<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 25, 2000
REGISTRATION NO. 333-36122
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
ACCOUNT4.COM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7372 04-3002234
(STATE OR OTHER JURISDICTION
OF INCORPORATION OR (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
75 WELLS AVENUE
NEWTON, MASSACHUSETTS 02459
(617) 964-1633
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JOHN J. LUCAS, PRESIDENT
ACCOUNT4.COM, INC.
75 WELLS AVENUE
NEWTON, MASSACHUSETTS 02459
(617) 964-1633
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
--------------------------
COPIES TO:
<TABLE>
<S> <C>
WILLIAM C. ROGERS, ESQ. PAUL D. BROUDE, ESQ.
CHOATE, HALL & STEWART EPSTEIN BECKER & GREEN, P.C.
EXCHANGE PLACE 75 STATE STREET
53 STATE STREET BOSTON, MASSACHUSETTS 02109
BOSTON, MASSACHUSETTS 02109 (617) 342-4000
(617) 248-5000 (617) 342-4001(FAX)
(617) 248-4000 (FAX)
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
--------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED PRICE (1)(2) REGISTRATION FEE
<S> <C> <C>
Common Stock, $.01 par value per share...................... $64,400,000 $17,001.60
</TABLE>
(1) Includes shares of common stock issuable upon exercise of the underwriters'
over-allotment option.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(o) of the Securities Act of
1933.
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 25, 2000
P R O S P E C T U S
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 it is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.
<PAGE>
4,000,000 SHARES
[LOGO]
COMMON STOCK
----------------
Account4.com, Inc. is offering for sale 4,000,000 shares of common stock.
This is our initial public offering. Prior to this offering, no public market
has existed for our common stock. The initial public offering price of our
common stock is expected to be between $12.00 and $14.00 per share. We have
applied to list our common stock on the Nasdaq National Market under the symbol
"AFOR".
------------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 5.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- ---------
<S> <C> <C>
Public offering price..................................... $ $
Underwriting discounts.................................... $ $
Proceeds to Account4.com.................................. $ $
</TABLE>
Certain of our shareholders have granted the underwriters a 30-day option to
purchase up to 600,000 additional shares of common stock to cover
over-allotments.
The underwriters are offering the shares on a firm commitment basis. The
underwriters expect to deliver the shares on or about , 2000.
------------------------
The Robinson-Humphrey Company
Gerard Klauer Mattison & Co., Inc.
FAC/Equities
<PAGE>
[DESCRIPTION OF INSIDE COVER ARTWORK]
The Account4 product logo appears as the title of this graphic with the
subtitle "Internet-based Professional Services Automation."
Underneath this is a shaded oval. Inside the shaded oval is a list of
features that comprise the Account4 product. These are grouped under three
main categories: "Business Development," "Service Delivery," and
"Administration."
Under the "Business Development" category the following features are listed:
"Contact Management," "Opportunity Management," "Client Management," and "Work
Requests."
Under the "Service Delivery" category the following features are listed:
"Engagement Management," "Work Tracking," "Skills Management," "Resource
Management," "Schedules & Assignments," and "Forecasting."
Under the "Administration" category the following features are listed: "Time &
Expense Reporting," "Invoicing," "Chargebacks," and "Project Accounting."
Pointers from the Account4 oval lead to two illustrations underneath it. The
illustration on the left shows a multi-story building labeled "Professional
Services Organizations (PSOs)" with "Account4" indicated within the building;
bidirectional arrows go from "Account4" to rectangles labeled "Clients"
outside of the building. The illustration on the right shows a large
commercial building labeled "Corporate Information Technology (IT)
Departments" with "Account4" indicated within the building; bidirectional
arrows go from "Account4" to different areas of the building.
Underneath the two buildings is a globe graphic labeled "Internet."
A set of two curved arrows overlaps the globe and the multi-story building
graphic on the left side of the page as described above. One arrow labeled
"Communicate" points from the building into the globe; another arrow labeled
"Collaborate" points back from the globe to the building indicating a
circular flow.
A second set of two curved arrows overlaps the globe and the large commercial
building graphic on the right side of the page as described above. One arrow
labeled "Communicate" points from the building into the globe; another arrow
labeled "Collaborate" points back from the globe to the building indicating a
circular flow.
Beneath the globe is a bulleted list labeled "Business & Technology
Benefits...". The list is in two columns.
The first column includes: "Increased Revenue Opportunities," "Improved
Employee Utilization," "Increased Operational Efficiency," "Improved Client
Satisfaction," and "Increased Profitability."
The second column includes: "Rapid Deployment," "Cost Minimization," "Ease of
Personalization," "Adaptable to Customer's Business," and "Central Data
Repository."
The Account4.com logo appears under the list.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Summary..................................................... 1
Risk Factors................................................ 5
Forward-Looking Statements.................................. 12
Use of Proceeds............................................. 13
Dividend Policy............................................. 13
Capitalization.............................................. 14
Dilution.................................................... 15
Selected Financial Information.............................. 16
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 17
Business.................................................... 29
Management.................................................. 40
Related Party Transactions.................................. 46
Principal Shareholders...................................... 47
Description of Capital Stock................................ 48
Shares Eligible for Future Sale............................. 50
Underwriting................................................ 51
Experts..................................................... 54
Legal Matters............................................... 54
Where You Can Find More Information......................... 54
Index to Financial Statements............................... F-1
</TABLE>
i
<PAGE>
SUMMARY
THIS SECTION SUMMARIZES INFORMATION CONTAINED IN OTHER PARTS OF THIS
PROSPECTUS. THIS SUMMARY DOES NOT CONTAIN ALL OF THE INFORMATION YOU SHOULD
CONSIDER BEFORE INVESTING IN OUR COMMON STOCK. YOU SHOULD READ THE ENTIRE
PROSPECTUS CAREFULLY IN DECIDING WHETHER TO INVEST IN OUR COMMON STOCK.
UNLESS WE STATE OTHERWISE, THE INFORMATION IN THIS PROSPECTUS ASSUMES THAT
THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED AND THAT THE INITIAL
PUBLIC OFFERING PRICE IS $13.00 PER SHARE, THE MIDPOINT OF THE RANGE OF
ANTICIPATED INITIAL PUBLIC OFFERING PRICES.
ACCOUNT4.COM, INC.
OUR BUSINESS
We provide Internet-based software products and services that enable
professional services organizations (PSOs) and corporate information technology
(IT) departments to successfully manage projects and to increase the
utilization, productivity, effectiveness and retention of their workforces. Our
customers purchase our fully-integrated, end-to-end Account4 product because of
its comprehensive features and "100% thin-client" architecture that allow users
to access Account4 using only a Web browser and an Internet connection. These
features help our customers minimize both their total cost of ownership and
their need to change their business processes to accommodate a Professional
Services Automation (PSA) software solution. Account4 is installed on a single
server, making installation, personalization, modification and updates easy and
quick to implement. Installation on a central server and our thin-client
architecture will also allow us to modify Account4 to incorporate emerging
technologies and be fully functional with hand-held or other wireless computing
devices as demand for these features increases.
We have developed Account4 based on our 13 years of experience in providing
project and work management solutions. We have provided these solutions,
including Account4, to a premier customer base of over 150 companies
representing over 267,000 licensed users. We believe we have established a
reputation for developing and providing innovative enterprise software solutions
that has positioned Account4 as a leading product in the rapidly emerging PSA
market. To date, 47 customers, representing over 30,000 users, have licensed
Account4.
Account4's comprehensive features provide our customers with:
- increased revenue and profit opportunities and accelerated billing
processes by providing real-time collection of, and access to,
information;
- improved employee utilization and retention by providing continuous access
to personnel scheduling and availability, and project distribution;
- increased efficiency of operations through the distribution, sharing and
reuse of critical knowledge, data and information across an enterprise;
and
- improved client satisfaction resulting from efficient resource utilization
and project management.
Benefits of Account4's flexible, thin-client architecture include:
- rapid deployment and immediate availability to all users;
- ease of personalization, modification and scalability provided by
installation on a central server and the use of HTML;
1
<PAGE>
- flexibility to extend Account4 to meet additional requirements or modify
Account4 to accommodate existing business processes; and
- consolidation of data into a central database.
We believe these business and technology benefits collectively provide a
fully-integrated and comprehensive PSA solution that minimizes our customers'
total cost of ownership, creating a compelling competitive advantage for
Account4.
OUR INDUSTRY
Aberdeen Group estimates that the worldwide market potential for PSA
software solutions was approximately $1.6 billion in 1998 and should increase
20% annually to approximately $4.0 billion in 2003. The served portion of this
market is expected to increase by over 90% annually, from $106 million in 1999
to $1.6 billion in 2003, creating a large unserved market opportunity.
The vast majority of PSA software solutions are directed toward IT
consulting firms and corporate IT organizations, as the IT services sector
represents one of the largest and fastest-growing segments of the professional
services industry. Dataquest estimates that worldwide spending on IT services
will grow by 13.9% per year to nearly $800 billion in 2003, and Gartner Group
estimates that by 2003, 30% of all e-business projects will be suspended or
cancelled due to the unavailability of IT resources. We believe that the strain
on IT service providers caused by the shortage of IT workers will force IT
service providers to automate the management and delivery of their services in
order to maximize their utilization of resources and profitability.
OUR BUSINESS STRATEGY
Our objective is to be the leading global supplier of PSA solutions to PSOs
and corporate IT departments. We intend to leverage our 13 years of experience
in providing project and workforce management solutions and extend our
established reputation for developing and providing the most innovative,
comprehensive, functional and cost-effective products. Our strategy to
accomplish these goals includes:
- capitalizing on the rapidly growing market for PSA software solutions;
- investing in sales and marketing programs to generate significant brand
awareness for Account4;
- advancing our technology leadership position by continuing to focus
significant resources on innovative product development;
- expanding our sales, marketing, administrative and technology
infrastructure as well as our facilities and services to further develop
our international operations; and
- developing additional complementary business and technology partnerships
with third parties to augment our existing distribution channels, provide
access to additional customers and enhance the features of our PSA
solution.
HOW TO REACH US
Our principal executive offices are located at 75 Wells Avenue, Newton,
Massachusetts 02459, and our telephone number is (617) 964-1633. Our website is
located at www.account4.com. Information on our website is not, however,
intended to be part of this prospectus, and you should rely only on the
information contained in this prospectus before deciding to invest in our common
stock.
2
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock we are offering................................ 4,000,000 shares
Common stock to be outstanding immediately after this
offering.................................................. 15,384,521 shares(1)
Use of proceeds............................................. Repayment of debt, expansion of sales
and marketing activities, enhancement
of our products and technology, and
general corporate purposes, including
working capital and potential
acquisitions.
Proposed Nasdaq National Market symbol...................... AFOR
</TABLE>
- ------------------------
(1) The number of shares of common stock to be outstanding excludes
1,458,421 shares that we may issue upon the exercise of stock options
outstanding as of May 1, 2000.
3
<PAGE>
SUMMARY FINANCIAL DATA
You should read the following summary historical and as adjusted financial
and operating information in conjunction with "Use of Proceeds," our financial
statements and related notes, including the unaudited interim financial
information, and other financial information, which appears later in this
prospectus.
<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(DOLLARS AND SHARES IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues:
Account4 revenue............................... $ 40 $ 296 $ 2,938 $ 877 $1,364
Other revenue.................................. 4,273 5,723 5,123 1,433 510
------ ------- ------- ------- ------
Total revenues............................... 4,313 6,019 8,061 2,310 1,874
Income (loss) from operations.................... 642 507 335 465 (629)
Net income (loss)................................ 534 389 145 265 (390)
Net income (loss) per share
Basic.......................................... $ 0.07 $ 0.05 $ 0.02 $ 0.03 $(0.05)
====== ======= ======= ======= ======
Diluted........................................ $ 0.06 $ 0.03 $ 0.01 $ 0.02 $(0.05)
====== ======= ======= ======= ======
Weighted average shares used in computing net
income (loss) per share:
Basic.......................................... 7,685 8,541 8,541 8,541 8,541
====== ======= ======= ======= ======
Diluted........................................ 9,689 12,206 12,194 12,194 8,541
====== ======= ======= ======= ======
OTHER OPERATING DATA:
New Account4 licenses............................ 1 8 20 2 14
Cumulative Account4 licenses at end of period.... 1 9 29 11 43
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 2000
--------------------------
ACTUAL AS ADJUSTED (1)
-------- ---------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 477 $47,041
Working capital............................................. 868 47,433
Total assets................................................ 2,533 49,097
Total debt and capital lease obligations, including current
portion................................................... 1,110 14
Total stockholders' equity (deficit)........................ (55) 47,605
</TABLE>
- ------------------------
(1) Reflects the receipt of the net proceeds from the sale of 4,000,000 shares
of common stock offered by us at the assumed public offering price of
$13.00 per share, the midpoint of the range of anticipated initial public
offering prices, and the application of the net proceeds from the offering
including repayment of approximately $1.1 million of indebtedness, after
deducting underwriting discounts and commissions and estimated offering
expenses.
