in part; and that the Trademarks
and the Patents constitute all the registered trademarks and patents,
respectively, in the United States Patent and Trademark Office and
non-registered trademarks that the Debtor now owns or uses in connection with
its business.
7(b) The Debtor represents and warrants that it has made all
necessary filings and recordations to protect its interest in the Trademarks,
Patents, and its other intellectual property; that it has and will continue to
pay all required taxes, fees, and costs to maintain all of its rights in the
Trademarks, Patents, and its other intellectual property; and that it has
received no notice or claim that its use of any of the Trademarks, Patents, or
other intellectual property infringes the rights of any third party.
7(c) Prior to licensing or assigning any of the Trademarks,
Patents, or its other intellectual property, the Debtor will give the Lender
written notice of any such license or assignment plus a copy of the draft
license agreement or assignment, and, upon execution, a copy of any final
agreement or assignment.
7(d) The Debtor shall, promptly upon learning thereof, notify the
Lender in writing of the name and address of, and furnish such pertinent
information that may be available with respect to, any party who may be
infringing or otherwise violating any of the Debtor's rights in and to any
Trademarks, Patents, or other intellectual property or of any party who makes a
claim that the use of any of the Trademarks, Patents, or other intellectual
property otherwise violates any property of any nature of that party or any
third party. Unless the Debtor shall reasonably determine that such Trademark,
Patents, or other intellectual property is not of material economic value to the
Debtor, the Debtor further shall diligently prosecute any and all persons who
infringe any of its Trademarks, Patents, or other intellectual property to
recover any and all damages and take such other actions as the Debtor shall deem
appropriate under the circumstances to protect such Trademarks, Patents, or
other intellectual property. The Lender shall have the option, but not the
obligation, to participate in any such action at Debtor's expense and to
maintain suits against parties for infringement or misappropriation if Lender
believes the Debtor is not diligently and vigorously proceeding in such
action(s).
7(e) If any trademark or service mark registration or patent
registration is issued hereafter to the Debtor as a result of any application or
registration now or hereafter pending before the United States Patent and
Trademark Office or foreign equivalent thereof, the Debtor shall forthwith
execute and deliver a copy of the certificate of registration within thirty (30)
days of receipt of such certificate and a grant of security in such trademark,
service mark or patent to the Lender confirming the grant thereof hereunder, the
form of such confirmatory grant to be substantially the same as the form hereof.
7(f) The Debtor will perform all acts and execute all documents
including, without limitation, documents in form suitable for filing with the
United States Patent and
- 8 -
<PAGE> 9
Trademark Office, other governmental office, and any foreign equivalent thereof,
as reasonably requested by the Lender at any time to evidence, perfect,
maintain, record and enforce the Lender's interest in the Trademarks, Patents,
and the Debtor's other intellectual property or otherwise in furtherance of the
provisions of this Agreement. In the event of foreclosure hereunder upon all or
any part of the Collateral, the Debtor shall, and hereby does, constitute the
Lender as the Debtor's attorney-in-fact to transfer, in the Debtor's name, the
Trademarks (including all goodwill associated with the Trademarks), the Patents,
and the Debtor's other intellectual property to a third party capable, in the
Lender's judgment, of using and maintaining the nature and quality of the
Trademarks, the Patents, and the Debtor's other intellectual property. Such
power-of-attorney shall include, without limitation, the right to execute all
documents and to do all acts as the Lender considers necessary to effect any of
the foregoing, and all acts of such attorney are hereby ratified and confirmed;
such power being coupled with an interest which is irrevocable until the
Liabilities are paid in full.
7(g) Except to the extent that the Lender shall consent in
writing, the Debtor will, unless the Debtor shall reasonably determine that a
Trademark is not of material economic value to the Debtor, (i) continue to use
each Trademark in order to maintain each Trademark in full force free from any
claim of abandonment for non-use, (ii) employ each Trademark with the
appropriate notice of application or registration, (iii) not adopt or use any
mark which is confusingly similar or a colorable imitation of any Trademark,
(iv) not use any Trademark except for the uses for which registration or
application for registration of such Trademark has been made, (v) not (and not
permit any licensee or sublicensee thereof, if any, to) do any act or knowingly
omit to do any act whereby any Trademark may be subject to dilution,
misappropriation, or invalidation, and (vi) ensure and warrant that the quality
of the goods and services bearing each applicable Trademark will be maintained
at not less than the quality level thereof as exists as of the date of this
Agreement, and in that regard, during normal business hours the Lender and its
representatives may inspect the Debtor's books, records, and facilities which
manufacture, inspect, or store products to ensure that quality of the applicable
goods and services are being maintained.
7(h) The Debtor shall notify the Lender immediately if it knows,
or has reason to know, of any reason that any application or registration
relating to any Trademark, Patent, or other intellectual property of the Debtor
may become abandoned or of any adverse determination or development (including,
without limitation, the institution of, or any such determination or development
in, any proceeding in the United States Patent and Trademark Office or any
court) regarding the Debtor's ownership of any Trademark, Patent, other
intellectual property, its right to register or use the same, or to keep and
maintain the same.
7(i) In no event shall the Debtor, either itself or through any
agent, employee, licensee or designee, file an application for the registration
of any Trademark, Patent, or other intellectual property with the United States
Patent and Trademark Office, other governmental office, or any similar office or
agency in any other country or any political subdivision thereof, unless it
promptly informs the Lender, and, upon request of the Lender, executes and
delivers any and all agreements, instruments, documents and papers as the Lender
may request to evidence the Lender's security interest in such Trademark,
Patent, or other intellectual property and the goodwill and general intangibles
of the Debtor relating thereto or represented thereby, and the Debtor hereby
constitutes the Lender its attorney-in-fact to execute and file all such
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writings for the foregoing purposes, including without limitation to modify this
Agreement by amending Schedule A-3 and/or Schedule A-4 (as the case may be) to
include any future Trademarks, Patents, and other intellectual property, all
acts of such attorney being hereby ratified and confirmed; such power being
coupled with an interest which is irrevocable until the Liabilities are paid in
full.
7(j) The Debtor will take all commercially reasonable steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, any other governmental office, or any other office or
agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the Trademarks and Patents, except to the extent
permitted under Section 7(g), including but not limited to the appropriate and
timely payment of any required fees and the appropriate and timely filing of any
documents or declarations necessary to maintain and renew such Trademarks and
Patents which may be necessary or appropriate under applicable federal, state,
and foreign law.
7(k) Upon the occurrence and during the existence of an Event of
Default, the Lender may, by written notice to the Debtor, take any or all of the
following actions: (i) declare the entire right, title and interest of the
Debtor in and to each of the Trademarks, Patents, and other intellectual
property, together with all related rights and rights of protection to the same,
vested, in which event such rights, title and interest shall immediately vest,
in the Lender, in which case the Debtor agrees to execute assignments in form
and substance satisfactory to the Lender, of all its rights, title and interest
in and to the Trademarks, Patents, and other intellectual property to the
Lender; (ii) take and use or sell the Trademarks, Patents, and other
intellectual property and the goodwill of the Debtor's business symbolized by
the Trademarks and the right to carry on the business of such Debtor in
connection with which the Trademarks have been used; and (iii) direct the Debtor
to refrain, in which event the Debtor shall refrain, from using the Trademarks,
Patents, and its other intellectual property in any manner whatsoever, directly
or indirectly, and, if requested by the Lender, change the Debtor's corporate
name to eliminate therefrom any use of any Trademarks and execute such other and
further documents that the Lender may request to further confirm this and to
transfer ownership of the Trademarks, Patents, and other intellectual property,
and any pending trademark and patent application(s) for trademarks, patents, and
other intellectual property in the United States Patent and Trademark Office,
any other governmental office, and in any similar foreign office to the Lender.
After any Event of Default, the Debtor shall cooperate and use its best efforts
to obtain any consents, waivers, or agreements necessary to enable the Lender to
exercise its rights and remedies with respect to any Trademark, Patent, and
other intellectual property of the Debtor.
SECTION 8. Covenants of Debtor.
In addition to the Debtor's covenants contained in the Credit
Agreement, the Debtor covenants that:
8(a) Subject to Section 3(e) and Section 3(f) hereof, the
Collateral is and will be located at the Debtor's chief executive office and
such other places of business and Permitted Inventory Locations as indicated on
Schedule B attached hereto. The Debtor's records of the Collateral will be
located at the Debtor's chief executive office. The chief executive office of
the
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<PAGE> 11
Debtor is located at the address shown on Schedule B attached hereto. The Debtor
will not move its chief executive office, the location of the Collateral or any
Records Office (as defined below) except to such new location as the Debtor may
establish in accordance with the last sentence of this Section 8(a) and with
respect to Inventory, to Permitted Inventory Locations. The originals of all
documents and all electronically stored data and information evidencing all
Accounts and Contracts of the Debtor and the only original books of account and
records of the Debtor relating thereto are, and will continue to be, kept at its
chief executive office shown on Schedule B attached hereto (each, a "Records
Office"), or at such new Records Office as the Debtor may establish in
accordance with the last sentence of this Section 8(a). All Accounts, Contracts
and records of the Debtor are, and will continue to be, maintained at, and
controlled and directed (including, without limitation, for general accounting
purposes) from, such Records Office location shown above, or such new location
as the Debtor may establish in accordance with the last sentence of this Section
8(a). The Debtor shall not establish a new location for its chief executive
office, the location of the Collateral or any Records Office until (i) it shall
have given to the Lender not less than 45 days' prior written notice of its
intention so to do, clearly describing such new location and providing such
other information in connection therewith as the Lender may reasonably request,
and (ii) with respect to such new location, it shall have taken all action,
satisfactory to the Lender, to maintain the security interest of the Lender in
the Collateral intended to be granted hereby at all times fully perfected and in
full force and effect.
8(b) The Collateral used or useful in its business, in
whomsoever's possession they may be, shall be kept in good repair, working order
and condition, and that from time to time there will be made to such Collateral
all needful and proper repairs, renewals, replacements, extensions, additions,
betterments and improvements thereto, to the extent and in the manner customary
for companies in similar lines of business under similar circumstances. The
Debtor will not encumber, sell, erase, transfer, assign, abandon or otherwise
dispose of the Collateral except for: (i) collection, discharge, discount,
compromise or expiration of the Accounts, Chattel Paper, Instruments or General
Intangibles in the ordinary course of the Debtor's business, (ii) sale or
transfer of Inventory in the ordinary course of business, (iii) dispositions of
items of Equipment no longer needed by the Debtor in the ordinary course of
business, (iv) Liens as permitted under the Credit Agreement and (v) trade-ins,
replacements or exchanges of items of Equipment for other items of Equipment to
the extent the same shall promptly be replaced by Equipment having an equal or
greater value (in excess of purchase money liens on such items) and useful in
the Debtor's business. The inclusion of "products" and "proceeds" of the
Collateral under the security interest granted herein shall not be deemed a
consent by the Lender to any sale or other disposition of the Collateral except
as expressly permitted herein or in the Credit Agreement.
8(c) The Debtor will have and maintain insurance at its expense
as required of the Company pursuant to Section 6.04 of the Credit Agreement. The
Lender is authorized by the Debtor to act as its attorney in collecting,
adjusting, settling or cancelling such insurance and endorsing any drafts drawn
by insurers. The Lender may apply any insurance proceeds received by it to the
Liabilities, whether due or not; provided, however, that the Lender will hold
such proceeds as a special deposit for use by the Debtor in replacing any
damaged Equipment which gave rise to such proceeds, so long as the Debtor is
taking steps to replace such Equipment with due diligence and in good faith and
so long as no Event of Default has occurred and is continuing hereunder. The
Debtor will immediately notify the Lender of any damage to or loss of the
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<PAGE> 12
Collateral in excess of $50,000. Not later than the expiration date of each
insurance policy then in effect, the Debtor shall deliver to the Lender a
certificate of insurance certifying as to (i) the extension of such policy or
the issuance of a renewal policy therefor, describing the same in reasonable
detail satisfactory to the Lender and (ii) the payment in full of the portion of
the premium therefor then due and payable (or accompanied by other proof of such
payment satisfactory to the Lender). The Debtor shall be required forthwith to
notify the Lender if the Debtor shall determine at any time not to, or at any
time be unable to, extend or renew any such insurance policy then in effect.
8(d) The Debtor will use the Collateral for business purposes and
not for personal, family, household or farming purposes and not in violation of
any statute or ordinance.
8(e) The Debtor will pay promptly when due all taxes,
contributions, charges or levies and assessments upon the Collateral owned by
the Debtor or upon its use or sale (other than those the amount or validity of
which is currently being contested in good faith by appropriate proceeding and
with respect to which appropriate reserves are maintained on the books of the
Debtor in accordance with GAAP). At its option the Lender may discharge taxes,
liens or other encumbrances at any time levied against or placed on the
Collateral which have not been stayed as to execution and contested with due
diligence in appropriate legal proceedings, and the Lender may pay for insurance
on the Collateral and maintenance and preservation of the Collateral if the
Debtor fails to do so. The Debtor shall reimburse the Lender on demand for any
such expense incurred by the Lender pursuant to the foregoing authorization,
together with interest thereon, from the date paid by the Lender until payment
in full by the Debtor, at the per annum rate of the Base Rate plus four percent
(4%).
8(f) The Debtor will at all times and in all material respects
keep accurate and complete records of the Collateral. Subject to such notice
required pursuant to the Credit Agreement (if any), the Lender, or any of its
agents, shall have the right (in addition to the rights granted to the Lender
pursuant to Section 6(c) hereof) to call at the Debtor's place or places of
business during normal business hours, at intervals to be determined by the
Lender, to examine and inspect the Collateral and to inspect, audit, make test
verifications and otherwise check and make extracts from the books, records,
journals, orders, receipts, correspondence and other data relating to the
Collateral or to any other transactions between the parties hereto.
8(g) The Debtor agrees to stamp its books and records pertaining
to Accounts, Contracts, Chattel Paper, Instruments, Documents, Trademarks and
General Intangibles to evidence the Lender's security interest therein in form
satisfactory to the Lender immediately upon the Lender's written demand.
8(h) The Debtor will obtain the consent of any Governmental
Authority or other Person to the assignment hereunder of any of the Collateral
if such consent may be required by the terms of any contract or statute.
8(i) If any action or proceeding shall be commenced, other than
any action to collect the Liabilities, to which action or proceeding the Lender
or any Lender is made a party and in which it becomes necessary to defend or
uphold the Lender's security interest hereunder, all costs incurred by the
Lender for the expenses of such litigation (including reasonable actual
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<PAGE> 13
attorney fees and expenses) shall be deemed part of the Liabilities secured
hereby, which the Debtor agrees to pay or cause to be paid.
8(j) The Debtor agrees that if any warehouse receipt or receipt
in the nature of a warehouse receipt is issued with respect to any of its
Inventory, such warehouse receipt or receipt in the nature thereof shall not be
"negotiable" (as such term is used in Section 7-104 of the UCC).
8(k) The Debtor will, at its own expense, make, execute, endorse,
acknowledge, file and/or deliver to the Lender from time to time such lists,
descriptions and designations of its Collateral, warehouse receipts, receipts in
the nature of warehouse receipts, bills of lading, documents of title, vouchers,
invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, reports and
other assurances or instruments and take such further steps relating to the
Collateral and other property or rights covered by the security interest hereby
granted, which the Lender deems appropriate or advisable to perfect, preserve or
protect its security interest in the Collateral consistent with the terms
hereunder, and the Debtor hereby authorizes the Lender to execute and file at
any time and from time to time one or more financing statements or copies
thereof or of this Security Agreement with respect to the Collateral signed only
by the Lender.
8(l) If the Debtor is not the owner of any premises where any
Equipment is located, the Debtor will use its reasonable best efforts to furnish
such consents and waivers executed by the owners of such premises as the Lender
shall request.
SECTION 9. Events of Default.
9(a) An Event of Default ("Event of Default") shall have occurred
under this Agreement upon (i) the failure by the Debtor to pay when due any
Liabilities, whether by acceleration or otherwise, (ii) the occurrence of any
event, condition or act which is defined or described as an Event of Default in
any Loan Document, or (iii) the occurrence of any event, condition or act which
pursuant to the terms of any Loan Document gives the Lender, for the benefit of
the Lender, the right to accelerate the payment of any Liabilities, regardless
of whether the Lender exercises such right.
9(b) Upon the occurrence and during the existence of an Event of
Default, the Lender shall have all of the rights, powers and remedies set forth
in the Credit Agreement, the Notes, this Agreement, the other Loan Documents and
any other instrument or other evidence of any of the Liabilities secured hereby,
together with the rights and remedies of a secured party under the Uniform
Commercial Code of the jurisdictions where the Collateral is located, and,
without limiting the foregoing, the Lender may:
(i) personally, or by agents or attorneys,
immediately retake possession of the Collateral or any part
thereof, from the Debtor or any other Person who then has
possession of any part thereof with or without notice or process
of law, and for that purpose may enter upon the Debtor's premises
where any of the Collateral is located and remove the same and
use in connection with
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<PAGE> 14
such removal any and all services, supplies, aids and other
facilities of the Debtor; and
(ii) instruct the obligor or obligors on any
agreement, instrument or other obligation (including, without
limitation, the Accounts and the Contracts) constituting the
Collateral to make any payment required by the terms of such
instrument or agreement directly to the Lender; and
(iii) withdraw all monies, securities and
instruments in the Company Account or any other account for
application to the Liabilities; and
(iv) sell or otherwise liquidate, or direct the
Debtor to sell or otherwise liquidate, any or all investments
made in whole or in part with the Collateral or any part thereof,
and take possession of the proceeds of any such sale or
liquidation; and
(v) take possession of the Collateral or any part
thereof, by directing the Debtor in writing to deliver the same
to the Lender at any place or places designated by the Lender, in
which event the Debtor shall at its own expense
(A) forthwith cause the same to be moved to
the place or places so designated by the Lender and there
delivered to the Lender,
(B) store and keep any Collateral so
delivered to the Lender at such place or places pending
further action by the Lender as provided in Section 9(c)
hereof, and
(C) while the Collateral shall be so stored
and kept, provide such guards and maintenance services as
shall be necessary to protect the same and to preserve and
maintain them in good condition;
it being understood that the Debtor's obligation so to deliver
the Collateral is of the essence of this Agreement and that,
accordingly, upon application to a court of equity having
jurisdiction, the Lender shall be entitled to a decree requiring
specific performance by the Debtor of said obligation.
9(c) Any Collateral repossessed by the Lender under or pursuant
to Section 7(k) or 9(b) and any other Collateral whether or not so repossessed
by the Lender, may be sold, leased or otherwise disposed of under one or more
contracts or as an entirety, and without the necessity of gathering at the place
of sale the property to be sold, and in general in such manner, at such time or
times, at such place or places and on such terms as the Lender may, in
compliance with any mandatory requirements of applicable law, determine to be
commercially
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<PAGE> 15
reasonable. Any of the Collateral may be sold, leased or otherwise disposed of,
in the condition in which the same existed when taken by the Lender or after any
overhaul or repair which the Lender shall determine to be commercially
reasonable at a public or private sale or proceeding, or otherwise, by one or
more contracts, in one or more parcels, at the same or different times, for cash
and/or credit and upon any terms, at such places and times and to such persons
as the Lender deems best, and for that purpose the Lender may enter peaceably
any premises on which the Collateral or any part thereof may be situated and
remove the same therefrom and the Debtor will not resist or interfere with such
action. If an Event of Default shall have occurred and be continuing, the Lender
may require the Debtor to assemble and/or remove the Collateral and make it
available to the Lender at a place to be designated by the Lender which is
reasonably convenient to both parties. The Debtor hereby agrees that its address
and the place or places of location of the Collateral are places reasonably
convenient to it to assemble the Collateral. Unless the Collateral is perishable
or threatens to decline speedily in value or is of a type customarily sold on a
recognized market, if an applicable statute requires reasonable notice of sale
or other disposition, the Lender will send to the Debtor reasonable notice of
the time and place of any public sale or reasonable notice of the time after
which any private sale or any other disposition thereof is to be made. The
Debtor agrees that requirement of sending reasonable notice shall be met if such
notice is mailed, postage prepaid, to the Debtor at least ten (10) days before
the time of the sale or disposition. If an Event of Default shall have occurred
and be continuing, the Lender may at any time in its discretion transfer any
property constituting Collateral into its own name or that of its nominee and
receive the income thereon and hold the same as security for the Liabilities. To
the extent permitted by any law, the Lender may itself bid for and purchase the
Collateral or any item thereof offered for sale in accordance with this Section
without accountability to the Company (except to the extent of surplus money
received as provided in Section 9(f)).
9(d) The Debtor recognizes that the Collateral may not be readily
marketable and may not be marketable at all if an Event of Default has occurred.
Therefore, in order to enable the Lender to use such means as it may determine
necessary or advisable to realize upon the Collateral from time to time, the
Debtor consents that the Lender may use whatever means it may reasonably
consider necessary or advisable to sell any or all of the Collateral at any time
or times after default thereunder, including but not restricted to the giving of
an option to purchase any or all of the Collateral to any party and the
extending of credit to any purchaser of such Collateral. The Lender may sell any
or all of the Collateral or commit itself to sale without limiting the amount
sold to the amount of indebtedness secured thereby, plus costs and expenses of
collection.
9(e) The Lender may appropriate, set off and apply to the payment
of the Liabilities, any Collateral in or coming into the possession of the
Lender or its agents, without notice to the Debtor and in such manner as the
Lender may in its discretion determine.
9(f) The proceeds of any Collateral obtained pursuant to Section
2(a), 7(k) or 9(b) or disposed of pursuant to Section 9(c) shall be applied as
follows:
(i) to the payment of any and all expenses and fees
(including reasonable actual attorneys' fees and expenses)
incurred by the Lender in obtaining, taking possession of,
removing,
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insuring, repairing, storing and disposing of Collateral and any
and all amounts incurred by the Lender in connection therewith;
(ii) next, any surplus then remaining to the
payment of the Liabilities in such order as the Lender may
determine (subject to any statutory requirements), and the Debtor
shall remain liable for, and shall pay on demand, any deficiency;
and
(iii) after payment in full of all amounts due
under subparagraphs 9(f)(i) and 9(f)(ii) above, any surplus then
remaining shall be paid to the Debtor, subject, however, to the
rights of the holder of any then existing Lien of which the
Lender has actual notice (without investigation).
9(g) Each and every right, power and remedy hereby specifically
given to the Lender shall be in addition to every other right, power and remedy
specifically given under this Agreement or under the other Security Documents or
now or hereafter existing at law or in equity, or by statute and each and every
right, power and remedy whether specifically herein given or otherwise existing
may be exercised from time to time or simultaneously and as often and in such
order as may be deemed expedient by the Lender. All such rights, powers and
remedies shall be cumulative and the exercise or the beginning of exercise of
one shall not be deemed a waiver of the right to exercise of any other or
others. The Lender may exercise its rights with respect to Collateral without
resorting to or regard to other Collateral or sources of reimbursement for any
of the Liabilities. No delay or omission of the Lender in the exercise of any
such right, power or remedy and no renewal or extension of any of the
Liabilities shall impair any such right, power or remedy or shall be construed
to be a waiver of any Default or Event of Default or an acquiescence therein. In
the event that the Lender shall bring any suit to enforce any of its rights
hereunder and shall be entitled to judgment, then in such suit the Lender may
recover reasonable expenses, including attorneys' fees, and the amounts thereof
shall be included in such judgment.
9(h) In case the Lender shall have instituted any proceeding to
enforce any right, power or remedy under this Agreement by foreclosure, sale,
entry or otherwise, and such proceeding shall have been discontinued or
abandoned for any reason or shall have been determined adversely to the Lender,
then and in every such case the Debtor, the Lender and each holder of any of the
obligations shall be restored to their former positions and rights hereunder
with respect to the Collateral subject to the security interest created under
this Agreement, and all rights, remedies and powers of the Lender shall continue
as if no such proceeding had been instituted.
SECTION 10. Waivers.
10(a) Except as otherwise provided in this Agreement, THE DEBTOR
HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE OR JUDICIAL
HEARING IN CONNECTION WITH THE LENDER'S TAKING POSSESSION OR THE LENDER'S
DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL
PRIOR NOTICE AND
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HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH THE
DEBTOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED
STATES OR OF ANY STATE, and the Debtor hereby further waives:
(i) all damages occasioned by such taking of
possession except any damages which are the direct result of the
Lender's gross negligence or willful misconduct;
(ii) all other requirements as to the time, place
and terms of sale or other requirements with respect to the
enforcement of the Lender's rights hereunder; and
(iii) all rights of redemption, appraisement,
valuation, stay, extension or moratorium now or hereafter in
force under any applicable law in order to prevent or delay the
enforcement of this Agreement or the absolute sale of the
Collateral or any portion thereof, and the Debtor, for itself and
all who may claim under insofar as it or they, now or hereafter,
lawfully may, hereby waives the benefit of all such laws.
Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of the Debtor therein and thereto, and shall
be a perpetual bar both at law and in equity against the Debtor and against any
and all Persons claiming or attempting to claim the Collateral so sold, optioned
or realized upon, or any part thereof, from, through and under the Debtor.
10(b) The Debtor waives demand, notice, protest, notice of
acceptance of this Agreement, notice of loans made, credit extended, Collateral
received or delivered or other action taken in reliance hereon and all other
demands and notices of any description except as hereinbefore provided. With
respect to Liabilities and Collateral, the Debtor assents to any extension or
postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of Collateral, to the addition or release of
any party or person primarily or secondarily liable, to the acceptance of
partial payments thereon and the settlement, compromising or adjusting of any
thereof, all in such time or times as the Lender may deem advisable. The Debtor
waives all rules of suretyship law and any other law whatsoever which is legally
permitted to be waived and which would, if not waived, impair the Lender's
enforcement of its security interests hereunder. By way of example, but not in
limitation of the Lender's rights under this Security Agreement, subject to the
terms and conditions of this Security Agreement and the Credit Agreement, the
Lender may do any of the following without notice to the Debtor (unless such
notice or other action is otherwise required pursuant to any of the Loan
Documents to which the Debtor is a party):
(i) change, renew or extend the time for payment of all
or any part of the Liabilities;
(ii) change any provision with respect to all or any part
of the Liabilities;
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(iii) release, surrender, sell or otherwise dispose
of any money or property which is in the Lender's possession as
collateral security for the Liabilities;
(iv) fail to perfect a security interest in any
property which is pledged or mortgaged as security for payment of
the Liabilities;
(v) release or discharge any party liable to the
Lender in whole or in part for the Liabilities, or accept any
additional parties or guarantors;
(vi) delay or refrain from exercising any of the
Lender's rights;
(vii) settle or compromise any and all claims
pertaining to the Liabilities and the Collateral; and
(viii) apply any money or property of the Debtor or
that of any other party liable to the Lender for any part of the
Liabilities in any order the Debtor chooses.
10(c) The Lender shall have no duty as to the collection or
protection of Collateral not in the Lender's possession, and the Lender's duty
with reference to Collateral in its possession shall be to use reasonable care
in the custody and preservation of such Collateral, but such duty shall not
require the Lender to do any of the following (although the Lender is authorized
to reasonably undertake any such action if the Lender deems such action
appropriate):
(i) exercise any rights under the Collateral or
act upon any request made by the Debtor;
(ii) collect any sums due on the Collateral;
(iii) notify the Debtor of any maturities or other
similar matters concerning the Collateral; or
(iv) preserve or protect the Debtor's rights in the
Collateral or take any action to protect any of the Collateral
against claims of others or to preserve rights against prior
parties.
SECTION 11. Indemnity and Costs and Expenses.
11(a) The Debtor agrees to pay, or reimburse the Lender for any
and all fees, costs and expenses of whatever kind or nature incurred in
connection with (i) the enforcement or attempted enforcement of the Lender's
rights under this Security Agreement, and (ii) the creation, preservation or
protection of the Lender's Liens on, and security interest in, the Collateral,
including, without limitation, all fees and taxes in connection with the
recording or filing of instruments and documents in public offices, payment or
discharge of any taxes or Liens upon or in respect of the Collateral, premiums
for insurance with respect to the Collateral and all
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<PAGE> 19
other fees, costs and expenses in connection with protecting, maintaining or
preserving the Collateral and the Lender's interest therein, whether through
judicial proceedings or otherwise, or in defending or prosecuting any actions,
suits or proceedings arising out of or relating to the Collateral.
11(b) Without limiting the application of Section 11(a) hereof,
the Debtor agrees to pay, indemnify and hold the Lender (herein, the
"Indemnitee") harmless from and against any loss, costs, damages and expenses
which any such Indemnitee may suffer, expend or incur in consequence of or
growing out of any misrepresentation by the Debtor in this Agreement or any of
the other Loan Documents or in any statement or writing contemplated by or made
or delivered pursuant to or in connection with this Agreement or any of the
other Security Documents or any breach by the Debtor of this Agreement or any of
the other Loan Documents.
11(c) If and to the extent that the obligations of the Debtor
under this Section 11 are unenforceable for any reason, the Debtor hereby agrees
to make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
11(d) Any amounts paid by any Indemnitee as to which such
Indemnitee has the right to reimbursement shall constitute Liabilities secured
by the Collateral. The indemnity obligations of the Debtor contained in this
Section 11 shall continue in full force and effect notwithstanding the full
payment of all Liabilities and notwithstanding the discharge thereof.
SECTION 12. [Intentionally Omitted]
SECTION 13. Successors and Assigns. The covenants,
representations, warranties and agreements herein set forth shall be binding
upon the Debtor, its legal representatives, successors and assigns, and shall
inure to the benefit of the Lender and its successors and assigns. The successor
of the Lender hereunder shall forthwith become vested with and shall be entitled
to exercise all the powers and rights given by this Agreement to the Lender, as
if said successor were originally named as secured party herein.
SECTION 14. Lender May Perform. If Debtor fails to perform any
agreement contained herein, the Lender may itself perform, or cause performance
of, such agreement, and the expenses of the Lender incurred in connection
therewith shall be payable by Debtor on demand.
SECTION 15. No Waiver; Remedies. No failure on the part of the
Lender to exercise, and no delay in exercising, and no course of dealing with
respect to, any right, power, or remedy under this Agreement shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
and under any of the other Loan Documents preclude any other or further exercise
thereof or the exercise of any other right, power, or privilege. The remedies
provided herein and in the other Loan Documents are cumulative and not exclusive
of any remedies provided by law.
SECTION 16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO ANY CHOICE OF LAW RULES WHICH WOULD REQUIRE THE APPLICATION OF THE
LAWS OF ANY OTHER
- 19 -
<PAGE> 20
JURISDICTION EXCEPT TO THE EXTENT THAT THE LAWS OF THE JURISDICTIONS WHERE THE
COLLATERAL IS LOCATED APPLY TO THE CREATION, ATTACHMENT, PERFECTION, PRIORITY
AND ENFORCEMENT OF LIENS ON AND SECURITY INTERESTS IN THE COLLATERAL.
SECTION 17. Severability. If any provision hereof shall be held
to be invalid, illegal or unenforceable in any jurisdiction, then, to the
fullest extent permitted by law, (i) the other provisions hereof shall remain in
full force and effect in such jurisdiction, and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.
SECTION 18. Amendments. None of the terms or provisions of this
Security Agreement may be waived, altered, modified, or amended except by an
agreement in writing signed by the Lender and the Debtor.
SECTION 19. Notices. All notices, statements, requests and
demands herein provided for shall be in writing and shall be deemed to have been
given or made when delivered to the respective addresses and in the manner
specified in Section 9.01 of the Credit Agreement.
SECTION 20. Counterparts. This Agreement may be executed in any
number of counterparts, all of which, when taken together shall constitute one
and the same instrument, and any party hereto may execute this Agreement by
signing any such counterpart.
SECTION 21. Termination. When all Liabilities shall have been
paid in full and the Guarantee has expired or been terminated, this Agreement
shall terminate, and the Lender shall cause to be assigned, transferred and
delivered, against receipt but without any recourse, warranty or representation
whatsoever, any remaining Collateral and money received in respect thereof, to
or for the account of the Debtor. The Lender shall also execute and deliver to
the Debtor upon such termination such UCC termination statements and such other
documentation as shall be reasonably requested as necessary by the Debtor to
effect the termination and release of the Liens on the Collateral, all at the
expense of the Debtor.
- 20 -
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective duly authorized officers as of the date and
year first above written.
CAMINUS LLC
By: /s/ Mark A. Herman
--------------------------------
Name: Mark Herman
Title: Chief Financial Officer
FLEET BANK, N.A.,
as Lender
By: /s/ Kathleen A. McEntee
--------------------------------
Name: Kathleen A. McEntee
Title: Vice President
- 21 -
<PAGE> 22
SCHEDULE A-1
to
Security Agreement and UCC-1 Financing Statement
in favor of
Fleet Bank, N.A.
as the Lender
granted by Caminus LLC
as Debtor
(i) All equipment (as defined in the UCC) in all of its forms, wherever located,
now existing or hereafter acquired, including, without limitation, all machinery
and other goods, furniture, furnishings, trade fixtures, office supplies, motor
vehicles, tools, computers (including hardware and software), other office
equipment, all equipment and other goods and property more particularly
described in capital leases and any subleases or assignments thereof, and all
other tangible personal property used in connection with or related to the
operation of the Debtor's business, together with all parts, fittings, special
tools, alterations, attachments, additions, accessories, improvements,
substitutions, replacements and accessions thereto, and all proceeds and
products arising therefrom (the "Equipment");
(ii) All inventory (as defined in the UCC) and merchandise in all of its forms,
wherever located, now existing or hereafter acquired including, but not limited
to, (i) all raw materials and work in process therefor, finished goods thereof,
and materials used or consumed in the manufacture or production thereof, (ii)
goods in which the Debtor has an interest in mass or a joint or other interest
or right of any kind (including, without limitation, goods in which the Debtor
has an interest or right as consignee), and (iii) goods which are returned to or
repossessed by the Debtor, and all accessions thereto and products and proceeds
thereof and general intangibles arising therefrom (the "Inventory");
(iii) All of the Debtor's accounts (as defined in the UCC), whether now existing
or hereafter acquired, including without limitation any and all rights evidenced
by an account, note, contract, security agreement, chattel paper, or other
evidence of indebtedness or security, together with (a) all security pledged,
assigned, hypothecated or granted to or held by the Company to secure the
foregoing, (b) all of the Company's right, title and interest in and to any
goods, the sale of which gave rise thereto, (c) all guarantees, endorsements and
indemnifications on, or of, any of the foregoing, (d) all powers of attorney for
the execution of any evidence of indebtedness or security or other writing in
connection therewith, (e) all books, records, ledger cards, and invoices
relating thereto, (f) all evidences of the filing of financing statements and
other statements and the registration of other instruments in connection
therewith and amendments thereto, notices to other creditors or secured parties,
and certificates from filing or other registration officers, (g) all credit
information, reports and memoranda relating thereto, and (h) all other writings
related in any way to the foregoing, and all proceeds and general intangibles
arising therefrom (the "Accounts");
(iv) All of the contracts and agreements of the Debtor listed on Schedule A-2
attached hereto, together with all schedules, exhibits, documents and
certificates referred to therein, as amended,
<PAGE> 23
supplemented or otherwise modified from time to time, including without
limitation, all rights of the Debtor to (a) receive moneys due and to become due
to it thereunder or in connection therewith, (b) damages arising out of, or for,
breach or default in respect thereof, (c) compel performance of the terms
thereof, (d) benefits and claims under all warranty and indemnity provisions
contained therein, (e) all insurance payments provided therein and (f) any other
moneys due and to become due to the Debtor thereunder or in connection therewith
(the "Contracts");
(v) All chattel paper (as defined in the UCC), now owned or hereafter acquired,
and all proceeds and general intangibles arising therefrom (the "Chattel
Paper");
(vi) All instruments (as defined in the UCC) of the Debtor, now owned or
hereafter acquired, and all proceeds and general intangibles arising therefrom
(the "Instruments");
(vii) All of the Debtor's now existing and hereafter acquired general
intangibles (as defined in the UCC), including without limitation all of the
Debtor's rights and interest in any contracts, franchises, licenses, leases,
easements, customer lists, methods of doing business, copyrights (including,
without limitation, the Zai*Net Foreign Exchange (fx) Trading System User Guide,
with a Registration Number of TX - 2382109), the Trademarks, the Patents,
non-compete agreements, distribution agreements, and all other general
intangibles, and intellectual, proprietary and intangible property and the
proceeds of any of the foregoing (the "General Intangibles");
(viii) All of the Debtor's right, title and interest in, to and under any now
existing or hereafter created or acquired United States (or individual State
thereof) and foreign servicemarks and trademarks (including without limitation
the trademarks listed on Schedule A-3 attached hereto), trade names, trade
styles, logos and/or designs, and trade dress, including, without limitation,
the goodwill of the business to which each of the foregoing relates, all
registrations, recordings, and applications with respect to the foregoing, all
affidavits of use and incontestability, all renewals thereof, all licenses,
royalties, income, claims, damages, payments, and proceeds of suit now or
hereafter payable or due for past or future infringements of any of the
foregoing; the right (but not the obligation) to sue for past, present, and
future infringements of any of the foregoing; all rights corresponding to the
foregoing throughout the world; and all proceeds and general intangibles arising
therefrom (the "Trademarks");
(ix) All of the Debtor's right, title and interest in, to and under any now
existing or hereafter created or acquired United States and foreign patents,
patent applications, and patentable inventions, including, but not limited to,
each patent and patent application referred to in Schedule A-4 attached hereto;
all reissues, divisions, continuations, continuations-in-part, extensions,
renewals and reexaminations of any of the foregoing; all licenses, royalties,
income, claims, damages, payments, and proceeds of suit now or hereafter payable
or due for past or future infringements of any of the foregoing; the right (but
not the obligation) to sue for past, present, and future infringements of any of
the foregoing; all rights corresponding to the foregoing throughout the world;
and all proceeds and general intangibles arising therefrom (the "Patents");
- 2 -
<PAGE> 24
(x) All of the Debtor's books, records and other property relating to or
referring to any of the foregoing, including without limitation, all books,
records, ledger cards and other property and general intangibles at any time
evidencing or relating to the Accounts, Inventory, Instruments, Chattel Paper,
Documents, Trademarks, Patents and General Intangibles, and the proceeds thereof
(the "Records");
(xi) All insurance policies held by the Debtor or naming the Debtor as loss
payee (including, without limitation, casualty insurance, key-man life
insurance, property insurance and business interruption insurance), and all such
insurance policies entered into after the date hereof, and all proceeds and
general intangibles arising therefrom (the "Insurance");
(xii) All documents of title (as defined in the UCC) or other receipts of the
Debtor covering, evidencing or representing any Inventory or Equipment wherever
located, now owned or hereafter acquired, and all proceeds and general
intangibles arising therefrom (the "Documents");
(xiii) All of the Debtor's rights as a seller of goods under Article 2 of the
UCC or otherwise with respect to Inventory, and all goods represented by or
securing any of the Accounts, all of the Debtor's rights therein, including,
without limitation, rights as an unpaid vendor or lienor and including rights of
stoppage in transit, replevin and reclamation ("Other Rights");
(xiv) All guarantees, mortgages or security interests on real or personal
property, leases or other agreements or property now or hereafter securing or
relating to any of the items referred to above in favor of the Debtor, or now or
hereafter acquired for the purpose of securing and enforcing any of such items
in favor of the Debtor, and the proceeds thereof (the "Debtor's Security"); and
(xv) All sums at any time standing to Debtor's credit on the books of Lenders
and all moneys, securities, and other property of the Debtor at any time in the
Lender's possession, including, without limitation, all monies, securities and
instruments deposited or required to be deposited in the Company Account and any
other account, whether now existing or hereafter from time to time acquired, and
all proceeds and general intangibles arising therefrom ("Other Property").
- 3 -
<PAGE> 25
SCHEDULE A-2
to
Security Agreement and UCC-1 Financing Statement
in favor of
Fleet Bank, N.A.
as the Lender
granted by Caminus LLC
as Debtor
List of Contracts
Limited Liability Company Agreement of Debtor dated as of May 12, 1998,
including Appendix B attached thereto.
Service Agreement dated September 1, 1998 with Nicholas E.V. Perry.
Employment Agreement dated October 21, 1998 with David Stoner.
Service Agreements dated May 12, 1998 between Caminus Energy Ltd. and each of
Dr. Nigel L. Evans, Dr. Michael Morrison and Dr. Serena K. B. Hesmondhalgh.
Employment Agreement dated May 12, 1998 with Brian Scanlan.
Employment Agreement dated May 12, 1998 with Simon Young.
Employment Agreement dated November 13, 1998 with Corwin Joy.
Letter agreement dated November 13, 1998 with Paul Addison LaMar.
Employee Equity Ownership Agreement dated November 13, 1998 with Paul Addison
LaMar.
Letter agreement dated November 13, 1998 with Richard A. Langham.
Employee Equity Ownership Agreement dated November 13, 1998 with Richard A.
Langham.
Purchase and Option Agreement dated as of December 31, 1998 with SS&C
Technologies, Inc. (as amended by letter agreement dated March 29, 1999).
Distributor Agreements dated as of May 12, 1998 between SS&C Technologies, Inc.
and the Debtor, as amended by letter amendment dated March 29, 1999.
Purchase Agreement dated May 12, 1998 among Zai*Net Software, Inc. GFI Caminus
LLC (now the Debtor) and the other parties thereto (together with ancillary
documents).
Stock Purchase Agreement dated May 12, 1998 among GFI Caminus LLC (now the
Debtor), Caminus Energy Ltd. and the other parties thereto (together with
ancillary documents).
<PAGE> 26
Purchase Agreement dated November 13, 1998 between ZAI*NET Software, L.P. (now
the Debtor) and Corwin Joy, dba Positron Energy Consulting (together with
ancillary documents).
Conversion Agreement and Amendment of Purchase Agreement dated December 31, 1998
among Caminus Energy Ventures LLC (now the Debtor), Rooney Software, L.L.C. and
the other parties thereto.
- 2 -
<PAGE> 27
SCHEDULE A-3
to
Security Agreement and UCC-1 Financing Statement
in favor of
Fleet Bank, N.A.
as the Lender
granted by Caminus LLC
as Debtor
Description of Trademarks
<TABLE>
<CAPTION>
REG. NO. DESCRIPTION TITLE HOLDER ISSUED
-------- ----------- ------------ ------
<S> <C> <C> <C>
1. 2,094,226 Zai*Net Design Only Caminus LLC 9/9/97
2. 2,076,995 Zai*Net and Design Caminus LLC 7/8/97
3. 1,782,466 Zai*Net Caminus LLC 7/20/93
4. pending Weather Delta Caminus LLC pending
</TABLE>
<PAGE> 28
SCHEDULE A-4
to
Security Agreement and UCC-1 Financing Statement
in favor of
Fleet Bank, N.A.
as the Lender
granted by Caminus LLC
as Debtor
Description of Patents
<TABLE>
<CAPTION>
PATENT NO. DESCRIPTION TITLE HOLDER EXPIRATION
---------- ----------- ------------ ----------
<S> <C> <C> <C>
None.
</TABLE>
<PAGE> 29
Schedule B
to
Security Agreement
in favor of
Fleet Bank, N.A.
as the Lender
granted Caminus LLC
as Debtor
Principal Place of Business of Debtor:
1. 12121 Wilshire Boulevard
Los Angeles, CA 90025
2. 747 Third Avenue
New York, New York 10017
Chief Executive Office of Debtor (if different
from the Principal Place of Business):
747 Third Avenue
New York, New York 10017
All Other Places of Business of Debtor:
5444 Westheimer, Suite 1430
Houston, Texas 77056
All Locations of Collateral (including Permitted Inventory Locations):
1. See above.
2. Caminus House, Castle Park
Cambridge, UK CB3 ORA
3. 3 American Square
London, England EC3N 2LR
4. 65-66 Queen Street
London, England EC4R 0RA
<PAGE> 1
Exhibit 10.29
747 THIRD AVENUE
LEASE
SAGE REALTY CORPORATION, AGENT
LANDLORD
and
ZAITECH SOFTWARE, INC.
INDENTURE OF LEASE
TENANT
PREMISES: Portion of the 34th Floor
747 Third Avenue
New York, New York 10017
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Page
------- ----
<S> <C> <C>
1 Definitions, Term 1
2 Commencement of Term 2
3 Fixed Rent, Additional Rents and Rent
Adjustments 4
A. Operating Expense Adjustment 6
B. Real Estate Tax Adjustment 7
4 Electricity 9
5 Use 14
6 Repairs, Alterations and Liens 15
7 Floor Load, Noise, Window Cleaning 20
8 Laws, Ordinances, Requirements of
Public Authorities 21
9 Insurance, Property Loss, Reimbursement 22
10 Damage or Destruction by Fire
or Other Cause 25
11 Assignment, Subletting, Mortgaging 28
12 No Liability on Landlord 32
13 Moving of Heavy Equipment 33
14 Condemnation 34
15 Entry, Right to Change Public Portions
of the Building 35
16 Bankruptcy 36
17 Defaults and Remedies and Waiver
of Redemption 38
18 Landlord's Right to Perform Tenant's
Obligations 41
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
Article Page
------- ----
<S> <C> <C>
19 Covenant of Quiet Enjoyment 42
20 Excavation 42
21 Services and Equipment 43
22 Definition of Landlord 47
23 Invalidity of Any Provision 47
24 Broker 48
25 Subordination 48
26 Estoppel Certificate 49
27 Legal Proceedings, Waiver of Jury Trial 50
28 Surrender of Premises 51
29 Rules and Regulations 52
30 Notices 53
31 No Waiver, Entire Agreement 53
32 Captions 54
33 Inability to Perform 54
34 No Representation by Landlord 55
35 Name of Building 55
36 Successors and Assigns 55
37 Deferred Collections 56
38 Tenant's Option to Extend Term 56
Schedule A Floor Plan
Schedule B Work Agreement
Schedule C Rules and Regulations
</TABLE>
(ii)
<PAGE> 4
INDENTURE OF LEASE made as of this ______ day of _________, 1990,
between SAGE REALTY CORPORATION, a New York corporation, having its principal
office at 777 Third Avenue, New York, New York 10017, Agent for the owner of the
Building hereinafter mentioned (herein "Landlord"), and ZAITECH SOFTWARE, INC.,
a New York corporation, having its office at 26 Broadway, New York, New York
(herein "Tenant").
W I T N E S S E T H:
ARTICLE 1
DEFINITIONS, TERM
Section 1.01. The terms defined in this Article shall, for all purposes
of this Lease and all agreements supplemental thereto, have the meanings herein
specified unless the context otherwise requires.
(a) "Building" shall mean the office building known as 747
Third Avenue, in the Borough of Manhattan, City and State OF New York. The plot
of land on which the building is erected is hereinafter called the "Land."
(b) "Business Days" shall mean all days excluding Saturdays,
Sundays and days observed by the State of New York or Federal Government as
legal holidays, and further excluding holidays established by any union contract
applicable to employees at the Building.
(c) "Commencement Date" shall have the meaning set forth in
Section 2.02.
(d) "Demised Premises" shall mean a portion of the 34th floor
of the Building, as shown on the Floor Plan annexed hereto as Schedule A and
made a part of this Lease, including all fixtures and equipment which at the
Commencement Date or during the Term of this Lease are attached thereto and
which become a part thereof.
(e) "Expiration Date" shall mean 11:59 P.M. on the last day of
the month in which the day immediately preceding the fourth (4th) anniversary of
the Commencement Date occurs.
(f) "Fixed Rent" shall mean the annual rental payable by
Tenant for the Demised Premises in equal monthly installments as provided for in
Article 3 of this Lease.
(g) "Fixed Rent Commencement Date" shall mean the date which
is three (3) months after the Commencement Date.
-2-
<PAGE> 5
(h) "Interest Rate" shall mean the lesser of (i) 2% above the
prime commercial lending rate of marine Midland Bank, N.A. in effect from time
to time or (ii) the maximum applicable legal rate, if any.
(i) "Landlord's Work" shall mean the work agreed to be done by
Landlord in the Demised Premises as provided for in Schedule B annexed hereto
and made a part of this Lease.
(j) "Lease" shall mean this indenture of Lease and any and all
Schedules annexed hereto.
(k) "Term of this Lease" and "Term" shall mean the term of
years commencing on the Commencement Date and expiring on the Expiration Date,
subject to the terms and conditions hereinafter set forth.
Section 1.02. Landlord hereby leases to Tenant, and Tenant hereby rents
from Landlord, the Demised Premises, subject to the provisions hereinafter set
forth, together with appurtenances, including the right to use in common with
others the lobbies, elevators and other public portions of the Building.
TO HAVE AND TO HOLD unto Tenant, its successors and permitted assigns,
for the Term of this Lease or until the Term of this Lease sooner terminates as
hereinafter provided.
ARTICLE 2
COMMENCEMENT OF TERM
Section 2.01. Tenant acknowledges that it has examined the Demised
Premises and is taking same "as is" as of the Commencement Date. Tenant
acknowledges that Landlord is not required to do any work with respect thereto,
except as set forth in Schedule B.
Section 2.02. The Term of this Lease shall commence on the date that
the Demised Premises shall be "substantially completed" (herein the
"Commencement Date"). The Demised Premises shall be deemed to be "substantially
completed" when Landlord has substantially performed the work required to be
performed by Landlord as provided for in Schedule B (and Tenant is able to use
and occupy the Demised Premises for the conduct of its business),
notwithstanding that minor or insubstantial
-3-
<PAGE> 6
items which do not materially interfere with Tenant's use or occupancy of the
Demised Premises remain to be performed (so-called "punch list" items), which
Landlord agrees shall thereafter be performed. Promptly after the Commencement
Date, Landlord and Tenant agree to execute an agreement ("Commencement Date
Agreement") in form and substance satisfactory to Landlord setting forth, among
other things, the Commencement Date and the Expiration Date of this Lease.
The taking of possession by Tenant of the Demised Premises shall be
deemed an acceptance of same by Tenant and shall be conclusively deemed
substantial compliance by Landlord with Schedule B. Such taking of possession
shall also be conclusive evidence, as against Tenant, that the Demised Premises
and the Building of which the same form a part were in good and satisfactory
condition at the time of such occupancy (except for so-called "punch-list" items
and latent defects, if any) and that the Demised Premises were substantially as
shown on Schedule A. Landlord shall, however, thereafter complete the so-called
"punch-list" items, with a minimum amount of inconvenience to the Tenant, to the
extent practicable.
Section 2.03. If Landlord shall be unable to give possession of the
Demised Premises on the date anticipated for the commencement of the Term hereof
for any reason whatsoever, Landlord shall not be subject to any liability, nor
shall the validity of this Lease nor the obligations of Tenant hereunder be
thereby affected. Landlord agrees to promptly commence, and diligently pursue
completion of, Landlord's Work. In the event that Landlord shall be unable to
give possession of the Demised Premises on or prior to ninety (90) days after
approval of Tenant's Plans (provided that Tenant's Plans submitted to Landlord
shall not contain any so-called "long lead" items) (subject to extension for a
period of two (2) months in the aggregate by reason of force mejeure [set forth
immediately below]), Tenant may cancel and terminate this Lease by giving notice
thereof to Landlord on or prior to ten (10) days after the expiration of such
ninety (90) day period, in which event this Lease shall terminate upon the
giving of such notice, and the parties hereto shall have no further liabilities
or obligations to each other hereunder. Any delay in Landlord's substantial
completion of Landlord's Work caused by labor trouble, governmental controls,
act of God, or any other cause beyond Landlord's reasonable control shall extend
such time period for Landlord to substantially complete Landlord's Work and give
possession of the Demised Premises to Tenant. Without limiting the foregoing,
the parties hereto expressly negate the
-4-
<PAGE> 7
provisions of Section 223-a of the Real Property Law and agree that such Section
shall be inapplicable hereto. Tenant agrees that the provisions of this Article
are intended to constitute "an express provision to the contrary within the
meaning of Section 223-a. If by reason of such delay, the Term of this Lease
shall commence subsequent to such anticipated date, the Term of this Lease shall
be deemed extended for the same period.
Section 2.04. Landlord shall endeavor to give Tenant fifteen (15) days'
prior written notice of the anticipated date of substantial completion of
Landlord's Work.
ARTICLE 3
FIXED RENT, ADDITIONAL RENTS AND RENT ADJUSTMENTS
Section 3.01. (a) During the Term of this Lease, Tenant shall pay, at
Landlord's address as herein set forth, or at such other address that Landlord
may from time to time designate, a Fixed Rent, at an annual rate of (i)
$84,581.50 during the period beginning on the Fixed Rent Commencement Date up to
and including the last day of the 24th full calendar month of the Term, and (ii)
$87,015.50 beginning on the first day of the 25th full calendar month of the
Term through the balance of the Term, payable in lawful money of the United
States of America (by check of Tenant drawn on a bank that is a member of the
New York Clearing House Association), which shall be legal tender in payment of
all debts and dues, public and private, at the time of payment in equal monthly
installments in advance on the first day of each calendar month, without notice
or demand, and without setoff or deduction whatsoever. If the date Tenant's
obligation to pay Fixed Rent shall commence on a date other than the first day
of a calendar month, the first installment of Fixed Rent shall be in an amount
equal to that required to cover the period up to and including the last day of
the month wherein the obligation to pay Fixed Rent occurs, computed on a per
them basis.
(b) No payment of Fixed Rent shall be required hereunder
until, and payment of Fixed Rent hereunder shall commence on, the Fixed Rent
Commencement Date.
Section 3.02. The Fixed Rent does not take into account increases of
real estate taxes and/or expenses during the Term of this Lease or other
adjustments in rent, or other payments to be made by Tenant, during the Term of
this Lease. Provision therefor is hereinafter made.
-5-
<PAGE> 8
Section 3.03. All costs and expenses, adjustments and payments, which
Tenant assumes or agrees or is obligated to pay to Landlord pursuant to this
Lease and/or its Schedules shall be deemed additional rent and, in the event of
nonpayment, Landlord shall have all rights and remedies with respect thereto as
herein provided for in case of nonpayment of Fixed Rent.
Tenant covenants to pay the Fixed Rent, additional rent and adjustments
of rent as in this Lease provided, when due.
Section 3.04. For the purposes of this Section 3.04, the following
definitions shall apply:
(a) The Term "Base Tax Year" as hereinafter set forth for the
determination of real estate tax escalation shall mean the period commencing
July 1, 1991, and ending June 30, 1992.
(b) The term "the Percentage" shall mean .67%, based upon the
Building having a total of 361,176 rentable square feet.
(c) The term "Real Estate Taxes" shall mean all real estate
taxes, assessments, water and sewer rents, governmental levies, county taxes or
any other governmental charge, general or special, ordinary or extraordinary,
unforeseen as well as foreseen, of any kind or nature whatsoever, which are or
may be assessed or imposed upon the Land, the Building and the sidewalks, plazas
or streets in front of or adjacent thereto, including any tax, excise or fee
measured by or payable with respect to any rent, and levied against Landlord
and/or the Land and/or Building, under the laws of the United States, the State
of New York, or any political subdivision thereof, or by the City of New York,
or any political subdivision thereof. If, due to a future change in the method
of taxation or in the taxing authority, a franchise, income, transit, profit or
other tax or governmental imposition, however designated, shall be levied
against Landlord, and/or the Land and/or the Building, in substitution in whole
or in part for said Real Estate Taxes, or in lieu of additional real estate
taxes, then such franchise, income, transit, profit or other tax or governmental
imposition shall be deemed to be included within the definition of "Real Estate
Taxes" for the purposes hereof. The amount of such tax, levy, assessment,
imposition, charge or fee deemed to be included within the definition of "Real
Estate Taxes" shall be
-6-
<PAGE> 9
determined as if the Land and Building were the only assets of Landlord and as
if the rents received therefrom were the only income of Landlord.
(d) The term "Tax Year" shall mean every twelve-month
consecutive period commencing each July lst during the Term of this Lease.
(e) The term "Wage Rate" shall mean the minimum regular hourly
wage rate plus all other sums, including, but not limited to, sums paid for
pensions, welfare funds, vacations, bonuses, social security unemployment,
disability benefits, health, life, accident and other type of insurance required
to be paid to or for the benefit of employees engaged in the general maintenance
and operation of office buildings of the type in the vicinity of the Building
pursuant to a collective bargaining agreement (designated as "Others" in said
agreement) between Realty Advisory Board on Labor Relations, Inc. (or any
successor thereto) and Local 32B/32J of the Building Service Employees
International Union AFL-CIO (or any successor thereto). The Wage Rate is
intended to be an index in the nature of a cost of living index, and is not
intended to reflect the actual costs of wages or expenses for the Building. If
any such agreement is not entered into, or such parties or their successors
shall cease to bargain collectively, then the Wage Rate shall be the minimum
regular hourly wage rate and other sums as aforesaid payable to or for the
benefit of employees engaged in the maintenance and operation of first class
office buildings of the same general type as the Building in the Manhattan area.
(f) The term "Base Wage Rate" shall mean the Wage Rate in
effect on July 1, 1991.
(g) The term "Wage Rate Factor" shall mean 2434.
A. Operating Expense Adjustment.
It is agreed that if at any time the Wage Rate shall be greater than
the Base Wage Rate, Tenant shall be required to pay to Landlord as additional
rent an Operating Expense Adjustment in an annual sum equal to the product
obtained by multiplying (i) the number of cents (including any fraction of a
cent) by which the Wage Rate exceeds the Base Wage Rate by (ii) the Wage Rate
Factor. Such Operating Expense Adjustment shall be payable to Landlord together
with Fixed Rent in equal monthly installments on the first day of each calendar
month commencing with the first month during the Term of this Lease
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in which the Wage Rate shall be greater than the Base Wage Rate and as billed by
Landlord continuing hereafter until a new adjustment in the additional rent
shall be established and become effective in accordance with the provisions of
this paragraph. Notwithstanding any change in Wage Rate downwards, the Fixed
Rent shall not be reduced. In the event any change in the Wage Rate shall be
made retroactive. Tenant shall pay Landlord the amount of any resulting
retroactive adjustment in such additional rent within fifteen (15) days after
being billed therefor.
B. Real Estate Tax Adjustment
In the event that the Real Estate Taxes payable for any Tax Year shall
exceed the amount of such Real Estate Taxes, as finally determined, payable with
respect to the Base Tax Year, Tenant shall pay to Landlord, as additional rent
("Tenant's Tax Payment") for such Tax Year, an amount equal to the Percentage of
the excess. By or after the start of the Tax Year following the Base Tax Year,
and by or after the start of each Tax Year thereafter, Landlord shall furnish to
Tenant a statement of the Real Estate Taxes payable with respect to such Tax
Year, and a statement of the Real Estate Taxes payable during the Base Tax Year.
Within thirty (30) days after the issuance by the governmental
authority having jurisdiction thereover of tax bills for Real Estate Taxes
assessed, levied and/or imposed upon the Land and Building for any Tax Year,
Landlord shall submit to Tenant a photostatic copy of such bill and/or bills and
thereafter on or about each respective anniversary date shall submit a copy of
the tax bill and/or bills for the Real Estate Taxes assessed, levied or imposed
upon the Land and Building for such Tax Year, together with a statement which
shall indicate the amount, if any, of Tenant's Tax Payment. Landlord's failure
to submit copies of bills as aforesaid shall not be considered a default by
Landlord or a defense by Tenant to such tax payment.
Within thirty (30) days after the issuance of the statement, Tenant
shall pay Tenant's Tax Payment in the amount set forth on such statement. Such
statement shall be conclusively deemed binding upon Tenant unless Tenant shall
have objected thereto in writing within thirty (30) days of receipt thereof.
Notwithstanding the foregoing provisions of this paragraph, Tenant's Tax Payment
shall be payable in the same number of installments as Real Estate Taxes are
payable to the taxing authority and shall be payable by tenant not less
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than thirty (30) days in advance of the date on which the corresponding
installment is due such taxing authority without incurring any penalty, interest
or late charge.
In the event Landlord shall receive a final reduction or refund of Real
Estate Taxes for any Tax Year for which Tenant is obligated to pay any
additional rent under the provisions of this subsection B of Section 3.04, the
amount or the proceeds of such reduction or refund, less legal fees and other
expenses incurred in collecting the same or achieving such reduction, shall be
applied and allocated to the periods for which such final reduction or refund
was obtained, and proper adjustment shall be made between Landlord and Tenant.
Tenant has been advised that proceedings to protest the Real Estate Tax
Assessment for the Base Tax Year may have been filed and may result in a
reduction of Real Estate Taxes for the Base Tax Year.
Any payments or refunds due hereunder for any period of less than a
full Tax Year at the commencement or end of the Term of this Lease shall be
equitably prorated to reflect such event.
In addition to Tenant's obligation to pay Tenant's Tax Payment as
aforesaid, Tenant shall pay to Landlord as additional rent payable upon demand,
any occupancy tax or rent tax now in effect or hereafter enacted, if payable by
Landlord in the first instance or hereafter required to be paid by Landlord.
Section 3.05. Upon the date of the expiration or any sooner termination
of this Lease, whether the same be the date hereinabove set forth as the
expiration of the Term of this Lease (hereinafter called "Lease Expiration
Date") or any prior or subsequent date, a proportionate share of the Fixed Rent,
adjustments and additional rents for the year (calendar or fiscal) in which such
expiration or termination occurs, shall immediately become due and payable by
Tenant to Landlord as hereinafter provided, if not theretofore already billed
and paid. Such proportionate share shall be based upon the length of time that
this Lease shall have been in existence during such year. Promptly after any
such expiration or termination, Landlord shall compute the amounts due from
Tenant, as aforesaid, which computations shall either be based on that year's
actual figures or be an estimate based on the most recent statements theretofore
prepared by Landlord and furnished to Tenant pursuant to this Lease. If an
estimate is used, then Landlord shall promptly cause statements to be
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prepared on the basis of the comparative year's actual figures as soon as they
are available, and within ten (10) days after such statement or statements are
prepared by Landlord and furnished to Tenant, Landlord and Tenant shall make
appropriate adjustments of any estimated payments theretofore made.
Tenant's obligation to pay any and all rents, adjustments and
additional rents under this Lease shall continue and shall cover all periods up
to the Lease Expiration Date. Landlord's and Tenant's obligations to make the
adjustments hereinabove referred to shall survive any expiration or termination
of this Lease. Any delay or failure of Landlord in billing any Fixed Rent or
additional rent herein provided for shall not constitute a waiver of or in any
way impair the continuing obligation of Tenant to pay such rent ADJUSTMENTS
HEREUNDER.
ARTICLE 4
ELECTRICITY
Section 4.01. The Fixed Rent reserved in this Lease includes the agreed
sum of $6,693.50, in consideration of which Landlord, as an additional service,
will supply Tenant with electricity for normal use in the Demised Premises
between the hours 9:00 A.M. and 5:30 P.M. on Business Days. If Landlord's
electric rates (i.e., the public utility rate schedule at the time in question,
including all surcharges, taxes, fuel adjustments, taxes regularly passed on to
consumers by the public utility, and other sums payable in respect thereof for
the supply of electric energy to Landlord for-the Building) are increased over
the rates in effect on the date hereof, the Fixed Rent reserved in this Lease
shall be adjusted by applying to the sum specified above, the same percentage as
such rate increase, and such adjusted Fixed Rent shall be billed by Landlord to
Tenant, with effect as of the date of the increase of Landlord's electric rate.
If Tenant disputes the amount, Tenant shall nevertheless pay the same as billed,
and the amount shall be determined by an independent utility consultant to be
selected by Landlord and paid by Tenant. The determination of the consultant
shall be subject to the provisions of Section 4.07(b). The determination of the
consultant shall be binding upon the parties. Landlord shall not be liable in
any way to Tenant for any failure or defect in the supply or character of
electric energy furnished to the Demised Premises by reason of any requirement,
act or omission of the public utility serving the Building with electricity or
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for any other reason not attributable to the Landlord. At Landlord's option,
Tenant shall purchase from the Landlord or Landlord's agent all lighting tubes,
lamps, bulbs and ballasts used in the Demised Premises and Tenant shall pay
Landlord's reasonable charges for providing and installing same on demand, as
additional rent.
Section 4.02. Tenant's use of electric energy in the Demised Premises
shall not at any time exceed the capacity of any of the electrical conductors,
machinery and equipment in or otherwise serving the Demised Premises. in order
to insure that such capacity is not exceeded and to avert possible adverse
effect upon the Building electric service, Tenant shall not, without Landlord's
prior written consent in each instance, connect any additional fixtures,
machinery, appliances or equipment to the Building electric distribution system
or make any alteration or addition to Tenant's machinery, appliances or
equipment, or the electric system of the Demised Premises existing on the
Commencement Date, other than typewriters, copiers, computer terminals, copying
machines, communications equipment such as telephones, appliances, word
processors, fax machines, scanners, binding machines, projectors, monitors,
peripherals, disc drives, personal computers, servers, printers, modems,
computer accessories, coffee maker, rice cooker, toaster oven, microwave, water
cooler and other small office machines that consume comparable amounts of
electricity. Should Landlord grant such consent, all additional risers or other
equipment required therefor shall provided by Landlord, and the cost thereof
shall be paid by Tenant upon Landlord's demand. As a condition to granting such
consent, Landlord may require Tenant to agree to an increase in the Fixed Rent
by an amount which will reflect the value to Tenant of the additional service to
be furnished by Landlord, that is, the potential additional electrical energy to
be made available to Tenant based upon the estimated additional capacity of such
additional risers or other equipment. If Landlord and Tenant cannot agree
thereon, Tenant shall nevertheless pay the same as billed until such amount
shall be determined by an independent utility consultant to be selected by
Landlord and paid by Tenant. The determination of the consultant shall be
subject to the provisions of Section 4.07(b). When the amount of such increase
is so determined, the parties shall execute an agreement supplementary hereto to
reflect such increase in the amount of the Fixed Rent stated in this Lease and
in the amount set forth in Section 4.01, effective from the date such additional
service is made available to Tenant, but such increase shall be effective from
such date even if such supplementary agreement is not executed.
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Section 4.03. If there shall be an increase in the space constituting
the Demised Premises, or if-Tenant's failure to maintain its machinery and
equipment in good order and repair causes greater consumption of electrical
current, or if Tenant uses electricity on days or hours other than those
specified in Section 4.01, or if Tenant adds any machinery, appliances or
equipment requiring additional electrical current, the Fixed Rent herein
reserved shall be increased accordingly. The amount thereof shall be billed by
Landlord to Tenant, effective as of the date of the increased usage. Such sum
shall be due, and shall be paid by Tenant, as additional rent hereunder at the
time billed. If Tenant disputes the amount, Tenant shall nevertheless pay the
same as billed, and the amount shall be determined by an independent utility
consultant to be selected by Landlord and paid by Tenant. The determination of
the consultant shall be binding upon the parties.
Section 4.04. Landlord reserves the right to discontinue furnishing
electric energy to Tenant in the Demised Premises at any time upon not less than
thirty (30) days' notice to Tenant, provided that electric service is available
from the public utility servicing the Building (Landlord hereby agreeing, unless
otherwise required by law, not to discontinue furnishing electricity to Tenant
until such time as Tenant is able to obtain same directly from the public
utility). If Landlord exercises such right of termination, this Lease shall
continue in full force and effect and shall be unaffected thereby, except only
that, from and after the effective date of such termination, Landlord shall not
be obligated to furnish electric energy to Tenant and the Fixed Rent under this
Lease shall be reduced by the amount set forth in Section 4.01, plus or minus
the amount of any change pursuant to Sections 4.01, 4.02, 4.03 and 4.05. If
Landlord so discontinues furnishing electric energy to Tenant, Tenant shall
arrange to obtain electric energy directly from the public utility company
furnishing electric service to the Building. Such electric energy may be
furnished to Tenant by means of the then existing building system feeders,
risers and wiring to the extent that the same are available, suitable and safe
for such purposes. All meters and additional panel boards, feeders, risers,
wiring and other conductors and equipment which may be required to obtain
electric energy directly from such public utility company shall be installed and
maintained by Tenant at its expense if Landlord's election to discontinue
furnishing electric energy to Tenant shall have been required by applicable law.
If, however, Landlord shall voluntarily elect to discontinue furnishing electric
energy to Tenant, then Landlord shall install the foregoing and pay for the cost
(but not the maintenance) of the same.
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Section 4.05. Tenant covenants and agrees that at no time will the
connected electrical load serving the Demised Premises exceed 5 watts per square
foot. Landlord represents that such electric service is presently available to
the Demised Premises and subject to the provisions of Section 4.04 will continue
to be available to the Demised Premises during the entire Term. Should Landlord
consent to an increase in the connected electrical load, as a condition to
granting such consent, Landlord may require Tenant to agree to an increase in
the Fixed Rent by an amount which will reflect the value to Tenant of the
additional connected electrical load.
Section 4.06. If any tax is imposed upon Landlord with respect to
electrical energy furnished as a service to Tenant by any Federal, State or
Municipal Authority, Tenant covenants and agrees that where permitted by law or
applicable regulations, Tenant's pro rata share of such taxes shall be
reimbursed by Tenant to Landlord.
Section 4.07(a) Landlord shall have the right to procure periodic
surveys made by an independent utility consultant selected by Landlord and if
such utility consultant determines that there has been (i) an increase in
Tenant's use of electrical current or (ii) the amount set forth in Section 4.01
is insufficient, then, the amount set forth in Section 4.01 shall be adjusted
and in addition to the other requirements and obligations imposed on Tenant in
this Article, Tenant shall pay the fees of the utility consultant making such
survey. The findings of such utility consultant shall be binding and conclusive
on Landlord and Tenant.
(b) If Tenant wishes to dispute any determination of the
additional rental value of electricity service to the Demised Premises on the
basis of any survey made pursuant to Section 4.07(a) or as otherwise determined
pursuant to Sections 4.01, 4.02 and 4.03 hereof, it shall notify Landlord to
such effect within thirty (30) days after receipt of written notice of such
determination. Unless and until such dispute is determined in Tenant's favor,
Tenant shall pay the Fixed Rent as computed in accordance with such
determination. The dispute shall be determined in the following manner: Tenant
shall retain an independent electrical engineer or consultant ("Tenant's
Consultant") to review Landlord's survey or other basis of Landlord for such
determination, and to make an independent survey. Not later than thirty (30)
days after Tenant shall have given Landlord the notice of dispute, Tenant shall
deliver to Landlord (i) Tenant's Consultant's comments on Landlord's survey or
on Landlord's other basis for such
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determination, and (ii) Tenant's Consultant's survey. Landlord shall refer such
comments and survey to the consultant who prepared the original survey or to its
electrical engineer ("Landlord's Engineer") who shall meet with Tenant's
Consultant for the purpose of reaching agreement upon the additional rental
value of the electricity service to the Demised Premises. If they are unable to
reach such agreement within thirty (30) days after the delivery of such comments
or report, Landlord's Engineer and Tenant's Consultant shall appoint a
disinterested third electrical consultant, who shall, within twenty (20) days
thereafter, resolve whatever differences may remain between Landlord's Engineer
and Tenant's Consultant and on the basis of such resolution determine the
additional rental value of the electricity service to the Demised Premises. If
Landlord's Engineer and Tenant's Consultant are unable to agree upon a
disinterested third electrical consultant within the thirty (30) day period
above specified for agreement between Landlord's Engineer and Tenant's
Consultant, and if the parties are unable to agree upon such a third electrical
consultant within ten (10) days therafter, either party, upon written notice to
the other, may apply for the appointment of such a third electrical consultant
to the President of the Real Estate Board of New York, Inc. or any organization
successor thereto, or in his absence or refusal or failure to act, to the
Supreme Court of the State of New York in the County of New York. The fees and
expenses of Tenant's Consultant shall be borne entirely by Tenant. The fees and
expenses of the disinterested third electrical consultant shall be shared
equally by Landlord and Tenant. If and to the extent that the additional rental
value of the electricity service to the Demised Premises shall be so determined
to be less than the value originally determined by Landlord's Engineer, the
amount-of the resulting overpayment of the Fixed Rent shall be refunded by
Landlord to Tenant on Tenant's demand therefor.
Section 4.08. Notwithstanding the aforesaid provisions of this Article,
if, pursuant to an action of the Public Service Commission of the State of New
York, or otherwise, submetering of electricity is permitted at the Building,
then Landlord shall have the option, at Landlord's sole cost and expense, of
installing submeters to measure Tenant's electricity consumption. Upon
installation of the submeters, Tenant's electricity consumption and demand shall
be measured by said submeters, and Tenant agrees to purchase such electricity
from Landlord or Landlord's designated agent at Landlord's actual cost, plus
nine (9%) percent thereof to reimburse Landlord for administrative services in
connection with supplying and billing such electricity and two and
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one-half (2-1/2%) percent for line loss. All such sums shall be paid by Tenant
to Landlord as additional rent hereunder. if more than one meter measures the
electricity consumption and demand of Tenant in the Building, the service
rendered through each meter shall be aggregated and billed in accordance with
the above rate classification, unless Landlord shall elect separate billing on a
per-meter basis. Landlord may at any time render bills for Tenant's consumption
and demand and Tenant shall pay the same within thirty (30) days following date
the same are rendered.
ARTICLE 5
USE
Section 5.01. Tenant shall use and occupy the Demised Premises for
administrative, executive and general business office purposes only and for no
other purposes.
Section 5.02. Tenant shall not suffer or permit the Demised Premises or
any part thereof to be used in any manner, or anything to be done therein, or
suffer or permit anything to be brought into or kept in the Demised Premises
which would in any way (i) violate any law or requirement of public authorities,
(ii) cause structural injury to the Building or any part thereof, (iii)
interfere with the normal operation of the heating, air-conditioning,
ventilating, plumbing or other mechanical or electrical systems of the Building
or the elevators installed therein, (iv) constitute a public or private
nuisance, (v) alter the appearance of the exterior of the Building or of any
portion of the interior thereof other than the Demised Premises.
Section 5.03. Tenant shall not, without the prior written consent of
Landlord (which shall not be unreasonably withheld or delayed), allow a
"Servicing Company" (defined below) to install any telephone, data, information
or other communications equipment in the Demised Premises to service premises
occupied by persons other than Tenant and/or its affiliates. For example, the
Demised Premises may not be used as a so-called "switching" or "relay" station
serving third parties (that is, parties other than Tenant and its affiliates)
without such consent by Landlord. In granting such consent, Landlord may require
that the Servicing Company enter into a license agreement with Landlord
confirming that the Servicing Company shall have no independent rights in the
Demised Premises and that upon termination of this Lease, for whatever
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reason, the Servicing Company will have no right to leave its equipment in the
Demised Premises. Landlord may make a reasonable charge to the Servicing Company
for-allowing it to install its equipment in the Demised Premises. A "Servicing
Company" shall mean a person, firm, corporation or other entity other than
Tenant whose equipment services not only the Demised Premises, but other
premises or parties as well.
ARTICLE 6
REPAIRS, ALTERATIONS AND LIENS
Section 6.01. Tenant shall take good care of the Demised Premises and
the fixtures and appurtenances, therein, and at its sole cost and expense make
all repairs thereto as and when needed to preserve them in good working order
and condition (other than structural repairs and repairs to the plumbing, wiring
and other Building equipment for the general supply of water, heat,
air-conditioning, gas and electricity which are not caused by the carelessness,
omission, neglect, improper conduct or other cause of Tenant, its servants,
employees, agents or licensees). All damage or injury to the Demised Premises
and to its fixtures, appurtenances and equipment or to the Building of which the
same form a part, or to its fixtures, appurtenances and equipment, caused by
Tenant moving property, or resulting from air-conditioning unit or system, short
circuits, flow or leakage of water, steam, illuminating gas, sewer gas, sewerage
or odors, or by frost or by bursting or leaking of pipes or plumbing works or
gas, or from any other cause of any other kind or nature whatsoever due to
carelessness, omission, neglect, improper conduct or other cause of Tenant, its
servants, employees, agents, visitors or licensees, shall be repaired, restored
or replaced promptly by Tenant, at its sole cost and expense to the satisfaction
of Landlord. If Tenant fails to make such repairs, restorations or replacements,
same may be made by Landlord at the expense of Tenant and any costs therefor
shall be collectible as additional rent or otherwise, and shall be paid by
Tenant within five (5) days after rendition of a bill or statement therefor.
Section 6.02. Landlord shall, at its expense, make all repairs and
replacements, structural and otherwise, necessary in order to keep in good order
and repair the exterior of the Building and the public portions of the Building,
the need for which Landlord shall have knowledge
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(including the public halls and stairways, plumbing, wiring and other Building
equipment for the general supply of water, heat, air-conditioning, gas and
electricity) except repairs hereinabove provided to be made by Tenant and
repairs, the need for which Tenant has not reported to Landlord. Such repairs
shall be completed in a standard in conformity with the standard of the
Building.
Section 6.03. All repairs, restorations or replacements by either party
shall be of first-class quality and done in good and workmanlike manner. Tenant
shall, and shall include in all contracts, subcontracts and purchase orders a
requirement that such contractors, subcontractors or materialmen, as the case
may be, shall, cause all workers at the Demised Premises to work harmoniously
with each other and with Building personnel and in a manner which will not
disrupt access to or use of the common areas of the Building, cause
inconvenience to the other tenants in the Building or interfere with the conduct
of other tenants' business. Tenant's installations shall be completed free of
all liens and encumbrances. Tenant agrees that should Tenant, its agents and/or
contractors, enter upon the Demised Premises for the purpose of performing any
work, the labor employed by Tenant or anyone performing such work, for or on
behalf of Tenant, shall always be harmonious and compatible with the labor
employed by Landlord or any contractors or subcontractors of Landlord. Should
such labor be unharmonious or incompatible, Landlord may require Tenant to
withdraw from the Demised Premises. In the event Tenant or Tenant's contractor
shall enter upon the Demised Premises or any other part of the Building, Tenant
agrees to indemnify and save Landlord free and harmless, from and against any
and all claims whatsoever arising out of said entry or such work. Tenant's
agents, contractors and their employees shall comply with the special rules,
regulations and requirements of building management for the performance and
coordination of said agents, contractors and their employees so as to avoid the
intrusion into the operation of the Building and to avoid disturbing the quiet
enjoyment of other tenants. As a condition to Landlord's permission to Tenant to
make any of Tenant's installations in the Demised Premises, Landlord may require
that Tenant agree with Landlord to fixing the Commencement Date of this Lease.