Account4-Registered Trademark- and the Account4.com logo are trademarks of
Account4.com. All other trade names and trademarks referred to in this
prospectus are the property of their respective owners.
4
<PAGE>
RISK FACTORS
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS, AS WELL AS OTHER INFORMATION
PRESENTED IN THIS PROSPECTUS, IN DECIDING WHETHER TO INVEST IN OUR COMMON STOCK.
EACH OF THESE FACTORS COULD ADVERSELY AFFECT OUR OPERATIONS, THE MARKET PRICE OF
OUR COMMON STOCK AND OUR FINANCIAL RESULTS, AND COULD RESULT IN A COMPLETE LOSS
OF YOUR INVESTMENT.
RISKS RELATED TO OUR BUSINESS
BECAUSE WE HAVE A LIMITED HISTORY IN SELLING ACCOUNT4 AND WE OPERATE IN A
RAPIDLY EMERGING INDUSTRY, IT IS DIFFICULT TO EVALUATE OUR BUSINESS AND
PROSPECTS
It is difficult to evaluate our business and prospects because our Account4
revenue and income potential are not fully proven. We did not begin commercial
sales of Account4, our Internet-based product, until the third quarter of 1998.
Because of our limited operating history with Account4, and because we expect
Account4 to be our primary source of revenue in the future, there may not be an
adequate basis for forecasts of future operating results and there can be no
assurance that we will ever achieve or sustain profitability.
WE ANTICIPATE LOSSES AND NEGATIVE CASH FLOW IN THE FUTURE. OUR LOSSES MAY
INCREASE BECAUSE WE PLAN TO INCREASE OPERATING EXPENSES, AND WE CANNOT GUARANTEE
THAT WE WILL BECOME PROFITABLE
We have recently increased our operating expenses in anticipation of future
revenues and expect to continue to increase our operating expenses because of
increases in:
- the number of our employees;
- sales and marketing activities; and
- other costs related to implementing our growth strategy.
As a result, we expect to experience losses and negative cash flow even if
sales of our products and services continue to grow, and we may not generate
sufficient revenues to achieve profitability in the future.
WE ARE CURRENTLY EXPERIENCING A PERIOD OF SIGNIFICANT GROWTH THAT MAY PLACE A
STRAIN ON OUR RESOURCES
We are experiencing and expect to continue to experience significant growth
in our operations. This expansion will place additional demands on our
management, operational capacity and financial resources. Our management, sales,
technical and accounting resources may not be adequate to support our
anticipated future growth. We need to hire additional personnel and devote
significant resources to improving or replacing existing operational, accounting
and information systems, procedures and controls. Our future operating results
will depend on our ability to manage our growth effectively by, among other
things:
- predicting accurately the growth in the demand for Acccount4 and related
services;
- attracting, training and retaining key employees;
- expanding and improving our financial systems, procedures and controls;
- acquiring and installing new equipment and facilities; and
- responding quickly and effectively to unanticipated changes in the PSA
industry.
If we are unable to manage our growth effectively, our business may suffer.
5
<PAGE>
THE GROWTH OF OUR BUSINESS DEPENDS ON THE ADOPTION OF PSA SOLUTIONS BY PSOS AND
CORPORATE IT DEPARTMENTS
We derive our revenues from the sale of PSA solutions to PSOs and corporate
IT departments. This is a relatively new market, and it is uncertain whether
these organizations will adopt PSA solutions on a widespread basis. Accordingly,
the market for our products and services may not continue to grow, or, even if
the market does grow in the immediate term, such growth may not be sustainable.
Even if this market continues to grow, if we fail to continue to increase our
penetration of this industry, our operating results may suffer.
THE LOSS OF OUR CHIEF EXECUTIVE OFFICER OR OTHER KEY EXECUTIVE PERSONNEL COULD
SIGNIFICANTLY HARM OUR BUSINESS
Our future success depends to a significant extent on the continued services
of our senior management and other key personnel, particularly John J. Lucas,
our Chairman, President and Chief Executive Officer. The loss of the services of
Mr. Lucas or other key employees would hurt our business. We do not maintain key
person life insurance on the lives of Mr. Lucas or any of our other senior
officers or key employees. Additionally, none of our key personnel is bound by
employment agreements.
OUR MARKETS ARE HIGHLY COMPETITIVE AND COMPETITION COULD HARM OUR ABILITY TO
SELL OUR PRODUCTS AND SERVICES AND REDUCE OUR MARKET SHARE
Some of our competitors have significantly greater financial, technical,
marketing or other resources, or greater name recognition than we do. Many of
our competitors may be able to respond more quickly than us to new or emerging
technologies and changes in customer requirements. Our competitors have made and
may continue to make strategic acquisitions or establish cooperative
relationships among themselves or with other software vendors, possibly
increasing their ability to address the need for PSA solutions. Our competitors
may also establish or strengthen cooperative relationships with parties with
whom we have relationships, thereby limiting our success with these parties.
IF WE CANNOT HIRE AND RETAIN QUALIFIED PERSONNEL, WE WILL NOT BE ABLE TO CONDUCT
OUR OPERATIONS SUCCESSFULLY, IF AT ALL
Due to significant competition for skilled workers and high turnover rates
for such workers, we may experience difficulty in hiring and retaining the
highly skilled employees we need. Our operating results may be harmed if we
experience increased expenses related to attracting, training and retaining
qualified employees. Like many other technology companies, we rely on stock
options as a component of our employee compensation. If the market price of our
common stock increases or decreases substantially, some current or potential
employees may not perceive our equity incentives as attractive. Our failure to
attract new personnel or retain and motivate our current personnel could
adversely affect our business, financial condition and results of operations.
WE MAY LOSE EXISTING CUSTOMERS OR BE UNABLE TO ATTRACT NEW CUSTOMERS IF WE DO
NOT DEVELOP NEW PRODUCTS OR ENHANCE OUR EXISTING PRODUCTS
If we are unable to maintain and improve our product line and develop new
products, we may lose existing customers or be unable to attract new customers.
We may not be successful in developing and marketing product enhancements or new
products on a timely or cost-effective basis. If we develop new products, they
may not achieve market acceptance and our business could suffer.
6
<PAGE>
OUR OPERATING RESULTS MAY VARY SIGNIFICANTLY DUE TO THE LENGTHY AND
UNPREDICTABLE SALES CYCLES OF OUR PRODUCTS AND SERVICES AND POTENTIAL RESISTANCE
TO ADOPTION OF OUR SOFTWARE
Because our products and services have lengthy and unpredictable sales
cycles, it is difficult to forecast the timing and recognition of revenues from
sales of our products and services. Since we are unable to control many of the
factors that influence our customers' buying decisions, lengthy and
unpredictable sales cycles could cause our operating results to be below the
expectations of analysts and investors, which could cause the price of our
common stock to fall.
Customers in our target market often take an extended time to evaluate our
products before purchasing them. During the evaluation period, a variety of
factors, including the introduction of new products or aggressive discounting by
competitors and changes in our customers' budgets and purchasing priorities, may
lead customers to not purchase, or reduce orders for, our products.
In addition, because we are offering a new, Internet-based technology
solution, we often must educate our prospective customers regarding the use and
benefits of our technology, which may cause additional delays during the
evaluation process.
WE MAY ENCOUNTER PROBLEMS EXPANDING OUR OPERATIONS INTERNATIONALLY
We may not be able to successfully market, sell, deliver and support our
products and services internationally. Our failure to build and manage effective
international operations could limit the future growth of our business. Entry
into international markets will require significant management attention and
financial resources to open international offices and hire international sales
and support personnel. Localizing our products is difficult and may take longer
than we anticipate. We may experience delays in recruiting and training
international staff. In addition, we have no experience in developing local
versions of our products, and we have limited experience in marketing and
selling our products and services overseas. We may experience longer sales
cycles for our products and services in international markets. Doing business
internationally involves greater expense and many additional risks, including:
- changes in regulatory requirements, taxes, trade laws, tariffs,
intellectual property rights and labor regulations;
- changes in political or economic conditions;
- difficulty in establishing, staffing and managing foreign operations; and
- fluctuating exchange rates.
IF OUR PRODUCTS DO NOT CONTINUE TO BE COMPATIBLE WITH WIDELY USED SOFTWARE
PROGRAMS, OUR REVENUES MAY BE ADVERSELY AFFECTED
Our software must be installed on a computer server running the Microsoft
Windows NT operating system and the Microsoft Internet Information Server system
and have connectivity to the same computer server, or another computer server,
running database software from Microsoft Corporation or Oracle Corporation. If
we cannot obtain access to these software products, we may be unable to build
and enhance our products on schedule. If these operating systems and software
products do not remain widely used, or if we do not update our software to be
compatible with newer versions of these systems and programs, our business could
suffer.
Our software connects to and uses data from a variety of our customers'
existing software systems. If we fail to enhance our software to connect to and
use data from newer versions of these products, we may lose potential customers.
7
<PAGE>
OUR BUSINESS MAY SUFFER IF WE ARE NOT ABLE TO PROTECT OUR INTELLECTUAL PROPERTY
Our success is dependent upon our ability to develop and protect our
proprietary technology and intellectual property rights. We seek to protect our
software, documentation and other written materials primarily through a
combination of trade secret, trademark and copyright laws, confidentiality
procedures and contractual provisions. While we have attempted to safeguard and
maintain our proprietary rights, we do not know whether we have been or will be
successful in doing so.
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. While we are unable to determine the extent to which piracy of our
software products exists, software piracy can be expected to be a persistent
problem, particularly in foreign countries where the laws may not protect
proprietary rights as fully as in the United States. We can offer no assurance
that we can adequately protect our proprietary rights or that our competitors
will not reverse engineer or independently develop similar technology.
IF OTHERS CLAIM THAT WE ARE INFRINGING ON THEIR INTELLECTUAL PROPERTY, WE COULD
INCUR SIGNIFICANT EXPENSES OR BE PREVENTED FROM SELLING OUR PRODUCTS
We cannot provide assurance that others will not claim that we are
infringing on their intellectual property rights or that we do not in fact
infringe on those intellectual property rights. We have not conducted a search
for existing intellectual property registrations, and we may be unaware of
intellectual property rights of others that may cover some of our technology.
Any litigation regarding intellectual property rights could be costly and
time-consuming and divert the attention of our management and key personnel from
our business operations. The complexity of the technology involved and the
uncertainty of intellectual property litigation increase these risks. Claims of
intellectual property infringement might also require us to enter into costly
royalty or license agreements, and in such event, we may not be able to obtain
royalty or license agreements on terms acceptable to us, if at all. We also may
be subject to significant damages or an injunction against the use of our
products. A successful claim of patent or other intellectual property
infringement against us could cause immediate and substantial damage to our
business and financial condition.
IF OUR PRODUCTS CONTAIN SIGNIFICANT DEFECTS OR IF OUR SERVICES ARE NOT PERCEIVED
AS HIGH QUALITY, WE COULD LOSE POTENTIAL CUSTOMERS OR BE SUBJECT TO CLAIMS FOR
DAMAGES
Our products are complex and may contain unknown errors, defects or
failures, particularly since we frequently release new versions. In the past we
have discovered software errors in some of our products after introduction. We
may not be able to detect and correct errors before releasing our products
commercially. If our commercial products contain errors, we may:
- need to expend significant resources to locate and correct the errors;
- need to delay introduction of new products or commercial shipment of
products;
- need to compensate dissatisfied customers; or
- experience reduced sales and harm to our reputation from dissatisfied
customers.
IF OUR CUSTOMERS ENCOUNTER PROBLEMS WITH OUR PRODUCTS, WE MAY BE SUBJECT TO
PRODUCT LIABILITY CLAIMS
Product defects may give rise to product liability claims. Although our
license agreements with customers typically contain provisions designed to limit
our exposure, some courts may not enforce all of these limitations. Product
liability claims, whether or not successful, could:
- divert the attention of our management and key personnel from our
business;
8
<PAGE>
- be expensive to defend; and
- result in large damage awards.
We have product liability insurance, but it may not be adequate to cover all
of the expenses resulting from a claim.
WE MAY REQUIRE ADDITIONAL FINANCING TO MAINTAIN AND EXPAND OUR BUSINESS, WHICH
MAY NOT BE AVAILABLE ON FAVORABLE TERMS, IF AT ALL
We expect to incur losses as we pursue our growth strategy. We may need
additional funds to expand or meet all of our operating needs. If we need
additional financing, we cannot be certain that it will be available on
favorable terms, if at all. Further, if we issue additional shares of our
capital stock, shareholders will experience additional dilution, which may be
substantial. If we need funds and cannot raise them on acceptable terms, we may
not be able to continue our operations at the current level.