Section 6.04. Tenant shall not store or place any materials or other
obstructions in the lobby or other public portions of the Building, or on the
sidewalk adjacent to the Building.
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Section 6.05. Tenant shall make no alterations, decorations,
installations, additions or improvements in or to the Demised Premises,
including, but not limited to, a water cooler, an air-conditioning or cooling
system unit or part thereof or other apparatus of like or other nature, without
Landlord's prior written consent, which consent shall not unreasonably be
withheld or delayed in the case of alterations, decorations, installations,
additions or improvements in or to the Demised Premises which are non-structural
in nature and do not affect the structure, exterior or common areas of the
Building or the heating, ventilation or air-conditioning, electrical,
mechanical, plumbing or elevator systems of the Building or other Tenants' use
thereof, and then only by contractors or mechanics approved by Landlord. Such
approval must be obtained prior to any bidding for said work. All such work,
alterations, decorations, installations, additions or improvements shall be done
at Tenant's sole expense and at such times and in such manner as Landlord may
from time to time designate and in full compliance with all governmental bodies
having jurisdiction thereover. All alterations, decorations, installations,
additions or improvements upon the Demised Premises, made by either party,
including all paneling, decorations, partitions, railings, mezzanine floors,
galleries and the like, affixed to the realty or for which Tenant has received a
credit shall, unless Landlord elects otherwise (which election shall be made by
giving a notice pursuant to the provisions of Article 30 not less than thirty
(30) days prior to the expiration or other termination of this Lease or any
renewal or extension thereof) become the property of Landlord, and shall remain
upon, and be surrendered with, said premises, as a part thereof, at the end of
the term or renewal term, as the case may be. In the event that Landlord shall
elect otherwise, then such alterations, decorations, installations, additions or
improvements made by Tenant upon the Demised Premises as shall be atypical of an
ordinary office installation (atypical shall be deemed to include, but not
limited to, a raised floor for a computer, an internal stairway, louvered
windows, etc.), as Landlord shall select, shall be removed by Tenant, and Tenant
shall restore the Demised Premises to its original condition, at its own cost
and expense, at or prior to the expiration of the term. Notwithstanding the
foregoing, Tenant's initial alterations shall become the property of Landlord
and shall remain upon and be surrendered with the Demised Premises at the end of
the Term, and Landlord may not elect to require their removal by Tenant at the
expiration of the Term. As a condition precedent to Landlord's consent to the
making by Tenant of alterations, decorations, installations, additions or
improvements to the
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Demised Premises, Tenant agrees to obtain, and deliver to Landlord, written and
unconditional waivers of mechanics' liens upon the real property in which the
Demised Premises are located, for all work, labor, and services to be performed
and materials to be furnished by them in connection with such work, signed by
all contractors, subcontractors, materialmen and laborers to become involved in
such work. Landlord shall not be liable for any failure of the air-conditioning
and ventilating equipment in the Demised Premises installed by Landlord caused
by alterations, installations and/or additions by Tenant, and Tenant shall
correct any such faulty installation. Upon Tenant's failure to correct same,
Landlord may make such correction and charge Tenant for the cost thereof. Such
sum due Landlord shall be deemed additional rent and shall be paid by Tenant
promptly upon being billed therefor.
Section 6.06. Prior to commencing any work pursuant to the provisions
of Section 6.05, Tenant shall furnish to Landlord:
(i) Copies of all governmental permits and authorizations
which may be required in connection with such work.
(ii) A certificate evidencing that Tenant (or Tenant's
contractors) has (have) procured workers' compensation insurance covering all
persons employed in connection with the work who might assert claims for death
or bodily injury against Landlord, "Overlandlord" (as hereinafter defined),
Tenant or the Building.
(iii) Such additional personal injury and property damage
insurance (over and above the insurance required to be carried by Tenant
pursuant to the provisions of Article 9) as Landlord may reasonably require
because of the nature of the work to be done by Tenant.
Section 6.07. Where furnished by or at the expense of Tenant (except
where same is a replacement of an item theretofore furnished and paid for by
Landlord or against which Tenant has received a credit), all movable property,
furniture, furnishings and trade fixtures, alterations, installations and
additions other than those affixed to the realty so that they cannot be removed
without material damage shall remain the property of Tenant, and, in case of
damage by reason of such removal, Tenant shall restore the Demised Premises to
good order and condition (normal wear and tear excepted). In case
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Tenant shall decide not to remove any part of such property, it shall notify
Landlord in writing not less than sixty (60) days prior to the expiration of the
Term of this Lease specifying the items of property which it has decided not to
remove. if within thirty (30) days after the service of such notice Landlord
shall request Tenant to remove any of the said property, Tenant shall at its
expense at or before the expiration of the Term of this Lease, remove said
property, and, in case of damage by reason of such removal, restore the Demised
Premises to good order and condition (normal wear and tear excepted).
Section 6.08. Landlord shall not be responsible for supervision and/or
coordination in respect to Tenant's alterations or repairs. Landlord's managing
agent shall perform such work and shall be directly compensated therefor on the
following basis: with respect to any alteration or improvement costing more than
$10,000 (other than Tenant's initial alteration work), Tenant agrees to pay to
Landlord's managing agent promptly upon being billed therefor, a sum equal to
ten (10%) percent of the cost of such work or alteration, for indirect costs,
field supervision and coordination in connection therewith. Tenant agrees to
keep records of Tenant's alterations and improvements costing in excess of
$10,000 and of the cost thereof. Tenant agrees to furnish to Landlord's managing
agent copies of such records certified as correct by Tenant within forty-five
(45) days of Landlord's managing agent's request therefor.
Section 6.09. Tenant will not do any act or suffer to be done which
will in any way encumber the title of Tenant in and to the Demised Premises or
the Land nor will the interest or estate of Tenant in the Demised Premises or
the Building or in any way subject to any claim by way of lien or whether by
operation of law or by virtue of any implied contract by Tenant.
Section 6.10. Tenant will not suffer or permit any liens to stand
against the Demised Premises, the Building or the Land or any part thereof, by
reason of any work, labor, services or materials done for, or supplied to, or
claimed to have been done for, or supplied to, Tenant, or anyone holding the
Demised Premises, or any part thereof, through or under Tenant. If any such lien
is at any time filed against the Demised Premises or the Building or the Land,
Tenant will cause the same to be discharged of record within ten (10) days after
the date of filing the same, by either payment, deposit or
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bonding (and the failure of Tenant to do so shall be a material default
hereunder entitling Landlord to give a notice to Tenant pursuant to the
provisions of Section 17.01(l) hereof), and, in addition-to any other right or
remedy of Landlord, Landlord may, but will not be obligated to, procure the
discharge of the same either by paying the amount claimed to be due by deposit
in court or bonding, and/or Landlord will be entitled, if Landlord so elects, to
compel the prosecution of an action for the foreclosure of such lien by the
lienor and to pay the amount of the judgment, if any, in favor of the lienor
with interest computed at the Interest Rate, costs and allowances. Any amount
paid or deposited by Landlord for any of the aforesaid purposes, and all legal
and other expenses of Landlord, including attorneys' fees, in defending such
action or in procuring the-discharge of such lien, with all necessary
disbursements in connection therewith, will become due and payable on the date
of payment or deposit, as additional rent.
Section 6.11. Nothing in this Lease will be deemed to be, or construed
in any way as constituting, the consent or request of Landlord, express or
implied by inference or otherwise, to any person, firm or corporation for the
performance of any labor or the furnishing of any materials for any
construction, rebuilding, alteration or repair of or to the Demised Premises,
the Building or the Land or any part thereof, nor as giving Tenant any right,
power or authority to contract for or permit the rendering of any services or
the furnishing of any materials which might in any way give rise to the right to
file any lien against Landlord's interest in the Demised Premises, the Building
or the Land.
ARTICLE 7
FLOOR LOAD, NOISE, WINDOW CLEANING
Section 7.01. Tenant shall not place a load upon any floor of the
Demised Premises which exceeds the load of 50 lbs. per square foot which such
floor was designed to carry and which is allowed by law.
Section 7.02. Business machines and mechanical equipment belonging to
Tenant which cause noise or vibration that may be transmitted to the structure
of the Building or Demised Premises to such a degree as to be objectionable to
Landlord shall be placed and maintained by the party owning the machines or
equipment, at such party's expense, in settings of cork, rubber or spring type
vibration eliminators sufficient to eliminate noise or vibration.
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Section 7.03. Tenant will not clean, nor require, permit, suffer or
allow any window in the Demised Premises to be cleaned, from the outside in
violation of Section 202 of the Labor Law or of the rules of the Board of
Standards and Appeals or of any other board or body having or asserting
jurisdiction.
ARTICLE 8
LAWS, ORDINANCES, REQUIREMENTS OF PUBLIC AUTHORITIES
Section 8.01. Tenant shall, at its expense, comply with all laws,
orders, ordinances and regulations or any direction made pursuant to law of any
public officer or officers which shall, with respect to the occupancy,
particular use or manner of use (as opposed to office use in general) of the
Demised Premises or to any abatement of nuisance, impose any violation, order or
duty upon Landlord or Tenant arising from Tenant's occupancy, use or manner of
use of the Demised Premises or any installations made therein in compliance with
the work article or by or at Tenant's request or required by reason of a breach
of any of Tenant's covenants or agreements hereunder.
Section 8.02. If Tenant should desire to contest the validity of any
such law, ordinance, rule, order or regulation with which Tenant is obligated to
comply, it may, at its expense, carry on such contest; and non-compliance by it
during such contest (so long as Tenant proceeds with due diligence) shall not
constitute a breach of this Lease provided-that it shall, to the satisfaction of
Landlord, indemnify and hold Landlord harmless against all liability for any
loss, damages, and expenses (including attorneys' fees) which might result from
or be incurred in connection with such contest or non-compliance.
Notwithstanding the foregoing, non-compliance as aforesaid shall not commence or
continue if it might subject Landlord to any fine or penalty or to prosecution
for a crime, or if it would constitute a default by Landlord under any mortgage
or lease affecting the Building and/or the Land.
Section 8.03. If Tenant receives written notice of any violation of
law, ordinance, rule, order or regulation applicable to the Demised Premises, it
shall give prompt notice thereof to Landlord.
Section 8.04. Except as aforesaid, Landlord shall, at its expense,
comply with or cause to be complied with, all laws, orders, ordinances and
regulations of federal, state, county and municipal authorities and any
direction made
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pursuant to law of any public officer or officers which shall with respect to
the public portions of the Building, or which affect Tenant's use, enjoyment or
access, of the Demised Premises, impose any violation, order or duty upon
Landlord or Tenant and with respect to which Tenant is not obligated by Section
8.01 to comply. Landlord may, at its expense, contest the validity of any such
law, ordinance, rule, order or regulation.
ARTICLE 9
INSURANCE, PROPERTY LOSS, REIMBURSEMENT
Section 9.01. Tenant shall not do or permit to be done any act or thing
upon the Demised Premises which will invalidate or be in conflict with the
Certificate of Occupancy or the terms of the New York State standard form of
fire, boiler, sprinkler, water damage or other insurance policies covering the
Building and the fixtures and property therein; and Tenant shall at its own
expense, comply with all rules, orders, regulations or requirements of the New
York Board of Fire Underwriters or any other similar body having jurisdiction,
and shall not knowingly do or permit anything to be done in or upon the Demised
Premises in a manner which increases the rate of fire insurance upon the
Building or on any property or equipment located therein over the rate in effect
at the commencement of the Term of this Lease. Notwithstanding the foregoing
sentence, Landlord acknowledges that the mere conduct of Tenant's business as
permitted hereunder shall not be deemed to effect such an increase.
Section 9.02. If, by reason of any failure of Tenant to comply with the
provisions of this Lease, the rate of fire, boiler, sprinkler, water damage or
other insurance (with extended coverage) on the Building or on the property and
equipment of Landlord or any other tenant or subtenant in the Building shall be
higher than it otherwise would be, Tenant shall reimburse Landlord and the other
tenants in the Building for that part of the fire, boiler, sprinkler, water
damage or other insurance premiums thereafter paid by Landlord or by the other
tenants in the Building which shall have been charged because of such failure by
Tenant, and Tenant shall make the reimbursement on the first day of the month
following such payment by Landlord or such other tenants. In any action or
proceeding wherein Landlord and Tenant are parties, a schedule or "make up" of
any insurance rate for the Building or Demised Premises issued by the New York
Fire Insurance Exchange, or
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other body establishing fire insurance rates for the Building, shall be
conclusive evidence of the facts therein stated and of the several items and
charges in the insurance rates then applicable to the Building or Demised
Premises.
Section 9.03. Tenant, at Tenant's own cost and expense, shall maintain
insurance protecting and indemnifying Landlord and Tenant (and at Landlord's
request, the landlord under any ground or underlying lease [herein
"Overlandlord"), as well as the holder of any mortgage affecting the Land, the
Building or both) against any and all claims for injury or damage to persons or
property for the loss of life or of property occurring upon, in or about the
Demised Premises, and the public portions of the Building used by Tenant, its
employees, agents, contractors, and invitees arising out of the negligent act or
omission of any of the foregoing, such insurance to afford minimum protection
during the Term of this Lease of not less than a single combined limit of
$1,000,000 in respect of bodily injury or death to any one person or in respect
of any one occurrence or accident, and for property damage.
All such insurance shall be effected under valid and enforceable
policies (which may cover the Demised Premises and other locations), shall be
issued by insurers of recognized responsibility and shall contain a provision
whereby the insurer agrees not to cancel the insurance without ten (10) days'
prior written notice to Landlord.
On or before the Commencement Date of this Lease, Tenant shall furnish
Landlord with a certificate evidencing the aforesaid insurance coverage, and
renewal certificates shall be furnished to Landlord at least thirty (30) days
prior to the expiration date of each policy for which a certificate was
theretofore furnished.
Section 9.04. Tenant shall give Landlord notice in case of a fire or
accident in the Demised Premises promptly after Tenant is aware of such event.
Section 9.05. Tenant shall indemnify and hold Landlord harmless from
and against all liabilities, suits, claims, demands and actions, and costs and
expenses of any kind or nature, due to or arising out of any injury to person or
property, including death resulting at any time therefrom, occurring in or about
the Demised Premises (unless caused by or due to the negligence of Landlord, its
agents, employees, licensees or contractors, in which event Tenant's
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indemnification herein shall be only to the extent, if any, of Tenant's
negligence or that of Tenant's agents, employees, licensees or contractors). To
the extent of any valid and collectible insurance furnished by Tenant for the
protection of Landlord, Tenant's obligation to indemnify and hold Landlord
harmless against liability which is covered by such insurance shall be deemed,
to the extent thereof, to be fully satisfied.
Section 9.06. Landlord and Tenant shall each endeavor to secure an
appropriate clause in, or an endorsement upon, each fire or extended coverage or
rent insurance policy obtained by it and covering the Building, the Demised
Premises or the personal property, fixtures and equipment located therein or
thereon, pursuant to which the respective insurance companies waive subrogation
or permit the insured, prior to any loss, to agree with a third party to waive
any claim it might have against said third party. The waiver of subrogation or
permission for waiver of any claim hereinbefore referred to shall extend to the
agents of each party and its employees and, in the case of Tenant, shall also
extend to all other persons and entities occupying or using the Demised Premises
in accordance with the terms of this Lease. If and to the extent that such
waiver or permission can be obtained only upon payment of an additional charge,
then the party benefiting from the waiver or permission shall pay such charge
upon demand, or shall be deemed to have agreed that the party obtaining the
insurance coverage in question shall be free of any further obligations under
the provisions hereof relating to such waiver or permission.
Subject to the foregoing provisions of this Section 9.06, and insofar
as may be permitted by the terms of the insurance policies carried by it, each
party hereby releases the other with respect to any claim (including a claim for
negligence) which it might otherwise have against the other party for loss,
damages or destruction with respect to its property by fire or other casualty
(including rental value or business interest, as the case may be) occurring
during the Term of this Lease.
Section 9.07. Tenant agrees to look solely to Landlord's estate and
interest in the Land and Building, or the lease of the Building, or of the Land
and Building, and the Demised Premises, for the satisfaction of any right or
remedy of Tenant for the collection of a judgment (or other judicial process)
requiring the payment of money by Landlord, in the event of any liability by
Landlord, and no other property or assets of Landlord shall be subject to levy,
execution,
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attachment, or other enforcement procedure for the satisfaction of Tenant's
remedies under or with respect to this Lease, the relationship of Landlord and
Tenant hereunder, or Tenant's use and occupancy of the Demised Premises, or any
other liability of Landlord to Tenant.
ARTICLE 10
DAMAGE OR DESTRUCTION BY FIRE OR OTHER CAUSE
Section 10.01. If the Building or the Demised Premises shall be
partially or totally damaged or destroyed by fire or other cause, then whether
or not the damage or destruction shall have resulted from the fault or neglect
of Tenant, or its employees, agents or visitors (and if this Lease shall not.
have been terminated as in this Article 10 hereinafter provided), Landlord shall
to the extent permitted by available insurance proceeds, repair the damage and
restore and rebuild the Building and/or the Demised Premises (without limiting
the rights of any insurance company, subrogated to Landlord's rights hereunder
pursuant to the terms of any insurance policy as to which Landlord shall have
been unable to obtain a waiver of subrogation in accordance with Section 9.06
hereof, to seek recovery from Tenant, and any rights of Landlord under any other
provisions of this Lease or at law or in equity), with reasonable dispatch after
notice to it of the damage or destruction; provided, however, that Landlord
shall not be required to repair or replace any of Tenant's property.
Notwithstanding anything contained herein to the contrary, in no event shall
Tenant be relieved of liability or responsibility for damage or destruction
resulting from the fault or neglect of Tenant if the insurance policies carried
by Landlord on the Building do not contain a waiver of the right of subrogation.
Section 10.02. If the Building or the Demised Premises shall be
partially destroyed by fire or other cause, the rents payable hereunder shall be
abated to the extent that the Demised Premises shall have been rendered
untenantable and for the period from the date of such damage or destruction to
the date the damage shall be repaired or restored. If the Demised Premises or a
major part thereof shall be totally (which shall be deemed to include
substantially completely) untenantable on account of fire or other cause, the
rent shall abate as of the date of the damage or destruction and until Landlord
shall repair, restore and rebuild the Building and the Demised Premises,
provided, however, that should Tenant
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reoccupy a portion of the Demised Premises during the period the Demised
Premises are made completely untenantable, rents allocable to such portion shall
be payable by Tenant from the date of such occupancy.
Section 10.03. If the Building or Demised Premises shall be totally
damaged or destroyed by fire or other cause, or if the Building shall be so
damaged or destroyed by fire or other cause that Landlord shall decide not to
restore or rebuild it, then in either such case Landlord may terminate this
Lease by giving Tenant notice to such effect within ninety (90) days after the
date of the casualty. In case of any damage or destruction mentioned in this
Article 10, Tenant may terminate this Lease by notice to Landlord, if the
Demised Premises shall have been rendered untenantable and if Landlord has not
completed the making of the required repairs and restored and rebuilt the
Demised Premises within three (3) months from the date of such damage or
destruction, and such termination shall be effective upon the expiration of
thirty (30) days after the date of such notice; provided, however, that Tenant
shall not have such termination right if Landlord shall have "Available Space"
(as described below) for Tenant's use.
If Landlord has available office space in the Building (the "Available
Space") for Tenant's use during the period that the damaged portion of the
Demised Premises is being restored (the "Restoration Period"), Landlord shall by
written notice to Tenant ("Landlord's Notice") offer the Available Space to
Tenant for Tenant's use during the Restoration Period. Tenant shall have a
period of fifteen (15) days after receipt of Landlord's Notice to accept
Landlord's offer. Failure by Tenant to accept such offer within said fifteen
(15) day period shall be deemed a rejection of such offer by Tenant. The
Available Space shall be comparable in size to the damaged portion of the
Demised Premises and shall be usable by Tenant for Tenant's intended use of the
Demised Premises as provided in Article 5 hereof. Landlord shall not be
obligated to do any work of any nature whatsoever to the Available Space in
order to prepare same for Tenant's temporary occupancy. Tenant's occupancy of
the Available Space shall be pursuant to all of the terms, conditions and
covenants contained in this Lease, except that Tenant's occupancy shall be for
the Restoration Period only. In any event, Tenant's right to occupy the
Available Space shall immediately terminate upon the termination of this Lease
pursuant to the provisions of this Article 10 or as otherwise provided for in
this Lease.
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Section 10.04. No damages, compensation or claim shall be payable by
Landlord for inconvenience, loss of business or annoyance arising from any
repair or restoration of any portion of the Demised Premises or of the Building
pursuant to this Article 10. Landlord shall endeavor to effect such repair or
restoration promptly and in such manner as not unreasonably to interfere with
Tenant's use and occupancy.
Section 10.05. Notwithstanding any of the foregoing provisions of this
Article 10, if Landlord or Overlandlord or the holder of any superior mortgage
shall be unable to collect all of the insurance proceeds (including rent
insurance proceeds) applicable to damage or destruction of the Demised Premises
or the Building by fire or other cause by reason of some action or inaction on
the part of Tenant or any of its employees, agents or contractors (eg., Tenant's
refusal to cooperate or supply information in connection with the adjustment of
an insurance claim), then, without prejudice to any other remedies which may be
available against Tenant, there shall be no abatement of Tenant's rent until the
total amount of such rent not abated which would otherwise have been abated
equals the amount of uncollected insurance proceeds.
Section 10.06. Landlord will not carry separate insurance of any kind
on Tenant's property, and Landlord shall not be obligated to repair any damage
thereto or replace the same.
Section 10.07. In the event of the termination of this Lease pursuant
to any of the provisions of this Article 10, this Lease and the term and estate
hereby granted shall expire as of the date of such termination with the same
effect as if that were the Expiration Date, and the Fixed Rent and additional
rent payable hereunder shall be apportioned as of such date.
Section 10.08. The provisions of this Article 10 shall be considered an
express agreement governing any case of damage or destruction of the Demised
Premises by fire or other casualty, and Section 227 of the Real Property Law of
the State of New York, providing for a contingency in the absence of an express
agreement, and any other law of like import, now or hereafter in force, shall
have no application to the Demised Premises and this Lease.
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ARTICLE 11
ASSIGNMENT, SUBLETTING, MORTGAGING
Section 11.01. (a) Tenant will not by operation of law or otherwise,
assign, mortgage or encumber this Lease, nor the estate and term hereby granted,
nor sublet or permit the Demised Premises or any part thereof to be used by
others, without Landlord's prior written consent in each instance. The consent
by Landlord to any assignment or subletting shall not in any manner be construed
to relieve Tenant from obtaining Landlord's express written consent to any other
or further assignment or subletting.
If Tenant desires to assign or sublet all or any portion of the Demised
Premises, Tenant agrees to use as its exclusive rental agent for such purpose
for a period of thirty (30) days the then designated leasing agent of the
Building and to notify such leasing agent of its desire to assign this Lease or
sublet the Demised Premises. After said thirty (30) day period, Tenant shall use
the then designated leasing agent for such purpose on a non-exclusive basis.
Upon obtaining a proposed assignee or sublessee, upon terms satisfactory to
Tenant, Tenant shall submit to Landlord in writing (1) the name of the proposed
assignee or subtenant; (2) the terms and conditions of the proposed assignment
or subletting; (3) the nature and character of the business of the proposed
assignee or subtenant and any other information reasonably requested by
Landlord.
Landlord shall have the following options to be exercised within twenty
(20) Business Days from receipt of Tenant's submission:
1. If an assignment shall be proposed or if such subletting shall be
for all or substantially all of the Demised Premises, Landlord shall have the
option to cancel and terminate this Lease as of the date proposed by Tenant for
such assignment or subletting, which option shall be exercised within the
aforesaid twenty (20) day period.
2. If any such proposed sublease shall be for less than all or
substantially all of the Demised Premises or if it shall be for less than the
balance of the term granted hereunder, Landlord shall have the option to be
exercised within said twenty (20) day period of cancelling and terminating this
Lease as to such portion of the Demised
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Premises and as to such portion of the term as is included in such proposed
sublease, to take effect as of the effective date thereof. In the event of the
exercise of such option under this subparagraph 2, the rent and all other
charges payable hereunder shall be equitably apportioned, and Tenant shall be
responsible for the cost of constructing any necessary demising walls.
3. Landlord shall have the option to be exercised within said twenty
(20) day period, to require Tenant to execute an assignment or sublease to
Landlord, or to any party designated by Landlord, containing the same terms and
conditions as with the proposed assignee or subtenant, except that (1) the
assignee or sublessee shall have an express unlimited right to assign or
sublease to others, and make any alterations required in connection therewith,
and (2) the rent or consideration payable under said assignment or sublease to
Landlord or Landlord's designee shall be the lower of (i) the rental payable by
Tenant to Landlord under this Lease or (ii) the rental payable by the proposed
assignee or subtenant pursuant to the proposed assignment or subletting.
It is agreed that the above options shall not be available to Landlord
if Tenant's Notice sets forth a desire to sublease not more than one (1) office
in the Demised Premises, whose rentable square footage is less than 500 rentable
square feet, provided Tenant makes no alterations to the Demised Premises in
connection with the sublease of such space. Tenant, however, shall be required
to obtain Landlord's consent to any such proposed sublet in accordance with the
provisions of this Article 11.
If Landlord shall not exercise any of its foregoing options within the
time set forth above, provided Tenant shall not be in default hereunder,
Landlord's consent to any such proposed assignment or subletting shall not be
"unreasonably" withheld, in accordance with paragraph (b) of this Section 11.01.
It is agreed, however, that if Landlord shall not exercise any of the foregoing
options and Tenant shall thereupon assign this Lease or sublet all or any
portion of the Demised Premises, then and in that event, Tenant shall pay to
Landlord, as additional rent, the difference, if any, between the Fixed Rent
plus additional rent allocable to that part of the Demised Premises affected by
such assignment or sublease pursuant to the provisions of this Lease, and the
Fixed Rent and additional rent payable by the assignee or sublessee to Tenant.
Such additional rent payments shall be made monthly within five (5) days after
receipt of the same by Tenant. Any
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other cash or other consideration payable to Tenant in connection with such
assignment or sublease or the sale of Tenant's property in connection therewith,
less, in case of the sale thereof, the fair market value of Tenant's property,
shall be similarly paid over to Landlord when and as received by Tenant.
If Tenant fails to consummate any proposed assignment or subletting to
which Landlord shall have consented within sixty (60) days after granting such
consent, this paragraph (a) shall again apply to said proposed assignment or
subletting.
No option exercised by Landlord pursuant to the above provisions of
this paragraph (a), and no assignment or sublease made to Landlord under the
above provisions of this paragraph (a), shall be binding upon any purchaser of
any ground or underlying lease who acquires such ground or underlying lease by
reason of the foreclosure of any mortgage to which this Lease is subordinate,
nor upon any assignee of any ground or underlying lease who takes such
assignment in lieu of such foreclosure, it being understood, however, that such
purchaser or assignee may, at its option, elect to enforce such option,
assignment or sublease.
(b) In determining reasonableness, Landlord may take into
consideration all relevant factors surrounding the proposed sublease or
assignment, including, without limitation, the following:
(i) the financial stability and business reputation
of the proposed assignee or subtenant;
(ii) the nature of the business and the proposed use
of the Demised Premises by the proposed assignee or subtenant in relation to the
majority of other tenants in the Building;
(iii) the proposed assignee or subtenant shall not
be a tenant of other space in the Building or a party which has dealt with
Landlord or Landlord's agent (directly or through a broker) with respect to
space in the Building during the six (6) months immediately preceding Tenant's
request for Landlord's consent, provided Landlord has space in the Building for
such proposed assignee or subtenant;
(iv) restrictions contained in leases of other
tenants of the Building;
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(v) the effect that the proposed assignee's or
subtenant's occupancy or use of the Demised Premises would have upon the
operation and maintenance of the Building and Landlord's investment therein;
(vi) not more than two (2) entities shall occupy the
Demised Premises at any time.
Section 11.02. If this Lease shall be assigned, or if the Demised
Premises or any part thereof be sublet or occupied by any person or persons
other than Tenant, Landlord may after default by Tenant, collect rent from the
assignee, subtenant or occupant and apply the net amount collected to the rent
herein reserved, but no such assignment, subletting, occupancy or collection of
rent shall be deemed a waiver of the covenants in this Article, nor shall it be
deemed acceptance of the assignee, subtenant or occupant as a tenant, or a
release of Tenant from the full performance by Tenant of all the terms,
conditions and covenants of this Lease.
Section 11.03. Each assignee or transferee shall assume and be deemed
to have assumed this Lease and shall be and remain liable jointly and severally
with Tenant for the payment of the rent, additional rent and adjustments of
rent, and for the due performance of all the terms, covenants, conditions and
agreements herein contained on Tenant's part to be performed for the Term of
this Lease. No assignment shall be binding on Landlord unless such assignee or
Tenant shall deliver to Landlord a duplicate original of the instrument of
assignment which contains a covenant of assumption by the assignee of all of the
obligations aforesaid and shall obtain from Landlord the aforesaid written
consent prior thereto.
Section 11.04. For the purposes of this Lease, any sale, transfer or
assignment of a majority of the issued and outstanding shares of the stock of a
corporate Tenant or any transfer in the control of Tenant by operation of law or
otherwise shall be deemed an assignment. Notwithstanding the foregoing, the
sale, transfer or assignment of the stock of Tenant pursuant to a public or
private offering or pursuant to any corporate restructuring shall not be deemed
an assignment, provided that same is not done to circumvent the prohibition
contained herein.
Section 11.05. Notwithstanding anything to the contrary elsewhere
contained herein, provided that Tenant shall not be in default in any of the
terms of this Lease beyond notice and the expiration of any applicable grace
period,
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Tenant may, upon not less than ten (10) days, prior written notice to Landlord,
sublet to any corporations or other business entities which control, are
controlled by, or are under common control with Tenant (herein referred to as a
"Related Entity") all or part of the Demised Premises or permit any Related
Entity to occupy the same for any of the purposes permitted to Tenant, subject
however to compliance with Tenant's obligations under this Lease. Such
subletting or occupancy shall not be deemed to vest in any such Related Entity
any right or interest in this Lease or the Demised Premises nor shall it
relieve, release, impair or discharge any of Tenant's obligations hereunder.
Tenant shall deliver to Landlord a copy of any such sublease or occupancy
agreement for all or any portion of the Demised Premises. For purposes hereof,
"control" shall be deemed to mean ownership of not less than 51% of the issued,
authorized and outstanding shares of all classes of stock of such corporation or
not less than 51% of all of the legal and equitable interest in any other
business entities.
Section 11.06. The listing of any name other than that of Tenant,
whether on the doors of the Demised Premises, on the Building directory or
otherwise, shall not operate to vest any right or interest in this Lease or the
Demised Premises. It is expressly understood that any such listing is a
privilege extended by Landlord that is revocable at will by written notice to
Tenant.
Section 11.07. Tenant shall reimburse Landlord for any costs incurred
by Landlord to review the requested consent provided in Article 11, including
reasonable attorneys' fees.
ARTICLE 12
NO LIABILITY ON LANDLORD
Section 12.01. Landlord or its agents shall not be liable for any
damage to property of Tenant or of others entrusted to employees of the
Building, nor for the loss of or damage to any property of Tenant by theft or
otherwise. Landlord or its agents shall not be liable for any injury or damage
to persons or property resulting from fire, explosion, falling plaster, steam,
gas, electricity, water, rain or snow, leaks from any part of the Building or
from the pipes, appliances or plumbing works or from the roof, street or
sub-surface or from any other place or by dampness or by any other cause of
whatsoever nature, unless caused by or due to
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the negligence of Landlord, its agents, servants or employees; nor shall
Landlord or its agents be liable for any such damage caused by other tenants or
persons in the Building or caused by operations in construction of any private,
public or quasi-public work, unless due to the negligence of Landlord or its
agents, servants, employees and contractors, in which case Landlord shall be
liable only to the extent of Landlord's negligence or that of its agents,
servants, employees and contractors; nor shall Landlord be liable for any latent
defect in the Demised Premises or in the Building of which they form a part. If
at any time any windows of the Demised Premises are temporarily closed, darkened
or bricked up for any reason whatsoever (unless done by Landlord without reason
or justification), or if any windows of the Demised Premises are permanently
closed pursuant to a requirement of law, Landlord shall not be liable for any
damage Tenant may sustain thereby, and Tenant shall not be entitled to any
compensation therefor nor abatement of rent nor shall the same release Tenant
from its obligations hereunder nor constitute an eviction. Tenant shall
reimburse and compensate Landlord as additional rent within five (5) days after
rendition of a statement for all expenditures made by, or damages or fines
sustained or incurred by, Landlord due to non-performance or non-compliance with
or breach or failure to observe any term, covenant or condition of this Lease
upon Tenant's part to be kept, observed, performed or complied with. Tenant
shall give immediate notice to Landlord in case of fire or accidents in the
Demised Premises or in the Building or of defects therein or in any fixtures or
equipment.
ARTICLE 13
MOVING OF HEAVY EQUIPMENT
Section 13.01. Tenant shall not move any safe, heavy equipment or bulky
matter in or out of the Building without Landlord's written consent, which
consent Landlord agrees not unreasonably to withhold or delay. If the movement
of such items requires special handling, Tenant agrees to employ only persons
holding a Master Rigger's License to do said work and all such work shall be
done in full compliance with the Administrative Code of the City of New York and
other municipal requirements. All such movements shall be made during hours
which will least interfere with the normal operations of the Building, and all
damage caused by such movement shall be promptly repaired by Tenant at Tenant's
expense.
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ARTICLE 14
CONDEMNATION
Section 14.01. In the event that the whole of the Demised Premises
shall be lawfully condemned or taken in any manner for any public or
quasi-public use, this Lease and the Term and estate hereby granted shall
forthwith cease and terminate as of the date of vesting of title. In the event
that only a part of the Demised Premises shall be so condemned or taken, then,
effective as of the date of vesting of title, the rent hereunder for such part
shall be abated. In the event that only a part of the Building shall be so
condemned or taken, then (a) if substantial structural alteration or
reconstruction of the Building shall in the reasonable opinion of Landlord be
necessary or appropriate as a result of such condemnation or taking (whether or
not the Demised Premises be affected), Landlord may, at its option, terminate
this Lease and the Term and estate hereby granted as of the date of such vesting
of title by notifying Tenant in writing of such termination within sixty (60)
days following the date on which Landlord shall have received notice of vesting
of title, or (b) if Landlord does not elect to terminate this Lease, as
aforesaid, this Lease shall be and remain unaffected by such condemnation or
taking, except that the Fixed Rent shall be abated to the extent, if any,
hereinbefore provided in this Article 14. In the event that only a part of the
Demised Premises shall be so condemned or taken and this Lease and the Term and
estate hereby granted are not terminated as hereinbefore provided, Landlord
will, at its expense, restore with reasonable diligence the remaining structural
portions of the Demised Premises as nearly as practicable to the same condition
as it was prior to such condemnation or taking.
In the event of termination in any of the cases hereinabove provided,
this Lease and the Term and estate hereby granted shall expire as of the date of
such termination with the same effect as if that were the date hereinbefore set
for the expiration of the Term of this Lease, and the rent hereunder shall be
apportioned as of such date.
In the event of any condemnation or taking hereinabove mentioned of all
or a part of the Building, Landlord shall be entitled to receive the entire
award in the condemnation proceeding, including any award made for the value of
the estate vested by this Lease in Tenant, and Tenant hereby expressly assigns
to Landlord any and all right, title and
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interest of Tenant now or hereafter arising in or to any such award or any part
thereof, and Tenant shall be entitled to receive no part of such award. Tenant
shall, at its own cost and expense, be entitled to pursue an independent claim
for moving expenses, Tenant's property (which does not become part of the
Building or property of Landlord) and injury to Tenant's business provided,
however, that such claim shall not thereby lessen, reduce or otherwise affect
Landlord's award.
ARTICLE 15
ENTRY, RIGHT TO CHANGE PUBLIC PORTIONS OF THE BUILDING
Section 15.01. Tenant shall permit Landlord to erect, use and maintain
pipes and conduits in and through the Demised Premises. All such pipes and
conduits shall either be concealed above the suspended ceiling area, or within
the demising walls or installed in the service columns, or shall be installed
along the walls of the Demised Premises and appropriately enclosed, where
feasible. In the event the construction deprives the Tenant of the use of a
material or substantial area (other than on a temporary basis), the Tenant shall
be entitled to an abatement of rent for the space so permanently taken. Landlord
agrees that in the event that more than fifteen (15%) percent of the Demised
Premises is permanently taken pursuant to this Article 15, Tenant shall within
thirty (30) days after such permanent taking have the right to cancel and
terminate this Lease upon written notice to Landlord. Landlord or its agents or
designees shall have the right, but only upon reasonable notice, except in
emergencies, given to Tenant or any authorized employee of Tenant at the Demised
Premises, to enter the Demised Premises at reasonable times during business
hours, for the purpose of making such repairs or alterations as Landlord shall
be required or shall have the right to make by the provisions of this Lease and,
subject to the foregoing, shall also have the right to enter the Demised
Premises for the purpose of inspecting them or exhibiting them to prospective
purchasers or lessees of the entire Building or to prospective mortgagees of the
property of which the Demised Premises are a part. The holder of any mortgage of
Landlord's interest in the property, its agents or designees shall also have
such right of inspection for itself and for any prospective assignees of any
such mortgagees. Landlord shall be allowed to take all material into and upon
the Demised Premises that may be required for the repairs and alterations above
mentioned without the same constituting an eviction of Tenant in whole or in
part, and the rent reserved
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shall in no wise abate, except as otherwise provided in this Lease, while said
repairs or alterations are being made, by reason of loss or interruption of the
business of Tenant because of the prosecution of any such work, provided
Landlord diligently proceeds therewith in such manner as to cause the least
possible interference with the Tenant's use and enjoyment of the Demised
Premises.
Section 15.02. During the twelve (12) months prior to the expiration of
the Term of this Lease, Landlord may exhibit the Demised Premises to prospective
tenants.
Section 15.03. Landlord shall have the right at any time without
thereby creating an actual or constructive eviction or incurring liability to
Tenant therefor, to change the arrangement or location of such of the following
as are not contained within the Demised Premises or any part thereof: entrances,
passageways, elevators, doors and doorways, corridors, stairs, toilets and other
like public service portions of the Building.
ARTICLE 16
BANKRUPTCY
Section 16.01. (a) Anything elsewhere in this Lease to the contrary
notwithstanding, this Lease may be cancelled by Landlord by the sending of a
written notice to Tenant within a reasonable time after the happening of any one
or more of the following events: (i) Tenant shall (a) have applied for or
consented to the appointment of a receiver, trustee, liquidator, or other
custodian of Tenant or any of its properties or assets, (b) be unable to pay its
debts generally as they become due or shall have taken any other action which
could result in it becoming the subject of an insolvency or bankruptcy
proceeding, (c) have made a general assignment for the benefit of creditors, (d)
have commenced a voluntary case for relief as a debtor under the United States
Bankruptcy Code or filed a petition to take advantage of any bankruptcy,
reorganization, insolvency, readjustment of debts, dissolution or liquidation
law or statute or an answer admitting the material allegations of a petition
filed against it in any proceeding under any such law, or (e) be adjudicated a
bankrupt or insolvent, or (ii) without the acquiescence or consent of Tenant an
order, judgment or decree shall have been entered by any court of competent
jurisdiction (a) approving as properly filed a petition seeking relief under the
United States
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Bankruptcy Code or any bankruptcy, reorganization, insolvency, readjustment of
debts, dissolution or liquidation law or statute with respect to Tenant or
appointing a receiver, trustee, liquidator or other custodian of all or a
substantial part of its properties or assets, and such order, judgment or decree
shall have continued unstayed and in effect for any period of not less than
sixty (60) days. Neither Tenant, nor any person claiming through or under Tenant
or by reason of any statute or order of court, shall thereafter be entitled to
possession of the Demised Premises, but shall forthwith quit and surrender the
Demised Premises. If this Lease shall be assigned in accordance with its terms,
the provisions of this Article shall be applicable only to the party then owning
Tenant's interest in-this Lease.
(b) It is stipulated and agreed that in the event of the
termination of this Lease pursuant to (a) hereof, Landlord shall forthwith,
notwithstanding any other provisions of this Lease to the contrary, be entitled
to recover from Tenant as and for liquidated damages an amount equal to the
difference between the rent reserved hereunder for the unexpired portion of the
Term demised and the then fair and reasonable rental value of the Demised
Premises for the same period. In the computation of such damages the difference
between any installment of rent becoming due hereunder after the date of
termination and the fair and reasonable rental value of the Demised Premises for
the period for which such installment was payable shall be discounted to the
date of termination at the rate of four percent (4%) per annum. If the Demised
Premises or any part thereof be re-let by Landlord for the unexpired Term of
this Lease, or any part thereof, before the presentation of proof of such
liquidated damages to any court, commission or tribunal, the amount of rent
reserved upon such re-letting shall be prima facie evidence as to the fair and
reasonable rental value for the part or the whole of the Demised Premises so
re-let during the term of the re-letting. Nothing herein contained shall limit
or prejudice the right of Landlord to prove for and obtain as liquidated damages
by reason of such termination, an amount equal to the maximum allowed by any
statute or rule of law in effect at the time when, and governing the proceedings
in which, such damages are to be proved, whether or not such amount be greater,
equal to, or less than the amount of the difference referred to above.
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ARTICLE 17
DEFAULTS AND REMEDIES AND WAIVER OF REDEMPTION
Section 17.01. (1) If Tenant defaults in fulfilling any of the
covenants of this Lease, including the covenants for the payment of rent or
additional rent, or if the Demised Premises become vacant or deserted, or if the
Demised Premises are damaged by reason of negligence or carelessness of Tenant,
its agents, employees or invitees, and if such default or omission shall
continue for five (5) days in the event of a default in the payment of Fixed
Rent, additional rent or other charges payable hereunder and fifteen (15) days
in the event of any other default after Landlord shall have given to Tenant a
written notice specifying such default or omission, or in the case of the
happening of a default or omission (other than in the payment of Fixed Rent,
additional rent or other charges hereunder and other than the failure to cause a
lien against the Demised Premises, the Building or the Land to be discharged of
record) which cannot with due diligence be completely cured or remedied within
said fifteen (15) day period, and-if Tenant shall not have diligently commenced
curing such default within such fifteen (15) day period, and shall not
thereafter with reasonable diligence and in good faith proceed to remedy or cure
such default, then, in any such case Landlord may give to Tenant a notice of
intention to terminate this Lease upon the expiration of three (3) days from the
service of such notice of intention, and upon the expiration of said three
(3)-days, this Lease and the Term hereof shall terminate, and Tenant shall then
quit and surrender the Demised Premises to Landlord, but Tenant shall remain
liable as hereinafter provided.
(2) If the notice provided for in (1) hereof shall have been given, and
the Term shall expire as aforesaid; or (2a) if Tenant shall make a default in
the payment of the rent reserved herein or any item of additional rent herein
mentioned or any part of either or in making any other payment herein provided;
or (2b) if any execution or attachment shall be issued against Tenant or any of
Tenant's property whereupon the Demised Premises shall be taken or occupied or
attempted to be taken or occupied by someone other than Tenant; or (2c) if
Tenant shall make default with respect to any other lease between Landlord and
Tenant; or (2d) if Tenant shall fail to move into or take possession of the
Demised Premises within fifteen (15) days after commencement of the Term of this
Lease, of which fact Landlord shall be the sole judge; then and in any of such
events Landlord may without notice, re-enter the
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Demised Premises either by force or otherwise, and dispossess Tenant by summary
proceedings or otherwise, and the legal representatives of Tenant or other
occupant of the Demised Premises and remove their effects and hold the Demised
Premises as if this Lease had not been made, and Tenant hereby waives the
service of notice of intention to re-enter or to institute legal proceedings to
that end. If Tenant shall make default hereunder prior to the date fixed as the
commencement of any renewal or extension of this Lease, Landlord may cancel and
terminate such renewal or extension agreement by written notice, but Tenant
shall remain liable as hereinafter provided.
Section 17.02. In case of any such default, re-entry, expiration and/or
dispossess by summary proceedings or otherwise, (a) the rent shall become due
thereupon and be paid up to the time of such re-entry, dispossess and/or
expiration together with such expenses as Landlord may incur for legal expenses,
attorneys' fees, brokerage and/or putting the Demised Premises in good order, or
for preparing the same for re-rental; (b) Landlord may re-let the Demised
Premises or any part or parts thereof, either in the name of Landlord or
otherwise, for a term or terms, which may at Landlord's option be less than or
exceed the period which would otherwise have constituted the balance of the Term
of this Lease and may grant concessions or free rent; and/or (c) Tenant or the
legal representatives of Tenant shall also pay Landlord as liquidated damages
for the failure of Tenant to observe and perform Tenant's covenants herein
contained, at the election of Landlord, either:
(a) a sum which at the time of such termination of this Lease or at the
time of any such re-entry by Landlord, as the case may be, represents the then
value of the excess, if any, of (1) the aggregate of the installments of Fixed
Rent and the additional rent (if any) which would have been payable hereunder by
Tenant, had this Lease not so terminated, for the period commencing with such
earlier termination of this Lease or the date of any such re-entry, as the case
may be, and ending with the date hereinbefore set for the expiration of the full
term hereby granted pursuant to Articles 1 and 2 hereof, over (2) the aggregate
rental value of the Demised Premises for the same period, said lump sum to be
discounted to the Expiration Date of this Lease at the then prevailing prime
rate of interest; or
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(b) sums equal to the aggregate-of the installments of Fixed Rent and
additional rent (if any) which would have been payable by Tenant had this Lease
not so terminated, or had Landlord not so re-entered the Demised Premises,
payable upon the due dates therefor specified herein following such termination
or such re-entry and until the date hereinbefore set for the expiration of the
full term hereby granted; provided, however, that if Landlord shall re-let the
Demised Premises during said period, Landlord shall credit Tenant with the net
rents received by Landlord for such re-letting, such net rents to be determined
by first deducting from the gross rents as and when received by Landlord from
such re-letting the expenses incurred or paid by Landlord terminating this Lease
or of re-entering the Demised Premises and of securing possession thereof,
including, without limitation, attorneys' fees and costs of removal and storage
of Tenant's property, as well as the expenses of re-letting, including
repairing, restoring, altering, decorating and preparing the Demised Premises
for new tenants, brokers' commissions, advertising costs, attorneys' fees, and
all other similar or dissimilar expenses chargeable against the Demised Premises
and the rental therefrom in connection with such re-letting, it being understood
that any such re-letting may be for a period equal to or shorter or longer than
the remaining Term of this Lease; provided, further, that M in no event shall
Tenant be entitled to receive any excess of such net rents over the-sums payable
by Tenant to Landlord hereunder, (ii) in no event shall Tenant be entitled in
any suit for the collection of damages pursuant to this paragraph (b) to a
credit in respect of any net rents from a re-letting except to the extent that
such net rents are actually received by Landlord prior to the commencement of
such suit, and (iii) if the Demised Premises or any part thereof should be
re-let in combination with other space, then proper apportionment on a square
foot area basis shall be made of the rent received from such re-letting and of
the expenses of re-letting.
For the purpose of paragraph (a) of this Section 17.02, the amount of additional
rent which would have been payable by Tenant under Article 3 hereof for each
year, as therein provided, ending after such termination of this Lease or such
re-entry, shall be deemed to be an amount equal to the amount
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of such additional rent payable by Tenant for the calendar year and Tax Year
ending immediately preceding such termination of this Lease or such re-entry.
Suit or suits for the recovery of such damages, or any installments thereof, may
be brought by Landlord from time to time at its election, and nothing contained
herein shall be deemed to require Landlord to postpone suit until the date when
the Term of this Lease would have expired if it had not been terminated under
the provisions of Articles 16 or 17 hereof, or under any provision of law, or
had Landlord not re-entered the Demised Premises.
Landlord, at Landlord's option, may make such alterations, repairs,
replacements and/or decorations in the Demised Premises as Landlord in
Landlord's sole judgment considers advisable and necessary for the purpose of
re-letting the Demised Premises; and the making of such alterations and/or
decorations shall not operate or be construed to release Tenant from any
liability hereunder as aforesaid. Landlord shall in no event be liable in any
way whatsoever for failure to re-let the Demised Premises, or in the event that
the Demised Premises are re-let, for failure to collect the rent thereof under
such re-letting. In the event of a breach or threatened breach by Tenant of any
of the covenants or provisions hereof, Landlord shall have the right of
injunction and the right to invoke any remedy allowed at law or in equity as if
re-entry, summary proceedings and other remedies were not herein provided for.
Mention in this Lease of any particular remedy shall not preclude Landlord from
any other remedy, in law or in equity. Tenant hereby expressly waives any and
all rights of redemption. granted by or under any present or future laws in the
event of Tenant being evicted or dispossessed for any cause, or in the event of
Landlord obtaining possession of the Demised Premises, by reason of the
violation by Tenant of any of the covenants and conditions of this Lease, or
otherwise.
ARTICLE 18
LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS
Section 18.01. If Tenant shall default in the observance or performance
of any term or covenant on its part to be observed or performed under or by
virtue of any of the terms or provisions in any Article of this Lease, Landlord,
without being under any obligation to do so and without thereby waiving such
default, may remedy such default for the account and at the expense of Tenant,
provided that Landlord shall have given Tenant at least-ten (10) days prior
written notice to
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cure such default (except in the case of an emergency) and Tenant shall have
failed to cure the same within such ten (10) day period. If Landlord makes any
expenditures or incurs any obligations for the payment of money in connection
therewith, including, but not limited to, attorneys, fees in instituting,
prosecuting or defending any action or proceedings, such sums paid or
obligations incurred with interest computed at the Interest Rate and costs shall
be deemed to be additional rent hereunder and shall be paid to it by Tenant on
demand.
ARTICLE 19
COVENANT OF QUIET ENJOYMENT
Section 19.01. Landlord covenants that upon Tenant paying the rent and
additional rents and observing and performing all the terms, covenants and
provisions of this Lease on Tenant's part to be observed and performed, Tenant
may peaceably and quietly enjoy the Demised Premises, subject nevertheless to
the terms and conditions of this Lease and provided, however, that no eviction
of Tenant by reason of paramount title, the foreclosure of any mortgage now or
hereafter affecting the Demised Premises or by reason of any termination of any
ground or underlying lease to which this Lease is subject and subordinate,
whether such termination is by operation of law, by agreement or otherwise,
shall be construed as a breach of this covenant nor shall any action by reason
thereof be brought against Landlord, and provided further that this covenant
shall bind and be enforceable against Landlord, subject to the terms hereof only
so long as Landlord is in possession and is collecting rent from Tenant but not
thereafter.
ARTICLE 20
EXCAVATION
Section 20.01. In the event that an excavation should be made for
building or other purposes upon land adjacent to the Building, or should be
authorized to be made, Tenant shall, if necessary, afford to the person or
persons causing or authorized to cause such excavation, license to enter upon
the Demised Premises for the purpose of doing such work as shall reasonably be
necessary to protect or preserve the wall or walls of the Building, or the
Building, from injury or damage and to support them by proper foundations,
pinning and/or underpinning.
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ARTICLE 21
SERVICES AND EQUIPMENT
Section 21.01. So long as Tenant is not in default under any of the
covenants of this Lease, Landlord shall, at its cost and expense:
(a) Provide necessary elevator facilities on Business Days
from 8:00 A.M. to 6:00 P.M. and shall have sufficient elevators available at all
other times. At Landlord's option, the elevators shall be operated by automatic
control or by manual-control, or by a combination of both of such methods.
(b) Maintain and keep in good order and repair the
air-conditioning, heating and ventilating system installed by Landlord. The
aforesaid systems will be operated by Landlord when seasonably required on
Business Days, and shall be effective from 8:00 A.M. to 6:00 P.M. Landlord shall
have no responsibility or liability for the ventilating conditions and/or
temperature of the Demised Premises during the hours or days Landlord is not
required to furnish heat, ventilation or air-conditioning pursuant to this
paragraph. Landlord has informed Tenant that the windows of the Demised Premises
and the Building may be sealed, and that the Demised Premises may become
uninhabitable and the air therein may become unbreathable during the hours or
days when Landlord is not required pursuant to this paragraph to furnish heat,
ventilation or air-conditioning. Any use or occupancy of the Demised Premises
during the hours or days Landlord is not so required to furnish heat,
ventilation or air-conditioning to the Demised Premises shall be at the sole
risk, responsibility and hazard of Tenant. Such condition of the Demised
Premises shall not constitute nor be deemed to be a breach or a violation of
this Lease or of any provision thereof, nor shall it be deemed an eviction nor
shall Tenant claim or be entitled to claim any abatement of rent nor make any
claim for any damages or compensation by reason of such condition of the Demised
Premises. Tenant shall in any event cause all of the windows in the Demised
Premises to be kept closed and shall cause and keep entirely unobstructed all of
the vents, intakes, outlets and grilles, at all times and shall comply with and
observe all regulations and requirements prescribed by Landlord for the proper
functioning of the heating, ventilating and air-conditioning systems. In the
event that Tenant shall require air-conditioning, heating or ventilation at such
times
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as same are not furnished by Landlord, Tenant shall give Landlord at least
twenty-four (24) hours advance notice of such requirement and, if same is
furnished by Landlord, Tenant agrees to pay Landlord's charges therefor as
additional rent.
In addition to the Building interior duct air-conditioning system,
there is a peripheral air-conditioning system which services that portion of the
Demised Premises which is within approximately fifteen (15) feet of the glass
line of the Building. The peripheral system, consisting of automatic and
thermostatically controlled self-contained units, shall be available to, and may
be operated by, Tenant at all times of the day and night, seven (7) days a week.
(c) Provide cleaning and janitorial services on Business Days.
(d) Furnish hot and cold water for lavatory and drinking and
office cleaning purposes (including use in a warming pantry). If Tenant
requires, uses or consumes water for any other purposes, Tenant agrees to
Landlord installing a meter or meters or other means to measure Tenant's water
consumption, and Tenant further agrees to reimburse Landlord for the cost of the
meter or meters and the installation thereof, and to pay for the maintenance of
said meter equipment and/or to pay Landlord's cost of other means of measuring
such water consumption by Tenant. Tenant shall reimburse Landlord the cost of
all water consumed, as measured by said meter or meters or as otherwise
measured, including sewer rents.
(e) Provide Tenant with three (3) directory listings free of
charge to Tenant, which shall be requested in writing by Tenant. Landlord may
make a reasonable charge for changes to directory listings.
Section 21.02. Landlord reserves the right to interrupt, curtail or
suspend the services required to be furnished by Landlord under this Article 21
when the necessity therefor arises by reason of accident, emergency, mechanical
breakdown, or when required by any law, order or regulation of any federal,
state, county or municipal authority, or for any other cause beyond the
reasonable control of Landlord. Landlord shall use due diligence to complete all
required repairs or other necessary work as quickly as possible so that Tenant's
inconvenience resulting therefrom may be for as short a period of time as
circumstances will permit. Notwithstanding Article 33 to the contrary, if
Landlord fails to provide the services required to be furnished by Landlord
under this
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Article 21 for more than five (5) consecutive Business Days and such failure
substantially and materially interferes with Tenant's use of the Demised
Premises for the purposes set forth in Article 5 and thereby compels Tenant to
discontinue its business operations therein, and if Tenant gives notice to
Landlord thereof, the Fixed Rent and additional rent hereunder shall abate
(beginning as of the first day that Tenant discontinued its business operations
therein as a result of such failure) until such interference no longer exists
(regardless of any delay by Tenant in resuming such business operations). If
Tenant shall by reason of such interference be compelled to discontinue its
business operations in the Demised Premises for more than sixty (60) consecutive
Business Days then Tenant, by notice given to Tenant within ten (10) days after
the expiration-of such sixty (60) day period, may cancel and terminate this
Lease, in which event this Lease and the Term and estate hereby granted shall
cease and expire on the date set forth in such notice as if that date were the
original Expiration Date. Except as provided in this Section 21.02, no
diminution or abatement of rent or other compensation shall or will be claimed
by Tenant as a result therefrom, nor shall this Lease or any of the obligations
of Tenant be affected or reduced by reason of such interruption, curtailment or
suspension.
Section 21.03. Tenant shall reimburse Landlord for the cost to Landlord
of removal from the Demised Premises and the Building of so much of any refuse
and rubbish of Tenant as shall exceed that ordinarily accumulated daily in the
routine of business office occupancy or by any use of the Demised Premises after
customary business hours.
Section 21.04. It is expressly agreed that only Landlord or any one or
more persons, firms or corporations authorized in writing by Landlord will be
permitted to furnish laundry, linen, towels, drinking water, ice and other
similar supplies and services to tenants and licensees in the Building. Landlord
may fix, on a Building wide basis, in its sole and absolute discretion, at any
time and from time to time, the hours during which and the regulations under
which such supplies and services are to be furnished . Landlord expressly
reserves the right to act as or to designate, at any time and from time to time,
an exclusive supplier of all or any one or more of the said supplies and
services, provided that the quality thereof and the charges therefor are
reasonably comparable to that of other suppliers; and Landlord furthermore
expressly reserves the right to exclude from the Building any person, firm or
corporation attempting to furnish any of said supplies or services but not so
designated by Landlord.
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Section 21.05. It is expressly agreed that only Landlord or any one or
more persons, firms or corporations authorized in writing by Landlord will be
permitted to sell, deliver or furnish any food or beverages, either personally
or through the use of vending machines, for consumption within the Demised
Premises or elsewhere in the Building. Landlord expressly reserves the right to
act as or to designate at any time, or from time to time, an exclusive supplier
or suppliers of such food and beverages; and Landlord further expressly reserves
the right to exclude from the Building any person, firm or corporation
attempting to deliver or purvey any such food or beverages but not so designated
by Landlord. It is understood, however, that Tenant or regular office employees
of Tenant who are not employed by any supplier of such food or beverages or by
any person, firm or corporation engaged in the business of purveying such food
or beverages, may personally bring food or beverages into the Building for
consumption within the Demised Premises by employees of Tenant, but not for
resale to or for consumption by any other tenant. Landlord may fix in its
absolute discretion, at any time and from time to time, the hours during which,
the regulations under which, foods and beverages may be brought into the
Building by regular employees of Tenant.
Section 21.06. Tenant agrees to employ such office maintenance
contractor as Landlord may from time to time designate, for all waxing,
polishing, lamp replacement, cleaning (other than those cleaning services
Landlord is obligated to furnish) and the maintenance work in the Demised
Premises, provided that the quality thereof and the charges therefor are
reasonably comparable to that of other contractors. Tenant shall not employ any
other contractor without Landlord's prior written consent, which shall not be
unreasonably withheld.
Section 21.07. Landlord will not be required to furnish any other
services, except as otherwise provided in this Lease.
Section 21.08. Tenant, at its sole cost and expense, shall cause the
Demised Premises to be exterminated on a monthly basis to the satisfaction of
Landlord and shall for such purposes employ exterminators designated by
Landlord.
If Tenant shall have facilities on the Demised Premises for cooking,
drinking, eating, washing and/or storage of food, or similar items, Tenant
shall, on a weekly basis, cause the portion of the Demised Premises on which
such
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facilities are located to be exterminated to the satisfaction of Landlord by
exterminators designated by Landlord. The foregoing shall not, however,
constitute any approval or consent to the use of the Demised Premises for such
purposes.
If Tenant fails to comply with the provisions of this Section 21.08,
Landlord, in addition to any other remedies available to it under this Lease or
pursuant to law, may perform such service, and the cost therefor shall be paid
by Tenant on demand as additional rent hereunder.
ARTICLE 22
DEFINITION OF LANDLORD
Section 22.01. The term "Landlord" wherever used in this Lease shall be
limited to mean and include only the owner or owners at the time in question of
the Land and the Building or the Building or the tenant under a ground or
underlying lease affecting the Land and the Building or the Building, or both,
to whom this Lease may be assigned, or a mortgagee in possession, so that in the
event of any sale, assignment or transfer of the Land and the Building or the
Building, or of such ground or underlying lease, such owner, tenant under a
ground lease or mortgagee in possession shall thereupon be released and
discharged from all covenants, conditions and agreements of Landlord thereafter
accruing hereunder; but such covenants, conditions and agreements shall be
binding upon each new owner, tenant under a ground or underlying lease, or
mortgagee in possession for the time being of the Land and the Building, until
sold, assigned or transferred.
ARTICLE 23
INVALIDITY-OF ANY PROVISION
Section 23.01. If any term, covenant, condition or provision of this
Lease or the application thereof to any circumstance or to any person, firm or
corporation shall be invalid or unenforceable to any extent, the remaining
terms, covenants, conditions and provisions of this Lease, or the application
thereof to any circumstances or to any person, firm or corporation other than
those as to which any term, covenant, condition or provision is held invalid or
unenforceable, shall not be affected thereby and each remaining term, covenant,
condition and provision of this Lease shall be valid and shall be enforceable to
the fullest extent permitted by law.
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ARTICLE 24
BROKER
Section 24.01. The parties hereto agree that V.J. Peters Associates
L.P. and Sage Realty Corporation (collectively, the "Brokers") were the only
brokers who negotiated and brought about this transaction, and Landlord agrees
to pay the Brokers a commission therefor as per separate agreements. Tenant
represents and warrants that it has not dealt with any broker other than the
Brokers, and Tenant agrees to indemnify and save Landlord harmless from any
claims made by other brokers claiming to have dealt with Tenant. Landlord
represents and warrants that it has not dealt with any broker other than the
Brokers, and Landlord agrees to indemnify and hold Tenant harmless from any
claims made by other brokers claiming to have dealt with Landlord.
ARTICLE 25
SUBORDINATION
Section 25.01. This Lease is subject and subordinate to all ground or
underlying leases and to all mortgages which may now or hereafter affect such
leases or the Building of which the Demised Premises forms a part, and to all
renewals, modifications, consolidations, replacements and extensions thereof.
This clause shall be self-operative, and no further instrument of subordination
shall be required by any mortgagee. In confirmation of such subordination,
Tenant shall execute promptly any certificate that Landlord may request. Tenant
hereby constitutes and appoints Landlord the Tenant's attorney-in-fact to
execute any such certificate or certificates for and on behalf of Tenant.
Section 25.02. At the option of Landlord or any successor landlord or
the holder of any mortgage affecting the Demised Premises, Tenant agrees that
neither the cancellation nor termination of any ground or underlying lease to
which this Lease is now or may hereafter become subject or subordinate, nor any
foreclosure of a mortgage affecting said premises, nor the institution of any
suit, action, summary or other proceeding against Landlord herein or any
successor landlord, or any foreclosure proceeding brought by the holder of any
such mortgage to recover possession of such property, shall by operation of law
or otherwise result in cancellation or
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termination of this Lease or the obligations of Tenant hereunder, and upon the
request of any such landlord, successor landlord, or the holder of such
mortgage, Tenant covenants and agrees to attorn to Landlord or to any successor
to Landlord's interest in the Demised Premises, or to such holder of such
mortgage or to the purchaser of the mortgaged premises in foreclosure.
Section 25.03. In the event of any act or omission by Landlord which
would give Tenant the right to terminate this Lease or to claim a partial or
total eviction, pursuant to the terms of this Lease, if any, Tenant will not
exercise any such right until (i) it has given written notice of such act or
omission to
(a) the holder of any first mortgage,
(b) the landlord under any ground or underlying lease to which
this Lease is subject and subordinate, whose names and addresses shall
previously have been furnished to Tenant, by delivering such notice of such act
or omission addressed to such holders at the last address so furnished, and (ii)
a reasonable period for remedying such act or omission shall have elapsed
following such giving of notice during which such parties, or any of the
parties, with reasonable diligence, following the giving of such notice, has not
commenced and continued to remedy such act or omission or to cause the same to
be remedied.
Section 25.04. If, in connection with obtaining financing, a banking,
insurance or other recognized institutional lender shall request reasonable
modifications in this Lease as a condition to such financing, Tenant will not
unreasonably withhold, delay or defer its consent thereto, provided that such
modifications do not, in Tenant's reasonable opinion, increase the obligations
of Tenant hereunder or materially adversely affect the leasehold interest hereby
created or Tenant's use and enjoyment of the Demised Premises.
ARTICLE 26
ESTOPPEL CERTIFICATE
Section 26.01. Tenant agrees, at any time, and from time to time, upon
not less than seven (7) days prior notice from Landlord, to execute, acknowledge
and deliver to Landlord a statement in writing addressed to Landlord certifying
that this Lease is unmodified and in full force and effect (or, if
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there have been modifications, that the same is in full force and effect as
modified and stating the modifications), stating the dates to which the Fixed
Rent, additional rental and other charges have been paid, and stating whether or
not to the best knowledge of the signer of such certificate, there exists any
default in the performance of any covenant, agreement, term, provision or
condition contained in this Lease, and any claim or offset in favor of Tenant,
and, if any, specifying each such default, claim or offset in favor of Tenant,
and, if any, specifying each such default, claim or offset of which signer may
have knowledge, it being intended that any such statement delivered pursuant
hereto may be relied upon by Landlord and by any purchaser or prospective
purchaser of the Building and/or the Land and by any mortgagee or prospective
mortgagee of any mortgage affecting the Building and/or the Land, and by any
landlord under a ground or underlying lease affecting the Land or the Building.
ARTICLE 27
LEGAL PROCEEDINGS: WAIVER OF JURY TRIAL
Section 27.01. Landlord and Tenant hereby waive, to the extent such
waiver is not prohibited by law, the right to a jury trial in any action,
summary proceeding or legal proceeding between or among the parties hereto or
their successors arising out of this Lease or Tenant's occupancy of the Demised
Premises or Tenant's right to occupy the Demised Premises.
Section 27.02. Tenant hereby waives the right to interpose a
counterclaim in any summary proceeding instituted by Landlord against Tenant or
in any action instituted by Landlord for unpaid rent or additional rent under
this Lease.
Section 27.03. In the event Tenant claims or asserts that Landlord has
violated or failed to perform a covenant of Landlord not to unreasonably
withhold or delay Landlord's consent or approval, or in any case where
Landlord's reasonableness in exercising its judgment is in issue, Tenant's sole
remedy shall be an action for specific performance, declaratory judgment or
injunction, and in no event shall Tenant be entitled to any money damages for a
breach of such covenant, and in no event shall Tenant claim or assert any claims
in any money damages in any action or by way of set-off, defense or
counterclaim, and Tenant hereby specifically waives the right to any money
damages or other remedies; provided, however, that Tenant also shall have the
right to determine any
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dispute between Landlord and Tenant arising under Article 11 of this Lease as to
whether Landlord has violated or failed to perform a covenant of Landlord not
unreasonably to withhold or delay Landlord's consent or in any case under
Article 11 where Landlord's reasonableness in exercising its judgment is in
issue by arbitration in the City of New York in accordance with the provisions
of this Section. Within ten (10) Business Days next following the giving of any
notice by Tenant to Landlord stating that it wishes such dispute to be so
determined, such dispute shall be determined by arbitration in the Borough of
Manhattan, City, County and State of New York, in accordance with the rules then
obtaining of the American Arbitration Association, or any successor body of
similar function, governing commercial arbitration. The determination in any
arbitration held pursuant to this Section shall be final and binding upon
Landlord and Tenant, whether or not a judgment shall be entered in any court.
The sole question to be determined shall be whether or not Landlord has
unreasonably withheld or delayed its consent or approval, and the sole remedy
shall be the determination that such consent or approval must be granted. Each
party shall pay its own counsel fees and expenses, if any, in connection with
any arbitration under this Section, and the parties shall share all expenses and
fees of any such arbitration. The arbitrators shall be bound by the provisions
of this Lease, and shall not add to, subtract from or otherwise modify such
provisions.
ARTICLE 28
SURRENDER OF PREMISES
Section 28.01. Upon the expiration or other termination of the Term of
this Lease, Tenant shall quit and surrender the Demised Premises in good order
and condition, ordinary wear and tear and damage by fire or other casualty, the
elements and any cause beyond Tenant's reasonable control excepted, and shall
remove all its property therefrom, except as otherwise provided in this Lease.
Tenant's obligation to observe or perform this covenant shall survive the
expiration or other termination of the Term of this Lease.
Section 28.02. If at any time during the last month of the Term of this
Lease, Tenant shall have removed all or substantially all of Tenant's property
from the Demised Premises, Landlord may, and Tenant irrevocably grants to
Landlord a license to, immediately enter and alter, renovate and redecorate the
Demised Premises, without diminution or abatement of rent, or incurring
liability to Tenant for any compensation, and such acts shall have no effect on
this Lease.
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Section 28.03. Tenant agrees it shall-indemnify and save Landlord
harmless against all costs, claims, loss or liability resulting from delay by
Tenant in surrendering the Demised Premises upon expiration or sooner
termination of the term of this Lease, including, without limitation, any claims
made by any succeeding tenant founded on such delay. The parties recognize and
agree that the damage to Landlord resulting from any failure by Tenant timely to
surrender the Demised Premises will be substantial, will exceed the amount of
monthly rent theretofore payable hereunder, and will be impossible of accurate
measurement. Tenant, therefore, agrees that if possession of the Demised
Premises is not surrendered to Landlord within two (2) days after the date of
the expiration or sooner termination of the Term of this Lease, then Tenant will
pay Landlord as liquidated damages for each month and for each portion of any
month during which Tenant holds over in the Demised Premises after expiration or
sooner termination of the Term of this Lease, a sum equal to two (2) times the
average rent and additional rent which was payable per month under this Lease
during the six (6) month period preceding such expiration or termination of the
Term-of this Lease. The aforesaid obligations shall survive the expiration of
sooner termination of the Term of this Lease.
ARTICLE 29
RULES AND REGULATIONS
Section 29.01. Tenant, its servants, employees, agents, visitors, and
licensees shall observe faithfully and comply strictly with the rules and
regulations set forth in Schedule C attached hereto and made a part hereof.
Landlord shall have the right from time to time during the Term of this Lease to
make reasonable changes in and additions to the rules thus set forth. Landlord
agrees not to enforce the rules and regulations against Tenant in a
discriminatory manner unless compliance is necessitated due to the manner in
which Tenant uses and occupies the Demised Premises that is contrary to the
terms of this Lease, or any act or omission by Tenant in violation of the terms
of this Lease.
Section 29.02. Any failure by Landlord to enforce any rules and
regulations now or hereafter in effect, either against Tenant or any other
tenant in the Building, shall not constitute a waiver of any such rules and
regulations.
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ARTICLE 30
NOTICES
Section 30.01. Any notice, request or demand permitted or required to
be given by the terms and provisions of this Lease, or by any law or
governmental regulation, either by Landlord to Tenant or by Tenant to Landlord,
shall be in writing. Unless otherwise required by such law or regulation, such
notice, request or demand shall be given, and shall be deemed to have been
served and given by Landlord and received by Tenant, when Landlord (1) shall
have deposited such notice, request or demand by-registered or certified mail
enclosed in a securely closed postpaid wrapper, in a United States Government
general or branch post office, addressed to Tenant at the Demised Premises, and
(2) until Tenant has moved its offices to the Demised Premises, shall have
deposited such notice, request or demand by registered or certified mail
enclosed in a securely closed postpaid wrapper in such a post office addressed
to Tenant at its address as stated on the first page of this Lease. Such notice,
request or demand shall be given, and shall be deemed to have been served and
given by Tenant and received by Landlord, when Tenant shall have deposited such
notice, request or demand by registered or certified mail enclosed in a securely
closed postpaid wrapper in such a post office addressed to Landlord at 777 Third
Avenue, New York, New York 10017. Either party may, by notice as aforesaid,
designate a different address or addresses for notices, requests or demands to
it.
ARTICLE 31
NO WAIVER: ENTIRE AGREEMENT
Section 31.01. The failure of Landlord to seek redress for violation
of, or to insist upon the strict performance of, any covenant or condition of
this Lease, or any of the Rules and Regulations set forth or hereafter adopted
by Landlord shall not prevent a subsequent act which would have originally
constituted a violation from having all the force and effect of an original
violation. The receipt by Landlord of rent with knowledge of the breach of any
covenant of this Lease shall not be deemed a waiver of such breach. The failure
of Landlord to enforce any of the Rules and Regulations set forth, or hereafter
adopted, against Tenant and/or any other tenant in the Building shall not be
deemed a waiver of any such
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Rules and Regulations. No provision of this Lease shall be deemed to have been
waived by Landlord, unless such waiver be in writing signed by Landlord. No
payment by Tenant or receipt by Landlord of a lesser amount than the monthly
rent herein stipulated shall be deemed to be other than on account of the
earliest stipulated rent, nor shall any endorsement or statement on any check or
any letter accompanying any check or payment as rent be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such rent or pursue any other remedy
in this Lease provided.
Section 31.02 This Lease with the Schedules annexed hereto, if any,
contains the entire agreement between Landlord and Tenant, and any executory
agreement hereafter made between Landlord and Tenant shall be ineffective to
change, modify, waive, release, discharge, terminate, or effect an abandonment
of this Lease, in whole or in part, unless such executory agreement is in
writing and signed by the party against which enforcement of the change,
modification, waiver, release, discharge, termination or the effecting of the
abandonment is sought.
ARTICLE 32
CAPTIONS
Section 32.01. The captions of Articles in this Lease are inserted only
as a matter of convenience and for reference, and they in no way define, limit
or describe the scope of this Lease or the intent of any provision thereof.
ARTICLE 33
INABILITY TO PERFORM
Section 33.01. This Lease and the obligation of Tenant to pay rent
hereunder and perform all of the other covenants and agreements hereunder on the
part of Tenant to be performed shall in no way be affected, impaired or excused
because Landlord is unable to fulfill any of its obligations under this Lease or
to supply or is delayed in supplying any service expressly or impliedly to be
supplied or is unable to make, or is delayed in making any repair, additions,
alterations or decorations or is unable to supply or is delayed in supplying any
equipment or fixtures if Landlord is prevented or delayed from so doing by
reason of strike or labor troubles or any outside cause whatsoever including but
not limited to, governmental preemption in connection with a National Emergency
or by reason of any rule, order or regulation of any department or subdivision
thereof of any government agency or by reason of the conditions of supply and
demand which have been or are affected by war or other emergency.
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ARTICLE 34
NO REPRESENTATION BY LANDLORD
Section 34.01. Landlord or Landlord's agents have made no
representations or promises with respect to the Building, the Land or the
Demised Premises except as herein expressly set forth, and no rights, easements
or licenses are acquired by Tenant by implication or otherwise except as
expressly set forth in the provisions of this Lease. The taking of possession of
the Demised Premises by Tenant shall be conclusive evidence, as against Tenant,
that Tenant accepts said premises and that the Demised Premises and the Building
of which the same form a part were in good and satisfactory condition at the
time such possession was so taken.
ARTICLE 35
NAME OF BUILDING
Section 35.01. The Building may be known as or by such name as
Landlord, in its sole discretion, may elect, and Landlord shall have the right
from time to time to change such designation or name without Tenant's consent.
ARTICLE 36
SUCCESSORS AND ASSIGNS
Section 36.01. The covenants, conditions and agreements contained in
this Lease shall bind and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and, except as otherwise
provided herein, their assigns.
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ARTICLE 37
DEFERRED COLLECTIONS
Section 37.01. If all or any part of the Fixed Rent or additional
rents, as above defined, shall at any time become uncollectible, reduced or
required to be refunded by virtue of any rules, regulations, orders, laws and
ordinances (including, without limitation, rent control or stabilization laws),
or governmental or quasi-governmental authorities having jurisdiction ("Laws and
Ordinances"), then for the period prescribed by said Laws and Ordinances,.Tenant
shall pay to Landlord the maximum amounts permitted pursuant to said Laws and
Ordinances. Upon the expiration of the applicable period of time during which
such amounts shall be uncollectible, reduced or refunded, Tenant shall pay to
Landlord as additional rent, within fifteen (15) days after demand, all such
uncollected, reduced or refunded amounts that would have been payable for the
period absent such Laws and Ordinances; provided, however, that the retroactive
collection thereof shall then be lawful.
ARTICLE 38
TENANT'S OPTION TO EXTEND TERM
Section 38.01. Tenant shall have the option to extend the initial Term
of this Lease for a single additional period ("Extended Term") of five (5) years
beyond the initial Term, upon the following terms and conditions:
(a) said option shall be exercised by written notice to
Landlord given not later than one (1) year prior to the expiration of the
initial Term of this Lease;
(b) there shall not be any uncured default by Tenant pursuant
to Section 17.01 at the time of the exercise of said option and upon the
commencement of the Extended Term (unless Landlord, in its sole discretion,
elects to waive such condition);
(c) unless waived by Landlord, the option and extension of the
initial Term of this Lease shall be null and void if Tenant named herein does
not physically occupy all of the Demised Premises both at the time of the
exercise of the option and upon the commencement of the Extended Term; and
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(d) upon such Extended Term taking effect, this Lease shall
continue for an additional term of five (5) years, with no further right to
extend the Extended Term.