RISKS RELATED TO THIS OFFERING
THERE HAS BEEN NO MARKET FOR OUR COMMON STOCK AND OUR STOCK PRICE MAY DECLINE
AFTER THIS OFFERING
Our common stock has never been sold in a public market. An active trading
market for our common stock may not develop or be sustained after this offering.
The initial public offering price may not be indicative of the prices that will
prevail in the public market after the offering, and the market price of our
common stock could fall below the initial public offering price. The initial
public offering price will be determined through negotiations between
representatives of the underwriters and us and may not be representative of the
price of our common stock after this offering. The price of our common stock may
fluctuate substantially in the future. These fluctuations may be caused by
several factors, including the prices we are able to charge for our products and
services, competition and changes in technology. Other factors which may cause
your investment in our common stock to be adversely affected or which may cause
significant fluctuations in our stock price include:
- our actual or anticipated operating results;
- changes in our actual or anticipated growth rates;
- changes in financial estimates or investment recommendations by securities
analysts;
- our operating results falling below analysts' or investors' expectations
in any given period;
- general economic and PSA market conditions;
- changes in economic and capital market conditions;
- changes in market valuations or earnings of our competitors;
- announcements by us or our competitors of new products, service offerings,
acquisitions or strategic relationships;
- changes in business or regulatory conditions; and
- trading volume of our common stock.
Many companies' equity securities, including equity securities of Internet
and other technology companies, have recently experienced extreme price and
volume fluctuations. Often, these fluctuations are unrelated to the companies'
operating performance. Elevated levels in market prices for securities, often
reached following these companies' initial public offerings, may not be
sustainable and may not bear any relationship to operating performance. Our
common stock may not trade at the same levels as other stocks in our industry,
and Internet stocks and other technology stocks in general may not sustain
9
<PAGE>
their current market prices. In the past, following periods of market
volatility, shareholders have instituted securities class action litigation. If
we become involved in securities litigation, it could be costly and divert
resources and the attention of management from our business.
We intend to apply to have our common stock included for quotation on the
Nasdaq National Market. If we are approved for quotation on the Nasdaq National
Market, we would be subject to financial and market-related tests established by
Nasdaq to maintain our listing. We may not be able to maintain these listing
criteria in the future, and our inability to do so could hinder the liquidity of
our common stock and your ability to buy or sell it.
WE MAY NOT USE THE PROCEEDS OF THIS OFFERING EFFECTIVELY
We intend to use the proceeds from this offering to repay debt; expand our
business, including increasing sales, marketing and product development
expenses; and for general corporate purposes, including working capital. We may
use a portion of the proceeds to acquire other businesses, products or
technologies. Investors will be relying on our judgment regarding the use of the
proceeds from this offering. If we do not use these funds effectively, our
business and stock price may be harmed.
FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE
If our shareholders sell substantial amounts of our common stock in the
public market following this offering, the market price of our common stock
could fall. Such sales also might make it more difficult for us to sell equity
or equity-related securities in the future at a time and price that we deem
appropriate.
After this offering, we will have 15,384,521 shares of our common stock
outstanding. All of the shares sold in this offering, and 10,132 shares of
common stock outstanding prior to this offering, will be freely tradable. The
remaining shares of common stock will be available for sale in the public market
180 days after the date of this prospectus.
OUR OFFICERS, DIRECTORS AND THEIR AFFILIATED ENTITIES WILL BENEFICIALLY OWN
APPROXIMATELY 74% OF OUR COMMON STOCK AND NO CORPORATE ACTION REQUIRING
SHAREHOLDER APPROVAL CAN BE TAKEN WITHOUT THEIR APPROVAL, WHICH COULD ADVERSELY
AFFECT THE VALUE OF OUR COMMON STOCK
Our executive officers and directors, together with their affiliates, will
beneficially own an aggregate of approximately 74% of our outstanding common
stock following the completion of this offering. These shareholders, if acting
together, will be able to control all matters requiring approval by our
shareholders, including the election of directors and the approval of mergers or
similar transactions, even if other shareholders disagree.
WE DO NOT INTEND TO PAY DIVIDENDS AND YOU MAY NOT EXPERIENCE A RETURN ON
INVESTMENT WITHOUT SELLING YOUR SHARES
We have never declared or paid any cash dividends on our capital stock and
do not intend to pay any dividends in the future. Therefore, you may not
experience a return on your investment in our common stock without selling your
shares.
10
<PAGE>
WE HAVE IMPLEMENTED ANTI-TAKEOVER PROVISIONS THAT COULD DISCOURAGE OR PREVENT A
TAKEOVER, EVEN IF AN ACQUISITION WOULD BE BENEFICIAL TO OUR SHAREHOLDERS
Provisions of our Certificate of Incorporation and By-Laws, as well as
provisions of Delaware law, could make it more difficult for a third party to
acquire us, even if doing so would be beneficial to our shareholders. These
provisions include:
- authorizing the issuance of "blank check" preferred stock that could be
issued by our Board of Directors to increase the number of outstanding
shares and thwart a takeover attempt;
- prohibiting cumulative voting in the election of directors, that would
otherwise allow less than a majority of shareholders to elect director
candidates;
- limiting the ability of shareholders to call special meetings of
shareholders; and
- establishing advance notice requirements for nominations for election to
the Board of Directors or for proposing matters to be acted upon by
shareholders at shareholder meetings.
In addition, Section 203 of the Delaware General Corporation Law and the
terms of our stock purchase and stock option plans may discourage, delay or
prevent a change in control of us.
INVESTORS IN THIS OFFERING WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION IN THE
NET TANGIBLE BOOK VALUE OF THEIR SHARES
The initial public offering price is substantially higher than the pro forma
net tangible book value per share of our outstanding common stock immediately
after this offering. Accordingly, purchasers of common stock in this offering
will experience immediate and substantial dilution of approximately $9.91 in pro
forma net tangible book value per share, or approximately 76.2% of the assumed
offering price of $13.00 per share, the midpoint of the range of initial public
offering prices.
11
<PAGE>
FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus represents our expectations or
projections. You can generally identify these forward-looking statements by the
use of the words "may," "will," "expects," "intends," "plans," "estimates,"
"anticipates," "believes" or similar language. These forward-looking statements
are made only as of the date of this prospectus and therefore involve
substantial risks and uncertainties. We believe that it is important to
communicate our expectations for the future to our investors, and we believe the
expectations expressed in our forward-looking statements are reasonable and
accurate based on information we currently have. However, our expectations may
not prove to be correct due to future events that we have not accurately
predicted or over which we have no control, and our actual results may be
materially different from our estimates or predictions. Important factors that
could cause actual results to differ from our expectations are disclosed under
"Risk Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and in other parts of this prospectus.
Subject to any obligation that we may have to amend or supplement this
prospectus as required by law and the rules of the SEC, we are under no duty to
update any of these forward-looking statements after the date of this prospectus
to conform these statements to actual results.
12
<PAGE>
USE OF PROCEEDS
We estimate that we will receive net cash proceeds from this offering of
approximately $47,660,000, after deducting estimated underwriting discounts and
estimated offering expenses and based upon an initial public offering price of
$13.00 per share, which is the midpoint of the estimated price range.
The principal purposes of this offering are to establish a public market for
our common stock, to increase our visibility in the marketplace, to facilitate
future access to public capital markets, to provide liquidity to existing
stockholders and to obtain additional working capital.
We currently intend to use the net proceeds of this offering received by us
as follows:
- to repay approximately $1.1 million in debt;
- to expand domestic and international sales and marketing activities;
- to expand customer service and operating capabilities;
- to continue enhancement of our products and technologies; and
- to develop our business infrastructure.
We expect to use the remainder of the net proceeds for other general
corporate purposes, including working capital, capital expenditures and possible
acquisitions. The amount of funds that we actually use for these purposes will
depend upon many factors, including revisions to our business plan, material
changes in our revenues or expenses, and other factors described under "Risk
Factors." Accordingly, our management will have significant discretion over the
use and investment of the net proceeds from this offering.
The indebtedness we intend to repay bears interest at a bank's prime rate
(9.5% at March 31, 2000) plus 3.5% per year and matures on December 31, 2001.
Pending the uses described above, we will invest the net proceeds in
interest-bearing accounts or short-term, interest-bearing securities, or both.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain any future earnings and do not anticipate paying any
cash dividends in the foreseeable future.
13
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 2000. Our
capitalization is presented:
- on an actual basis; and
- on an as adjusted basis to reflect (i) our receipt of the net proceeds
from the sale of 4,000,000 shares of common stock in this offering, as if
it had occurred as of March 31, 2000 and (ii) the application of a portion
of the net proceeds to repay approximately $1.1 million of indebtedness.
The information in the table should be read in conjunction with the
financial statements and accompanying notes that we have included elsewhere in
this prospectus. The share numbers exclude 1,458,421 shares of common stock
issuable upon the exercise of stock options outstanding at May 1, 2000 at a
weighted average exercise price of $.68 per share and 932,826 shares of common
stock available for issuance under our 1997 Stock Plan as of May 1, 2000.
<TABLE>
<CAPTION>
AS OF MARCH 31, 2000
----------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................... $ 477 $47,041
====== =======
Current portion of capital lease obligations................ 5 5
====== =======
Long-term debt and capital lease obligations, net of current
portion................................................... $1,105 $ 9
------ -------
Stockholders' equity (deficit):
Undesignated preferred stock; 10,000,000 shares authorized;
no shares issued and outstanding, actual and as
adjusted.................................................. -- --
------ -------
Common stock, $.01 par value; 40,000,000 shares authorized;
11,384,521 shares issued and outstanding, actual;
15,384,521 shares issued and outstanding, as adjusted..... 114 154
Additional paid-in capital.................................. 3,037 50,657
Subscriptions receivable.................................... (11) (11)
Deferred compensation....................................... (2,327) (2,327)
Accumulated deficit......................................... (868) (868)
------ -------
Total stockholders' equity (deficit)........................ (55) 47,605
------ -------
Total capitalization........................................ $1,050 $47,614
====== =======
</TABLE>
14
<PAGE>
DILUTION
The assumed initial public offering price of $13.00 per share exceeds our
net tangible book value per share. As of March 31, 2000, our net tangible book
deficit was approximately $55,000 or $0.00 per share. Net tangible book value
per share is determined by subtracting our total liabilities from our total
tangible assets and dividing this difference by the number of shares of common
stock issued and outstanding.
The sale of shares of common stock by us in this offering and the
application of the net proceeds therefrom will result in an immediate increase
in pro forma net tangible book value to $47.6 million or $3.09 per share to
existing shareholders and an immediate dilution of $9.91 per share to investors
purchasing shares of common stock in this offering. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............ $ 13.00
Net tangible book deficit per share as of March 31, 2000... $ 0.00
Increase per share attributable to this offering........... 3.09
------
Net tangible book value per share after this offering...... 3.09
-------
Dilution per share purchased in this offering.............. $ 9.91
=======
</TABLE>
The following table summarizes the number of shares of common stock we will
sell in this offering, the total price to be paid for these shares, the number
of shares of common stock previously issued, the total consideration paid and
the average price per share paid.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PURCHASE
--------------------- ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- -------- ----------- -------- ----------------
<S> <C> <C> <C> <C> <C>
New investors......................... 4,000,000 26.0% $52,000,000 98.8% $13.00
Existing shareholders................. 11,384,521 74.0% 625,422 1.2% 0.05
---------- ----- ----------- -----
Total............................... 15,384,521 100% $52,625,422 100%
========== ===== =========== =====
</TABLE>
The foregoing tables assume:
- a public offering price of $13.00 per share;
- no exercise of the underwriters' over-allotment option; and
- no exercise of any of the 1,458,421 options to purchase common stock
outstanding as of May 1, 2000.
If the underwriters exercise their over-allotment option in full, the shares
to be held by existing shareholders will decrease to 10,784,521, or 70.1% of the
total shares to be outstanding after the exercise, and the number of shares to
be held by new investors will increase to 4,600,000, or 29.9% of the total
shares to be outstanding after the exercise.