Section 38.02. All of the additional rents, terms, covenants and
conditions of this Lease shall continue in force and effect during the Extended
Term, except that the Fixed Rent payable pursuant to Section 3.01 shall be
modified to an annual rate equal to the fair market annual rental value of the
Demised Premises for the Extended Term. If the parties are unable to agree upon
the Fixed Rent for the Extended Term within three (3) months prior to the
expiration of the initial Term, such Fixed Rent shall be determined by
arbitration by submission to the appropriate committee of The Real Estate Board
of New York, Inc., for determination in accordance with its rules then existing,
on the basis of new base periods for operating expense adjustment and real
estate tax adjustment. Notwithstanding anything to the contrary contained
herein, in no event shall the Fixed Rent for each year of the Extended Term be
less than the sum of the Fixed Rent and all additional rent, including all
additional rent provided for in Article 3 hereof, payable with respect to the
calendar year immediately preceding the year in which the Extended Term shall
commence.
Section 38.03. At the request of Landlord, Tenant shall, promptly after
the exercise by Tenant of its option to extend the initial Term of this Lease,
and the Fixed Rent payable during the Extended Term shall have been determined,
execute an agreement in form and substance satisfactory to Landlord setting
forth, among other things, the expiration date of the Extended Term and the
Fixed Rent payable by Tenant during the Extended Term.
<PAGE> 61
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this
Lease as of the day and year first above written.
SAGE REALTY CORPORATION, AGENT
By: /s/ signature illegible
------------------------------------
Landlord
[CORPORATE SEAL]
ZAITECH SOFTWARE, INC.
By: /s/ Cynthia C. Chang
------------------------------------
Tenant
<PAGE> 62
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On the 19th day of February,1991,before me personally came Robert
Kaufman, to me known, who being me duly sworn, did depose and say that he
resides at 18 Martin Ct Gt. Neck NY; that he is the Exec. V. Pres. of SAGE
REALTY CORPORATION, the corporation described in and which executed the
foregoing instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the Board of Directors of said corporation, and that he signed his name
thereto by like order.
/s/ Lisa I. Altoran
------------------------------------
Notary Public
<PAGE> 63
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On the 15th day of February, 1991, before me personally came Cynthia
Chang, to me known, who being duly sworn by me, did depose and say that she
resides at __________________________; that she is the ______________of ZAITECH
SOFTWARE, INC., the corporation described in and which executed the foregoing
instrument; that she knows the seal of said corporation; that the seal affixed
to said instrument is such corporate seal; that it was so affixed by order of
the Board of Directors of said corporation, and that she signed her name thereto
by like order.
/s/ Earl Barrison
------------------------------------
Notary Public
<PAGE> 64
SCHEDULE "A"
34th Floor, 747 Third Avenue
[Floor plan]
<PAGE> 65
SCHEDULE "B"
WORK AGREEMENT
ARTICLE I
Subject to the provisions of this Schedule, Landlord agrees to and will, at its
sole cost and expense, perform, furnish, install and provide in the Demised
Premises all of the work and installations detailed on those certain
architectural plans, specifications and drawings prepared by Michael David
Monsky, Architect and labeled A-1, dated January 7, 1991 ("Tenant's Plans"),
hereby approved by Landlord and Tenant, subject to the following qualifications
("Landlord's Work"):
Landlord agrees to reimburse Tenant for the architectural fees incurred by
Tenant in connection with the preparation of Tenant's Plans up to an amount not
in excess of $4,868.00.
Provided that Tenant shall have given Landlord written notice thereof within one
(1) year of substantial completion of Landlord's Work, Landlord at its expense
agrees to maintain and repair (and replace, if necessary) Landlord's Work, and
agrees to remain responsible to cure, or cause to be cured, any defects in
workmanship design, materials or equipment-relating to Landlord's Work.
<PAGE> 66
ARTICLE II
Landlord shall perform Landlord's Work in compliance with applicable laws and
Landlord's Work shall be done in good and workmanlike manner.
Tenant's Plans submitted shall be deemed authorization by Tenant for Landlord to
proceed with the work shown; except that any work in excess of this agreement
shall be estimated by Landlord for Tenant's prior approval before proceeding
with the same.
Any approvals required to be given by either party shall be deemed approved and
authorized, unless within five (5) days after submission they are disapproved.
The air conditioning will be designed at Landlord's expense. For engineering
services required for any purposes other than as required in connection with
Tenant's Plans, Tenant shall reimburse Landlord for the cost of such engineering
services. Any change to Tenant's Plans shall be at Tenant's expense.
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Any architect or designer acting for or on behalf of Tenant shall be deemed an
Agent of Tenant and authorized to bind Tenant in all respects. At Landlord's
option, either Landlord's architect or Tenant's own architect shall submit all
plans for any approvals or permits to the governmental authority having
jurisdiction. All permits which may be required to build the space in accordance
with Tenant's Plans shall be procured and paid for by Landlord.
If there is a delay in Landlord's completion due to changes made by Tenant or in
giving authorizations or approvals in connection therewith or failure to execute
any of the work permitted to be performed by Tenant, or any act or failure to
act by Tenant, then the Demised Premises shall be deemed ready for occupancy and
the-Term shall commence on the date when the Demised Premises would have been
ready but for such Tenant's delay.
In addition, Tenant shall pay all costs and any damages Landlord may sustain by
reason of such delays.
Landlord shall have no responsibility for the failure to complete all of
Tenant's work under this Schedule by reason of any delays in delivery or
installation of any such items which are not included in Tenant's Plans, and the
Term of this Lease shall commence on the date that this Lease would have
commenced had the completion of the work not been so delayed.
Prior to commencement, entry by Tenant in or on the Demised Premises shall be at
Tenant's sole risk and upon request of Landlord, Tenant shall deliver to
Landlord policies and certificates of insurance reasonably satisfactory to
Landlord. Tenant's installations shall be completed free of all liens and
encumbrances.
Tenant agrees that should Tenant, its agents and/or contractors, enter upon the
Demised Premises for the purpose of performing any work, the labor employed by
Tenant or anyone performing such work, for or on behalf of Tenant, shall always
be harmonious and compatible with the labor employed by Landlord or any
contractors or subcontractors of Landlord. Should such labor be unharmonious or
incompatible, Landlord may require Tenant to withdraw from such premises.
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In the event Tenant or Tenant's contractor shall enter upon the Demised Premises
or any other part of the Building, Tenant agrees to indemnify and save Landlord
free and harmless, from and against any and all claims whatsoever arising out of
said entry or such work.
Tenant's agents, contractors and their employees shall comply with the special
rules, regulations and requirements of building management for the performance
and coordination of said agents, contractors and their employees so as to avoid
the intrusion into the operation of the Building and to avoid disturbing the
quiet enjoyment of other tenants.
As a condition to Landlord's permission to Tenant to make any of Tenant's
installations in the Demised Premises during the performance by Landlord of
Landlord's Work, Landlord may require that Tenant agree with Landlord the fixing
of the Commencement Date of this Lease.
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SCHEDULE "C"
RULES AND REGULATIONS
1. The rights of tenants in the entrances, corridors, elevators and
escalators of the Building are limited to ingress to and egress from the
tenants' premises for the tenants and their employees, licensees and invitees,
and no tenant shall use, or permit the use of, the entrances, corridors,
escalators or elevators for any other purpose. No bicycles, dogs or other
animals may be brought into the Building by Tenant, or its employees, licensees
or invitees. No tenant shall invite to the tenant's premises, or permit the
visit of, persons in such numbers or under such conditions as to interfere with
the use and enjoyment of any of the plazas, entrances, corridors, escalators,
elevators and other facilities of the Building by other tenants. Tenant shall
not use or permit its employees to use the elevators before 10:00 A.M. in a
"Down" direction for purposes of taking a coffee break or similar activities.
Fire exits and stairways are for emergency use only, and they shall not be used
for any other purposes by the tenants, their employees, licensees or invitees.
No tenant shall encumber or obstruct, or permit the encumbrance or obstruction
of, any of the sidewalks, plazas, entrances, corridors, escalators, elevators,
fire exits or stairways of the Building. Landlord reserves the right to control
and operate the public portions of the Building and the public facilities, as
well as facilities furnished for the common use of the tenants, in such manner
as it deems best for the benefit of the tenants generally.
2. The cost of repairing any damage to the public portions of the
Building or the public facilities or to any facilities used in common with other
tenants, caused by a tenant or the employees, licensees or invitees of the
tenant, shall be paid by such tenant.
3. Landlord may refuse admission to the Building outside of ordinary
business hours to any person not known to the watchman in charge or not having a
pass issued by Landlord or not properly identified, and may require all persons
admitted to or leaving the Building outside of ordinary business hours to
register. Tenant's employees, agents and visitors shall be permitted to enter
and leave the Building whenever appropriate arrangements have been previously
made between Landlord and Tenant with respect thereto. Each tenant shall be
responsible for all persons for whom he requests such
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permission and shall be liable to Landlord for all acts of such persons. Any
person whose presence in the Building at any time shall, in the judgment of
Landlord, be prejudicial to the safety, character, reputation and interests of
the Building or its tenants may be denied access to the Building or may be
ejected therefrom. In case of invasion, riot, public excitement or other
commotion, Landlord may prevent all access to the Building during the
continuance of the same, by closing the doors or otherwise, for the safety of
the tenants and protection of property in the Building. Landlord may require any
person leaving the Building with any package or other object to exhibit a pass
from the tenant from whose premises the package or object is being removed, but
the establishment and enforcement, or failure to enforce, of such requirements
shall not impose any responsibility on Landlord for the protection of any tenant
against the removal of property from the premises of the tenant. Landlord shall,
in no way, be liable to any tenant for damages or loss arising from the
admission, exclusion or ejection of any person to or from the tenant's premises
or the Building under the provisions of this rule.
4. No tenant shall obtain or accept or use in its premises ice,
drinking water, food, beverage, towel, barbering, boot blacking, floor
polishing, lighting maintenance, cleaning or other similar services from any
persons not authorized by Landlord in writing to furnish such services, provided
always that the charges for such services by persons authorized by Landlord are
not excessive. Such services shall be furnished only at such hours, in such
places within the tenant's premises and under such regulations as may be fixed
by Landlord.
5. No awnings or other projections over or around the windows shall be
installed by any tenant and only such window blinds as are supplied, or
permitted by Landlord shall be used in a tenant's premises.
6. There shall not be used in any space, or in the public halls of the
Building, either by Tenant or by jobbers or others, in the delivery or receipt
of merchandise or mail, any hand trucks, except those equipped with rubber tires
and side guards.
7. All entrance doors in each tenant's premises shall be left locked
when the tenant's premises are not in use. Entrance doors shall not be left open
at any time. All windows in each tenant's premises shall be kept closed at all
times, and all blinds or drapes therein above the ground floor shall be lowered
or closed when and as reasonably required
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because of the position of the sun, during the operation of the Building air
conditioning system to cool or ventilate the tenant's premises.
8. No noise, including the playing of any musical instruments, radio or
television, which, in the judgment of Landlord, might disturb other tenants in
the Building shall be made or permitted by any tenant and no cooking shall be
done in Tenant's premises except as expressly approved by Landlord. Nothing
shall be done or permitted in any tenant's premises and nothing shall be brought
into or kept in any tenant's premises which would impair or interfere with any
of the Building services or the proper and economic heating, cleaning or other
servicing of the Building or the premises, or the use or enjoyment by any other
tenant of any other premises, nor shall there be installed by any tenant any
ventilating, air conditioning, electrical or other equipment of any kind which,
in the judgment of Landlord, might cause any such impairment or interference. No
dangerous, inflammable, combustible or explosive object or material shall be
brought into the Building by any tenant or with the permission of any tenant.
9. Tenant shall not permit any cooking or food odors emanating from the
Demised Premises to seep into other portions of the Building.
10. No acids, vapors or other materials shall be discharged or
permitted to be discharged into the waste lines, vents or flues of the Building
which may damage them. The water and wash closets and other plumbing fixtures in
or serving any tenant's premises shall not be used for any purpose other than
the purpose for which they were designed or constructed, and no sweepings,
rubbish, rags, acids or other foreign substances shall be deposited therein. All
damages resulting from any misuse of the fixtures shall be borne by-the tenant
who, or whose servants, employees, agents, visitors or licensees, shall have
caused the same.
11. No signs, advertisement, notice or other lettering shall be
exhibited, inscribed, painted or affixed by any tenant on any part of the
outside or inside the premises or the Building without the prior written consent
of Landlord. In the event of the violation of the foregoing by any tenant,
Landlord may remove the same without any liability, and may charge the expense
incurred by such removal to the tenant or tenants violating this rule. Interior
signs and lettering on doors and elevators shall be inscribed, painted, or
affixed for each tenant by Landlord at the expense of such tenant, and shall be
of a size, color and style acceptable to Landlord.
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Landlord shall have the right to prohibit any advertising by any tenant which
impairs the reputation of the Building or its desirability as a building for
offices, and upon written notice from Landlord, Tenant shall refrain from or
discontinue such advertising.
12. No additional locks or bolts of any kind shall be placed upon any
of the doors or windows in any tenant's premises, and no lock on any door
therein shall be changed or altered in any respect. Duplicate keys for a
tenant's premises and toilet rooms shall be procured only from Landlord, which
may make a reasonable charge therefor. Upon the termination of a tenant's lease,
all keys to the tenant's premises and toilet rooms shall be delivered to
Landlord.
13. No tenant shall mark, paint, drill into, or in any way deface any
part of the Building or the premises demised to such tenant. No boring, cutting
or stringing of wires shall be permitted, except with the prior written consent
of Landlord, and as Landlord may direct. No tenant shall install any resilient
tile or similar floor covering in the premises demised to such tenant except in
a manner approved by Landlord.
14. No tenant shall use or occupy, or permit any portion of the
premises demised to such tenant to be used or occupied, as an office for a
public stenographer or typist, or as a barber or manicure shop, or as an
employment bureau. No tenant or occupant shall engage or pay any employees in
the Building, except those actually working for such tenant or occupant in the
Building or advertise for laborers giving an address at the Building.
15. No premises shall be used, or permitted to be used, at any time, as
a store for the sale or display of goods or merchandise of any kind, or as a
restaurant, shop, booth, bootblack or other stand, or for the conduct of any
business or occupation which involves direct patronage of the general public in
the premises demised to such tenant, or for manufacturing or for other similar
purposes.
16. The requirements of tenants will be attended to only upon
application at the office of the Building. Employees of Landlord shall not
perform any work or do anything outside of the regular duties, unless under
special instructions from the office of Landlord.
17. Each tenant shall, at its expense, provide artificial light in the
premises demised to such tenant for Landlord's agents, contractors and employees
while performing janitorial or other cleaning services and making repairs or
alterations in said premises.
18. Employees of Tenant shall not loiter around the hallways,
stairways, elevators, front, roof or any other part of the Building used in
common by the occupants thereof.
19. Any cuspidors or similar containers or receptacles used in the
Demised Premises shall be cared for and cleaned by and at the expense of Tenant.
20. Any and all wet and/or food garbage, including coffee grinds, is to
be deposited in a plastic liner bag in a waste basket or other receptacle.
21. Tenant shall separate all refuse and rubbish of Tenant in
accordance with the methods and procedures set forth, from time to time, by
Landlord.
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<PAGE> 73
FIRST AMENDMENT OF LEASE
AGREEMENT, dated this 7th day of December, 1994, between SAGE REALTY
CORPORATION, a New York corporation having an office at 777 Third Avenue, New
York, New York 10017, as agent for the owner of the building hereinafter
mentioned ("Landlord"),and ZAI NET SOFTWARE, INC., a New York corporation having
an office at 747 Third Avenue, New York, New York 10017 ("Tenant").
W I T N E S S E T H
WHEREAS, Landlord and Zaitech Software, Inc. (Tenant's
predecessor-in-interest) entered into an Indenture of Lease, dated February 15,
1991 ("Lease"), pursuant to which Landlord leased to Tenant, and Tenant hired
from Landlord, a portion of the 34th floor (the "Existing Premises") in the
building known as 747 Third Avenue, New York, New York (the "Building"); and
WHEREAS, Landlord and Tenant desire to amend the Lease to provide,
among other things, for a substitution of the space constituting the Demised
Premises (as defined in the Lease) and for an extension of the term of the
Lease.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. All terms used herein shall have the same meaning ascribed to them
in the Lease, unless otherwise herein indicated, or unless the context hereof
shall otherwise require.
2. Effective as of the date hereof, the Term is hereby extended to the
last day of the month in which the day immediately preceding the fifth (5th)
anniversary of the date of Substantial Completion (as such term is defined in
Schedule B to this First Amendment of Lease) shall occur. Said date shall
hereafter be deemed the "Expiration Date".
3. Effective as of the date of Substantial Completion Schedule A to the
Lease shall be deemed deleted and Schedule A annexed hereto and made a part
hereof shall be substituted in lieu thereof and, from and after such date, the
Demised Premises shall be deemed to be that portion of the 18th floor shown as
the hatched area of Schedule A attached hereto (the "Substitution Space"),
including all fixtures and equipment which as of the date of Substantial
Completion or during the Term of the Lease are attached thereto or become a part
thereof. Tenant shall deliver vacant possession of the Existing Premises to
Landlord on the date of Substantial Completion in the condition required by
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the Lease as if said date were the originally stated Expiration Date (such date
of delivery of the Existing Premises is hereinafter referred to as the "Delivery
Date") and from and after the Delivery Date Tenant shall have no further
responsibility with respect to the Existing Premises, provided, however,
notwithstanding such surrender, Tenant shall be and remain liable for any and
all rent and additional rent due and owing for the Existing Premises, whether or
not theretofore billed, for the period through and including the Delivery Date,
and Tenant's failure to pay any such sums and/or deliver the Existing Premises
to Landlord as herein required shall be deemed a default entitling Landlord to
all remedies provided for in the Lease or otherwise available at law. In the
event that the date of Substantial Completion shall occur after the originally
stated Expiration Date, the parties acknowledge that Tenant shall remain in
possession of the Existing Premises until the date of Substantial Completion
upon all of the terms and conditions contained in the Lease applicable to Tenant
prior to this First Amendment of Lease, and Tenant shall not be considered to be
a "holdover tenant" unless and until Tenant shall fail to deliver vacant
possession of the Existing Premises within five (5) days of the date of
Substantial Completion.
4. Effective upon the date of Substantial Completion, Section 3.01 of
the Lease shall be amended to provide that the annual rate of Fixed Rent shall
be (i) $173,950.70 during the period beginning on the date of Substantial
Completion and continuing through the day prior to the second (2nd) anniversary
of the date of Substantial Completion and (ii) $184,856.20 during the period
beginning on the second (2nd) anniversary of the date of Substantial Completion
and continuing through the balance Of the Term. Landlord and Tenant acknowledge
that the aforesaid sums include an agreed sum, as specified in Article 4 of the
Lease, as amended herein, for which Landlord will supply electricity to the
Demised Premises in accordance with said Article 4.
Anything herein to the contrary notwithstanding, provided this Lease
shall be in full force and effect and Tenant shall not be in default hereunder
beyond any applicable notice and grace periods, the Fixed Rent shall abate at
the rate of $2,196.35 per month for a period of twenty-four (24) months from and
after the date of Substantial Completion.
5. Effective as of the date of Substantial Completion, subparagraphs
(a), (b), (f) and (g) of Section 3.04 of the Lease shall be amended to read as
follows:
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(a) The term "Base Tax Year" as hereinafter set forth for the
determination of real estate tax escalation shall mean the
calendar year 1995 (i.e., Real Estate Taxes, as herein
defined, for the Base Tax Year shall be the average of Real
Estate Taxes for the period commencing July 1, 1994 and ending
June 30, 1995 and Real Estate Taxes for the period commencing
on July 1, 1995 and ending on June 30, 1996).
(b) The term "the Percentage" shall mean 1.51%.
(f) The term "Base Wage Rate" shall mean the Wage Rate in effect
on January 1, 1995.
(g) The term "Wage Rate Factor" shall mean 5,453.
6. Effective as of the date of Substantial Completion, the first
sentence of paragraph A immediately following Section 3.04(g), shall be deleted
in its entirety and the following shall be inserted in lieu thereof:
A. Operating Expense Adjustment
It is agreed that if any time the Wage Rate shall be
greater than the Base Wage Rate, Tenant shall be required to
pay to Landlord, as additional rent, an "Operating Expense
Adjustment" in an annual sum obtained by multiplying (i) the
number of cents (irr.1ndj.Tig any fraction of a cent) by which
the Wage Rate exceeds the Base Wage Rate by (ii) the Wage Rate
Factor, by (iii) 75%.
7. Effective as of the date of Substantial Completion, (i)
Section 4.01 of the Lease shall be amended by the deletion of the sum of
$6,693.50 set forth in the second line thereof (as the same may have been
adjusted from time to time pursuant to the provisions of the Lease) and the
insertion of the sum of 11$15,813.7011 in lieu thereof and (ii) the term
Commencement Date as set forth in Article 4 shall be deemed to mean the date
hereof.
8. Effective as of the date hereof, the third full paragraph of
subsection 3 of Section 11.01 (a) is hereby deleted in its entirety and the
following shall be inserted in lieu thereof:
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If Landlord shall not exercise any of its foregoing options within the
time set forth above, provided Tenant shall not be in default hereunder,
Landlord's consent to any such proposed assignment or subletting shall not be
"unreasonably" withheld in accordance with paragraph (b) of this Section 11.01.
It is agreed, however, that if Landlord shall not exercise any of the foregoing
options and Tenant shall thereupon assign this Lease or sublet all or any
portion of the Demised Premises, then and in that event, Tenant shall pay to
Landlord, as additional rent, fifty (50%) percent of the excess, if any, of the
fixed rent plus additional rent paid by the assignee or sublessee to Tenant over
the Fixed Rent plus additional rent allocable to that part of the Demised
Premises affected by such assignment or sublease pursuant to the provisions of
this Lease, such excess, if any, to be reduced by the actual reasonable expenses
incurred by Tenant in connection with such assignment or subletting, including a
single brokerage commission (if applicable), the cost of physically separating
the sublet area (if applicable) from the rest of the Demised Premises and other
related construction expenses actually incurred in connection with preparing the
space for occupancy by the sublessee, free rent and reasonable legal expenses,
all such costs and expenses to be amortized over the term of the sublease or
assignment. Such additional rent payments shall be made monthly within five (5)
days after receipt of the same Tenant. Fifty (50%) percent of any cash or other
consideration payable to Tenant in connection with such assignment or sublease
or the sale of Tenant's property in connection therewith (less in the case of
the sale thereof the fair market value of such personal property, as reasonably
determined by Landlord), shall be similarly paid over to Landlord when and as
received by Tenant.
9. Effective as of the date hereof, Schedule B of the Lease is hereby
deleted in its entirety and Schedule B annexed hereto shall be inserted in lieu
thereof with the understanding that the term "Demised Premises" as used in said
Schedule B shall be deemed to mean the Substitution Space. Tenant hereby
acknowledges that Landlord is not required to do any work with respect to the
Substitution Space except as set forth in Schedule B and that except as provided
in Schedule B Tenant is taking the same "as-is" as of the date of Substantial
Completion.
10. The parties hereto agree that Edward S. Gordon Company, Inc. and
Sage Group Associates Inc. (collectively, the "Brokers") were the only brokers
who negotiated and brought about this transaction, and Landlord agrees to pay
the Brokers a commission therefor as per separate agreements. Tenant represents
and warrants that it has not dealt with any broker other than the Brokers, and
Tenant agrees to indemnify and save
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Landlord harmless from and against any claims made by other brokers claiming to
have dealt with Tenant. Landlord represents that it has not dealt with any
broker other than the Brokers, and Landlord agrees to indemnify and save Tenant
harmless from and against any claims made by other brokers claiming to have
dealt with Landlord.
11. Effective upon the date hereof Article 38 of the lease entitled
"Tenant's Option to Extend Term" shall be deleted in its entirety.
12. In the event that the present tenant (the "Present Tenant") of the
Substitution Space shall fail to vacate and surrender the Substitution Space as
and when required under the terms of its lease, Landlord agrees to take such
action as it deems necessary and appropriate in its sole judgment to obtain
possession of the Substitution Space. In the event that Landlord shall collect
any sums for use and occupation of the Substitution Space from the Present
Tenant on account of the Present Tenant holding over in the Substitution Space
and provided such sums as collected on a monthly basis are in excess of the
Fixed Rent and Additional Rent which is payable by the Present Tenant during the
last month of the term of its lease (the "Excess Use and Occupation Amount"),
Landlord shall pay to Tenant, within ten (10) days after Landlord's receipt of
any such Excess Use and Occupation Amount, a sum equal to fifty (50%) percent of
such Excess Use and Occupation Amount after deducting therefrom any
out-of-pocket costs and expenses incurred by Landlord in connection therewith.
Notwithstanding the foregoing, nothing contained herein shall be deemed to
require that Landlord bring any legal proceeding or commence any action
against the Existing Tenant, it being understood and agreed that Landlord, in
its sole discretion, shall take such action as it deems necessary and
appropriate to obtain possession of the Substitution Space from the Existing
Tenant.
13. In the event that the Present Tenant shall not have vacated the
Surrender Space at the end of the term of its lease, Landlord agrees, upon the
written request of Tenant, to provide Tenant with temporary space (the
"Temporary Space") located in the Building if and to the extent such Temporary
Space is then available. Landlord shall deliver the Temporary Space, and Tenant
shall accept the same, in its then "as is" condition. Tenant shall occupy the
Temporary Space during the period until five (5) days after Landlord
Substantially Completes Landlord's Work with respect to the Substitution Space,
subject to all of the terms and conditions of the Lease as amended hereby,
except that:
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(i) Tenant shall not be obligated to pay to Landlord any Fixed Rent,
Operating Expense adjustments or Real Estate Tax adjustments pursuant to Section
3.04 of the Lease for such occupancy; and
(ii) Tenant shall pay to Landlord for electricity service in the
Temporary Space, on a monthly basis, one-twelfth (1/12) of an amount equal to
$2.90 multiplied by the rentable square foot area of the Temporary Space.
Within five (5) days after Landlord Substantially Completes Landlord's
Work with respect to the Substitution Space, Tenant shall vacate and surrender
the Temporary Space to Landlord. Landlord shall endeavor to give Tenant ten (10)
days advance notice (which notice may be oral) of the estimated date of
Substantial Completion of the Substitution Space but failure by Landlord to give
such notice shall not affect Tenant's obligations under this paragraph. Tenant's
failure to vacate and surrender the Temporary Space to Landlord within said five
(5) day period shall be deemed a material default under the Lease.
14. Except as modified by this First Amendment of Lease, the Lease and
each of the covenants, terms and conditions set forth therein are and shall
remain in full force and effect and are hereby ratified, confirmed and approved.
IN WITNESS WHEREOF, Landlord and Tenant have respectively
executed this First Amendment of Lease as of the day and year first above
written.
SAGE REALTY CORPORATION, as Agent
By: signature illegible
--------------------------------
Landlord
ZAI NET SOFTWARE, INC.
By: /s/ Cynthia C. Chang
--------------------------------
Tenant
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<PAGE> 79
SCHEDULE "A"
FLOOR PLAN
SEE ATTACHED
<PAGE> 80
SCHEDULE "B"
LANDLORD'S WORK
I. PLANS AND WORK
Within thirty (30) days after the date of this Lease, Tenant shall
submit to Landlord for review and approval complete and detailed final
architectural, mechanical and engineering plans and specifications showing the
alterations required by Tenant to the Demised Premises in order to prepare the
Demised Premises for Tenant's occupancy. Tenant's plans and specifications shall
be prepared in accordance with, and Landlord's responsibility shall be limited
to, the specifications set forth in Section IV of this Schedule B.
Notwithstanding the foregoing, subject to Landlord's approval of the Final Plans
(as hereinafter defined), the Final Plans may exceed the specifications as to
quality and/or quantity set forth in Section IV of this Schedule B, and so long
as the total cost thereof shall not exceed Landlord's maximum expenditure of
$109,060.00 the same shall be Landlord's responsibility. The plans and
specifications, as approved by Landlord, are hereinafter referred to as the
"Final Plans" and all work required by the Final Plans to be performed by
Landlord is hereinafter referred to as "Landlord's Work." The Final Plans shall
be prepared by Tenant at Tenant's own cost and expense provided that Landlord
shall reimburse Tenant up to a maximum of $8,179.50 for the costs incurred by
Tenant in preparation of the Final Plans (which expense shall be in addition to
Landlord's maximum expenditure of $109,060.00 as described in Section II of this
Schedule B). In addition to submission of the aforesaid plans and
specifications, Tenant shall also furnish any and all documents and information
which Landlord may reasonably require for submission to its insurance
company(s), mortgagee(s), contractors and other interested parties.
Tenant shall be responsible for showing that the Final Plans comply
with all applicable laws, rules, ordinances, requirements and regulations of all
governmental and quasi-governmental authorities having jurisdiction over
Landlord's Work and Tenant shall be liable for and shall indemnify Landlord
against any and all claims and expenses arising from or relating to the failure
of the Final Plans to meet such requirements including, without limitation, any
and all costs incurred for revising the Final Plans and correcting faulty work
resulting from errors or omissions in the Final Plans. Landlord's approval of
the Final Plans, Landlord's description of the kind and extent of work to be set
forth in the Final Plans and Landlord's performance of the work in conformity
with the Final Plans shall not make Landlord liable for any expense or claim
which may arise from or relate to the failure of Landlord's Work to meet
applicable laws, rules, ordinances, requirements and or regulations of any
governmental or quasi-governmental authority having jurisdiction thereover,nor
shall Landlord's approval of the Final Plans, performance of Landlord's Work or
any statement made herein or in the body of the Lease constitute an express or
implied representation of Landlord that any or all work performed and
installation supplied pursuant to the Final Plans is suitable for the particular
requirements of Tenant or any specific or general use and purpose of Tenant.
Landlord shall cause the Final Plans and/or appropriate building
notices and forms relating thereto to be filed with and approved by any
governmental and quasi-governmental authorities having jurisdiction over
Landlord's Work. All costs, fees and expenses incurred in connection with
obtaining the approvals of and filings with such governmental and
quasi-governmental authorities as well as all engineering and architectural
costs associated therewith, if any, shall be paid for by Landlord. Any
additional approvals or filings necessitated by changes made by Tenant to the
Final Plans shall be at the sole cost and expense of Tenant.
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The submission of the Final Plans to Landlord shall be deemed
authorization by Tenant for Landlord to proceed with the work shown on the Final
Plans, subject to the provisions hereof. Simultaneously with Tenant's submission
of the Final Plans to Landlord, Tenant shall choose one of Landlord's designated
general contractors to perform Landlord's Work. Any approvals required to be
given by either party shall be deemed given, unless within five (5) days after
any submission the party receiving the same notifies the submitting party of an
objection thereto. Any architect or designer now or hereafter acting for or on
behalf of Tenant shall be deemed an agent of Tenant and authorized to bind
Tenant in all respects.
The air conditioning system to serve the Demised Premises will be
designed at Landlord's expense which expense shall be included as part of
Landlord's maximum expenditure described in Section II of this Schedule B). For
engineering services required for any other purposes, Tenant shall reimburse
Landlord for the cost of the same. Any changes to the Final Plans and any
changes to the original air-conditioning design necessitated by any changes made
by Tenant to the Final Plans shall be at Tenant's expense.
Prior to the Commencement Date, entry by Tenant, its agents,
contractors or subcontractors, in or on the Demised Premises for performance of
work in the Demised Premises not included within Landlord's Work, or for any
other purpose whatsoever, shall be at Tenant's sole risk and responsibility.
Upon the request of Landlord, Tenant shall deliver to Landlord policies and
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certificates of insurance reasonably satisfactory to Landlord. In the event
Tenant or Tenant's contractor shall enter upon or perform work in the Demised
Premises or any other part of the Building, Tenant agrees to indemnify and save
Landlord free and harmless, from and against any and all claims whatsoever
arising out of said entry or such work.
Tenant agrees that should Tenant, its agents, contractors or
subcontractors, enter upon the Demised Premises for the purpose of performing
any work not included within Landlord's Work, or for any other purpose
whatsoever, the labor employed by Tenant or anyone performing such work, for or
on behalf of Tenant, shall always be harmonious and compatible with the labor
employed by Landlord or any agents, contractors or subcontractors of Landlord.
Should such labor be unharmonious or incompatible, Landlord may require Tenant,
its agents and/or contractors to withdraw from the Demised Premises. Tenant's
agents, contractors and subcontractors and their respective employees shall
comply with the special rules, regulations and requirements of Building
management for the performance and coordination of said agents, contractors,
subcontractors and their employees so as to avoid the intrusion into the
operation of the Building and to avoid disturbing the quiet enjoyment of other
tenants.
Landlord's Work shall be deemed to be substantially completed
("Substantial Completion" or "Substantially Completed")on the date (the
"Substantial Completion Date") when Landlord's Work shall have been completed in
accordance with the Final Plans with the exception of punchlist items (i.e.,
insubstantial details of construction, mechanical adjustment or decoration which
remain to be performed in connection with Landlord's Work which shall be
completed with reasonable promptness after the Commencement Date). Landlord
shall use its reasonable efforts to give Tenant notice of the estimated date of
Substantial Completion fifteen (15) days prior thereto, but the parties
understand and agree that any such notice shall be an estimate only and Landlord
shall incur no liability or responsibility whatsoever if the actual date of
Substantial Completion of Landlord's Work is before or after such date.
As a condition to Landlord's permission to Tenant to make any of
Tenant's installations in the Demised Premises, Landlord may require that Tenant
agree with Landlord the fixing of the Commencement Date of this Lease.
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II. LIABILITY FOR ABOVE BUILDING STANDARD WORK
All items set forth in Section IV below shall be of manufacture,
material, design, capacity and finish selected by Landlord as the standards of
the Building (the "Building Standard"). Tenant shall be liable to Landlord or
Landlord's designated agent for costs incurred by Landlord in the completion of
Landlord's Work to the extent that (i) such costs are incurred as a result of a
change by Tenant in the work as shown on the Final Plans, or (ii) if changes to
the Final Plans require the performance of work or the installation of items not
described in Section IV below, or (iii) the cost of Landlord's Work exceeds the
amount of $109,060.00, which shall be Landlord's maximum expenditure for
Landlord's Work. Landlord or Landlord's agent shall inform Tenant by notice of
the cost of such extra work which shall be payable by Tenant together with, in
the case of extra work generated solely by (i) or (ii) above, a handling and
supervision fee of fifteen percent (15%) (such costs together with such fee
being collectively, "Tenant's Contribution") as additional rent within ten (10)
days of delivery to Tenant of an invoice for same. Landlord shall perform such
extra work only if Tenant approves the cost thereof in writing within three (3)
days from Landlord's notice thereof.
III. DELAYS
The term "Tenant Delay" shall mean any delay that Landlord may
encounter in the completion of Landlord's Work by reason of any act, neglect,
failure or omission of Tenant, its agents, servants, contractors, architect or
employees, in the performance of Tenant's obligations under this Schedule B,
including:
1. Any delay in submission of Tenant's complete and detailed final
architectural, mechanical and engineering plans and specifications as and when
described in the first paragraph of this Schedule B;
2. Any delay due to changes made by or on behalf of Tenant in the Final
Plans;
3. Any delay due to Tenant's request for items to be installed within
the Demised Premises not set forth, or in greater quantities than those set
forth, in Section IV, or that have a delivery date which does not provide
sufficient time for installation prior to the otherwise anticipated date of
Substantial Completion;
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4. Any delay caused by work by or on behalf of Tenant, other than
Landlord's Work as described in the Final Plans; and
5. Non-payment of any installment of Tenant's Contribution, or any
other payment required of Tenant under this Schedule B or elsewhere in the
Lease, when due.
If the Substantial Completion Date shall be delayed by reason of a
Tenant Delay, the Demised Premises shall be deemed to be Substantially Completed
for purposes of the Commencement Date (as defined in the Lease) as of the date
that the Demised Premises would have been Substantially Completed but for any
such Tenant Delay, as determined by Landlord in its reasonable discretion,
whether or not any such Tenant Delay could have been avoided by the commitment
by Landlord of additional personnel to the performance of Landlord's Work. In
addition, Tenant shall, promptly upon demand, reimburse Landlord for all damages
resulting from such Tenant Delay.
IV. SPECIFICATIONS
Except as may be otherwise specifically provided, the following work
and materials shall be provided by Landlord at its sole cost and expense, in
accordance with the Building Standard:
Certain elements of the following work will or may adjoin, abut or
connect to, previously existing installations. Reasonable effort will be made to
make these conjunctions in a good and workmanlike manner, but Tenant recognizes
and agrees that not all elements will necessarily be newly installed provided,
however, any element which is not newly installed shall be in good condition and
consistent with the quality of the entire installation.
1. Partitioning
Gypsum board (5/8") - one side 2-1/2" steel stud and other side two (2)
layers of 5/8" gypsum board, of which one layer shall extend to underside of
floor above; sound transmission class 38; amount as required. Sound baffles will
be installed in peripheral enclosures where partitions abut said enclosure.
2. Doors and Bucks
Integral pressed steel 16 gauge, floor to ceiling bucks; flush
fireproof "3/4 hr." doors, hollow metal, full height; as required. Buck design
affords option of butt or reveal joint.
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Reveal will be installed unless otherwise specified. Doors will be undercut to
accept carpet.
3. Closets
Each closet shall be 5fO" (nominal in length) ceiling high, with flush
bi-fold doors (as manufactured by Paniflex or equal) and shall have two (2) wood
hat shelves (paint grade) and one (1) metal chrome coat rod; one (1) per tenant
or per 1,500 square feet. Doors will be installed trimless.
4. Hardware
Building standard latch sets (as manufactured by Russwin Mohad, or
equal), 1-1/2" pair Olive Knuckle Hinges; wall door stops for each door. One
lockset on main entrance door with dead bolt (Russwin or equal) master keyed to
Building system; surface mounted model L.C.N. narrow line closer (Stanley or
equal).
5. Painting
Painting is to be based upon a two coat application for all new
surfaces which shall consist of one coat prime and one coat finish. All existing
surfaces are to be painted one of nine Building Standard colors from Building
Standard color card. It shall be the responsibility of the painting contractor
to guarantee adequate paint coverage, proper surface preparation and knowledge
of all existing conditions. Strict adherence to all Building Standard paint
specifications on file in the Building office is required.
6. Flooring
Vinyl composition tile floor covering (12" X 12" 1/8"), as manufactured
by Kentile or equal throughout, or Building Standard carpeting, as per Building
Standard selection board, with underlayment; 4" straight black rubber base on
all walls. Flash patching throughout as required. All floors (except where
Tenant chooses to have carpet installed) will be cleaned and/or waxed prior to
occupancy. No "glued down" carpet will be permitted except as set forth below.
Only the following methods of carpet installation shall be permitted:
Carpet Tile: carpet tile may be installed only with releasable adhesive
approved by Landlord allowing for easy removal of such carpet tiles from
sub-floor without damage to said sub-floor.