15
<PAGE>
SELECTED FINANCIAL INFORMATION
The selected statement of operations data for each of the years ended
December 31, 1997, 1998 and 1999, and the selected balance sheet data as of
December 31, 1998 and 1999 have been derived from our financial statements,
audited by Arthur Andersen LLP, independent public accountants, and are included
elsewhere in this prospectus. The selected statement of operations data for the
year ended December 31, 1996, and the selected balance sheet data as of
December 31, 1996 and 1997 have been derived from our financial statements,
audited by Arthur Andersen LLP, not included in this prospectus. The selected
statement of operations data for the year ended December 31, 1995 and the
balance sheet data as of December 31, 1995 have been derived from our unaudited
financial statements. The selected statement of operations data for the quarters
ended March 31, 1999 and 2000 and the selected balance sheet data as of
March 31, 2000 are derived from our unaudited financial statements and the
related notes included elsewhere in this prospectus. The unaudited financial
statements have been prepared on substantially the same basis as the audited
financial statements and include, in the opinion of our management, all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the information set forth therein. The selected statement
of operations data for the quarter ended March 31, 2000 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2000 or any other future period. This data should be read in conjunction with
our financial statements and related notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing elsewhere
in this prospectus.
<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software licenses............................. $1,156 $ 793 $1,564 $ 1,066 $ 2,423 $ 913 $ 796
Consulting, support services and
maintenance................................. 1,903 2,370 2,749 4,953 5,638 1,397 1,078
------ ------ ------ ------- ------- ------- ------
Total revenues.............................. 3,059 3,163 4,313 6,019 8,061 2,310 1,874
Costs and expenses:
Software licenses............................. 215 378 436 281 242 80 --
Consulting, support services and
maintenance................................. 651 780 1,191 2,168 2,377 653 457
Sales and marketing........................... 529 691 1,028 1,475 2,939 574 1,196
Product development........................... 478 479 561 925 1,434 349 455
General and administrative.................... 483 425 456 663 708 189 233
Stock-based compensation...................... -- -- -- -- 26 -- 162
------ ------ ------ ------- ------- ------- ------
Income (loss) from operations................... 703 410 641 507 335 465 (629)
Interest income (expense), net.................. (139) (115) (101) (112) (80) (23) (21)
------ ------ ------ ------- ------- ------- ------
Income (loss) before income taxes............... 564 295 540 395 255 442 (650)
Provision for (benefit from) income taxes....... (5) 10 6 6 110 177 (260)
------ ------ ------ ------- ------- ------- ------
Net income (loss)............................... $ 569 $ 285 $ 534 $ 389 $ 145 $ 265 $ (390)
====== ====== ====== ======= ======= ======= ======
Net income (loss) per share:
Basic......................................... $ 0.10 $ 0.05 $ 0.07 $ 0.05 $ 0.02 $ 0.03 $(0.05)
====== ====== ====== ======= ======= ======= ======
Diluted....................................... $ 0.10 $ 0.05 $ 0.06 $ 0.03 $ 0.01 $ 0.02 $(0.05)
====== ====== ====== ======= ======= ======= ======
Weighted average shares used in computing net
income (loss) per share
Basic......................................... 5,687 5,687 7,685 8,541 8,541 8,541 8,541
====== ====== ====== ======= ======= ======= ======
Diluted....................................... 5,687 5,687 9,689 12,206 12,194 12,194 8,541
====== ====== ====== ======= ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------- AS OF MARCH 31,
1995 1996 1997 1998 1999 2000
-------- -------- -------- -------- -------- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................... $ 695 $ 854 $1,045 $ 729 $1,752 $ 477
Working capital.............................. (131) 126 599 (119) 1,094 868
Total assets................................. 1,182 1,322 2,288 2,429 3,171 2,533
Total debt and capital lease obligations,
including current portion.................. 1,096 1,096 1,118 1,115 1,111 1,110
Total stockholders' equity (deficit)......... (1,207) (923) (386) 2 173 (55)
</TABLE>
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
YOU SHOULD READ THE FOLLOWING DISCUSSION IN CONJUNCTION WITH OUR FINANCIAL
STATEMENTS AND RELATED NOTES AND OTHER FINANCIAL INFORMATION INCLUDED ELSEWHERE
IN THIS PROSPECTUS. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS RELATED
TO SUCH MATTERS AS OUR FUTURE FINANCIAL PERFORMANCE, BUSINESS STRATEGY AND
FINANCIAL PLANS THAT INVOLVE RISKS AND UNCERTAINTY. OUR ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THE RESULTS ANTICIPATED IN THESE FORWARD-LOOKING
STATEMENTS AS A RESULT OF MANY KNOWN AND UNKNOWN FACTORS, INCLUDING THOSE UNDER
"RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
We are a leading provider of Internet-based business software solutions to
the PSA market. We license our 100% thin-client, Internet-based PSA solution,
Account4, to PSOs and corporate IT departments, and we provide related
consulting, personalization, implementation, integration, training and
maintenance services. Account4 helps our customers increase the utilization,
productivity and effectiveness of their workforces.
We began commercial sales of Account4 in 1998 following approximately 3
years of development. In March 2000, we changed our name to Account4.com, Inc.
to better reflect our focus on Internet-based software solutions for the PSA
market. While we have operated profitably in each of the past 5 years, we
incurred losses for the quarter ended March 31, 2000, and we expect to continue
to incur losses as we invest to expand our business and further establish
Account4 as a leading PSA solution. We increased our personnel from 48 employees
as of January 1, 1999 to 68 employees as of May 1, 2000, as we added personnel
in marketing, sales and product development.
We began operations in 1988 as MultiTrak Software Development Corporation
and provided mainframe computer-based work management software. In 1993, we
began selling client-server-based work management software developed by
PlanView, Inc., and in 1994 we changed our name to Work Management
Solutions, Inc. Since our inception, we have licensed software solutions to over
150 customers for use by over 267,000 users, including 47 organizations who have
licensed Account4 for over 30,000 users.
We currently focus all of our efforts on selling Account4 and related
services, and we no longer actively sell software licenses and related services
for mainframe computer-based and client-server based project and work management
software. We believe our 13 years of experience in project and workforce
management solutions and our innovative product advancements serve as important
competitive advantages and will allow us to extend our leadership position in
the emerging market for PSA solutions.
SOURCES OF REVENUES AND REVENUE RECOGNITION
We classify our revenues as revenue from software licenses or revenue from
consulting, support services and maintenance. These classifications represent
the way in which we operate our business and the way in which we position our
software and services to our customers. Since we introduced Account4, our
software license revenue has been generated primarily from Account4. Consulting,
support services and maintenance revenue has been generated in association with
a combination of Account4 licenses and licenses of prior project and work
management software products. While we continue to support prior products, we no
longer actively sell software licenses for them. We do not expect that the
revenues or costs related to prior products will have a material impact on our
future financial results.
Software license agreements typically represent a one-time license fee for
the use of our software, the price of which is based primarily on the number of
users. We license Account4 as an integrated
17
<PAGE>
system which provides full access to all features, as opposed to many of our
competitors who sell individual modules or components of their products
separately. Customers are charged additional license fees as they increase the
number of users.
Consulting, support services and maintenance revenue includes revenue from
maintenance agreements and consulting projects. A customer has the option to
purchase, at the time of an initial license, a maintenance agreement which
entitles the customer to software upgrades and technical support over a stated
term, generally 12 months. In subsequent years, customers can renew the
maintenance agreement, for which they pay a renewal fee at the beginning of the
maintenance period. We charge customers at the same rate for maintenance whether
the fee is for an initial maintenance agreement or a renewal fee.
Consulting projects typically involve implementation services as well as
evaluating our customers' business practices, organizational structure and
business requirements; designing, developing and configuring any requested
personalization; and training our customers' staff. Although consulting services
are not required for the implementation of Account4 or essential to its
functionality, most customers choose to purchase consulting services. Some
customers also purchase consulting services to develop and install interfaces
between Account4 and third party enterprise software applications. Consulting
services normally are performed on a per diem basis by our internal staff based
on the number of days of services requested by our customers.
Generally, we recognize software license revenue when all of the following
conditions are met:
- we have persuasive evidence of an arrangement with the customer;
- we have delivered the product;
- the amount of fees to be paid by the customer is fixed or determinable;
- we believe that collection of these fees is probable; and
- we have fulfilled all significant obligations related to the software
license.
We recognize revenue from maintenance support contracts ratably over the
contract period. Consulting services are not essential to the functionality of
the software products and are recognized as the services are performed.
COSTS AND EXPENSES
COST OF REVENUES
Our cost of software license revenue historically has been comprised of
royalty payments to third parties for sales of prior products, primarily to
PlanView. Generally, there have been no material costs associated with sales of
Account4 software licenses. To the extent we sell Account4 through resellers, we
may incur commissions or other payments that may be categorized as costs of
software license revenue. Our cost of providing consulting, support services and
maintenance is comprised principally of personnel costs.
OTHER OPERATING EXPENSES
Our other operating expenses consist of 3 general categories: sales and
marketing, product development, and general and administrative. We classify all
charges to these operating expense categories based on the nature of the
expenditures. Although each of these categories includes expenses that are
unique to the category type, there are expenditures that are typically included
in each of these categories, such as salaries, employee benefits, travel and
entertainment expenses, and third party professional fees. In addition, certain
common costs such as communication, rent and facilities costs are allocated to
each of these areas based on headcount. Sales and marketing costs include sales
18
<PAGE>
commissions, public relations and advertising, trade shows and marketing
materials. Software development costs incurred prior to the establishment of
technological feasibility are included in product development costs as incurred.
To date, all product development costs have been expensed as incurred. General
and administrative costs include non-allocated salaries, other general overhead
expenses and depreciation expenses. We expect that the absolute dollar amount of
all 3 categories of operating expenses will continue to increase in future
quarters as we hire additional employees and make investments to expand our
business.
STOCK-BASED COMPENSATION
In connection with the granting of stock options to our employees in the
year ended December 31, 1999 and the quarter ended March 31, 2000, we recorded
deferred stock-based charges totaling approximately $314,000 in the year ended
December 31, 1999 and $2.2 million in the quarter ended March 31, 2000. These
amounts represent the difference between the exercise prices at which the stock
options were granted and the deemed fair value of our common stock on the date
of the grants. This amount is included as a component of stockholders' equity
(deficit), in accordance with the method described in Financial Accounting
Standards Board Interpretation No. 28. At March 31, 2000, the remaining
unamortized stock-based compensation totaled approximately $2.3 million and will
be amortized over the following periods:
<TABLE>
<CAPTION>
<S> <C>
9 months ending December 31, 2000 $ 493,000
Year ending December 31, 2001 657,000
Year ending December 31, 2002 646,000
Year ending December 31, 2003 370,000
Year ending December 31, 2004 162,000
----------
Total $2,328,000
==========
</TABLE>
We expect to record significant additional stock-based compensation for stock
options granted subsequent to March 31, 2000 including options to purchase
240,000 shares of common stock at an exercise price of $3.00 per share granted
in May 2000.
19
<PAGE>
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth, for the periods presented, certain quarterly
financial results and other operating data for the 7 quarters since we began
commercial sales of Account4. The information for each of these quarters is
unaudited and has been prepared on the same basis as our audited financial
statements appearing elsewhere in this prospectus. In the opinion of management,
all necessary adjustments, consisting only of normal recurring adjustments, have
been included to present fairly the unaudited quarterly results when read in
conjunction with our financial statements and related notes included elsewhere
in this prospectus. We have experienced and expect to continue to experience
fluctuations in operating results from quarter-to-quarter. Historical operating
results are not necessarily indicative of the results that we may expect for any
future period.
To enable you to better understand the trends in our business, the revenues
in the following table have been divided into revenue from Account4 and other
revenue.
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------------
SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1998 1998 1999 1999 1999 1999 2000
--------- -------- -------- -------- --------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues:
Account4 software licenses....................... $ 23 $ 218 $ 770 $ 306 $ 448 $ 425 $ 796
Account4 consulting, support services and
maintenance.................................... 8 37 107 179 312 391 568
----- ----- ----- ----- ----- ----- -----
Total Account4 revenue......................... 31 255 877 485 760 816 1,364
Other revenue.................................... 1,577 1,409 1,433 1,532 1,255 903 510
----- ----- ----- ----- ----- ----- -----
Total revenues............................. 1,608 1,664 2,310 2,017 2,015 1,719 1,874
Costs and expenses:
Software licenses................................ -- -- 80 124 -- 38 --
Consulting, support services and maintenance..... 582 591 653 635 577 512 457
Sales and marketing.............................. 415 464 574 660 736 969 1,196
Product development.............................. 249 290 349 329 364 392 455
General and administrative....................... 178 193 189 144 163 212 233
Stock-based compensation......................... -- -- -- -- -- 26 162
----- ----- ----- ----- ----- ----- -----
Income (loss) from operations...................... 184 126 465 125 175 (430) (629)
Interest income (expense), net..................... (26) (30) (23) (24) (18) (15) (21)
----- ----- ----- ----- ----- ----- -----
Income (loss) before income taxes.................. 158 96 442 101 157 (445) (650)
Provision for (benefit from) income taxes.......... 5 1 177 40 63 (170) (260)
----- ----- ----- ----- ----- ----- -----
Net income (loss).................................. $ 153 $ 95 $ 265 $ 61 $ 94 $(275) $(390)
===== ===== ===== ===== ===== ===== =====
OTHER OPERATING DATA:
New Account4 licenses.............................. 1 6 2 6 5 7 14
Cumulative Account4 licenses at end of period...... 3 9 11 17 22 29 43
</TABLE>
REVENUES
Total revenues increased approximately $266,000 from approximately
$1.6 million for the quarter ended September 30, 1998 to approximately
$1.9 million for the quarter ended March 31, 2000. This increase reflects a
$1.3 million increase in Account4 revenue, partially offset by a $1.1 million
reduction in other revenue, as summarized below.