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Broadloom: broadloom may be installed either with releasable adhesive
approved by Landlord allowing for easy removal of such broadloom from sub-floor
without damage to said sub-floor, or with "tack strips" along perimeter of the
carpeted room with commercial grade padding installed underneath broadloom.
7. Hung Ceilings
Manufactured by United States Gypsum ("Glacier" or equal). No
"dutchmans" allowed.
8. Lighting
Four (4) tube fluorescent light fixtures, Building Standard (without
lamps), 21 x 41 (as manufactured by National Lighting or equal); one (1) fixture
per 125 square feet of net rentable area, but in no event in excess of
governmental regulations in effect as of the date of installation. Fixtures may
be new or refurbished from Building stock. All lenses to be new. Tenant to
supply new Building Standard lamps and bulbs (the cost of which shall be
included as part of Landlord's maximum expenditure), which Landlord will install
at no cost.
9. Venetian Blinds
White colored venetian blinds in blind pockets on all windows; no
substitutions will be permitted. Blinds may be new or refurbished from Building
stock.
10. Heating, Ventilating and Air Conditioning
Year-round air conditioning system, combining the use of periphery
units and interior duct air distribution system. The periphery air conditioning
system shall service that portion of the Demised Premises being approximately
151 distant from the glass line of the Building. The air conditioning system
shall be designed to maintain interior conditions of 80* dry bulb and 50%
relative humidity when outside conditions are 95 degrees dry bulb and 75 degrees
wet bulb, 70* when 0* outside; and will provide fresh air in a quantity not less
than 0.3 cubic feet per minute per square foot of floor area, provided that in
any given room or area of the Demised Premises the occupancy does not exceed one
(1) person for each 100 square feet and the total connected electric load does
not exceed four (4) watts per square foot total, and further provided such
conditions are in conformance with the New York State Energy Conservation Code
effective January 1, 1979.
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Interior duct distribution, including Building standard ducts, grilles,
etc., to accommodate Tenant's layout. Said duct distribution to be designed by
Landlord's engineer only.
For each periphery room Landlord will furnish one or more automatic
thermostatically controlled incremental self contained peripheral units (as
manufactured by Singer/Remington) sized by Landlord's engineer to be of
sufficient capacity to provide heating, ventilating and air conditioning in
accordance with the standards set forth in Section (A) above. The automatic
system will operate from 8:00 a.m. to 6:00 p.m. each Business Day. Heating or
cooling at occupant's selection shall be available at any time in periphery
only. In order to reactivate the system after its automatic shut-off, Tenant
need only press a button within the Demised Premises. Once reactivated, the
system will thereafter automatically shut off at intermittent intervals. It can
again be reactivated upon the pressing of the aforesaid button.
Integrated with the air conditioning unit enclosure will be installed a
system of storage cabinets to provide a complete module of comfort and
convenience. The storage cabinets will be of the open bookcase type with an
adjustable metal shelf and fixed bottom shelf. The cabinets will be 12" deep and
located on both sides of the air conditioning enclosure to provide one
continuous assembly.
11. Electrical Outlets
Duplex receptacles in Building Standard partitions, in base and/or
peripheral enclosures, at prefabricated knockouts,and/or underfloor duct system,
one (1) per 150 square feet of area.
12. Switches
Ceiling fixtures will be serviced by switches as required by the New
York City Building Code, not less than one (1) switch per room.
13. Telephone
Landlord will supply up to one point of telephone distribution for each
200 square feet of area, through partition (in base) or peripheral knockouts
only and/or conduit up to 3/4" to top of partitions. All wiring shall be done by
Tenant's contractor and Landlord shall have no responsibility for said work.
Work must meet Building Standard criteria, and damage incurred to ceiling or
walls by Tenant's contractor shall be the sole responsibility of Tenant to
repair. Any additional conduit shall be installed by Landlord's contractors and
charged to Tenant.
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SECOND AMENDMENT OF LEASE
AGREEMENT, dated this 3rd day of February,1998, between SAGE REALTY
CORPORATION, a New York corporation having an office at 777 Third Avenue, New
York, New York 10017, as agent for the owner of the building hereinafter
mentioned ("Landlord"),and ZAI NET SOFTWARE, INC., a New York Corporation having
an office at 747 Third Avenue, New York, New York 10017 ("Tenant").
W I T N E S S E T H
WHEREAS, Landlord and Zaitech Software, Inc. (Tenant's
predecessor-in-interest) entered into an Indenture of Lease, dated February 15,
1991 (which lease as amended by First Amendment of Lease, dated December 7,
1994, is hereinafter referred to as the "Lease"), pursuant to which Landlord
presently leases to Tenant a portion of the 18th floor (the "Existing Premises")
in the building known as 747 Third Avenue, New York, New York (the "Building");
and
WHEREAS, Landlord and Tenant desire to amend the Lease to provide,
among other things, for an addition of space to the Demised Premises (as defined
in the Lease) and for an extension of the term of the Lease.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. All terms used herein shall have the same meaning ascribed to them
in the Lease, unless otherwise herein indicated, or unless the context hereof
shall otherwise require.
2. Effective as of the date hereof, the Term is hereby extended to the
last day of the month in which occurs the day immediately preceding the fifth
(5th) anniversary of the Effective Date (as such term is defined in Paragraph 3
hereof).
3. Effective as of the date (the "Effective Date") of Substantial
Completion of Landlord's Work (as such terms are defined in Schedule B to this
Second Amendment of Lease), that portion of the eighteenth (18th) floor of the
Building, shown as the hatched area on Schedule A attached hereto and made a
part hereof (the "Additional Space"), shall be added to the Existing Premises on
the terms and conditions set forth below, with the Existing Premises and the
Additional Space being deemed to collectively constitute the "Demised Premises"
for all purpose under the Lease.
4. (a) Section 3.01 of the Lease shall be amended to provide that the
Fixed Rent shall be increased by the sum of
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$115,860.30 per annum, which sum represents the Fixed Rent allocable to the
Additional Space.
(b) Section 3.01 of the Lease is hereby amended to provide
that the Fixed Rent allocable to the Existing Premises shall be $206,668.87 per
annum during the period commencing on May 1, 2000 and continuing through the
Expiration Date (as extended by this Second Amendment of Lease).
5. (a) As of the Effective Date, solely for purposes of
determining additional rent attributable to the Additional Space, subparagraphs
(a), (b), (f) and (g) of Section 3.04 of the Lease shall be amended to read as
follows:
(a) The term "Base Tax Year" as hereinafter set forth for the
determination of real estate tax escalation shall mean the
period commencing July 1, 1998 and ending June 30, 1999.
(b) The term "the Percentage" shall mean .81%.
(f) The term "Base Wage Rate" shall mean the Wage Rate in effect
on January 1, 1998.
(g) The term "Wage Rate Factor" shall mean.,13,057.
(b) As of May 1, 2000, solely for purposes of determining
additional rent attributable to the Existing Premises, subparagraphs (a) and (f)
of Section 3.04 shall be amended to read as follows:
(a) The term "Base Tax Year" as hereinafter set forth for the
determination of real estate tax escalation shall mean the
period commencing July 1, 1998 and ending June 30, 1999.
(f) The term "Base Wage Rate" shall mean the Wage Rate in effect
on January 1, 1998.
6. As of the Effective Date, Article 4 of the Lease is hereby amended
by increasing the sum of "$l5,813.70" as set forth in the second line thereof,
by the sum of "$8,865.30" to "$24,679.00".
7. Schedule B of the Lease shall not be applicable to the Additional
Space, and Schedule B annexed hereto shall be applicable thereto, with the
understanding that the term "Demised Premises" as used in Schedule B annexed
hereto shall be deemed to mean the "Additional Space" and the term "Commencement
Date" shall be deemed to be the "Effective Date". Tenant hereby acknowledges
that, except as provided in Schedule B annexed hereto, Landlord is not required
to perform any work, furnish any materials or give Tenant any rent credit or
work allowance or any sum of money in connection with the Additional Space and,
except as provided in Schedule B annexed hereto, Tenant is taking the same
"as-is" as of the Effective Date.
8. The parties hereto agree that Sage Group Associates Inc. (the
"Broker") was the only broker who negotiated and brought about this transaction,
and Landlord agrees to pay the Broker a commission therefor as per separate
agreement. Tenant represents and warrants that it has not dealt with any broker
other than the Broker, and Tenant agrees to indemnify and save Landlord harmless
from and against any claims made by other brokers claiming to have dealt with
Tenant. Landlord represents that it has not dealt with any broker other than the
Broker, and Landlord agrees to indemnify and save Tenant harmless from and
against any claims made by other brokers claiming to have dealt with Landlord.
9. Tenant warrants and represents that, as of the date hereof, Landlord
has performed all of its obligations under the Lease.
10. Except as modified by this Second Amendment of Lease, the Lease and
each of the covenants, terms and conditions set forth therein are and shall
remain in full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this
Third Amendment of Lease as of the day and year first above written.
SAGE REALTY CORPORATION, as Agent
By: signature illegible
---------------------------------
Landlord
ZAI NET SOFTWARE, INC.
By: /s/ Cynthia C. Chang
---------------------------------
Tenant ZAI*NET
SOFTWARE, INC.
747 THIRD AVENUE 18 FL
NEW YORK, NY 10017
(212) 888-3600
<PAGE> 90
SCHEDULE "B"
PLANS AND WORK
1. Plan Submission
Within 30 days after the date of this Second Amendment of Lease Tenant
hall submit to Landlord for review and approval complete and detailed final
architectural, mechanical and engineering plans and specifications showing the
alterations required by Tenant to the Demised Premises in order to prepare the
Demised Premises for Tenant's occupancy. In addition to submission of the
aforesaid plans and specifications, Tenant shall also furnish any and all
documents and information which Landlord may reasonably require for submission
to its insurance company (s), mortgagee (s), contractors and other interested
parties.
2. Authorization to Proceed
Tenant's plans and specifications shall be prepared in accordance with,
and Landlord's responsibility shall be limited to, the specifications set forth
in Section V of this Schedule B. The plans and specifications, as approved by
Landlord, are hereinafter referred to as the "Final Plans" and all work required
by the Final Plans to be preformed by Landlord is hereinafter referred to as
"Landlord's Work."
The submission of the Final Plans to Landlord shall be deemed
authorization by Tenant for Landlord to proceed with the work shown on the Final
Plans, subject to the provisions hereof. Any approvals required to be given by
either party shall be deemed given, unless within five (5) days after any
submission the party receiving the same notifies the submitting party of an
objection thereto. Any architect or designer now or hereafter acting for or on
behalf of Tenant shall be deemed an agent of Tenant and authorized to bind
Tenant in all respects.
3. Compliance with Laws & Codes
Tenant shall be responsible for showing that the Final Plans comply
with all applicable laws, rules, ordinances, requirements and regulations of all
governmental and quasi-governmental authorities having jurisdiction over
Landlord's Work and Tenant shall be liable for and shall indemnify Landlord
against any and all claims and expenses arising from or relating to the failure
of the Final Plans to meet such requirements including, without limitation, any
and all costs incurred for revising the Final Plans and correcting faulty work
resulting from errors or omissions in the Final Plans. Landlord's approval of
the Final Plans, Landlord's description of the kind and extent of work to be set
forth in the Final Plans and Landlord's performance of the work in conformity
with the Final Plans shall not make Landlord liable for any expense or claim
which may arise from or relate to the
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failure of Landlord's Work to meet applicable laws, rules, ordinances,
requirements and or regulations of any governmental or quasi-governmental
authority having jurisdiction thereover, nor shall Landlord's approval of the
Final Plans, performance of the Landlord's Work or any statement made herein or
in the body of the Lease constitute an express or implied representation of
Landlord that any or all work performed and installation supplied pursuant to
the Final Plans is suitable for the particular requirements of Tenant or any
specific or general use and purpose of Tenant.
4. Filing with Governmental Agencies
Landlord shall cause the Final Plans and/or appropriate building
notices and forms relating thereto to be filed with and approved by any
governmental and quasi-governmental authorities having jurisdiction over
Landlord's Work. All costs, fees and expenses incurred in connection with
obtaining the approvals of and filings with such governmental and
quasi-governmental authorities as well as all engineering and architectural
costs associated therewith, if any, shall be paid for by Landlord and the cost
thereof shall be applied against "Landlord's maximum expenditure,, (as defined
in Section IV hereof). Any additional approvals or filings necessitated by
changes made by Tenant to the Final Plans shall be at the sole cost and expense
of Tenant.
5. Architectural & Engineering Services
The Final Plans shall be prepared by Tenant at Tenant's own cost and
expense; provided that Landlord shall reimburse Tenant for the costs incurred by
Tenant in preparation of the Final Plans and the cost thereof shall be applied
against "Landlord's maximum expenditure" (as defined in Section IV hereof).
The air conditioning system to serve the Demised Premises will be
designed at Landlord's expense. For engineering services required for any other
purposes, Tenant shall reimburse Landlord for the cost of the same. Any changes
to the Final Plans and any changes to the original air-conditioning design
necessitated by any changes made by Tenant to the Final Plans shall be at
Tenant's expense.
6. Entry by Tenant
Prior to the Commencement Date, entry by Tenant, its agents,
contractors or subcontractors, in or on the Demised Premises for performance of
work in the Demised Premises not included within Landlord's Work, or for any
other purpose whatsoever, shall be at Tenant's sole risk and responsibility.
Upon the request of Landlord, Tenant shall deliver to Landlord policies and
certificates of insurance reasonably satisfactory to Landlord. In the event
Tenant or Tenant's contractor shall enter upon or perform work in the Demised
Premises or any other part of the Building, Tenant agrees to indemnify and save
Landlord free and harmless, from and against any and all claims whatsoever
arising out of said entry or such work.
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Tenant agrees that should Tenant, its agents, contractors or
subcontractors, enter upon the Demised Premises for the purpose of performing
any work not included within Landlord's Work, or for any other purpose
whatsoever, the labor employed by Tenant or anyone performing such work, for or
on behalf of Tenant, shall always be harmonious and compatible with the labor
employed by Landlord or any agents, contractors or subcontractors of Landlord.
Should such labor be unharmonious or incompatible, Landlord may require Tenant,
its agents and/or contractors to withdraw from the Demised Premises. Tenant's
agents, contractors and subcontractors and their respective employees shall
comply with the special rules, regulations and requirements of Building
management for the performance and coordination of said agents, contractors,
subcontractors and their employees so as to avoid the intrusion into the
operation of the Building and to avoid disturbing the quiet enjoyment of other
tenants.
As a condition to Landlord's permission to Tenant to make any of
Tenant's installations in the Demised Premises, Landlord may require that Tenant
agree with Landlord the fixing of the Commencement Date of this Lease.
II. SUBSTANTIAL COMPLETION
Landlord's Work shall be deemed to be substantially completed
("Substantially Completion" or "Substantial Completion") on the date (the
"Substantial Completion Date") when Landlord's Work shall have been completed in
accordance with the Final Plans with the exception of punchlist items (i.e.,
insubstantial details of construction, mechanical adjustment or decoration which
remain to be performed in connection with Landlord's Work which shall be
completed with reasonable promptness after the Commencement Date).
III. DELAYS
The term "Tenant Delay" shall mean any delay that Landlord may
encounter in the completion Landlord's Work by reason of any act, neglect,
failure or omission of Tenant, its agents, servants, contractors, architect or
employees, in the performance of Tenant's obligations under this Schedule B,
including:
1. Submission
Any delay in submission of Tenant's complete and detailed final architectural,
mechanical and engineering plans and specifications as and when described in the
first paragraph of this Schedule B;
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2. Changes
Any delay due to changes made by or on behalf of Tenant in the Final Plans;
3. Quantity or Long Lead
Any delay due to Tenant's request for items to be installed within the Demised
Premises not set forth, or in greater quantities than those set forth, in
Section V, or that have a delivery date which does not provide sufficient time
for installation prior to the otherwise anticipated date of Substantial
Completion;
4. Tenant Work
Any delay caused by work by or on behalf of tenant, other than Landlord's Work
as described in the Final Plans; and
5. Non-payment of Tenant Contribution
Non-payment of any installment of Tenant's Contribution (as defined in Section
IV below), or any other payment required of Tenant under this Schedule B or
elsewhere in the Lease, when due.
If the Substantial Completion Date shall be delayed by reason of a
Tenant Delay, the Demised Premises shall be deemed to be Substantially Completed
for purposes of the Commencement Date (as defined in the Lease) as of the date
that the Demised Premises would have been Substantially Completed but for any
such Tenant Delay, as determined by Landlord in its reasonable discretion,
whether or not any such Tenant Delay could have been avoided by the commitment
by Landlord of additional personnel to the performance of Landlord's Work. In
addition, Tenant shall, promptly upon demand, reimburse Landlord for all damages
resulting from such Tenant Delay.
IV. LIABILITY FOR ABOVE BUILDING STANDARD WORK
All items set forth in Section V below shall be of manufacture,
material, design, capacity and finish selected by Landlord as the standards of
the Building (the "Building Standard"). Tenant shall be liable to Landlord or
Landlord's designated agent for costs incurred by Landlord in the completion of
Landlord's Work to the extent that W such costs are incurred as a result of a
change by Tenant in the work as shown on the Final Plans, (ii) if the Final
Plans require the performance of work or the installation of items not described
in Section V below or-.(iii) the cost of Landlord's Work exceeds the amount of
$61,140, which shall be "Landlord's maximum expenditure" for Landlord's Work.
Landlord or Landlord's agent shall inform Tenant by notice of the cost of such
extra work which shall be payable by Tenant together with a handling and
supervision fee of twenty-one percent (21%) (such costs together with such fee
being collectively, "Tenant's Contribution") as additional rent within ten (10)
days of delivery to Tenant of an invoice for same. Landlord shall perform such
extra work only if Tenant approves the cost thereof in writing within three (3)
days from Landlord's notice thereof.
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V. SPECIFICATIONS
Except as may be otherwise specifically provided, the following work
and materials shall be provided by landlord at its sole cost and expense, in
accordance with the building standard:
Certain elements of the following work will or may adjoin, abut or
connect to, previously existing installations. Reasonable effort will be made to
make these conjunctions in a good and workmanlike manner, but tenant recognizes
and agrees that not all elements will necessarily be newly installed.
1. Partitioning
Where partitions contain hollow metal frames the wall construction
shall be; 5/8", gypsum board on one side of 2-1/2" steel stud and the other side
shall consist of two (2) layers of 5/8" gypsum board, of which, one layer shall
extend to underside of floor above. All other partitions shall be; 5/8" gypsum
board on one side of 2-1/2" steel stud and the other side one (1) layers of 5/8"
gypsum board which shall extend to underside of floor above.
Fiberglass insulation will be installed in all walls from floor to
above hung ceiling.
2. Doors and Bucks
Integral pressed steel 16 gauge, floor to ceiling bucks; flush
fireproof "3/4 hr." doors, hollow metal, full height; as required. Buck design
affords option of butt or reveal joint. Reveal will be installed unless
otherwise specified. Doors will be undercut to accept carpet. Doors may be new
or re-used from building stock.
3. Closets
Each closet shall be 5.0" (nominal in length) ceiling high, with 3/4"
paint grade, full height wood doors and shall have one (1) vinyl-coated wire
shelves with coat rods per tenant or per 1500 square feet.
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<PAGE> 95
4. Hardware
Building standard lever latch sets (as manufactured by Russwin Corbin,
Series 3400 in polished chrome finish), 2 pair paint grade butt hinges and wall
door stop for each door. one lockset on main entrance door with dead bolt master
keyed to building system; surface mounted L.C.N. narrow line closer. Where doors
are to be re-used, hinges shall be re-used 1-1/2 pair "olive knuckle".
5. Painting
Painting is to be based upon a two coat application for all new
surfaces which shall consist of one prime coat and one finish coat. All existing
surfaces are to receive one finish coat. All surfaces to be painted with
building standard colors from building standard color chart.
6. Flooring
Vinyl composition tile floor covering (12"x12"x1/8"), (as manufactured
by Armstrong) or equal or building standard carpeting, as per building standard
selection board; 4" rubber base on all walls. Broadloom is to be installed over
tackless and pad.
7. Hung Ceilings
Mechanically suspended acoustical ceilings, exposed spline, 2'0" x 2'0"
(as manufactured by United States Gypsum, # 584 Glacier, tegular tile), or
equal. Splines shall be white. Ceiling shall be 81- 411 throughout. No
"dutchmans" permitted.
8. Lighting
Four (4) tube fluorescent light fixtures, 2' x 4' (without lamps), (as
manufactured by National Lighting) or equal; one (1) fixture per 125 square feet
of net rentable area, but in no event in excess of governmental regulations in
effect as of the date of installation. Fixtures and lenses may be new or
refurbished from building stock. Tenant to supply new building standard
fluorescent "Phillips", warm white 34W-EWII bulbs which landlord will install at
no cost.
9. Venetian Blinds
White "Levolor" or equal venetian blinds in blind pockets at all
windows; no substitutions will be permitted. Blinds may be new or refurbished
from building stock.
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10. Heating, Ventilating and Air Conditioning
Year-round air conditioning system, combining the use of periphery
units and interior duct air distribution system. The periphery air conditioning
system shall service that portion of the demised premises being approximately
151 distant from the glass line of the building. The air conditioning system
shall be designed to maintain interior conditions of 80* dry bulb and 501
relative humidity when outside conditions are 95* dry bulb and 75* wet bulb, 70*
when 0' outside; and will provide fresh air in a quantity not less than 0.3
cubic feet per minute per square foot of floor area, provided that in any given
room or area of the Demised Premises the occupancy does not exceed one (1)
person for each 100 square feet and the total connected electric load does not
exceed four (4) watts per square foot of usable area, of which a maximum of (2)
watts per square foot of usable area may be used for lighting, and further
provided such conditions are in conformance with prevailing codes in effect at
the time of the work.
Interior duct distribution, including building standard ducts, grilles,
etc., to accommodate tenant's layout. Said duct distribution to be designed by
landlord's engineer only.
For each periphery room landlord will furnish one or more automatic
thermostatically controlled incremental self contained peripheral units (as
manufactured by McQuay) or equal, sized by landlord's engineer to be of
sufficient capacity to provide heating, ventilating and air conditioning in
accordance with the standards set forth above. The automatic system will operate
from 8:00 a.m. to 6:00 p.m. each business day. Heating or cooling at occupant's
selection shall be available at any time in periphery only. In order to
reactivate the system after its automatic shut-off, tenant need only press a
button. Once reactivated, the system will thereafter automatically shut off at
intermittent intervals. It can again be reactivated upon the pressing of the
aforesaid button.
11. Electrical Outlets
Duplex receptacles in building standard partitions and/or peripheral
enclosures at prefabricated knockouts, one (1) per 150 square feet of area. No
receptacles recessed in core walls.
12. Switches
Ceiling fixtures will be serviced by switches as required by the New
York City Building Code, not less than one (1) switch per room.
13. Telephone
Landlord will supply up to one point of telephone distribution for each
200 square feet of area, through partition or peripheral knockouts only and/or
conduit up to 3/411 to top of partitions. All wiring shall be done by tenant's
contractor and landlord shall have no responsibility for said work. No exposed
telephone wiring shall be permitted. Telephone cables in hung ceiling may be
exposed, however, the cables must be supported properly so as not to rest on the
hung ceiling. Where telephone cable is used in the hung ceiling, it must be
Teflon coated or in pipe. All work must meet building standard criteria, and
damage incurred to ceiling or walls by tenant's contractor shall be the sole
responsibility of tenant to repair.
14. Glass Walls
Up to 3001 of total partitioning can be full height 1/411 clear, butt
glazed, tempered glass with beveled edges, no silicone, in building standard 411
aluminum base and 211 aluminum head. Framing above ceiling to be metal stud
braced with wood blocking above top track as required.
B-7
<PAGE> 97
THIRD AMENDMENT OF LEASE
AGREEMENT, dated this 3rd day of February, 1999, between SAGE REALTY
CORPORATION, a New York corporation having an office at 777 Third Avenue, New
York, New York as agent for the owner of the building hereinafter mentioned
("Landlord"), and ZAI NET SOFTWARE, L.P., a New York limited partnership having
an office at 747 Third Avenue, New York, New York 10017 ("Tenant").
W I T N E S S E T H
WHEREAS, Landlord and Zaitech Software, Inc. (Tenant's
predecessor-in-interest) entered into an Indenture of Lease, dated February 15,
1991 (which lease as amended by First Amendment of Lease, dated December 7,
1994, and Second Amendment of Lease, dated February 3, 1998, is hereinafter
referred to as the "Lease"), pursuant to which Landlord presently leases to
Tenant the entire 18th floor (the "Existing Premises") in the building known as
747 Third Avenue, New York, New York (the "Building"); and
WHEREAS, Landlord and Tenant desire to amend the Lease to provide,
among other things, for an addition of space to the Demised Premises (as defined
in the Lease).
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. All terms used herein shall have the same meaning ascribe~d to them
in the Lease, unless otherwise herein indicated, or unless the context hereof
shall otherwise require.
2. A. Effective as of the date (the "First Effective Date") of
Substantial Completion of Landlord's Work (as such terms are defined in Schedule
B to this Third Amendment of Lease) with respect to that portion of the
seventeenth (17th) floor of the Building, shown as the hatched area on Schedule
Al attached hereto and made a part hereof (the "First Additional Space"), and
continuing through the balance of the Term, the First Additional Space shall be
added to the Existing Premises on the terms and conditions set forth below, with
the Existing Premises and the First Additional Space being deemed to
collectively constitute the "Demised Premises" for all purposes under the Lease.
<PAGE> 98
B. Effective as of the date (the "Second Effective Date")
on which Landlord delivers vacant possession of the "Second Additional Space"
(as defined below) to Tenant (which date is anticipated to be October 1, 1999),
and continuing through the balance of the Term, that portion of the seventeenth
(17 th) floor of the Building, shown as the hatched area on Schedule A-2
attached hereto and made a part hereof (the "Second Additional Space"), shall be
added to the then Demised Premises on the terms and conditions set forth below,
with, the Existing Premises, the First Additional Space and the Second
Additional Space being deemed thereafter to collectively constitute the "Demised
Premises" for all purposes under the Lease.
3. A. As of the First Effective Date, Section 3.01 of the
Lease shall be amended to provide that the Fixed Rent shall be increased by the
sum of $122,397.40 per annum, which sum represents the Fixed Rent allocable to
the First Additional Space.
B. As of the Second Effective Date, Section 3.01 of the
Lease shall be amended to provide that the Fixed Rent shall be increased by the
sum of $28,152.30 per annum, which sum represents the Fixed Rent allocable to
the Second Additional Space.
4. A. As of the First Effective Date, solely for purposes of
determining additional rent attributable to the First Additional Space,
subparagraphs (a), (b), M and (g) of Section 3.04 of the Lease shall be amended
to read as follows:
(a) The term "Base Tax Year" as hereinafter set forth for the
determination of real estate tax escalation shall mean the calendar year 1999
(i.e., Real Estate Taxes, as herein defined, for the Base Tax Year shall be the
average of Real Estate Taxes for the period commencing on July 1, 1998 and
ending June 30, 1999 and Real Estate Taxes for the period commencing July 1,
1999 and ending June 30, 2000).
(b) The term "the Percentage" shall mean .72%.
(f) The term "Base Wage Rate" shall mean the Wage Rate in
effect on January 1, 1999.
(g) The term "Wage Rate Factor" shall mean 2,726.
-2-
<PAGE> 99
B. As of the Second Effective Date, solely for purposes of
determining additional rent attributable to the Second Additional Space,
subparagraphs (a), (b), (f) and (g) of Section 3.04 of the Lease shall be
amended to read as follows:
(a) The term "Base Tax Year" as hereinafter set forth for the
determination of real estate tax escalation shall mean the
period commencing July 1, 1999 and ending June 30, 2000.
(b) The term "the Percentage" shall mean .17t.
(f) The term "Base Wage Rate" shall mean the Wage Rate in effect
on January 1, 1999.
(g) The term "Wage Rate Factor" shall mean 627.
5. A. As of the First Effective Date, Article 4 of the Lease shall be
amended by further increasing the sum of 11$24,679.00" as set forth in the
second line thereof, by the sum of "$7,905.40" to "$32,584.40".
B. As of the Second Effective Date, Article 4 of the Lease shall be
further amended by increasing the sum of $32,584.10 as set forth in the second
line thereof, by the sum of $1,818.30 to $34,402.20.
6. A. Schedule B of the Lease shall not be applicable to the First
Additional Space, and Schedule B annexed hereto shall be applicable thereto,
with the understanding that the term "Demised Premises" as used in Schedule B
annexed hereto shall be deemed to mean the "First Additional Space" and the term
"Commencement Date" shall be deemed to be the "First Effective Date". Tenant
hereby acknowledges that, except as provided in Schedule B annexed hereto,
Landlord is not required to perform any work, furnish any materials or give
Tenant any rent credit or work allowance or any sum of money in connection with
the First Additional Space and, except as provided in Schedule B annexed hereto,
Tenant is taking the same "as-is" as of the First Effective Date.
B. Schedule B of the Lease shall not be applicable to the Second
Additional Space and Landlord hereby agrees to reimburse Tenant in an amount not
to exceed($10,659 ("Landlord's Contribution") towards the costs incurred by
Tenant to prepare the Second Additional Space for Tenant's occupancy. Landlord
shall reimburse Tenant as aforesaid within forty-five (45) days
-3-
<PAGE> 100
after receipt of paid invoices therefor, provided such work is performed within
six (6) months after the Second Effective Date and further provided that all
such work shall be performed in accordance with the terms and conditions of the
Lease, including, without limitation, Article 6 thereof. Tenant hereby
acknowledges that, except as provided above, Landlord is not required to perform
any work, furnish any materials or give Tenant any rent credit or work allowance
or any sum of money in connection with the Second Additional Space and, except
as provided above, Tenant is taking same "as-is" as of the Second Effective
Date.
C. Notwithstanding anything to the contrary contained in this
Paragraph 6 or Schedule B hereof, it is understood and agreed that all or any
portion of Landlord's Contribution may be applied, at Tenant's option, towards
the costs incurred by Tenant for work performed in the First Additional Space.
Additionally, if Tenant shall not utilize the entire amount of "Landlord's
maximum expenditure" (as such term is defined in Schedule B hereof) any
remaining portion thereof may be applied, at Tenant's option, towards costs
incurred by Tenant for work performed in the Second Additional Space.
7. The parties hereto agree that Sage Group Associates (a
division of Sage Realty Corporation) (the "Broker") was the only broker who
negotiated and brought about this transaction, and Landlord agrees to pay the
Broker a commission therefor as per separate agreement. Tenant represents and
warrants that it has not dealt with any broker other than the Broker, and Tenant
agrees to indemnify and save Landlord harmless from and against any claims made
by other brokers claiming to have dealt with Tenant. Landlord represents that it
has not dealt with any broker other than the Broker, and Landlord agrees to
indemnify and save Tenant harmless from and against any claims made by other
brokers claiming to have dealt with Landlord.
8. Tenant warrants and represents that, as of the date hereof,
Landlord has performed all of its obligations under the Lease.
9. Except as modified by this Third Amendment of Lease, the
Lease and each of the covenants, terms and conditions set forth therein are and
shall remain in full force and effect.
- 4 -
<PAGE> 101
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this Third
Amendment of Lease as of the day and year first above written.
SAGE REALTY CORPORATION, as Agent
By: signature illegible
----------------------------------
Landlord
ZAI NET SOFTWARE, L.P.
By: /s/ Cynthia C. Chang
----------------------------------
Tenant
ZA1*NET SOFTWARE, L.P
747 THIRD AVENUE 18th FL.
NEW YORK, NY 10017
(212) 888 3600
- 5 -
<PAGE> 102
SCHEDULE "B"
I. PLANS AND WORK
1. Plan Submission
Within five (5) days after the date of this Third Amendment of Lease
Tenant shall submit to Landlord for review and approval complete and detailed
final architectural, mechanical and engineering plans and specifications showing
the alterations required by Tenant to the Demised Premises in order to prepare
the Demised Premises for Tenant's occupancy. In addition to submission of the
aforesaid plans and specifications, Tenant shall also furnish any and all
documents and information which Landlord may reasonably require for submission
to its insurance company (s), mortgagee (s), contractors and other interested
parties.
2. Authorization to Proceed
Tenant's plans and specifications shall be prepared in accordance with,
and Landlord's responsibility shall be limited to, the specifications set forth
in Section V of this Schedule B. The plans and specifications, as approved by
Landlord, are hereinafter referred to as the "Final Plans" and all work required
by the Final Plans to be preformed by Landlord is hereinafter referred to as
"Landlord's Work."
The submission of the Final Plans to Landlord shall be deemed
authorization by Tenant for Landlord to proceed with the work shown on the Final
Plans, subject to the provisions hereof. Any approvals required to be given by
either party shall be deemed given, unless within five (5) days after any
submission the party receiving the same notifies the submitting party of an
objection thereto. Any architect or designer now or hereafter acting for or on
behalf of Tenant shall be deemed an agent of Tenant and authorized to bind
Tenant in all respects.
3. Compliance with Laws & Codes
Tenant shall be responsible for showing that the Final Plans comply
with all applicable laws, rules, ordinances, requirements and regulations of all
governmental and quasi-governmental authorities having jurisdiction over
Landlord's Work and Tenant shall be liable for and shall indemnify Landlord
against any and all claims and expenses arising from or relating to the failure
of the Final Plans to meet such requirements including, without limitation, any
and all costs incurred for revising the Final Plans and correcting faulty work
resulting from errors or omissions in the Final Plans. Landlord's approval of
the Final Plans, Landlord's description of the kind and extent of work to be set
forth in the Final Plans and Landlord's performance of the work in conformity
with the Final Plans shall not make Landlord liable for any expense or claim
which may arise from or relate to the failure of Landlord's Work to meet
applicable laws, rules, ordinances, requirements and or regulations of any
governmental or quasi-governmental authority having jurisdiction thereover,
<PAGE> 103
nor shall Landlord's approval of the Final Plans, performance of the Landlord's
Work or any statement made herein or in the body of the Lease constitute an
express or implied representation of Landlord that any or all work performed and
installation supplied pursuant to the Final Plans is suitable for the particular
requirements of Tenant or any specific or general use and purpose of Tenant.
4. Filing with Governmental Agencies
Landlord shall cause the Final Plans and/or appropriate building
notices and forms relating thereto to be filed with and approved by any
governmental and quasi-governmental authorities having jurisdiction over
Landlord's Work. All costs, fees and expenses incurred in connection with
obtaining the approvals of and filings with such governmental and
quasi-governmental authorities as well as all engineering and architectural
costs associated therewith, if any, shall be paid for by Landlord and the cost
thereof shall be applied against "Landlord's maximum expenditure" (as defined in
Section IV hereof). Any additional approvals or filings necessitated by changes
made by Tenant to the Final Plans shall be at the sole cost and expense of
Tenant.
5. Architectural & Engineering Services
The Final Plans shall be prepared by Tenant at Tenant's own cost and
expense; provided that Landlord shall reimburse Tenant up to a maximum of $3,000
for the costs incurred by Tenant in preparation of the Final Plans.
The air conditioning system to serve the Demised Premises will be
designed at Landlord's expense. For engineering services required for any other
purposes, Tenant shall reimburse Landlord for the cost of the same. Any changes
to the Final Plans and any changes to the original air-conditioning design
necessitated by any changes made by Tenant to the Final Plans shall be at
Tenant' expense.
6. Entry by Tenant
Prior to the Commencement Date, entry by Tenant, its agents,
contractors or subcontractors, in or on the Demised Premises for performance of
work in the Demised Premises not included within Landlord's Work, or for any
other purpose whatsoever, shall be at Tenant's sole risk and responsibility.
Upon the request of Landlord, Tenant shall deliver to Landlord policies and
certificates of insurance reasonably satisfactory to Landlord. In the event
Tenant or Tenant's contractor shall enter upon or perform work in the Demised
Premises or any other part of the Building, Tenant agrees to indemnify and save
Landlord free and harmless, from and against any and all claims whatsoever
arising out of said entry or such work.
Tenant agrees that should Tenant, its agents, contractors or
subcontractors, enter upon the Demised Premises for the purpose of performing
any work not included within Landlord's Work, or for any other purpose
whatsoever, the labor employed by
<PAGE> 104
Tenant or anyone performing such work, for or on behalf of Tenant, shall always
be harmonious and compatible with the labor employed by Landlord or any agents,
contractors or subcontractors of Landlord. Should such labor be unharmonious or
incompatible, Landlord may require Tenant, its agents and/or contractors to
withdraw from the Demised Premises. Tenant's agents, contractors and
subcontractors and their respective employees shall comply with the special
rules, regulations and requirements of Building management for the performance
and coordination of said agents, contractors, subcontractors and their employees
so as to avoid the intrusion into the operation of the Building and to avoid
disturbing the quiet enjoyment of other tenants.
As a condition to Landlord's permission to Tenant to make any of
Tenant's installations in the Demised Premises, Landlord may require that Tenant
agree with Landlord the fixing of the Commencement Date of this Lease.
II. SUBSTANTIAL COMPLETION
Landlord's Work shall be deemed to be substantially completed
("Substantially Completion" or "Substantial Completion") on the date (the
"Substantial Completion Date") when Landlord's Work shall have been completed in
accordance with the Final Plans with the exception of punchlist items (i.e.,
insubstantial details of construction, mechanical adjustment or decoration which
remain to be performed in connection with Landlord's Work which shall be
completed with reasonable promptness after the Commencement Date).
III. DELAYS
The term "Tenant Delay" shall mean any delay that Landlord may
encounter in the completion Landlord's Work by reason of any act, neglect,
failure or omission of Tenant, its agents, servants, contractors, architect or
employees, in the performance of Tenant's obligations under this Schedule B,
including:
1. Submission
Any delay in submission of Tenant's complete and detailed final architectural,
mechanical and engineering plans and specifications as and when described in the
first paragraph of this Schedule B;
2. Changes
Any delay due to changes made by or on behalf of Tenant in the Final Plans;
3. Quantity or Long Lead
Any delay due to Tenant's request for items to be installed within the Demised
Premises not set forth, or in greater quantities than those set forth, in
Section V, or that have a
<PAGE> 105
delivery date which does not provide sufficient time for installation prior to
the otherwise anticipated date of Substantial Completion;
4. Tenant Work
Any delay caused by work by or on behalf of tenant, other than Landlord's Work
as described in the Final Plans; and
5. Non-payment of Tenant Contribution
Non-payment of any installment of Tenant's Contribution (as defined in Section
IV below), or any other payment required of Tenant under this Schedule B or
elsewhere in the Lease, when due.
If the Substantial Completion Date shall be delayed by reason of a
Tenant Delay, the Demised Premises shall be deemed to be Substantially Completed
for purposes of the Commencement Date (as defined in the Lease) as of the date
that the Demised Premises would have been Substantially Completed but for any
such Tenant Delay, as determined by Landlord in its reasonable discretion,
whether or not any such Tenant Delay could have been avoided by the commitment
by Landlord of additional personnel to the performance of Landlord's Work. In
addition, Tenant shall, promptly upon demand, reimburse Landlord for all damages
resulting from such Tenant Delay.
IV. LIABILITY FOR ABOVE BUILDING STANDARD WORK
All items set forth in Section V below shall be of manufacture,
material, design, capacity and finish selected by Landlord as the standards of
the Building (the "Building Standard"). Tenant shall be liable to Landlord or
Landlord's designated agent for costs incurred by Landlord in the completion of
Landlord's Work to the extent that W such costs are incurred as a result of a
change by Tenant in the work as shown on the Final Plans, (ii) if the Final
Plans require the performance of work or the installation of items not described
in Section V below the cost of Landlord's Work exceeds the amount of shall be
"Landlord's maximum expenditure" for Landlord's Work. Landlord or Landlord's
agent shall inform Tenant by notice of the cost of such extra work which shall
be payable by Tenant together with a handling and supervision fee of twenty-one
percent (219t) (such costs together with such fee being collectively, "Tenant's
Contribution") as additional rent within ten (10) days of delivery to Tenant of
an invoice for same. Landlord shall perform such extra work only if Tenant
approves the cost thereof in writing within three (3) days from Landlord's
notice thereof.
V. SPECIFICATIONS
Except as may be otherwise specifically provided, the following work
and materials shall be provided by landlord at its sole cost and expense, in
accordance with the building standard:
<PAGE> 106
Certain elements of the following work will or may adjoin, abut or
connect to, previously existing installations. Reasonable effort will be made to
make these conjunctions in a good and workmanlike manner, but tenant recognizes
and agrees that not all elements will necessarily be newly installed.
1. Partitioning
Where partitions contain hollow metal frames the wall construction
shall be; 5/8" gypsum board on one side of 2-1/2" steel stud and the other side
shall consist of two (2) layers of 5/8" gypsum board, of which, one layer shall
extend to underside of floor above. All other partitions shall be; 5/8" gypsum
board on one side of 2-1/2" steel stud and the other side one (1) layers of 5/8"
gypsum board which shall extend to underside of floor above.
Fiberglass insulation will be installed in all walls from floor to
above hung ceiling.
2. Doors and Bucks
Integral pressed steel 16 gauge, floor to ceiling bucks; flush
fireproof "3/4 hr." doors, hollow metal, full height; as required. Buck design
affords option of butt or reveal joint. Reveal will be installed unless
otherwise specified. Doors will be undercut to accept carpet. Doors may be new
or re-used from building stock.
3. Closets
Each closet shall be 5.0" (nominal in length) ceiling high, with 3/4"
paint grade, full height wood doors and shall have one (1) vinyl-coated wire
shelves with coat rods per tenant or per 1,500 square feet.
4. Hardware
Building standard lever latch sets (as manufactured by Russwin Corbin,
Series 3400 in polished chrome finish), 2 pair paint grade butt hinges and wall
door stop for each door. One lockset on main entrance door with dead bolt master
keyed to building system; surface mounted L.C.N. narrow line closer. Where doors
are to be re-used, hinges shall be re-used 1-1/2 pair "olive knuckle".
5. Painting
Painting is to be based upon a two coat application for all new
surfaces which shall consist of one prime coat and one finish coat. All existing
surfaces are to receive one finish coat. All surfaces to be painted with
building standard colors from building standard color chart.
6. Flooring
<PAGE> 107
Vinyl composition tile floor covering (12"x121'x1/8"), (as manufactured
by Armstrong) or equal or building standard carpeting, as per building standard
selection board; 4" rubber base on all walls. Broadloom is to be installed over
tackless and pad.
7. Hung Ceilings
Mechanically suspended acoustical ceilings, exposed spline, 210" x
21011 (as manufactured by United States Gypsum, # 584 Glacier, tegular tile), or
equal. Splines shall be white. Ceiling shall be 8'- 4" throughout. No
"dutchmans" permitted.
8. Lighting
Four (4) tube fluorescent light fixtures, 21 x 41 (without lamps), (as
manufactured by National Lighting) or equal; one (1) fixture per 125 square feet
of net rentable area, but in no event in excess of governmental regulations in
effect as of the date of installation. Fixtures and lenses may be new or
refurbished from building stock. Tenant to supply new building standard
fluorescent "Phillips", warm white 34W-EWII bulbs which landlord will install at
no cost.
9. Venetian Blinds
White 1", "Levolor" or equal venetian blinds in blind pockets at all
windows; no substitutions will be permitted. Blinds may be new or refurbished
from building stock.
10. Heating, Ventilating and Air Conditioning
Year-round air conditioning system, combining the use of periphery
units and interior duct air distribution system. The periphery air conditioning
system shall service that portion of the demised premises being approximately
151 distant from the glass line of the building. The air conditioning system
shall be designed to maintain interior conditions of 80' dry bulb and 50*1
relative humidity when outside conditions are 95* dry bulb and 75' wet bulb, 700
when 0* outside; and will provide fresh air in a quantity not less than 0.3
cubic feet per minute per square foot of floor area, provided that in any given
room or area of the Demised Premises the occupancy does not exceed one (1)
person for each 100 square feet and the total connected electric load does not
exceed four (4) watts per square foot of usable area, of which a maximum of (2)
watts per square foot of usable area may be used for lighting, and further
provided such conditions are in conformance with prevailing codes in effect at
the time of the work.
Interior duct distribution, including building standard ducts, grilles,
etc., to accommodate tenant's layout. Said duct distribution to be designed by
landlord's engineer only.
For each periphery room landlord will furnish one or more automatic
thermostatically controlled incremental self contained peripheral units (as
manufactured by McQuay) or equal, sized by landlord's engineer to be of
sufficient capacity to provide
<PAGE> 108
heating, ventilating and air conditioning in accordance with the standards set
forth above. The automatic system will operate from 8:00 a.m. to 6:00 p.m. each
business day. Heating or cooling at occupant's selection shall be available at
any time in periphery only. In order to reactivate the system after its
automatic shut-off, tenant need only press a button. Once reactivated, the
system will thereafter automatically shut off at intermittent intervals. It can
again be reactivated upon the pressing of the aforesaid button.
11. Electrical Outlets
Duplex receptacles in building standard partitions and/or peripheral
enclosures at prefabricated knockouts, one (1) per 150 square feet of area. No
receptacles recessed in core walls.
12. Switches
Ceiling fixtures will be serviced by switches as required by the New
York City Building Code, not less than one (1) switch per room.
13. Telephone
Landlord will supply up to one point of telephone distribution for each
200 square feet of area, through partition or peripheral knockouts only and/or
conduit up to 3/4" to top of partitions. All wiring shall be done by tenant's
contractor and landlord shall have no responsibility for said work. No exposed
telephone wiring shall be permitted. Telephone cables in hung ceiling may be
exposed, however, the cables must be supported properly so as not to rest on the
hung ceiling. Where telephone cable is used in the hung ceiling, it must be
Teflon coated or in pipe. All work must meet building standard criteria, and
damage incurred to ceiling or walls by tenant's contractor shall be the sole
responsibility of tenant to repair.
14. Glass Walls
Up to 3011 of total partitioning can be full height 1/4" clear, butt
glazed, tempered glass with beveled edges, no silicone, in building standard 4"
aluminum base and 2" aluminum head. Framing above ceiling to be metal stud
braced with wood blocking above top track as required.
Revised: 10/1/96
<PAGE> 109
FOURTH AMENDMENT OF LEASE
AGREEMENT, dated this 15th day of July, 1999, between SAGE REALTY
CORPORATION, a New York corporation having an office at 777 Third Avenue, New
York, New York 10017, as agent for the owner of the building hereinafter
mentioned ("Landlord"), and CAMINUS, LLC, a New York limited liability company
having an office at 747 Third Avenue, New York, New York 10017 ("Tenant").
W I T N E S S E T H
WHEREAS, Landlord and Zaitech Software, Inc. (Tenant's
predecessor-in-interest) entered into an Indenture of Lease, dated February 15,
1991 (which lease as amended by First Amendment of Lease, dated December 7,
1994, Second Amendment of Lease, dated February 3, 1998, and Third Amendment of
Lease, dated February 3, 1999, is hereinafter referred to as the "Lease"),
pursuant to which Landlord presently leases to Tenant the entire 18th floor (the
"18th Floor Premises") and a portion of the seventeenth (17th) floor
(collectively, the "Existing Premises") in the building known as 747 Third
Avenue, New York, New York (the "Building"); and
WHEREAS, Landlord and Tenant desire to amend the Lease to provide,
among other things, for an addition of space to the Demised Premises (as defined
in the Lease) and an extension of the term of the Lease.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. All terms used herein shall have the same meaning ascribed to them
in the Lease, unless otherwise herein indicated, or unless the context hereof
shall otherwise require.
2. Effective as of the date hereof, the Term is hereby extended to
September 30, 2004. Said date shall hereafter be deemed to be the Expiration
Date.
3. Effective as of the date (the "Effective Date") on which Landlord
delivers vacant possession of that portion of the seventeenth (17th) floor of
the Building, shown as the hatched area on Schedule A attached hereto and made a
part hereof (the "Third Additional Space"), and continuing through the balance
of the Term, as extended hereby, the Third Additional Space shall be added to
the Existing Premises on the terms and conditions set forth below, with the
Existing Premises
<PAGE> 110
- 2 -
and the Third Additional Space being deemed to collectively constitute the
"Demised Premises" for all purposes under the Lease.
4 A. As of the Effective Date, Section 3.01 of the Lease shall
be amended as follows:
(i) to provide that the Fixed Rent attributable to 18th Floor Premises
only shall be $382,099.00 during the period commencing on May 1, 2003
and ending on the Expiration Date, as extended hereby; and
(ii) to provide that the Fixed Rent attributable to the Third Additional
Space shall be $81,313.90 per annum during the period commencing on the
Effective Date and continuing through the Expiration Date, as extended
hereby.
B. Anything herein to the contrary notwithstanding, provided
the Lease shall be in full force and effect and Tenant shall not be in default
thereunder beyond any applicable notice and grace periods, the Fixed Rent
attributable to the Third Additional Space shall abate at the rate of $6,776.16
per month for a period commencing on the Effective Date and ending on the
earlier to occur of (i) three (3) months following the Effective Date or (ii)
the date Tenant commences the conduct of its business in the Third Additional
Space.
5. As of the Effective Date, solely for purposes of
determining additional rent attributable to the Third Additional Space,
subparagraphs (a), (b), (f) and (g) of Section 3.04 of the Lease shall be
amended to read as follows:
(a) The term "Base Tax Year" as hereinafter set forth for the
determination of real estate tax escalation shall mean the period commencing
July 1, 1999 and ending June 30, 2000.
(b) The term "the Percentage" shall mean .48%.
(f) The term "Base Wage Rate" shall mean the Wage Rate in
effect on January 1, 1999.
(g) The term "Wage Rate Factor" shall mean 1,811.
<PAGE> 111
- 3 -
6 A. As of the Effective Date, Article 4 of the Lease shall be amended
by increasing the sum of "$34,402.20 as set forth in the second line thereof, by
the sum of "$5,251.90" to "$39,654.10".
B. Schedule B of the Lease shall not be applicable to the
Third Additional Space and Landlord hereby agrees to reimburse Tenant in an
amount not to exceed $36,220 ("Landlord's Contribution") towards the costs
incurred by Tenant to prepare the Third Additional Space for Tenant's occupancy
including filing fees, permit fees, and architectural fees. Landlord shall
reimburse Tenant as aforesaid within forty-five (45) days after receipt of paid
invoices therefor, provided such work is performed within six (6) months after
the Effective Date and further provided that all such work shall be performed in
accordance with the terms and conditions of the Lease, including, without
limitation, Article 6 thereof. Landlord shall construct the demising walls, at
Landlord's sole cost and expense, except that Tenant shall reimburse Landlord
for the cost of installing and removing a temporary doorway into the Third
Additional Space. Tenant and its contractors will be permitted to gain access
through such temporary doorway to the Third Additional Space in order to perform
the work necessary to prepare the Third Additional Space for Tenant's occupancy
until such time as the space through which entry to the Third Additional Space
is made shall be leased, at which time Landlord shall remove the temporary
doorway in the demising wall and Tenant and its contractors' entry through such
temporary doorway shall cease. Tenant hereby acknowledges that, except as
provided above, Landlord is not required to perform any work, furnish any
materials or give Tenant any rent credit or work allowance or any sum of money
in connection with the Third Additional Space and, except as provided above,
Tenant is taking same "as-is" as of the Effective Date.
7. The parties hereto agree that Sage Group Associates (a division of
Sage Realty Corporation) (the "Broker") was the only broker who negotiated and
brought about this transaction, and Landlord agrees to pay the Broker a
commission therefor as per separate agreement. Tenant represents and warrants
that it has not dealt with any broker other than the Broker, and Tenant agrees
to indemnify and save Landlord harmless from and against any claims made by
other brokers claiming to have dealt with Tenant. Landlord represents that it
has not dealt with any broker other than the Broker, and Landlord agrees to
indemnify and save Tenant harmless from and against any claims made by other
brokers claiming to have dealt with Landlord.
<PAGE> 112
- 4 -
8. Tenant warrants and represents that, as of the date hereof, Landlord
has performed all of its obligations under the Lease.
9. Except as modified by this Fourth Amendment of Lease, the Lease and
each of the covenants, terms and conditions set forth therein are and shall
remain in full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this
Fourth Amendment of Lease as of the day and year first above written.
SAGE REALTY CORPORATION,
as Agent
By: signature illegible
-------------------------
Title:
Landlord
CAMINUS, LLC
By: /s/ Cynthia C. Chang
-------------------------
Title:
Tenant
<PAGE> 113
SCHEDULE "A"
SEE ATTACHED
<PAGE> 114
RENT PAYMENTS FOR NY OFFICE AS OF 7/27/99
TERM = THROUGH SEPTEMBER 30, 2004
[TO COME]
<PAGE> 115
[OFFICE MANAGER LETTERHEAD]
May 1, 1998
Ms. Cynthia Chang
Zai*Net Software, Inc.
747 Third Avenue
New York, NY 10017
Re: Substantial Completion Date
Dear Ms. Chang:
In accordance with paragraph 3 of your Second Amendment of Lease dated February
3, 1998 for a portion of the 18th floor, please be advised that the Demised
Premises will be Substantially Complete in accordance with Schedule B on
Friday, May 1, 1998.
Therefore the "Effective Date" of your lease will be May 1, 1998.
Very truly yours,
/s/ William J. Proceller
William J. Proceller
Property Manager
BY HAND
Melvyn Kaufman
Robert Kaufman
Iris Sutz
Joan Craig
Jay Benowitz
Maria Mooney
SageGroupAssociates
Master File
<PAGE> 116
April 30th, 1999
Ms. Cynthia Chang
Caminus,LLC
747 Third Avenue
New York, NY 10017
Re: Substantial Completion Notice
Dear Ms. Chang:
In accordance with Section 2.02 of your lease dated February 3,1999 for a
portion of the 17th floor, please be advised that the demised premises will be
Substantially Complete as of April 30, 1999.
Therefore, the terms of the your lease will commence at 12:00 A.M., Saturday,
May 1, 1999.
Very truly yours,
Sage Realty Corporation
Maria Mooney
Assistant Building Manager
VIA FAX/CERTIFIED MAIL, RETURN RECEIPT REQUESTED
Melvyn Kaufman
Robert Kaufman
William Proceller
Steve Ridulfo
Iris Sutz
Barbara Amster
Jay Benowitz
Frank Palazzolo
Fran Newman
Sage Group Associates
Ronald D. Hariri, Esq.
Tenant File
Master File
<PAGE> 117
FIFTH AMENDMENT OF LEASE
AGREEMENT, dated this 1st day of November, 1999, between SAGE REALTY
CORPORATION, a New York corporation, having an office at 777 Third Avenue, New
York, New York 10017, as agent for the owner of the building hereinafter
mentioned ("Landlord"), and CAMINUS, LLC, a New York limited liability company
having an office at 747 Third Avenue, New York, New York 10017 ("Tenant").
W I T N E S S E T H
WHEREAS, Landlord and Zaitech Software, Inc. (Tenant's
predecessor-in-interest) entered into an Indenture of Lease, dated February 15,
1991 (which lease as amended by First Amendment of Lease, dated December 7,
1994, Second Amendment of Lease, dated February 3, 1998, Third Amendment of
Lease, dated February 3, 1999, and Fourth Amendment of Lease, dated July 15,
1999, is hereinafter referred to as the "Lease"), pursuant to which Landlord
presently leases to Tenant the entire 18th floor and a portion of the 17th floor
(collectively, the "Existing Premises") in the building known as 747 Third
Avenue, New York, New York (the "Building"); and
WHEREAS, Landlord and Tenant desire to amend the Lease to provide,
among other things, for an addition of space to the Demised Premises (as defined
in the Lease).
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. All terms used herein shall have the same meaning ascribed to them
in the Lease, unless otherwise herein indicated, or unless the context hereof
shall otherwise require.
2. Effective as of the date hereof (the "Effective Date") and
continuing through the balance of the Term, that portion of the seventeenth
(17th) floor of the Building, shown as the hatched area on Schedule A attached
hereto and made a part hereof (the "Fourth Additional Space"), shall be added to
the Existing Premises on the terms and conditions set forth below, with the
Existing Premises and the Fourth Additional Space being deemed to collectively
constitute the "Demised Premises" for all purposes under the Lease.
3. A. As of the Effective Date, Section 3.01 of the Lease shall be
amended to provide that the Fixed Rent shall be increased as follows: (I) by the
sum of $153,581.40 per annum during the period commencing on the Effective Date
and continuing through the last day of the month which is thirty (30) months
after the Effective Date; and (ii) by the sum of $166,965.40 per annum during
the period commencing on the first day of the month which is thirty-one (31)
months after the Effective Date and continuing through the balance of the Term,
which sums represent the Fixed Rent allocable to the Fourth Additional Space.
B. Anything herein to the contrary notwithstanding, provided the
Lease shall be in full force and effect and Tenant shall not be in default
thereunder beyond any applicable notice and grace periods, the Fixed Rent
attributable to the Fourth Additional Space shall abate at the rate of
$12,798.45 per month for the period commencing on the Effective Date and ending
on January 31, 2000.
4. A. As of the Effective Date, solely for purposes of determining
additional rent attributable to the Fourth Additional Space, subparagraphs (a),
(b), (f) and (g) of Section 3.04 of the Lease shall be amended to read as
follows:
(a) The term "the Percentage" shall mean .88%.
(b) The term "Base Wage Rate" shall mean the Wage Rate in
effect on January 1, 2000.
(g) The term "Wage Rate Factor" shall mean 3,346.
<PAGE> 118
5. A. As of the Effective Date, Article 4 of the Lease shall
be amended by further increasing the sum of "$39,654.10" as set forth in the
second line thereof, by the sum of "$9,703.40" to "$49,357.50".
6. Schedule B of the lease shall not be applicable to the
Fourth Additional Space and Landlord hereby agrees to reimburse Tenant, or at
Tenant's option to pay Tenant's contractors directly, an amount not to exceed
$50,190 ("Landlord's Contribution") towards the costs incurred by tenant to
prepare the Fourth Additional Space for Tenant's occupancy. Landlord shall
reimburse Tenant, or pay Tenant's contractors directly, as aforesaid within
forty-five (45) days after receipt of invoices therefor, provided such work is
performed within six (6) months after the Effective Date and further provided
that all such work shall be performed in accordance with the terms and
conditions of the Lease, including, without limitation, Article 6 thereof.
Tenant hereby acknowledges that, except as provided above, and in Paragraph 3B
hereof Landlord is not required to perform any work, furnish any materials or
give Tenant any rent credit or work allowance or any sum of money in connection
with the Fourth Additional Space and, except as provided above, Tenant is taking
same "as-is" as of the Effective Date.
7. The parties hereto agree that Sage Group Associates (a
division of Sage Realty Corporation) (the "Broker") was the only broker who
negotiated and brought about this transaction, and Landlord agrees to pay the
Broker a commission therefor as per separate agreement. Tenant represents and
warrants that it has not dealt with any broker other than the Broker, and Tenant
agrees to indemnify and save Landlord harmless from and against any claims made
by other brokers claiming to have dealt with Tenant. Landlord represents that it
has not dealt with any broker other than the Broker, and Landlord agrees to
indemnify and save tenant harmless from and against any claims made by other
brokers claiming to have dealt with Landlord.
8. Tenant warrants and represents that, as of the date hereof,
Landlord has performed all of its obligations under the Lease.
9. Except as modified by this Fifth Amendment of Lease, the
Lease and each of the covenants, terms and conditions set forth therein are and
shall remain in full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this Fifth
Amendment of Lease as of the day and year first above written.
SAGE REALTY CORPORATION,
AS Agent
By: signature illegible
------------------------------------
Tenant
CAMINUS, LLC
By: /s/ Cynthia C. Chang
------------------------------------
Tenant
<PAGE> 119
SCHEDULE A
FOURTH ADDITIONAL SPACE
<PAGE> 1
Exhibit 10.30
DATED May 12, 1998
CAMINUS ENERGY LIMITED.
- and -
DR. MICHAEL MORRISON
------------------------
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. Michael Morrison, Ph.D., of 21 Victoria Park, Cambridge,
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 Managing Director
of the Company and shall continue to be a director 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 the Managing Director 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;
<PAGE> 3
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
2.1.5. not carry on or be interested, directly or indirectly, in a
Competing Business (as defined in clause 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
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 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,
-2-
<PAGE> 4
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 f 167,000 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 83,000) in addition to his salary and other
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
-3-
<PAGE> 5
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.
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.
-4-
<PAGE> 6
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.
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
-5-
<PAGE> 7
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.
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 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
-6-
<PAGE> 8
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 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:
(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
(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;
-7-
<PAGE> 9
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.
-8-
<PAGE> 10
Subject to Clauses 9.5 to 9.7, the Company shall have no 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
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<PAGE> 11
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 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
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<PAGE> 12
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;
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
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<PAGE> 13
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:
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.
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<PAGE> 14
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.
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
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<PAGE> 15
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 favorable
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
September 7, 1988;
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
September 7, 1988;
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
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<PAGE> 16
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.
15. ASSIGNMENT
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<PAGE> 17
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: Chief Executive Officer
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<PAGE> 18
The Employee
Address: 21 Victoria Park
Cambridge, United Kingdom
Attention: Dr. Michael Morrison
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.
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<PAGE> 19
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.
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> 20
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/ Michael B. Morrison
------------------------
signature of Employee
Signature of Witness /s/ G. Stanfield
Name of Witness G. Stanfield
Address of Witness 112 Hills Road
Cambridge C82 1PH UK
SIGNED AS A DEED by the Company )
acting by two of its directors )
/s/ Nigel Evans
------------------------
Director
/s/ Serena Hesmondhalgh
------------------------
Director
-19-
<PAGE> 1
Exhibit 10.31
PURCHASE AND OPTION AGREEMENT
PURCHASE AND OPTION AGREEMENT (the "Agreement"), dated as of December
31, 1998 by and between Caminus Energy Ventures LLC, a Delaware limited
liability company (the "Company"), and SS&C Technologies, Inc., a Delaware
corporation ("SS&C"). Capitalized terms used herein and not otherwise defined
shall have their respective meanings given in the LLC Agreement (as defined
below).
R E C I T A L S
WHEREAS, SS&C is a Series A Capital Member of the Company and holds the
SS&C Warrant to purchase a Series B Membership Interest in the Company
(collectively, such interest of SS&C in the Company are referred to as the "SS&C
Interests") pursuant to a Subscription Agreement with the Company dated as of
May 12, 1998 (the "Subscription Agreement") and the Limited Liability Company
Agreement of the Company dated as of May 12, 1998 (including the appendices
thereto, and as amended and supplemented to the date hereof, the "LLC
Agreement");
WHEREAS, pursuant to the LLC Agreement, the Company and SS&C are parties
to the License Agreement;
WHEREAS, the parties desire to have the Company repurchase the SS&C
Interests from SS&C;
NOW, THEREFORE, 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. Repurchase of SS&C Interests. SS&C hereby sells to the Company, and
the Company hereby purchases from SS&C, all of the SS&C Interests, free and
clear of any and all liens, claims and encumbrances whatsoever created by or
through SS&C, in consideration of the payment of TWO MILLION TWO HUNDRED FIFTY
THOUSAND DOLLARS ($2,250,000.00), which amount shall be paid by the Company in
cash by wire transfer to an account identified by SS&C for this purpose not
later than January 31, 1999. Payment of the debt created by this Agreement shall
be made not later than that date, and to the extent such amount is not paid on
or before that date, the unpaid balance shall accrue interest until paid at the
rate of ten percent (10%) per annum. As a result of such purchase, SS&C hereby
ceases to have any interest in the capital, profits or losses of or in the
Company (including, without limitation, pursuant to the SS&C Warrant), and the
SS&C Interest are hereby extinguished without any further obligation or
liability of the parties to one another, effective as of December 31, 1998.
Without limiting the generality of the foregoing, SS&C hereby ceases to have any
liability or obligation for the additional cash call referred to in Section
4.1.2 of the LLC Agreement and hereby ceases to have the right to designate a
member of the Management Committee of the Company pursuant to Section 6.2.1 of
the LLC Agreement.
<PAGE> 2
2. New License Agreement. The parties acknowledge that the existing
Distributor Agreement dated as of May 12, 1998 relating to the license to the
Company of certain products of SS&C is being terminated pursuant to the terms of
a new, separate Distributor Agreement dated as of even date herewith providing
for the license of certain products of SS&C to the Company.
3. Grant of Option.
(a) Subject to the terms of this Section 3, the Company hereby
grants to SS&C the right and option (the "Option") to purchase the number of
notional shares of the Series B Membership Interest in the Company reflected
opposite its name under the column "Series B Shares" on Exhibit "A" attached
hereto; immediately after giving effect to the repurchase of the SS&C Interests
and the grant of the Option, the ownership of the Company, expressed on a
notional share basis, shall be as set forth on Exhibit "A" hereto. The interest
represented by the Option shall be subject to dilution as a result of the
issuance of additional Membership Interests in the Company after the date hereof
(including, without limitation, pursuant to the exercise of options and other
rights hereafter granted pursuant to any Option Plan). Further, but without
limiting the generality of the foregoing, such interest shall be subject to
dilution as a result of the issuance of a Membership Interest in connection with
the purchase by the Company of the minority interest in the Company's ZAI*NET
Software, L.P. subsidiary.
(b) The Option is fully vested and fully exercisable as of the
date hereof (provided, that at the time of any proposed exercise, SS&C shall be
in full compliance with the New License Agreement). To exercise the Option
(which may be exercised only in full, and not in part), SS&C shall give written
notice ("Exercise Notice") to the Company to that effect not later than December
31, 2003 ("Expiration Date"); if the Option is not properly exercised on or
before the Expiration Date, it shall be null and void and of no further value.
The Exercise Notice shall be accompanied by the cash payment of the exercise
price of the Option, which is TWO MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS
($2,250,000.00). In connection with exercise, the Company shall be entitled to
require that SS&C pay the amount of withholding and other taxes, if any,
required by law to be paid or withheld by the Company in connection therewith.
Further, it shall be a condition to the exercise of the Option that SS&C execute
a counterpart to the LLC Agreement (as it may have been amended or supplemented
through the date of exercise) and agree to be bound by all of the provisions
thereof. No interest in the Option may be transferred or assigned in any form of
transaction without the prior written consent of the Company; provided, that the
Company's consent shall not be required for a transfer in connection with the
sale of all or substantially all of the assets or business of SS&C as an
entirety (whether by merger, stock sale, sale of assets or otherwise), provided
further that the buyer in such transaction is not in any material respect a
competitor of the Company and such buyer expressly agrees in writing to be bound
by all of the restrictive provisions of this Agreement and the LLC Agreement
with respect to the Option and the Membership Interest issuable upon exercise
thereof. In connection with any Sale or Qualified Public Offering, the Company
may require SS&C, by written notice to such effect give at least ten (10) days
prior to the anticipated closing of such transaction, to either exercise or
forfeit the Option, simultaneously with and contingent upon such closing.
2
<PAGE> 3
4. Representations and Warrants of SS&C. SS&C hereby represents and
warrants to the Company as follows:
(a) SS&C 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.
(b) SS&C has the requisite corporate power and authority to
deliver this Agreement and the new License Agreement, and perform its
obligations herein and therein, and consummate the transactions contemplated
hereby and thereby. SS&C has duly executed and delivered this Agreement and the
New License Agreement and has obtained the necessary authorization to execute
and deliver this Agreement and the New License Agreement and to perform its
obligations herein and therein and consummate the transactions contemplated
hereby and thereby. Each of this Agreement and the New License Agreement is
valid, legal and binding obligation of SS&C enforceable against SS&C in
accordance with their 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 (regard less of whether such enforcement is considered in a proceeding
at law or in equity).
(c) SS&C understand that the Option and the notional shares of
the Series B Membership Interest issuable upon exercise thereof have 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 securities have not been approved or disapproved by the
Securities and Exchange Commission or by any other federal or state agency, and
that no such agency has passed on the accuracy or adequacy of disclosures made
to SS&C by the Company. SS&C has had an opportunity to ask questions of and
receive answers from the Company, or a person or persons acting on its behalf,
concerning the terms and condition pertaining to the Option, which questions
have been answered to the full satisfaction of SS&C, and has also had an
opportunity to obtain any additional information that the Company possesses or
can reasonably acquire without undue expense that is necessary to verify the
accuracy of the information furnished to SS&C. SS&C further understands that
neither the Option nor the notional shares of the Series B Membership Interest,
nor any interest therein, may be sold or transferred except pursuant to a
registration or an available exemption from registration under the Securities
Act. Finally, SS&C acknowledges that the purchase price for the SS&C Interest
specified in this Agreement is the result of arms' length negotiations involving
a number of factors, including the termination of the existing License Agreement
and the execution of the New License Agreement, and that such purchase price may
not alone reflect a valuation of the Company that is consistent with other
transactions occurring at the same or approximately the same time as the
transactions contemplated by this Agreement. In particular, but without limiting
the generality of the foregoing, SS&C acknowledges that it has been fully
apprised of the Company's discussions with the holder of the minority interest
in the Company's ZAI*NET Software, L.P. subsidiary for the possible exchange of
notional shares of the Series A Membership Interest in the Company for such
minority interest.
3
<PAGE> 4
(d) The SS&C Interests are (immediately prior to giving effect
to the repurchase thereof contemplated by this Agreement) owned, beneficially
and of record, solely and wholly by SS&C, and it has not granted any interest
therein to any other person or entity, and such SS&C Interests are held by SS&C
free and clear of any and all liens, claims and encumbrances whatsoever (other
than any such claims arising under the LLC Agreement); and the sale of the SS&C
Interests by SS&C to the Company contemplated hereby will convey to the Company
all right, title and interest therein.
5. Representations and Warrants of the Company. The Company hereby
represents and warrants to SS&C as follows:
(a) The Company 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) The Company has the requisite power and authority to deliver
this Agreement and the New License Agreement, and perform its obligations herein
and therein; and consummate the transactions contemplated hereby and thereby.
The Company has duly executed and delivered this Agreement and the New License
Agreement and has obtained the necessary authorization to execute and deliver
this Agreement and the New License Agreement and to perform its obligations
herein and therein and consummate the transactions contemplated hereby and
thereby. Each of this Agreement and the New License Agreement is a valid, legal
and binding obligation of the Company enforceable against the Company in
accordance with their 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 in equity).
(c) The notional shares of Series A Membership Interest issuable
upon exercise of the Option, when issued and delivered in accordance with the
terms of this Agreement, will be duly authorized, validly issued, fully paid and
non-assessable.
6. General.
(a) 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 shall be entitled to
recover reasonable attorney's fees and costs as determined by the court or other
adjudicator.
(b) 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.
(c) This Agreement is governed by and shall be construed in
accordance with the laws of the laws of the State of New York, excluding any
conflict-of-laws rule or principle that might refer the governance or
construction of the Agreement to the law of another
4
<PAGE> 5
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 greatest extent permitted by law.
(d) Except as otherwise expressly provided herein, this
Agreement shall be binding upon and shall inure to the benefit of the parties'
respective successors and assigns.
(e) This Agreement may be executed in counterparts, each of
which shall be deemed an original and both of which shall constitute one and the
same document.
(f) All notices and other communications provided for or
permitted to be given under this Agreement shall be in writing and shall be
given by depositing the notice in the United States mail, addressed to the
person to be notified, postage prepaid, and registered or certified with return
receipt requested, or by such notice being delivered in person or by facsimile
communication to such party. Notices given or served pursuant hereto shall be
effective upon receipt by the person so notified. All notices shall be sent to
or made at, and all payments hereunder shall be made at, the address or number
given below for the parties (or such other address or number as that person may
specify by notice to the other party in the manner specified in this paragraph):
If to the Company:
c/o GFI Energy Ventures LLC
12121 Wilshire Boulevard, Suite 1375
Los Angeles, California 90025
Attention: President
Fax: (310) 442-0540
If to SS&C:
80 Lamberton Road
Windsor, Connecticut 06095
Attention: President
Fax: (860) 298-4969
(g) This Agreement (together with the other agreements and
instruments referred herein) constitutes the entire agreement of the parties
with respect to the subject matter hereof, and supersedes all prior or
contemporaneous oral and written communications with respect thereto. Any
modification to this Agreement must be in writing, and no modification or waiver
shall be inferred in the absence of a written instrument signed by the party to
be charged.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the date first set forth above.
CAMINUS ENERGY VENTURES LLC
By: /s/ Ian Schapiro
-----------------------
Name: I. Schapiro
Its: Treasurer
SS&C TECHNOLOGIES, INC.
By: /s/ William C. Stone
-----------------------
Name: William C. Stone
Its: CEO
6
<PAGE> 7
Exhibit "A"
<TABLE>
<CAPTION>
Notional Ownership
Post-SS&C Transaction
Series A Series A Series B Series B Series C Series C Total Total
"Shares" Percentage "Shares" Percentage "Shares" Percentage Shares Percentage
-------- ---------- ---------- ---------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GFI Energy Ventures 1,682,198 2.08% 8,080,686 10.00% 9,762,884 12.08%
OCM Caminus Investment 37,176,571 46.01% 37,176,571 46.01%
RIT Capital Partners PLC 6,728,791 8.33% 6,728,791 8.33%
Durham Cam Inc. 1,682,198 2.08% 1,682,198 2.08%
Nigel Evans 6,055,912 7.49% 3,030,000 3.75% 9,085,912 11.24%
Michael Morrison 4,037,275 5.00% 2,020,000 2.50% 6,057,275 7.50%
SS&C Technologies, Inc. 3,636,309 4.50% 3,636,309 4.50%
Serena Hesmondhalgh 672,879 0.83% 672,879 0.83%
Nick Perry 672,879 0.83% 1,363,156 1.69% 2,036,035 2.52%
Dave Stoner 3,364,396 4.16% 3,364,396 4.16%
Corwin Joy 525,629 0.65% 525,629 0.65%
Paul LaMar 60,650 0.07% 60,650 0.07%
Arthur Langham 17,328 0.02% 17,328 0.02%
---------- ----- ---------- ----- --------- ----- ---------- ------
Total 62,676,706 77.55% 10,049,465 12.44% 8,080,686 10.00% 80,806,857 100.00%
</TABLE>
<PAGE> 8
CAMINUS LLC
747 Third Avenue
New York, NY 10017
Ph: 212 888 3600
Fax: 212 888 0691
www.caminus.com
March 30, 1999
SS&C Technologies, Incorporated
80 Lamberton Road
Windsor, Connecticut 06095
Re: Distributor Agreement
Gentlemen:
This letter amends the Distributor Agreement between us dated as of
December 31, 1998 (the "DISTRIBUTOR AGREEMENT"). Specifically, this confirms
that we have agreed to the following matters relating to the Take or Pay License
Fee obligation of Caminus LLC set forth on Schedule 1 attached to the
Distributor Agreement;
1. You acknowledge that the $750,000 Take or Pay License Fee
applicable to the fourth quarter of 1998 was previously paid in
full, resulting in an aggregate remaining balance of Take or Pay
License Fees due (prior to giving effect to this letter
agreement) of $2,600,000. Further, as of the date of this
letter, Caminus LLC hereby purchases from you $1,250,000 in
value (as specified on Schedule 1 attached to the Distributor
Agreement) of licenses for SS&C Products (as defined in the
Distributor Agreement). You agree to provide such SS&C Products
and related SS&C Materials (as defined in the Distributor
Agreement) to Caminus LLC promptly following the date of this
letter. Payment for the licenses being purchased in the first
quarter of 1999 shall be made via wire transfer in accordance
with the instructions set forth in Schedule 1 of the Distributor
Agreement as follows:
(i) $875,000 is due and payable on March 31, 1999; and
(ii) $375,000 is due and payable on April 30, 1999.
2. The aggregate remaining Take or Pay License Fee obligation
(after giving effect to the purchase of licenses pursuant to
paragraph 1) is hereby amended to $750,000, payable by Caminus
LLC as follows;
(i) $250,000 is due and payable on March 31, 2000;
<PAGE> 9
(ii) $250,000 is due and payable on June 30, 2000; and
(iii) $250,000 is due and payable on September 30, 2000.
3. Payment by Caminus LLC of the amounts specified in paragraphs 1
and 2 shall constitute full payment and satisfaction of the
aggregate remaining Take or Pay License Fee obligation under the
Distributor Agreement, and no other amounts shall be due or
payable in respect thereof.
Except as expressly set forth in this letter agreement, the terms and
conditions of the Distributor Agreement shall remain in full force and effect.
If this letter correctly sets forth our agreement on these matters,
please so indicate by executing a copy of this letter in the space provided
below and return that copy to Caminus LLC. Thank you.
CAMINUS LLC
By: /s/ David M. Stoner
------------------------
Its: CEO
AGREED:
SS&C TECHNOLOGIES, INCORPORATED
By: /s/ William C. Stone
--------------------------
Its: CEO
<PAGE> 10
CAMINUS LLC
747 Third Avenue
New York, NY 10017
Ph: 212 888 3600
Fax: 212 888 0691
www.caminus.com
March 30, 1999
SS&C Technologies, Incorporated
80 Lamberton Road
Windsor, Connecticut 06095
Re: Purchase and Option Agreement
Gentlemen:
This letter amends the Purchase and Option Agreement between us dated as
of December 31, 1998 (the "OPTION AGREEMENT"). Specifically, this confirms that
we have agreed to the following matters relating to the terms of the Option (as
defined in the Option Agreement) specified in Section 3 of the Option Agreement:
1. The number of notional shares of Series B Membership Interest in
the Company subject to the Option is hereby reduced from
3,636,309 to 2,909,047, or a reduction of 20% from the original
position.
2. The cash payment required to exercise the Option is hereby
reduced (proportionately with the reduction in the notional
shares subject to the Option) from $2,250,000 to $1,800,000.