ACCOUNT4 REVENUE. Total Account4 revenue increased from approximately
$31,000 for the quarter ended September 30, 1998 to approximately
$1.4 million for the quarter ended March 31, 2000. Account4 software license
revenue increased from approximately $23,000 for the quarter ended
September 30, 1998 to approximately $796,000 for the quarter ended
March 31, 2000. This increase was primarily attributable to an increase in
the number of new licenses sold from 1 in the quarter ended September 30,
1998 to 14 in the quarter ended March 31, 2000. Quarter-to-quarter
20
<PAGE>
Account4 license revenue has fluctuated due to the varying size of the
licenses sold during each quarter. While the level of Account4 license
revenue and the number of new Account4 licenses sold per quarter have
generally increased over this period, during the quarter ended December 31,
1999 we experienced a reluctance on the part of potential customers to enter
into license arrangements due to their internal Year 2000 remediation
efforts. Additionally, we sold a single $750,000 Account4 license in the
quarter ended March 31, 1999, which represented 97.4% of our Account4
software license revenue in that quarter. During the 7-quarter period
presented above, cumulative Account4 licenses sold increased from 3 as of
September 30, 1998 to 43 as of March 31, 2000. Account4 consulting, support
services and maintenance revenue increased approximately $560,000 from
approximately $8,000 for the quarter ended September 30, 1998 to
approximately $568,000 for the quarter ended March 31, 2000.
OTHER REVENUE. Other revenue, which is derived from software license
revenue and consulting, support services and maintenance revenue related to
prior project and work management products, declined approximately
$1.1 million from approximately $1.6 million for the quarter ended
September 30, 1998 to approximately $510,000 for the quarter ended
March 31, 2000, as we no longer actively sell software licenses, maintenance
agreements or consulting services for these products.
COSTS AND EXPENSES
SOFTWARE LICENSES. Generally there are no costs associated with sales of
Account4 licenses. However, during this 7-quarter period we did incur some
royalty payments to third parties related to our sale of prior products and
one payment to a value added reseller related to an Account4 license.
CONSULTING, SUPPORT SERVICES AND MAINTENANCE. Costs of consulting, support
services and maintenance declined approximately $125,000 from approximately
$582,000 for the quarter ended September 30, 1998 to approximately $457,000
for the quarter ended March 31, 2000. This decrease resulted from decreased
incentives paid to staff based on lower utilization during the transition to
Account4 from prior products.
SALES AND MARKETING. Sales and marketing expenses increased approximately
$781,000 from approximately $415,000 for the quarter ended September 30,
1998 to approximately $1.2 million for the quarter ended March 31, 2000.
This increase was primarily attributable to an increase in costs related to
our Account4 marketing programs, and an increase in sales and marketing
employees from 14 to 27, reflecting our investment in Account4. We expect
that the absolute dollar amount of sales and marketing expenses will
continue to increase due to the planned growth of our sales force, including
the establishment of additional domestic and international sales offices,
and due to expected increases in marketing programs including advertising,
public relations, website development, and other brand enhancement and
promotional activities.
PRODUCT DEVELOPMENT. Product development expenses increased approximately
$206,000 from approximately $249,000 for the quarter ended September 30,
1998 to approximately $455,000 for the quarter ended March 31, 2000. This
increase reflects our investment in Account4 and was attributable to an
increase in development staff employees from 11 to 18. We believe that
continued investment in Account4 product development is essential to our
future success and expect that the absolute dollar amount of product
development expenses will increase in future periods.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
approximately $55,000 from approximately $178,000 for the quarter ended
September 30, 1998 to approximately $233,000 for the quarter ended
March 31, 2000. This increase was primarily attributable to an increase in
general overhead costs resulting from the increase in our overall number of
employees. We expect general and administrative expenses to increase in
absolute dollars in future periods.
21
<PAGE>
STOCK-BASED COMPENSATION. Prior to the quarter ended December 31, 1999, we
did not recognize any stock-based compensation. We incurred stock-based
compensation expense related to the amortization of deferred compensation
resulting from the grant of stock options to our employees of approximately
$26,000 during the quarter ended December 31, 1999 and approximately
$162,000 during the quarter ended March 31, 2000.
RESULTS OF OPERATIONS
The following table sets forth certain revenue and expense data as a
percentage of our total revenues for each period presented:
<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------- -------------------
1997 1998 1999 1999 2000
-------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses.............................. 36.3% 17.7% 30.1% 39.5% 42.5%
Consulting, support services and maintenance... 63.7 82.3 69.9 60.5 57.5
----- ----- ----- ----- ------
Total revenues............................... 100.0 100.0 100.0 100.0 100.0
Costs and expenses:
Software licenses.............................. 10.1 4.7 3.0 3.5 0.0
Consulting, support services and maintenance... 27.6 36.0 29.5 28.3 24.4
Sales and marketing............................ 23.8 24.5 36.4 24.8 63.8
Product development............................ 13.0 15.4 17.8 15.1 24.3
General and administrative..................... 10.6 11.0 8.8 8.2 12.5
Stock-based compensation....................... 0.0 0.0 0.3 0.0 8.6
----- ----- ----- ----- ------
Income (loss) from operations.................... 14.9 8.4 4.2 20.1 (33.6)
Interest income (expense), net................... (2.4) (1.8) (1.0) (1.0) (1.1)
----- ----- ----- ----- ------
Income (loss) before income taxes................ 12.5 6.6 3.2 19.1 (34.7)
Provision for (benefit from) income taxes........ 0.1 0.1 1.4 7.6 (13.9)
----- ----- ----- ----- ------
Net income (loss)................................ 12.4% 6.5% 1.8% 11.5% (20.8)%
===== ===== ===== ===== ======
</TABLE>
QUARTER ENDED MARCH 31, 1999 COMPARED TO QUARTER ENDED MARCH 31, 2000
REVENUES
Total revenues decreased approximately $436,000, or 18.9%, from
approximately $2.3 million for the quarter ended March 31, 1999 to approximately
$1.9 million for the quarter ended March 31, 2000. This decrease reflects an
increase of approximately $487,000 in revenue related to Account4 offset by a
decrease of approximately $923,000 in revenue related to prior products, for
which we no longer actively sell software licenses, maintenance agreements or
consulting services. The components of this net decrease are summarized below:
SOFTWARE LICENSES. Software license revenue decreased approximately
$117,000, or 12.9%, from approximately $913,000 for the quarter ended
March 31, 1999 to approximately $796,000 for the quarter ended March 31,
2000. Account4 software license revenue increased approximately $26,000,
while software license revenue from prior products decreased by
approximately $143,000.
CONSULTING, SUPPORT SERVICES AND MAINTENANCE. Consulting, support services
and maintenance revenue decreased approximately $319,000, or 22.9%, from
approximately $1.4 million for the quarter ended March 31, 1999 to
approximately $1.1 million for the quarter ended March 31, 2000. Consulting,
support services and maintenance revenue related to Account4 increased by
22
<PAGE>
approximately $461,000 during this period, while consulting, support
services and maintenance revenue from prior products decreased by
approximately $780,000.
COSTS AND EXPENSES
SOFTWARE LICENSES. Software license costs decreased from approximately
$80,000 for the quarter ended March 31, 1999 to $0 for the quarter ended
March 31, 2000. As there were no material software costs associated with
Account4 licenses in either period, this decrease was attributable to a
decrease in royalties paid to third parties associated with prior products.
CONSULTING, SUPPORT SERVICES AND MAINTENANCE. Consulting, support services
and maintenance costs decreased approximately $196,000, or 30.1%, from
approximately $653,000 for the quarter ended March 31, 1999 to approximately
$457,000 for the quarter ended March 31, 2000. This decrease was primarily
due to a decrease in royalties paid to third parties for sales of prior
products, as well as a decrease in incentives paid to staff based on lower
utilization during the transition to the sale of Account4.
SALES AND MARKETING. Sales and marketing expenses increased approximately
$622,000, or 108.3%, from approximately $574,000 for the quarter ended
March 31, 1999 to approximately $1.2 million for the quarter ended
March 31, 2000. The increase was due to increased costs related to our
Account4 marketing program and the addition of sales and marketing
employees.
PRODUCT DEVELOPMENT. Product development expenses increased approximately
$106,000, or 30.5%, from approximately $349,000 for the quarter ended
March 31, 1999 to approximately $455,000 for the quarter ended March 31,
2000. The increase was due to the addition of product development employees.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
approximately $44,000, or 23.0%, from approximately $189,000 for the quarter
ended March 31, 1999 to approximately $233,000 for the quarter ended
March 31, 2000. The increase was due to an increase in general overhead
costs incurred as a result of company-wide growth.
STOCK-BASED COMPENSATION. During the quarter ended March 31, 2000, we
amortized stock-based compensation expense of approximately $162,000. There
was no comparable charge during the quarter ended March 31, 1999.
INTEREST INCOME (EXPENSE), NET. Net interest expense decreased
approximately $2,000, or 10.7%, from approximately $23,000 for the quarter
ended March 31, 1999 to approximately $21,000 for the quarter ended
March 31, 2000. The decrease was due to an increase in interest earned on
higher cash balances.
PROVISION FOR (BENEFIT FROM) INCOME TAXES. We provided approximately
$177,000 for income taxes for the quarter ended March 31, 1999 at an
effective tax rate of 40%. For the quarter ended March 31, 2000, we
recognized $260,000 of tax benefit based upon an effective tax rate of 40%.
There was no provision for income taxes because we recognized an operating
loss.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1999
REVENUES
Total revenues increased approximately $2.0 million, or 33.9%, from
approximately $6.0 million for the year ended December 31, 1998, to
approximately $8.1 million for the year ended December 31, 1999. This reflects
an increase of approximately $2.6 million in revenue related to Account4 offset
by a decrease of approximately $600,000 in revenue related to prior products.
The increase in Account4
23
<PAGE>
revenue reflects further market penetration of Account4 as evidenced by an
increase in cumulative Account4 licenses from 9 as of December 31, 1998 to 29 as
of December 31, 1999.
SOFTWARE LICENSES. Software license revenue increased approximately
$1.4 million, or 127.3%, from approximately $1.1 million for the year ended
December 31, 1998 to approximately $2.4 million for the year ended
December 31, 1999. Account4 software license revenue increased approximately
$1.7 million, while software license revenue from prior products decreased
by approximately $341,000. This increase was primarily due to an increase in
the number of Account4 licenses, including a single $750,000 license in
1999.
CONSULTING, SUPPORT SERVICES AND MAINTENANCE. Consulting, support services
and maintenance revenue increased approximately $685,000, or 13.8%, from
approximately $5.0 million for the year ended December 31, 1998 to
approximately $5.6 million for the year ended December 31, 1999. Account4
consulting, support services and maintenance revenue increased approximately
$944,000, while consulting, support services and maintenance revenue from
prior products decreased by approximately $259,000. This reflects the
increase in Account4 consulting projects and maintenance revenue from a
growing installed base of Account4 customers.
COSTS AND EXPENSES
SOFTWARE LICENSES. Software license costs decreased approximately $39,000,
or 13.7%, from approximately $281,000 for the year ended December 31, 1998
to approximately $242,000 for the year ended December 31, 1999. As there
were no material software license costs associated with Account4 licenses in
either period, this decrease was attributable to a decrease in royalties
paid to third parties associated with prior products.
CONSULTING, SUPPORT SERVICES AND MAINTENANCE. Consulting, support services
and maintenance costs increased approximately $209,000, or 9.6%, from
approximately $2.2 million for the year ended December 31, 1998 to
approximately $2.4 million for the year ended December 31, 1999. This
increase was attributable to the expansion of our professional services
organization.
SALES AND MARKETING. Sales and marketing expenses increased approximately
$1.5 million, or 99.2%, from approximately $1.5 million for the year ended
December 31, 1998 to approximately $2.9 million for the year ended
December 31, 1999. This increase was due to an increase in costs related to
our Account4 marketing programs and the addition of sales and marketing
employees.
PRODUCT DEVELOPMENT. Product development expenses increased approximately
$509,000, or 54.9%, from approximately $925,000 for the year ended
December 31, 1998 to approximately $1.4 million for the year ended
December 31, 1999. This increase was attributable to the addition of product
development employees.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
approximately $45,000, or 6.7%, from approximately $663,000 for the year
ended December 31, 1998 to approximately $708,000 for the year ended
December 31, 1999. This increase was due to an increase in general overhead
costs incurred due to company-wide growth.
STOCK-BASED COMPENSATION. During the year ended December 31, 1999, we
amortized stock-based compensation expense of approximately $26,000. There
was no comparable charge during the year ended December 31, 1998.
INTEREST INCOME (EXPENSE), NET. Net interest expense decreased
approximately $32,000, or 28.1%, from approximately $112,000 for the year
ended December 31, 1998 to approximately $80,000 for the year ended
December 31, 1999. This decrease was due to an increase in interest earned
on higher cash balances.
24
<PAGE>
PROVISION FOR INCOME TAXES. Provision for income taxes increased
approximately $104,000 from approximately $6,000 for the year ended
December 31, 1998 to approximately $110,000 for the year ended December 31,
1999. The provision for income taxes was recorded at an effective tax rate
of 40%. The provision for income taxes in 1998 was reduced by the
utilization of our net operating loss carryforwards.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1998
REVENUES
Total revenues increased approximately $1.7 million, or 39.6%, from
approximately $4.3 million for the year ended December 31, 1997 to approximately
$6.0 million for the year ended December 31, 1998. This increase reflects an
increase of approximately $255,000 in revenue related to Account4 and an
increase of approximately $1.5 million in revenue related to prior products. The
increase in Account4 revenue reflects further market penetration of the Account4
product as evidenced by an increase in cumulative Account4 licenses from 1 as of
December 31, 1997 to 9 as of December 31, 1998. Also contributing to the
increase was an increase in revenue associated with a large implementation of a
prior product.
SOFTWARE LICENSES. Software license revenue decreased approximately
$498,000, or 31.9%, from approximately $1.6 million for the year ended
December 31, 1997 to approximately $1.1 million for the year ended
December 31, 1998. Account4 software license revenue increased approximately
$226,000, while software license revenue from prior products decreased by
approximately $724,000.
CONSULTING, SUPPORT SERVICES AND MAINTENANCE. Consulting, support services
and maintenance revenue increased approximately $2.2 million, or 80.2%, from
approximately $2.7 million for the year ended December 31, 1997 to
approximately $5.0 million for the year ended December 31, 1998. Account4
consulting, support services and maintenance revenue increased approximately
$30,000 and consulting, support services and maintenance revenue from prior
products increased approximately $2.2 million. The increase associated with
prior products was primarily attributable to revenue associated with a large
implementation of a prior product.
COSTS AND EXPENSES
SOFTWARE LICENSES. Software license costs decreased approximately $155,000,
or 35.6%, from approximately $436,000 for the year ended December 31, 1997
to approximately $281,000 for the year ended December 31, 1998. As there are
generally no software costs associated with Account4 licenses, this decrease
was attributable to a decrease in royalties paid to third parties associated
with prior products.
CONSULTING, SUPPORT SERVICES AND MAINTENANCE. Consulting, support services
and maintenance costs increased approximately $977,000, or 82.1%, from
approximately $1.2 million for the year ended December 31, 1997 to
approximately $2.2 million for the year ended December 31, 1998. This
increase was primarily due to the increased costs associated with a large
implementation of a prior product as well as the increased costs associated
with the addition of consulting employees.
SALES AND MARKETING. Sales and marketing expenses increased approximately
$447,000, or 43.5%, from approximately $1.0 million for the year ended
December 31, 1997 to approximately $1.5 million for the year ended
December 31, 1998. This increase was due to an increase in costs related to
our Account4 marketing programs, an increase in commissions paid due to
increased revenue, and the addition of sales and marketing employees.
PRODUCT DEVELOPMENT. Product development expenses increased approximately
$364,000, or 65.1%, from approximately $561,000 for the year ended
December 31, 1997 to approximately
25
<PAGE>
$925,000 for the year ended December 31, 1998. This increase was due to the
addition of product development employees.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
approximately $207,000, or 45.4%, from approximately $456,000 for the year
ended December 31, 1997 to approximately $663,000 for the year ended
December 31, 1998. This increase was due to an increase in general overhead
costs associated with company-wide growth and an increase in compensation
expense.
INTEREST INCOME (EXPENSE), NET. Net interest expense increased
approximately $11,000, or 10.6%, from approximately $101,000 for the year
ended December 31, 1997 to approximately $112,000 for the year ended
December 31, 1998. This increase was due to a decrease in interest earned on
cash balances.
PROVISION FOR INCOME TAXES. Provision for income taxes remained constant at
approximately $6,000 for the year ended December 31, 1997 and for the year
ended December 31, 1998. The provision for income taxes was recorded at an
effective tax rate of 40%, which was reduced by the utilization of our net
operating less carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
Since 1993, we have financed our operations through cash flow from
operations. The net cash flow from operations for each of the years in the
3-year period ended December 31, 1999 and quarter ended March 31, 2000 have been
impacted by net income (loss) along with changes in accounts receivable,
accounts payable and accrual expense (including deferred maintenance). Net cash
flow from operations was approximately $282,000 for the year ended December 31,
1997 and approximately $1.2 million for the year ended December 31, 1999. Net
cash used in operations was approximately $235,000 for the year ended
December 31, 1998 and approximately $1.3 million for the quarter ended
March 31, 2000, due to the changes noted above.
Cash used in investing activities, consisting of the purchase of computer
equipment, furniture and other equipment to support our corporate growth was
approximately $23,000, $138,000, $78,000 and $92,000 for the quarter ended
March 31, 2000, and the years ended December 31, 1999, December 31, 1998 and
December 31, 1997, respectively.
For the quarter ended March 31, 2000, and the years ended December 31, 1999
and December 31, 1998, cash used in financing activities was approximately
$1,000, $4,000 and $3,000, respectively. This cash used was primarily for the
payments on a capital lease obligation. For the year ended December 31, 1997, we
had cash provided by financing activities of approximately $1,000 due to
proceeds from the exercise of stock options.
We have notes payable to a shareholder of approximately $1.0 million and a
note payable to a non-shareholder of $50,000. All notes are due on December 31,
2001 and bear interest at a bank's prime rate (9.5% at March 31, 2000) plus
3.5%.
We expect to devote substantial resources to our product development
efforts, our sales and marketing programs, and the continued support and
maintenance of our growing customer base. We also expect to expand
internationally and to grow our infrastructure as necessary to support our
continued growth. As a result, we anticipate that capital expenditures will
continue to increase in absolute dollars in the foreseeable future. We believe
that the net proceeds from this offering, together with our current cash and
cash equivalents, will be sufficient to fund our operations for at least the
next 12 months.
26
<PAGE>
QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
The following discusses our exposure to market risk related to foreign
currency exchange rates, changes in interest rates and equity prices. This
discussion contains forward-looking statements that are subject to risks and
uncertainties. Actual results could vary materially as a result of a number of
factors including those set forth in the risk factors section of this
prospectus.
FOREIGN CURRENCY EXCHANGE RATE RISK
All of our revenues have been denominated in U.S. dollars, primarily from
customers in the United States, and we have no exposure to foreign currency
exchange rate changes. We expect, however, that future Account4 revenues may
also be derived from international markets and may be denominated in the
currency of the applicable market. As a result, our operating results may become
subject to significant fluctuations based upon changes in the exchange rates of
other currencies in relation to the U.S. dollar. Furthermore, to the extent that
we engage in international sales denominated in U.S. dollars, an increase in the
value of the U.S. dollar relative to foreign currencies could make our products
less competitive in international markets. Although we intend to monitor our
exposure to currency fluctuations, and, when appropriate, may use financial
hedging techniques in the future to minimize the effect of these fluctuations,
we cannot assure you that exchange rate fluctuations will not adversely affect
our financial results in the future.
INTEREST RATE RISK
As of March 31, 2000, we had approximately $477,000 of cash and highly
liquid short-term investments. Declines in interest rates would reduce our
interest income from our short-term investments. As of March 31, 2000, we had
total debt outstanding of approximately $1.1 million, which accrued interest at
a bank's prime rate (9.5% as of March 31, 2000) plus 3.5%. An increase in the
bank's prime rate would result in an increase in our interest expense.
EQUITY PRICE RISK
We do not own any equity securities. Therefore, we are not subject to any
direct equity price risk.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," that requires companies to
record derivative financial instruments on their balance sheets as assets or
liabilities, measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending on the use of
the derivative instrument and whether it qualifies for hedge accounting. The key
criterion for hedge accounting is that the hedging relationship must be highly
effective in achieving offsetting changes in fair value or cash flows. In
June 1999, the FASB issued SFAS No. 137, "Accounting For Derivative Instruments
and Hedging Activities--Deferral of the Effective Date of FASB Statement
No. 133," that amends SFAS No. 133 to be effective for all fiscal quarters or
all fiscal years beginning after June 15, 2000.
In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101, REVENUE RECOGNITION IN FINANCIAL STATEMENTS. This
bulletin summarizes certain views of the staff on applying generally accepted
accounting principles to revenue recognition in financial statements. The staff
believes that revenue is realized or realizable and earned when all of the
following criteria are met: persuasive evidence of an arrangement exists;
delivery has occurred or services have been rendered; the seller's price to the
buyer is fixed or determinable; and collectibility is reasonably assured. We
believe that our current revenue recognition policy complies with SEC
guidelines.
27
<PAGE>
YEAR 2000 IMPACT
We have not experienced any problems with our computer systems or products
relating to distinguishing twenty-first century dates from twentieth century
dates, which generally are referred to as Year 2000 problems. We are also not
aware of any material Year 2000 problems with our clients or vendors.
Accordingly, we do not anticipate incurring material expenses or experiencing
any material operational disruptions as a result of any Year 2000 problems.
INFLATION
We believe that our revenues and results of operations have not been
significantly impacted by inflation during the past 3 fiscal years.
28
<PAGE>
BUSINESS
OVERVIEW
We are a leading provider of Internet-based software solutions that PSOs and
corporate IT departments are using to successfully manage projects and to
increase the utilization, productivity, effectiveness and retention of their
workforces. Our fully-integrated Account4 solution utilizes 100% thin-client
architecture that allows users to access Account4 using only a Web browser and
an Internet connection. This is particularly attractive to organizations with
employees who work at multiple locations and at client sites. Account4 is
installed in a central location, making installation, personalization and
updates easy to implement and helping to make our customers' total cost of
ownership as low as possible. Installation on a central server and our
thin-client architecture will also allow us to modify Account4 to incorporate
emerging technologies and be fully-functional with hand-held and other computing
devices as demand for these features increases.
Account4 enables our customers to manage the processes that are key to their
businesses: developing new business; tracking employees' skills and
availability; assigning people to and managing projects; tracking work
performed, employee time and expenses incurred on a particular project; and
managing reports to clients. We also help our customers manage their workforce
data more efficiently by enabling the information collected by Account4 to be
transferred to and from other enterprise software programs, such as accounting
and human resources software.
As of May 1, 2000, we have licensed Account4 to 47 organizations for use by
over 30,000 users. A representative sample of our Account4 customers includes
ChaseMellon Shareholder Services, Inc., Continental Casualty Company, e-Sbiz,
Inc., infoWorks, a business unit ot Viacom International, Inc., Mellon Bank
Corporation, NSTAR, Octane Software, Inc., Silicon Graphics, Inc. and TXU Europe
Group, Inc. We designed and built Account4 as an entirely new, full-featured
Internet-based product. In designing the features and architecture of Account4,
we have drawn on our 13 years of experience in designing and implementing
project and workforce management solutions. We have provided these solutions,
including Account4, to over 267,000 users in more than 150 PSOs and corporate IT
departments.
THE PROFESSIONAL SERVICES AUTOMATION (PSA) MARKET OPPORTUNITY
PSOs and corporate IT departments are facing growth opportunities
constrained by inefficient internal management processes. Dataquest estimates
that worldwide spending on IT services will increase at the rate of 13.9% per
year to nearly $800 billion in 2003. A significant factor in the growth of the
IT services market has been the emergence of the Internet as a major platform
for business.
According to Gartner Group, demand for IT services will outpace the supply
of qualified IT personnel by as much as 20% per year through 2005. This
imbalance has caused tremendous strain on IT service providers. Gartner
estimates that by 2003, 30% of all e-business projects will be suspended or
cancelled due to the inavailability of IT resources.