3. In consideration of your agreement to reduce the size of the
Option position, Caminus LLC agrees to make a cash payment to
you of $250,000, which shall be due and payable on December 31,
1999.
Except as expressly set forth in this letter agreement, the terms and
conditions of the Option and the balance of the Option Agreement shall remain in
full force and effect.
<PAGE> 11
If this letter correctly sets forth our agreement on these matters,
please so indicate by executing a copy of this letter in the space provided
below and return that copy to Caminus LLC. Thank you.
CAMINUS LLC
By: /s/ David M. Stoner
------------------------
Its: CEO
AGREED:
SS&C TECHNOLOGIES, INCORPORATED
By: /s/ William C. Stone
--------------------------
Its: CEO
<PAGE> 1
Exhibit 10.32
PROMISSORY NOTE
(REVOLVING NOTE)
$2,500,000.00 June 23, 1999
New York, New York
FOR VALUE RECEIVED, the undersigned, CAMINUS LLC, a Delaware
corporation (the "Company"), hereby promises to pay to the order of FLEET BANK,
N.A. (the "Lender"), for the account of its respective Applicable Lending
Offices provided for in the Credit Agreement referred to below, at the principal
office of Fleet Bank, N.A., at 1185 Avenue of the Americas, New York, New York
10036, the principal sum of TWO MILLION FIVE HUNDRED THOUSAND AND 00/100 Dollars
(or such lesser amount as shall equal the aggregate unpaid principal amount of
the Revolving Loans made by the Lender to the Company under the Credit
Agreement), in lawful money of the United States of America and in immediately
available funds, on the dates and in the principal amounts provided in the
Credit Agreement, and to pay interest on the unpaid principal amount of each
such Revolving Loan, at such office, in like money and funds, for the period
commencing on the date of such Revolving Loan until such Revolving Loan shall be
paid in full, at the rates per annum and on the dates provided in the Credit
Agreement.
The Lender is hereby authorized to record the date, Type and amount of
each Revolving Loan made by the Lender, each continuation thereof, each
conversion of all or a portion thereof to another Type, the date and amount of
each payment or prepayment of principal thereof and, in the case of Eurodollar
Loans, the length of each Interest Period and Eurodollar Rate with respect
thereto, on its internal books and records and/or on the schedule annexed to and
constituting a part of this Note, and any such recordation on such schedule
shall constitute prima facie evidence of the accuracy of the information so
recorded; provided that the failure by the Lender to make any such recordation
shall not affect the obligations of the Company under this Note or the Credit
Agreement referred to below.
This Note is the Revolving Note referred to in the Credit Agreement,
dated as of June 23, 1999 (as amended, restated, supplemented or otherwise
modified from time to time, the "Credit Agreement"), between the Company and the
Lender, and evidences the Revolving Loans made by the Lender thereunder.
Capitalized terms used herein which are not otherwise defined herein shall have
the meanings ascribed to such terms in the Credit Agreement. This Note is
subject to all of the terms and conditions of the Credit Agreement and the
holder hereof is entitled to all of the benefits thereunder, including without
limitation the election of the jurisdiction(s) and venue(s) in which the Lender
may enforce this Note.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts then remaining unpaid on this
Note shall become, or may be declared to be, immediately due and payable, all as
provided therein. Further, any payment of principal or interest not paid on the
due dates shall be subject to a "late charge", "late fee" and/or the "Default
Rate" as provided in the Credit Agreement.
The undersigned hereby waives presentment, demand for payment, notice
of dishonor, and any and all other notices or demands in connection with the
delivery, acceptance, performance, default or enforcement of this Note.
Except as permitted under the Credit Agreement, this Note may not be
assigned by the Lender or the Company to any Person.
The obligations of the Company to make payments when due of any amount
owing under this Note are entitled to the benefits of the guarantees, collateral
security and other rights
<PAGE> 2
provided for in the Loan Documents.
THIS NOTE SHALL BE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CHOICE OF LAW
RULES WHICH WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed
by its officer being duly authorized, as of the date first above written.
CAMINUS LLC
By: /s/ Mark A. Herman
---------------------
Name: Mark Herman
Title: Chief Financial Officer
<PAGE> 3
SCHEDULE OF WORKING CAPITAL LOANS
This Note evidences Working Capital Loans made, Continued or Converted
under the within-described Credit Agreement to the Company, on the dates, in the
principal amounts, of the Types, bearing interest at the rates and having
Interest Periods (if applicable) of the durations set forth below, subject to
the payments, Continuations, Conversions and prepayments of principal set forth
below:
<TABLE>
<CAPTION>
Amount Paid,
Date Made, Principal Duration of Prepaid, Unpaid
Continued or Amount of Type of Interest Interest Continued or Principal Notation
Converted Loan Loan Rate Period Converted Amount Made By
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE> 1
Exhibit 10.33
PROMISSORY NOTE
(WORKING CAPITAL NOTE)
$2,500,000.00 June 23, 1999
New York, New York
FOR VALUE RECEIVED, the undersigned, CAMINUS LLC, a Delaware
corporation (the "Company"), hereby promises to pay to the order of FLEET BANK,
N.A. (the "Lender"), for the account of its respective Applicable Lending
Offices provided for in the Credit Agreement referred to below, at the principal
office of Fleet Bank, N.A. at 1185 Avenue of the Americas, New York, New York
10036, the principal sum of TWO MILLION FIVE HUNDRED THOUSAND AND 00/100 Dollars
(or such lesser amount as shall equal the aggregate unpaid principal amount of
the Working Capital Loans made by the Lender to the Company under the Credit
Agreement), in lawful money of the United States of America and in immediately
available funds, on the dates and in the principal amounts provided in the
Credit Agreement, and to pay interest on the unpaid principal amount of each
such Working Capital Loan, at such office, in like money and funds, for the
period commencing on the date of such Working Capital Loan until such Working
Capital Loan shall be paid in full, at the rates per annum and on the dates
provided in the Credit Agreement.
The Lender is hereby authorized to record the date, Type and amount of
each Revolving Loan made by the Lender, each continuation thereof, each
conversion of all or a portion thereof to another Type, the date and amount of
each payment or prepayment of principal thereof and, in the case of Eurodollar
Loans, the length of each Interest Period and Eurodollar Rate with respect
thereto, on its internal books and records and/or on the schedule annexed to and
constituting a part of this Note, and any such recordation on such schedule
shall constitute prima facie evidence of the accuracy of the information so
recorded; provided that the failure by the Lender to make any such recordation
shall not affect the obligations of the Company under this Note or the Credit
Agreement referred to below.
This Note is the Working Capital Note referred to in the Credit
Agreement, dated as of June 23, 1999 (as amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement"), between the
Company and the Lender, and evidences the Working Capital Loans made by the
Lender thereunder. Capitalized terms used herein which are not otherwise defined
herein shall have the meanings ascribed to such terms in the Credit Agreement.
This Note is subject to all of the terms and conditions of the Credit Agreement
and the holder hereof is entitled to all of the benefits thereunder, including
without limitation the election of the jurisdiction(s) and venue(s) in which the
Lender may enforce this Note.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts then remaining unpaid on this
Note shall become, or may be declared to be, immediately due and payable, all as
provided therein. Further, any payment of principal or interest not paid on the
due dates shall be subject to a "late charge", "late fee" and/or the "Default
Rate" as provided in the Credit Agreement.
The undersigned hereby waives presentment, demand for payment, notice
of dishonor, and any and all other notices or demands in connection with the
delivery, acceptance, performance, default or enforcement of this Note.
Except as permitted under the Credit Agreement, this Note may not be
assigned by the Lender or the Company to any Person.
<PAGE> 2
The obligations of the Company to make payments when due of any amount
owing under this Note are entitled to the benefits of the guarantees, collateral
security and other rights provided for in the Loan Documents.
THIS NOTE SHALL BE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CHOICE OF LAW
RULES WHICH WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed
by its officer being duly authorized, as of the date first above written.
CAMINUS LLC
By: /s/ Mark A. Herman
-----------------------
Name: Mark Herman
Title: Chief Financial Officer
<PAGE> 3
SCHEDULE OF WORKING CAPITAL LOANS
This Note evidences Working Capital Loans made, Continued or Converted
under the within-described Credit Agreement to the Company, on the dates, in the
principal amounts, of the Types, bearing interest at the rates and having
Interest Periods (if applicable) of the durations set forth below, subject to
the payments, Continuations, Conversions and prepayments of principal set forth
below:
<TABLE>
<CAPTION>
Amount Paid,
Date Made, Principal Duration of Prepaid, Unpaid
Continued or Amount of Type of Interest Interest Continued or Principal Notation
Converted Loan Loan Rate Period Converted Amount Made By
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE> 1
Exhibit 10.34
MORTGAGE OF STOCKS AND SHARES etc
AS SCHEDULED TO SECURE OWN
LIABILITIES
by
CAMINUS LIMITED
in favour of
FLEET BANK, N.A.
PINSENT CURTIS
GPT
<PAGE> 2
This Mortgage is made on the 23rd day of June 999
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
<PAGE> 5
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.
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
<PAGE> 6
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
(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 65
Caminus Consultants Limited Ordinary pound sterling 65
ZAI NET Software Limited Ordinary pound sterling 1
</TABLE>
EXECUTED as a deed by )
CAMINUS LIMITED acting by :- )
Dr. N. L. Evans Director /s/ Dr. N. L. Evans
Mrs. C. M. Wilcockson Secretary /s/ C. M. Wilcockson
Accepted by FLEET BANK, N.A. by:
Name:
Title
Dated:
<PAGE> 1
Exhibit 10.35
MORTGAGE OF STOCKS AND SHARES etc
AS SCHEDULED TO SECURE OWN
LIABILITIES
by
CAMINUS LLC
in favour of
FLEET BANK, N.A.
PINSENT 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.
<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 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
<PAGE> 5
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.
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
<PAGE> 6
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
(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 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 10.37
ESCROW AGREEMENT
This ESCROW AGREEMENT (the "AGREEMENT"), dated as of ___________, ____,
by and among [NAME REORGANIZED CORPORATION] ("PARENT"), Caminus/DC Acquisition
Corp., a Delaware corporation and a wholly-owned subsidiary of Parent ("BUYER"
and, together with the Parent and all affiliates, assignees or successors of the
Parent or the Buyer, and each officer, director, and trustee of any of the
foregoing, the "BUYER PARTIES"), Joy Armstrong, Rene Anderson, Lisa J. Conley,
Richard D. Couron, Richard L. Couron, David L. Covich, Jeremy D. Frye, Kyle
Gerrild, Kurt E. Gerrild, Andrew C. Hardin, Alan W. Nash and Scott Tucker (the
"ESCROWING SELLERS"), and [ESCROW AGENT TO BE NAMED BY CAMINUS WITH SELLER
REPRESENTATIVE'S CONSENT] (the "ESCROW AGENT").
WHEREAS, Parent has undergone a reorganization (the "REORGANIZATION")
into a subchapter C corporation;
WHEREAS, pursuant to a Purchase Agreement, dated as of July 30, 1999
(the "PURCHASE AGREEMENT"), among Caminus LLC, the Parent's predecessor in
interest ("CAMINUS"), the Buyer, the Shareholders (as defined in the Purchase
Agreement), and DC Systems, Inc., a Texas corporation, and the transactions
related thereto and contemplated thereby (collectively the "PURCHASE"), the
Buyer purchased from the Shareholders all of the capital stock of and all other
equity interests in DC Systems;
WHEREAS, in accordance with the terms of the Purchase Agreement,
Parent, Buyer and the Escrowing Sellers are required to enter into an escrow
agreement with the Escrow Agent, in substantially the form of this Agreement,
that establishes the terms pursuant to which the Escrow Agent will hold the
shares of capital stock of the Parent, as particularly described on SCHEDULE A,
which were exchanged in the Reorganization for notional share of Series A
membership interests in Caminus previously held by the Escrowing Sellers (the
"ESCROWED SHARES") and hold and distribute the Escrowed Shares pursuant to the
terms herein;
WHEREAS, at and from the Reorganization, Parent, Buyer and the
Escrowing Sellers desire to engage the Escrow Agent to assume certain
responsibilities and to perform certain duties as the escrow agent with respect
to the Escrowed Shares and the proceeds thereof, including the disbursement
thereof, upon the terms and conditions of this Agreement;
WHEREAS, the Escrow Agent is willing to assume such responsibilities
and to perform such duties on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
<PAGE> 2
SECTION 1. Defined Terms. For purposes of this Agreement, and except as
otherwise specifically defined herein, capitalized terms have the meanings
assigned to them in the Purchase Agreement. Any capitalized terms defined within
the text of this Agreement shall have the meaning assigned to them where
defined. In addition, the following terms shall be defined as follows:
(a) "ADJUSTED VALUATION PER SHARE" shall mean the Valuation Per Share,
adjusted proportionately to reflect the exchange ratio in the Reorganization
whereby notional shares of Series A membership interests in Caminus were
exchanged for or converted into shares of Parent's capital stock.
(b) "BUYER CLAIM" shall mean any bona fide claim made in good faith
with respect to which the Buyer Parties are entitled to be indemnified by any
Escrowing Sellers pursuant to the Purchase Agreement, including, without
limitation:
(i) any claim with respect to which any Buyer Parties are
entitled to be indemnified pursuant to Section 6 of the Purchase Agreement;
(ii) the amount of any Expenses paid by DC Systems, or any
Outstanding Liabilities paid by DC Systems and not previously deducted from the
Purchase Price, in each case to the extent not reimbursed to DC Systems or the
Buyer by the Shareholders; and
(iii) any claim for damages or other remedies made or
threatened against any Buyer Parties by a third party that, if successful, would
give rise to such a claim.
plus any accrued interest thereon, calculated at the rate of
five percent (5.0%) per annum from the inception of the Loss
claimed..
(c) "ESCROW AMOUNT" shall mean the Escrowed Shares held by the Escrow
Agent (together with any proceeds thereof, held by the Escrow Agent pursuant to
Section 5) at any point in time;
(d) "RELEASE DISTRIBUTION" shall mean the Escrow Amount, adjusted by
the amount of any outstanding Buyer Claims for which a written notice has been
provided by Buyer to the Escrow Agent pursuant to Section 7 on or before
December 31, 2000.
(e) "SELLER REPRESENTATIVE" shall mean, initially, _______________. Any
Escrowing Seller may require a vote of the Escrowing Sellers to remove the
Seller Representative by notice to the other Escrowing Sellers, proposing a
replacement Seller Representative and specifying the final date for voting,
which shall be no less than ten (10) and no more than twenty (20) business days
from such notice. An Escrowing Seller shall vote by giving notice of their votes
to the Seller Representative. The Seller Representative shall be removed and the
proposed Seller Representative shall become Seller Representative, after the end
of the voting period, if Escrowing Sellers holding a majority of the proportions
specified on SCHEDULE B have so voted, upon notice of the identity of the new
Seller Representative to such new Seller Representative, the Buyer, and the
Escrow Agent, and upon acceptance by such new Seller Representative. By entering
into this Agreement, each of the Escrowing Sellers agrees that the Seller
Representative shall have full authority to negotiate and compromise issues and
conclusively bind each of them to the
-2-
<PAGE> 3
resolution of Buyer Claims and all other disputes and matters that may arise
under this Agreement.
SECTION 2. APPOINTMENT OF THE ESCROW AGENT.
The parties hereto appoint and designate the Escrow Agent for the
purposes set forth herein, and the Escrow Agent hereby accepts such appointment
and designation. The Escrow Agent shall have all the rights, powers, duties and
obligations hereinafter provided, and agrees to perform only those duties as
expressly set forth herein and there shall be no implied duties imposed on the
Escrow Agent. The Escrow Agent shall have no responsibility to interpret the
terms of any party's obligations under the Purchase Agreement or any related
documents. Except as otherwise specifically provided herein, the Escrow Agent
shall not have the power to pledge, hypothecate, assign, sell, transfer or
otherwise dispose of or encumber the Escrow Amount. The Escrow Agent does not
have any interest in the Escrowed Shares deposited hereunder or the Escrow
Amount, but is serving as escrow agent and only has possession thereof.
Buyer and Seller Representative shall deliver to the Escrow Agent the
notices required to be delivered to the Escrow Agent pursuant to this Agreement,
but the Escrow Agent shall have no responsibility to confirm or verify the
accuracy of notices of Buyer or Seller Representative so delivered.
No provision of this Agreement shall require the Escrow Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder. Upon distribution of the entire
Escrow Amount pursuant to the terms herein, the Escrow Agent shall be discharged
from all obligations under this Agreement and shall have no further duties or
responsibilities in connection herewith.
SECTION 3. DEPOSIT OF THE ESCROWED SHARES.
Buyer and the Escrowing Sellers will deliver the Escrowed Shares to the
Escrow Agent to be held for the benefit of the parties hereto and for delivery
to the applicable parties pursuant to the terms herein. The Escrow Agent will
confirm receipt of the Escrowed Shares by delivery of written notice to the
parties and will continue to hold the Escrowed Shares on behalf of such parties
as set forth herein.
SECTION 4. TERMS OF THE ESCROW.
(a) Except as otherwise provided in this Agreement, the Escrow Agent
shall hold the Escrow Amount until the date on which the entire Escrow Amount
has been distributed pursuant to this Agreement. In addition to distributions by
the Escrow Agent pursuant to Section 7, the Escrow Agent is hereby instructed
and shall release the Release Distribution on January 2, 2001 (the "RELEASE
DATE"). In the event that all of the Escrow Amount is not distributed on the
Release Date, pursuant to the terms hereof, the Escrow Agent shall continue to
hold such remaining portion of the Escrow Amount in accordance with the terms of
this Agreement, until the final resolution of all Buyer Claims. Upon
distribution of all of the Escrow Amount, the Escrow Agent shall be relieved and
discharged of all its rights, powers, duties and obligations herein and this
Agreement shall terminate.
-3-
<PAGE> 4
(b) The Escrow Agent shall allocate all distributions of the Escrow
Amount to the Escrowing Sellers, pursuant to this Agreement, according to the
proportions specified on SCHEDULE B; provided that, if any Escrowing Seller
directs a sale of shares pursuant to Section 5(a), the Escrow Agent shall make
the following special allocations:
(i) The Escrow Agent shall hold the proceeds of such Directed
Sale (as hereinafter defined) separately and shall, upon any distribution of the
Escrow Amount, allocate such separate proceeds (together with any interest
thereon) to such Escrowing Seller.
(ii) The Escrow Agent shall decrease the number of Escrowed
Shares that would otherwise be allocated to such Escrowing Seller by the number
of shares sold in such Directed Sale.
SECTION 5. PROCEEDS.
(a) To the extent that, in any initial public offering of the Parent's
equity securities after the Reorganization or thereafter, any Escrowing Seller
would otherwise be entitled to sell any Escrowed Shares, if such Escrowing
Seller had received such shares free of escrow upon the Reorganization, such
Escrowing Seller shall be entitled to direct the Escrow Agent to sell Escrowed
Shares up to a number corresponding to such Escrowing Seller's proportion of the
Escrowed Amount as specified on SCHEDULE B. The Escrow Agent shall make any such
sale (a "DIRECTED SALE") only upon delivery of (i) written instructions from the
Escrowing Seller, specifying the number of shares to be sold, and (ii) a letter
from the Parent (which shall be provided on behalf of an Escrowing Seller upon
such Escrowing Seller's reasonable request) stating that such Escrowing Seller
is authorized to sell such Escrowed Shares as part of an initial public
offering, pursuant to an effective registration statement under the Securities
Act of 1933, as amended, or thereafter. In executing any such sale, the Escrow
Agent may select any securities broker or dealer that, in its opinion, is
capable of properly executing the transaction, and it may agree to such
commissions, fees and other charges (which will be paid from the proceeds of any
such sale) as it shall deem reasonable in the circumstances. The Escrow Agent
shall hold the proceeds of any such sale in accordance with the terms of this
Agreement.
(b) The Escrow Agent shall hold any dividends or other distributions
with respect to the Escrowed Shares in accordance with the terms of this
Agreement.
(c) The Escrow Agent shall collect all interest payments on cash and
cash equivalents included in the Escrow Amount, and shall hold the same as part
of the Escrow Amount for the benefit of the parties hereto, subject to Buyer's
right to request distributions thereof in accordance with Section 7 and subject
to the payments in accordance with Section 4. Any cash in the Escrow Amount
shall be invested in debt obligations issued or guaranteed as to principal or
interest by the United States or any agency or instrumentality thereof, or as
otherwise agreed by the parties hereto from time to time.
-4-
<PAGE> 5
SECTION 6. REPORTING BY THE ESCROW AGENT.
The Escrow Agent agrees to keep records of the Escrow Amount. The
Escrow Agent shall furnish to Buyer and Seller Representative itemized summaries
of the Escrow Amount, including all transactions made pursuant to Section 4 and
Section 7.
SECTION 7. BUYER CLAIMS.
(a) Buyer shall assert any Buyer Claim by notice in writing (the
"NOTICE") to the Seller Representative and the Escrow Agent. The Notice shall
specify, to the extent known, the amount of the claim and the circumstances
surrounding the claim.
(b) The Escrow Agent shall take action as follows with respect to any
claim with respect to which it has received a Notice:
(i) The Escrow Agent shall promptly send a copy of such Notice
to the Seller Representative.
(ii) In the event that the Escrow Agent shall receive written
directions signed by both Buyer and the Seller Representative setting forth the
nature and amount (which shall include any expenses incurred by the Buyer
Parties in connection therewith) of such claim, and a stipulation by the Seller
Representative that such claim is not being contested or disputed by the Seller
Representative, the Escrow Agent shall, within fifteen (15) days following the
receipt of such directions, distribute to the Buyer a portion of the Escrow
Amount equal to the amount of such claim.
(iii) In the event Buyer shall have asserted (in accordance
with this Section 7) that a claim has arisen hereunder, and, within a period of
thirty (30) days following the date of the Notice of the claim, the Escrow Agent
has not been notified by the Seller Representative of its determination that
such claim be litigated or otherwise contested or that such claim is in the
process of being litigated or otherwise contested, the Escrow Agent shall
thereupon pay the amount of such claim to Buyer from the Escrow Amount. If the
Escrow Agent shall be notified by the Seller Representative, within such 30-day
period, of its determination that such claim shall be litigated or otherwise
contested, or that such claim is in the process of being litigated or otherwise
contested, the Escrow Agent shall promptly transmit a copy of such notice to
Buyer and the claim shall not be paid by the Escrow Agent until the occurrence
of an event referenced in paragraph (iv) below.
(iv) In the event Buyer shall have asserted (in accordance
with this Section 7) that a claim has arisen, and shall have furnished the
Escrow Agent an affidavit certifying under penalty of law to the Escrow Agent
and the Seller Representative that all matters disputed by the Seller
Representative in connection with such claim have been resolved or adjudicated
pursuant to the arbitration procedure set forth in Section 7.6 of the Purchase
Agreement or, if applicable, by a court or courts of competent jurisdiction and
that the time for appeal for such adjudication has terminated without an appeal
having been taken, then in such event Buyer shall also provide to the Escrow
Agent, along with such affidavit, copies of all applicable decisions of the
arbitrator or non-appealable final court orders with respect thereto ("DECISIONS
AND ORDERS"). Upon receipt of the foregoing affidavit and related Decisions and
Orders, the Escrow Agent shall, within fifteen (15) days
-5-
<PAGE> 6
following the receipt of such materials, make distributions from the Escrow
Amount to the Buyer or the Escrowing Sellers, as applicable, based upon the
resolution of the applicable Buyer Claim(s) as specified in the Decisions and
Orders. At the same time that such affidavit and Decisions and Orders are
provided to the Escrow Agent, the Buyer shall also provide a copy thereof to the
Seller Representative.
Notwithstanding the foregoing, prior to the time a claim is paid by the
Escrow Agent in accordance with the terms of this Agreement, Buyer and
the Seller Representative may agree on the value of any claim and
notify the Escrow Agent, in a writing signed by the Seller
Representative and the Buyer, of such agreement. Upon receipt of the
foregoing agreement, the Escrow Agent shall thereupon pay the agreed
upon value of such claim to Buyer from the Escrow Amount.
SECTION 8. VALUATION OF DISTRIBUTIONS. For purposes of any distribution of
Escrowed Shares hereunder in satisfaction of a Buyer Claim, the parties agree
that the Escrow Agent shall value such shares as follows (in each case, the
determination of valuation to be made as of the first business day following the
receipt of materials specified in Section 7(b) hereof that are required in order
for the Escrow Agent to make a distribution to Buyer):
(a) If such shares are listed on any established stock exchange or a
national market system, including without limitation, the National Market System
("NMS") of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the value of a share shall be the closing sales
price for such share (or the closing bid, if no sales are reported) as quoted on
that system or exchange (or the exchange with the greatest volume of trading in
such shares) on the last market trading day prior to the day of determination,
as reported in the Wall Street Journal or any other source that the Board of
Directors of Parent considers reliable (a "RELIABLE SOURCE").
(b) If the shares are quoted on the NASDAQ System (but not on the
NASDAQ NMS) or are regularly quoted by recognized securities dealers but selling
prices are not reported, the value of a share shall be the mean between the high
bid and low asked prices for such a share on the last market trading day prior
to the day of determination, as reported by a Reliable Source.
(c) Prior to the initial public offering of Parent's equity securities
pursuant to underwritten offering registered under the Securities Act of 1933,
as amended, or in the absence of any established market for such shares, the
value of a share shall be the Adjusted Valuation Per Share.
SECTION 9. COMPENSATION AND REIMBURSEMENT OF THE ESCROW AGENT.
(a) For services rendered hereunder, Buyer and Escrowing Sellers (as a
group) shall equally pay the Escrow Agent compensation as set forth on SCHEDULE
C, from and after the date hereof for the services to be rendered herein.
(b) Buyer and Escrowing Sellers (as a group) shall equally reimburse
the Escrow Agent upon request for all reasonable expenses and disbursements
incurred or made by the Escrow Agent in implementing any of the provisions of
this Agreement, including
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<PAGE> 7
compensation and the expenses and disbursements of its counsel, except any such
expense or disbursement as may arise from its gross negligence or willful
misconduct.
SECTION 10. RESPONSIBILITIES OF THE ESCROW AGENT.
(a) The Escrow Agent shall exercise the same degree of care toward the
Escrow Amount as it exercises toward its own similar property and shall not be
held to any higher standard of care under this Agreement. The Escrow Agent shall
hold the Escrow Amount in safe keeping and make distributions of the Escrow
Amount as provided herein.
(b) The Escrow Agent shall not be liable hereunder except for its own
gross negligence or willful misconduct, and Parent, Buyer and the Escrowing
Sellers, severally and not jointly, agree to indemnify the Escrow Agent for, and
hold it harmless as to, any loss, liability, or expense, including attorney's
fees, incurred without gross negligence or willful misconduct on the part of the
Escrow Agent and arising out of or in connection with the Escrow Agent's duties
under this Agreement. In no event shall the Escrow Agent be liable (i) for
acting in accordance with instructions from Buyer, the Seller Representative or
any agent of either of them as provided in this Agreement, (ii) for acting in
accordance with the procedures set forth in Section 7, (iii) for special or
consequential damages, or (iv) at any time for any amount in excess of the value
of the Escrow Amount.
(c) The Escrow Agent shall be entitled to rely upon any order,
judgment, certification, instruction, notice or other writing delivered to it in
compliance with the provisions of this Agreement without being required to
determine the authenticity or the correctness of any fact stated therein or the
propriety or validity or service thereof. The Escrow Agent may act in reliance
upon any instrument comporting with the provisions of this Agreement or
signature believed by it to be genuine and may assume that any person purporting
to give notice of receipt or advice or make any statement or execute any
document in connection with the provisions hereof has been duly authorized to do
so.
(d) The Escrow Agent may consult with legal counsel in connection with
its duties under this Agreement and shall be fully protected in any act it
takes, suffers, or permits in good faith in accordance with such advice.
(e) In the event of any ambiguity in the provisions of this Agreement
or any dispute, controversy or conflicting claims by or among the undersigned
and/or any other person or entity with respect to any funds deposited hereunder,
the Escrow Agent shall be entitled, at its sole option, to refuse to comply with
any and all claims, demands or instructions with respect to such funds so long
as such dispute, controversy or conflict shall continue, and the Escrow Agent
shall not be or become liable in any way to the undersigned for its failure or
refusal to comply with such conflicting claims, demands or instructions,
provided that the Escrow Agent has not acted with willful misconduct, gross
negligence or bad faith. The Escrow Agent shall be entitled to refuse to act
until, at its sole option, either (i) such dispute, controversy or conflicting
claims shall have been finally determined by a court of competent jurisdiction
or settled by agreement between the conflicting parties as evidenced in a
writing satisfactory to the Escrow Agent, or (ii) the Escrow Agent shall have
received security or an indemnity satisfactory to the Escrow Agent sufficient to
save the Escrow Agent harmless from and against any and all loss, liability or
expense that the
-7-
<PAGE> 8
Escrow Agent may incur by reason of its acting. The Escrow Agent may in addition
elect in its sole option to commence an interpleader action or seek other
judicial relief or orders as the Escrow Agent may deem necessary.
SECTION 11. RESIGNATION OR REMOVAL OF THE ESCROW AGENT.
(a) The Escrow Agent may resign and be discharged from its duties or
obligations hereunder by giving not less than thirty (30) days' prior written
notice of its resignation to Buyer and Seller Representative specifying a date
on which such resignation shall take effect. If, within such notice period,
Buyer and Seller Representative provide the Escrow Agent with written
instructions signed by each of them with respect to the appointment of a
successor Escrow Agent and directions for the transfer of the Escrow Amount then
held by the Escrow Agent to such successor, then the Escrow Agent shall act in
accordance with such instructions and promptly transfer the Escrow Amount to
such designated successor. If no such instructions are provided, the Escrow
Agent may itself appoint a successor Escrow Agent or may file an action for
interpleader in any state or federal court of competent jurisdiction, and, by
placing the deposits then held by the Escrow Agent with such successor or court,
be released and discharged from any further or continuing right, liability, duty
or obligation under this Agreement.
(b) Buyer and Seller Representative may remove the Escrow Agent upon
written notice to the Escrow Agent signed by Buyer and Seller Representative.
Such removal shall take effect upon delivery of the Escrow Amount to a successor
Escrow Agent designated in writing by Buyer and Seller Representative, and the
Escrow Agent shall thereupon be discharged from all rights, powers, duties or
obligations under this Agreement and shall have no further rights, powers,
duties or obligations in connection herewith. The Escrow Agent shall deliver the
Escrow Amount within five (5) days of receiving the designation of a successor
Escrow Agent.
(c) If after thirty (30) days from the date of delivery of its written
notice of intent to resign or of Buyer and Seller Representative's notice of
removal the Escrow Agent has not received a written designation of a successor
Escrow Agent, the Escrow Agent's sole responsibility shall be in its sole
discretion either to retain custody of the Escrow Amount until it receives such
designation, or to apply to a court of competent jurisdiction for appointment of
a successor Escrow Agent and after such appointment to have no further rights,
powers, duties or obligations in connection herewith.
SECTION 12. MISCELLANEOUS.
(a) Construction. Throughout this Agreement, as the context requires,
(i) the singular tense and number includes the plural, and the plural tense and
number includes the singular; (ii) the past tense includes the present, and the
present tense includes the past; and (iii) references to parties, sections, and
schedules mean the parties, sections, and schedules of and to this Agreement.
All schedules referred to in this Agreement are hereby incorporated in and made
part of this Agreement. The section headings in this Agreement are inserted only
as a matter of convenience, and in no way define, limit, extend, or interpret
the scope of this Agreement or of any particular section. If there is any
apparent conflict or inconsistency between the provisions set forth in this
Agreement, and the provisions set
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<PAGE> 9
forth in any schedule or exhibit, to the extent possible such provisions shall
be interpreted in a manner so as to make them consistent. If it is not possible
to interpret such provisions consistently, the provisions set forth in the body
of this Agreement shall prevail.
(b) Entire Agreement. This Agreement together with the Purchase
Agreement and Related Agreements (as defined in the Purchase Agreement) and the
certificates and other instruments delivered in connection herewith or therewith
constitutes 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 and thereof, except
as specifically set forth in any document signed by all the parties hereto which
expressly amends this Agreement.
(c) Notices. Any notices or other communications required or permitted
hereunder shall be in writing and shall be delivered by personal service, fax 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 Parent or Buyer:
Caminus LLC
747 Third Avenue, 18th Floor
New York, NY 10017
Fax: (212) 888-0691
Attention: David Stoner, President
With a copy to:
GFI Energy Ventures LLC
11611 San Vicente Blvd., Suite 710
Los Angeles, CA 90049
Fax: (310) 442-0540
Attention: Richard K. Landers, Principal
With a copy to:
Irell & Manella LLP
333 South Hope Street, Suite 3300
Los Angeles, California 90071
Fax: (213) 229-0515
Attention: Anthony T. Iler, Esq.
If to the Escrow Agent:
____________________
____________________
____________________
____________________
Fax: _______________
-9-
<PAGE> 10
With a copy to:
____________________
____________________
____________________
____________________
Fax: _______________
If to any Escrowing Seller:
[SELLER REPRESENTATIVE]
____________________
____________________
____________________
Fax: _______________
With a copy to:
[DC SYSTEMS' COUNSEL]
____________________
____________________
____________________
Fax: _______________
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 fax,
notice shall be deemed given when such notice is transmitted to the appropriate
fax numbers specified in this Section 12(c). Notice by personal service shall be
deemed given when received.
(d) Governing Law. 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.
(e) Arbitration. Any controversy, dispute, or claim between or among
the parties, whether arising under the common law or any statute, including any
claim arising out of, in connection with, or in relation to the interpretation,
performance or breach of this Agreement (a "DISPUTED MATTER"), will be resolved
exclusively by arbitration, before a panel of three arbitrators, conducted in
the Borough of Manhattan, New York City, New York, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association ("AAA"),
and judgment upon any award rendered by the arbitrator may be entered by any
court of appropriate jurisdiction. Such arbitration will be administered by the
AAA if either of the parties requests such administration. Subject to Section
12(f), the parties shall, initially, bear the costs of arbitration (including
arbitrators' fees) equally.
(f) Costs and Attorneys Fees. In any dispute between or among the
parties concerning any provision of this Agreement or their rights and duties
under it, the party prevailing in such dispute shall be entitled, in addition to
such other relief as may be granted, to an award of its reasonable attorneys'
and expert witness fees and court costs (including the costs of the arbitration
procedure described in Section 12(e) and the fees of
-10-
<PAGE> 11
the arbitrators in any such procedure) incurred by reason of the arbitration of
the dispute, the enforcement of any arbitration award, and any other court or
other proceedings related to such dispute. For purposes of this Section 12(f),
the prevailing party is the party that most closely obtains the relief it sought
whether or not the suit or other legal proceeding is settled or carried out to
its conclusion.
(g) 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.
(h) Severability. The validity, legality or enforceability 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 enforceable 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.
(i) Counterparts. This Agreement may be executed in any number of
counterparts which together shall be one and the same instrument.
(j) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties, their respective successors and permitted
assigns. No party may assign any rights or obligations under this Agreement
without the prior written consent of each other party, which consent shall not
be unreasonably withheld.
(k) 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.
(l) Third-Party Benefits. None of the provisions of this Agreement will
be for the benefit of, or enforceable by, any third-party beneficiary.
(m) Specific Performance. In the event of any actual or threatened
default in, or breach of, any of the terms, conditions and provisions of this
Agreement, the party or parties who are thereby aggrieved shall have the right
to specific performance and adjunction in addition to any and all other rights
and remedies at law or equity, and such rights and remedies shall be
accumulative.
-11-
<PAGE> 12
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
Caminus LLC,
a Delaware limited liability company
By:__________________________________
Name: David M. Stoner
Its: President
CAMINUS/DC ACQUISITION CORP.,
a Delaware corporation
By:__________________________________
Name: David M. Stoner
Its: President
[ESCROW AGENT],
a [_______________]
By:__________________________________
Name:________________________________
Its:_________________________________
_____________________________________
JOY ARMSTRONG
_____________________________________
RENE ANDERSON
_____________________________________
LISA J. CONLEY
-12-
<PAGE> 13
_____________________________________
RICHARD D. COURON
_____________________________________
RICHARD L. COURON
_____________________________________
DAVID L. COVICH
_____________________________________
JEREMY D. FRYE
_____________________________________
KYLE GERRILD
_____________________________________
KURT E. GERRILD
_____________________________________
ANDREW C. HARDIN
_____________________________________
ALAN W. NASH
_____________________________________
SCOTT TUCKER
-13-
<PAGE> 14
SCHEDULE A
ESCROWED SHARES
A-1
<PAGE> 15
SCHEDULE B
SELLERS SPECIFICATIONS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
ADDITIONAL NOTICE PROPORTION OF
SHAREHOLDER NOTICE ADDRESS ADDRESS DISTRIBUTIONS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
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- -----------------------------------------------------------------------------------------------------------------
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B-1
<PAGE> 16
SCHEDULE C
FEE SCHEDULE
ESCROW AGENT SERVICES AND CHARGES
C-1
<PAGE> 1
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
Company Jurisdiction
------- ------------
1. Caminus Limited United Kingdom
(subsidiary of the Registrant)
2. DC Systems, Inc. Texas
(subsidiary of the Registrant)
3. Caminus Energy Limited United Kingdom
(subsidiary of Caminus Limited)
4. Zai*Net Software Limited United Kingdom
(subsidiary of Caminus Limited)
5. Caminus Consultants Limited United Kingdom
(subsidiary of Caminus Limited)
6. DCS*Gasnet Corporation Texas
(subsidiary of DC Systems, Inc.)
<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 May 28, 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
November 12, 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
12 November 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 8-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> APR-29-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 SEP-30-1999
<CASH> 2,770,538 801,351
<SECURITIES> 0 0
<RECEIVABLES> 3,472,662 5,705,856
<ALLOWANCES> 228,644 303,644
<INVENTORY> 0 0
<CURRENT-ASSETS> 6,321,330 8,130,672
<PP&E> 948,832 1,870,825
<DEPRECIATION> 168,756 490,952
<TOTAL-ASSETS> 31,069,002 40,868,631
<CURRENT-LIABILITIES> 10,971,720 12,818,358
<BONDS> 0 0
0 0
0 0
<COMMON> 97,292 110,004
<OTHER-SE> 17,062,490 26,440,269
<TOTAL-LIABILITY-AND-EQUITY> 31,069,002 400,868,631
<SALES> 0 0
<TOTAL-REVENUES> 9,626,003 18,525,559
<CGS> 0 0
<TOTAL-COSTS> 4,490,050 5,852,443
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 70,320 165,006
<INCOME-PRETAX> (10,036,457) (5,908,456)
<INCOME-TAX> 35,735 334,294
<INCOME-CONTINUING> (10,371,188) (6,242,750)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (10,371,188) (6,242,750)
<EPS-BASIC> (1.41) (0.76)
<EPS-DILUTED> (1.41) (0.76)
</TABLE>