The strain on IT service providers caused by the shortage of IT workers will
force IT service providers to automate the management and delivery of their
services to maximize their utilization of resources and profitability. The
largest opportunity exists for PSA software applications that provide end-to-end
solutions to automate and integrate processes which were previously paper-based,
manual or performed using various stand-alone and disparate software programs
within an organization. Such PSA solutions must also provide integrated access
to third party content, commerce and services in order to fully exploit this
opportunity.
The market for PSA solutions is exhibiting robust growth. Aberdeen Group
estimates that the worldwide market potential for PSA software solutions was
approximately $1.6 billion in 1998 and should increase 20% annually to
approximately $4.0 billion in 2003. The served portion of this market
29
<PAGE>
is expected to increase by over 90% annually from $106 million in 1999 to
$1.6 billion in 2003, creating a large unserved market opportunity.
A comprehensive PSA solution enables executives, managers and staff to
become more productive and profitable by:
- increasing resource utilization through planning and scheduling;
- better managing new business opportunities;
- reducing billing turnaround time;
- increasing access to and sharing of knowledge across an organization;
- rapidly deploying the PSA solution across the enterprise;
- integrating with existing enterprise applications;
- capturing the inherently virtual, collaborative and people-centric
characteristics of the workforce; and
- offering an open, scalable and integrated architecture.
Current resource utilization among PSOs averages only 60-65%. Aberdeen Group
estimates that a PSA solution can increase the resource utilization of a
workforce by 3-8%. The impact of such an increase in resource utilization can be
significant. For example, a 1,000 person organization with a 3% increase in
resource utilization would have the equivalent of 30 additional people added to
its workforce.
THE ACCOUNT4 SOLUTION
Account4 provides a fully-integrated business solution that provides PSOs
and corporate IT departments with enhanced revenue and profit opportunities,
increased operational efficiency, higher resource utilization and productivity,
and improved customer satisfaction. We built Account4 on a technology platform
that delivers this business solution in a way that helps our customers minimize
both their total cost of ownership and their need to change their business
processes to accommodate our software.
BUSINESS BENEFITS OF THE ACCOUNT4 SOLUTION
We believe Account4 provides the following business benefits to our
customers:
- INCREASED REVENUE AND PROFIT OPPORTUNITIES. PSOs and corporate IT
departments can increase the number of projects and revenues and profits
per project on which they work by providing more efficient service
delivery and more accurate financial management. By monitoring available
resources in a real-time environment, our customers can deploy their
resources across more projects. Customers use the time and expense
tracking capabilities of Account4 to accelerate their billing process,
permitting more timely payment for services.
- IMPROVED EMPLOYEE UTILIZATION AND RETENTION. Managers can access employee
utilization data and distribute assignments to maximize the efficiency of
their workforce. Account4 relieves employees of many administrative
burdens and enables them to monitor their schedules, assignments, and time
and expenses, and perform other administrative functions, all in a
real-time environment. Account4 enables employees to improve their
billable hours, job satisfaction and career development. In addition,
improving employee utilization and retention reduces recruitment and
training expenses, protects key knowledge assets and can have a
significant impact on operating results.
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- INCREASED EFFICIENCY OF OPERATIONS. Account4 enhances the capabilities and
effectiveness of knowledge workers within PSOs and corporate IT
departments by enabling the dissemination, sharing and reuse of critical
information throughout the enterprise. With Account4's Internet-based
access, service professionals can communicate and collaborate throughout
all phases of a project, allowing our customers to maximize the
productivity and improve the quality of work of each project member and
the project team as a whole.
- IMPROVED CLIENT SATISFACTION. Account4 improves client satisfaction by
more effectively matching client needs with the most appropriate resources
available for a project. Account4 enables our customers to provide their
clients constant project status updates, permitting better control of the
entire project. This efficiency allows PSOs and corporate IT departments
to develop closer relationships with their clients, fostering repeat
business.
TECHNOLOGY BENEFITS OF THE ACCOUNT4 SOLUTION
We believe our 100% thin-client architecture provides the following benefits
to our customers:
- RAPID DEPLOYMENT. Once installed, Account4 is immediately available to any
number of users without requiring installation on the users' computers.
Users can quickly and easily learn to use Account4.
- COST MINIMIZATION. Account4 minimizes the cost of implementation,
consulting, support and maintenance.
- EASE OF PERSONALIZATION, MODIFICATION AND SCALABILITY. Account4 can be
quickly and cost-effectively modified to conform to the specific needs of
a customer and to add users. New custom features can be easily added.
- ADAPTABILITY TO CUSTOMER'S BUSINESS. Account4 is designed to be process
neutral so that our customers can modify Account4 to accommodate their
business processes.
- CENTRAL DATABASE REPOSITORY. Account4 collects data into a single
integrated database, which allows our customers to make better business
decisions.
We believe these business and technology benefits collectively provide a
fully-integrated and comprehensive PSA solution that offers the lowest total
cost of ownership, creating a compelling competitive advantage for Account4.
GROWTH STRATEGY
Our objective is to be the leading global supplier of PSA solutions to PSOs
and corporate IT departments. We intend to achieve this goal by providing the
most innovative, functional and efficient PSA solutions. Key elements of our
strategy include:
- EXTENDING OUR LEADERSHIP POSITION IN THE RAPIDLY GROWING PSA MARKET. We
believe that the projected shortage of qualified IT personnel will
contribute to the rapid growth in the market for PSA solutions, currently
projected by Aberdeen Group to be over 90% annually. We will focus our
expanding sales and marketing efforts on leading PSOs and corporate IT
departments that need more efficient and robust PSA solutions to maximize
the utilization of their workforces. Account4 addresses the complex
collaboration and business processes that PSOs and corporate IT
departments face in selling, managing and delivering their services. Our
experience working with PSOs and IT customers to address their project and
workforce management needs allows us to quickly and efficiently assess and
meet their PSA needs and to attract new customers.
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- ENHANCING THE ACCOUNT4 BRAND TO CAPITALIZE ON SIGNIFICANT UNSERVED PSA
MARKET DEMAND. We intend to enhance our sales and marketing infrastructure
to increase brand awareness of Account4. Increased brand awareness will
allow us to capitalize on the significant current and future unserved
demand for PSA solutions. Aberdeen Group estimates that approximately
$2.0 billion of the $2.4 billion PSA market is currently unserved, and
that the unserved portion of the PSA market will grow to $2.4 billion of
the $4.0 billion market in 2003.
- ADVANCING ACCOUNT4'S TECHNOLOGY LEADERSHIP. Our Acccount4 technology
offers a unique PSA solution by combining 100% thin-client, XML compliant
capabilities with traditional technology standards such as HTML, HTTP and
SQL. Our technology objective is to continually improve our customers'
experience and enhance Account4's functionality, such as the extension of
our platform to support hand-held devices and voice-activated input. The
functionality and versatility of our technology will allow us to continue
to adapt Account4 to the specific requirements of an expanding customer
base in both the PSO and corporate IT markets.
- EXPANDING GLOBAL OPERATIONS. We believe there is a significant opportunity
to become a leading provider of PSA solutions to PSOs and corporate IT
departments internationally. We intend to invest significant resources in
our sales and marketing infrastructure to promote global recognition of
the Account4 brand. We also plan to continue to expand our other
operations needed to support a global concern, including administrative
and technology infrastructure, facilities and services.
- DEVELOPING OUR BUSINESS AND TECHNOLOGY RELATIONSHIPS. We intend to pursue
complementary business and technology partnerships that will allow us to
extend our technology development efforts and enhance the marketing, sales
and distribution of our products and services. In particular, we are
currently pursuing partnerships with IT staffing firms; other enterprise
software application firms, such as providers of human resources, customer
relationship management and accounting software products; application
service providers; value added resellers; and systems integrators. We
believe that these partnerships can provide us with access to additional
customers and technology that will enhance our existing PSA solutions and
allow us to further penetrate the PSO and corporate IT markets.
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PRODUCT AND SERVICES
ACCOUNT4
Account4 provides a fully-integrated, end-to-end PSA solution grouped into 3
major areas that mirror the business model of a typical PSO or corporate IT
department: Business Development, Service Delivery and Administration. Because
Account4 is an integrated Internet-based application, it provides users in an
organization the ability to access, share and collaborate on key data integral
to the success of their business.
[DESCRIPTION OF GRAPHIC ON PAGE 33]
The graphic is a shaded table titled "Account4 PSA Solution" with 3 boxed
categories beneath the title: "Business Development", "Service Delivery" and
"Administration". Features listed under each category are as follows:
Underneath "Business Development": "Contact Management", "Opportunity
Management", "Client Management" and "Work Requests".
Underneath "Service Delivery": "Engagement Management", "Work Tracking", "Skills
Management", "Resource Management", "Scheduling & Assignments" and
"Forecasting".
Underneath "Administration": "Time & Expense Reporting", "Invoicing",
"Chargebacks" and "Project Accounting".
BUSINESS DEVELOPMENT
Account4 supports the business development process from the identification
of a new business opportunity through the development and acceptance of an
engagement proposal. Features of Account4 that support business development
include:
- CONTACT MANAGEMENT. Users can establish their own individualized
categories for contacts, record activities such as telephone calls and
correspondence, and schedule future tasks.
- OPPORTUNITY MANAGEMENT. Sales managers are able to track the entire
sales cycle, price projects, forecast revenue and assess the
probability of completing a sale using "what if" scenarios based on
labor and nonlabor requirements, best practices templates or their own
model. Capacity planning is supported to maximize resource utilization.
- CLIENT MANAGEMENT. Users have immediate access to client portfolios and
all interactions with employees and contractors including documents,
contacts, telephone calls, contracts and statements of work to review
and manage client relationships.
- WORK REQUESTS. IT workgroups can manage a large number of requests for
services, regardless of complexity, and can assess their impact on the
group's business. Requests are initiated directly into the database and
are then electronically routed to the proper individuals so that
workers, requestors and evaluators are fully informed throughout the
project life cycle.
SERVICE DELIVERY
Account4 supports the service delivery process from the beginning of an
engagement through the completion of the project. Features of Account4 that
support service delivery include:
- ENGAGEMENT MANAGEMENT. Users can access information to manage work,
resources, time and expenses, and other project details.
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- WORK TRACKING. Users can identify, manage and track specific project
details to keep projects on time and within budget.
- SKILLS MANAGEMENT. Managers can access information and search for
resources within an organization based on the skills and proficiency
levels of service providers.
- RESOURCE MANAGEMENT. Managers can approve work requests, monitor and
approve time and expenses, monitor capacity and otherwise manage
resource utilization.
- SCHEDULING AND ASSIGNMENTS. Managers can review resource availability,
allocate resources to projects, and establish billing rates or charge
back allocation percentages for internal work.
- FORECASTING. Employees can communicate project status information and
managers can use the information to determine the effect any changes in
the project forecast would have on staff utilization.
ADMINISTRATION
Account4 provides the administrative services needed to support an
engagement and work efforts of a project from authorization to completion.
Features of Account4 that support administrative services include:
- TIME AND EXPENSE REPORTING. Users are able to quickly, easily and
accurately report 100% of their time and expenses spent on projects,
work requests, administrative tasks and vacation.
- INVOICING. Managers can collect and review expense items and create
invoices.
- CHARGEBACKS. Chargebacks are the internal billing of project costs
associated with work being performed by the IT staff of an
organization. IT managers can create, review and approve chargebacks
using Account4.
- PROJECT ACCOUNTING. Management can see the status of all work being
performed by staff, forecast the effects any new work may have on
staffing requirements and revenue potential, and perform win/loss
analysis on past opportunities.
ADDITIONAL FEATURES AND BENEFITS OF ACCOUNT4
Based on our experience in the project and work management markets, we have
added the following capabilities to enhance the usability of Account4:
- ACCOUNT4 MICROSOFT PROJECT PORTAL (MSP PORTAL). The MSP Portal provides a
bi-directional interface between Account4 and Microsoft's desktop project
management software, Microsoft Project. The MSP Portal allows customers to
create or store projects that pertain to new or previous work. These
projects may embody a company's best practices templates or may simply be
a knowledge base of how to perform familiar work. Using the MSP Portal,
information can be transferred to Account4, and the tasks from these
templates can be immediately distributed to all appropriate resources.
After time is entered, updates are made to the work in Account4, which can
be transferred back to Microsoft Project via the MSP Portal, automatically
updating the corresponding project. This provides managers with a means of
constantly updating projects using best practices and producing project
and resource-based graphical reports.
- ACCOUNT4 REPORT SERVER. The report server allows users to run reports
either on request or automatically at scheduled intervals. A comprehensive
selection/filtering mechanism within the report system allows managers to
select data from the Account4 knowledge base to focus on critical issues.
Reports can be added or modified at the user's discretion.
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CONSULTING, SUPPORT SERVICES AND MAINTENANCE
Our Professional Services Group assists our customers with the successful
implementation of Account4 by providing experienced and knowledgeable
professionals for implementation, development, training and support activities.
The Professional Services Group partners with our customers to:
- define their business requirements;
- create a design that meets their requirements;
- successfully implement Account4;
- provide user training and support;
- train system administrators to maintain the technical environment and
support their users;
- write customer-specific process, product and system documentation; and
- develop personalized HTML pages and processes, interfaces and reports.
We have successfully implemented enterprise business software systems in
organizations numbering from under a hundred to several thousand users for the
past 13 years. We build upon this experience and share our knowledge with
customers to help them achieve their goals.
Gartner Group estimates that total expenditures to implement traditional
client-server based enterprise software solutions can range from 3 to 5 times
the cost of licensing the software. Account4 has been designed to effectively
support customers having between 50 and several thousand users "out of the box".
Our experience indicates that even for customers who choose to purchase
implementation services from us the cost of implementing Account4 is, on
average, less than the cost of acquiring the Account4 software license.
We believe that high quality customer support is critical to ongoing
customer satisfaction. Our customer support group provides high quality
maintenance and technical support to our customers. Our customers have the
option to purchase a maintenance agreement, which is typically a one-year
renewable contract that entitles them to receive software updates and technical
support including telephone support and 24-hour access to the support area of
our website, www.account4.com.
CUSTOMERS
Our 13 years of experience in providing project work management solutions to
a customer base of more than 150 companies, representing over 267,000 licensed
users, have enabled us to establish a
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reputation for developing and providing leading edge technology solutions for
the PSA market. The following table provides a representative sampling of our 47
customers who have licensed Account4:
<TABLE>
<S> <C>
Ascension Health, Inc. National Council on Compensation
Blue Dingo, Inc. Insurance
Boehringer Ingelheim Corporation Navion Software Solutions, Inc.
Chase Manhattan Corporation Nice Systems, Inc.
ChaseMellon Shareholder Services, NSTAR
Inc.
Concord Communications, Inc. Octane Software, Inc.
Continental Casualty Company Osage Systems Group, Inc.
CNC Professional Services, Inc. Radnet, Inc.
e-SBiz, Inc. Salt River Project
Giant Step, LLC Silicon Graphics, Inc.
Hartford Technology Service Company Software Architects, Inc.
Hitachi America, Ltd. TXU Europe Group, Inc.
infoWorks, a business unit of Viacom Valmet Information Services
International, Inc. International
Innovative Business Knowledge Western Digital Corporation
Interactive Intelligence, Inc.
Mellon Bank Corporation
</TABLE>
CUSTOMERS CASE STUDIES
CONTINENTAL CASUALTY COMPANY (CNA) is one of the largest insurance companies in
the United States.
BUSINESS CHALLENGE: CNA's IT department utilized a proprietary mainframe
application to track work, budgets and time. CNA was seeking an Internet-based
application that was easy-to-use and focused on work management and project
tracking.
SOLUTION: Account4's functionality permitted greater insight into the IT
department's budgetary spending then CNA's former mainframe application. By not
forcing changes to CNA's existing business models, Account4's process-neutral,
Internet-based technology enabled CNA to extensively personalize Account4 to
meet its requirements and permit rapid training and migration of the workforce
to the new system. Account4 currently is being implemented for use by over 1,000
employees.
NSTAR is a leading utility service provider in the northeastern United States.
BUSINESS CHALLENGE: NSTAR's IT department receives a significant volume of
work requests and needed a PSA solution that could manage its service delivery
process. The merger of BEC Energy and Commonwealth Energy System, which created
NSTAR, necessitated the consolidation of the systems used by those companies for
tracking project requests and project status. The solution needed to be
implemented quickly and without changing existing business processes.
SOLUTION: Account4 is automating NSTAR's process of recording, prioritizing
and approving work requests and tracking project status without modifying the IT
department's existing processes. Account4's thin-client architecture will allow
NSTAR to implement Account4 rapidly. Using only Web browsers the IT department
staff will be able to easily access and exchange project data from any location.
TXU EUROPE, a subsidiay of TXU Corporation, is one of the largest energy
companies in the United Kingdom.
BUSINESS CHALLENGE: The TXU-Europe Center recognized the need to streamline
its current manual processes of resource management, reporting time and work
tracking. The organization needed an
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application that was easy to install, use and place into production. The
selected solution needed to be nimble, customizable to specific needs and
accessible internationally.
SOLUTION: The TXU-Europe Center selected Acount4 to optimize its European
work force. Skills availability is leveraged within Account4 to match the right
person with the right job. The TXU-Europe Center successfully implemented
Account4 within its target timeline after passing a two-week proof-of-concept.
Account4's flexibility accommodated TXU-Europe Center's unique business
requirements on a timely basis. As a result of the partnership between
Account4.com and TXU's implementation team, Account4 allows the TXU-Europe
Center to realize its business design principles to enable a more responsive and
customer-focused service.
SALES AND MARKETING
We focus our marketing efforts on achieving brand recognition, market
awareness and lead generation. The market for Account4 includes PSOs and
corporate IT departments, and we typically market directly to the senior
management teams of those organizations.
We primarily sell our software through our direct sales force located in
Newton, Massachusetts, San Jose and Huntington Beach, California, Washington,
D.C. and Melbourne, Florida. Our direct sales teams consist of tele-sales
representatives and sales, executives and software sales engineers. The
tele-sales representatives identify and qualify prospects, the sales executives
manage the sales cycle and the sales engineers provide technical support
throughout the sales cycle. Our direct sales teams are responsible for
geographic territories. We intend to enhance the distribution and market
presence of Account4 through the expansion of our direct sales staff and through
alliances with systems integrators and other third parties that will allow us to
expand domestically and internationally.
In selling Account4, we approach both business users and IT professionals
with our direct sales team. Initial sales activities typically include a
demonstration of Account4's capabilities followed by one or more detailed
technical reviews. Our sales process requires that we work closely with our
customers to identify short-term PSA needs and long-term PSA goals. The direct
sales teams then work with each customer to develop a proposal to address these
needs. The level of customer analysis and financial commitment required to
implement a PSA solution has resulted in our sales cycle ranging from 3 to 6
months.
We use a variety of marketing programs to build market awareness of our
company, brand name and product, and to attract potential customers. These
programs include targeted advertising in selected publications, product and
strategy updates with industry analysts, online marketing at our website,
www.account4.com, as well as tele-sales, attendance at seminars and tradeshows,
and speaking engagements by members of our management. Our marketing programs
allow us to qualify leads quickly, demonstrate the value of our products to
potential customers and measure customer feedback.
In addition, we sponsor PSASoftware.com, a website we launched in
April 2000 to provide a forum for participants in the PSA industry to share
their knowledge with PSOs and corporate IT departments. PSASoftware.com also
provides PSA industry news and analysis. Microsoft and Aberdeen Group are
co-sponsors of PSASoftware.com with us. We intend to continually enhance
PSASoftware.com by adding new content and seeking additional sponsors.
TECHNOLOGY
We built Account4 using state-of-the-art Internet technologies, embodying
accepted technology standards (HTML, HTTP and SQL) as well as emerging Internet
standards, such as XML.
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Account4 consists of an application server and a database. Account4 is a
100% thin-client application, which means the customer may access Account4 using
only a Web browser with an Internet connection. The Account4 architecture
includes the following strategic components:
- ACCOUNT4 APPLICATION SERVER. The Account4 Application Server fully
leverages the benefits of Internet and thin-client computing. The program
operates on Windows NT 4.0 with Microsoft Internet Information Server.
Account4 is entirely server-based, unlike other applications that are
retrofitted for the Internet using Java applets and ActiveX components.
Upgrades and updates to Account4 are performed once, on the central server
computer, and are available immediately to users across the customer's
organization.
- ACCOUNT4 APPLICATION. The Account4 application code is installed entirely
on a server computer and not on individual users' computers. The Account4
application source pages are written in the Account4 XML language. These
pages define the display of HTML pages and forms, specify business rule
validation and define database query and update functions. We have built
these pages using XML standards. Based on these pages, the Account4
Application Server dynamically generates HTML that is sent to the browser.
The Account4 application allows our customers to modify, personalize and
extend Account4 quickly and inexpensively.
- ACCOUNT4 APPLICATION PROGRAMMING INTERFACE. The Account4 Application
Programming Interface (API) provides comprehensive access to the Account4
database. The API allows for the sharing of data between Account4 and
other applications, other databases and other platforms. The API can be
used for synchronizing distributed information, eliminating redundant data
entry and capturing data via Account4 to interface to other systems. It
can be used to build full-featured linking applications between Account4
and other enterprise software programs, such as human resources or
accounting systems.
- ACCOUNT4 DATABASE STRUCTURE. Account4 supports both the Microsoft
SQLServer and Oracle relational databases. Account4 can utilize these
databases on any platform supported by Microsoft or Oracle. The Account4
database is designed to be easily extended and personalized by our
customers.
- ACCOUNT4 SYSTEM SECURITY. All Account4 pages are secured and require a
valid user ID and password to be accessed. The system administrator issues
an Account4 user ID and password that controls the database information
that each user can view and the functions that each user can access.
PRODUCT DEVELOPMENT
We believe that technology changes and market demand will require us to
continually introduce new and enhanced products and effectively maintain our
core technology and product functionality. In order to provide the necessary
stimulus for further technology and product development, we have incorporated a
strategy which combines our own internal research with customer input and
feedback from our sales force. In addition, we believe that constantly
evaluating new technologies and concepts for Account4 allows us to maintain our
competitive position. We invest significant resources in product development and
expect to continue to do so in the future.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
Our success is dependent upon our ability to develop and protect our
proprietary technology and intellectual property rights. We seek to protect our
software, documentation and other written materials primarily through a
combination of trade secret, trademark and copyright laws, confidentiality
procedures and contractual provisions. For example, we license, rather than
sell, our software, and we require licensees to enter into license agreements
that impose restrictions on the licensees' ability to
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utilize the software. In addition, we seek to avoid disclosure of our trade
secrets, by, among other things, requiring people with access to our proprietary
information to execute confidentiality agreements with us and by restricting
access to our source code.
COMPETITION
Competition in the PSA market is fragmented and growing increasingly
intense. Early entrants are attempting to establish technology excellence and
product superiority in an effort to gain acceptance and command market share.
Our competitors have chosen a variety of technology platforms for their
products. Although differing platforms offer individual advantages, we feel that
Account4's thin-client platform offers increased independence, greater
scalability, platform stability and personalization with significantly lower
development costs. We believe these factors, coupled with Account4's flexibility
to adapt to customer requirements in a cost-effective and user-friendly manner,
give Account4 a distinct competitive advantage.
We believe that the primary competitive factors in our market include:
- product quality, performance, features, functionality and usability;
- ease of integration with customers' existing business processes;
- an underlying technology architecture that facilitates low cost of
ownership and maintenance, and ease of expandability and personalization
to quickly meet unique customer requirements;
- knowledge of the PSA market and experience in the enterprise software
industry;
- a critical mass of prominent referenceable customers that have
successfully implemented PSA solutions; and
- customer service and support.
We believe we compete favorably with respect to these factors.
EMPLOYEES
As of May 1, 2000, we had 68 full-time employees, of which 26 were in sales
and marketing, 18 were in product development and support, 16 were in
professional services, and 8 were in executive management and administration. We
believe that our benefits package and corresponding costs are commensurate with
industry standards. None of our employees is covered by collective bargaining
agreements, and we have not experienced a strike or work stoppage. We believe
our relationship with our employees is good.
FACILITIES
Our corporate headquarters are located in Newton, Massachusetts. We have a 5
year lease for approximately 12,000 square feet of office space that expires in
July 2002, with an option for 3 additional years. This facility is strategically
located within the high technology belt of the northeastern United States and is
near colleges and universities in the Boston area. This location enables us to
actively recruit talented and experienced professionals. As a result of our
recent growth and anticipated expansion, we are currently seeking additional
office space in the Boston area. Additionally, we have sales offices in San Jose
and Huntington Beach, California, Washington, D.C. and Melbourne, Florida.
LEGAL PROCEEDINGS
We are not currently party to any material legal proceedings.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information about our directors and executive
officers, including their ages, as of May 1, 2000:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- --------
<S> <C> <C>
John J. Lucas..................... 55 Chairman, President, Chief Executive Officer and Director
Stephen M. Grange................. 54 Senior Vice President, Chief Financial Officer and
Director
E. Richard Artus.................. 57 Vice President of Marketing
Michael J. Beringer............... 47 Vice President of Sales
David M. Cooper................... 45 Vice President of Development and Chief Technology Officer
Stephen M. Fahey.................. 35 Vice President of Sales, Eastern Region
Louis A. Pereira.................. 36 Vice President of Professional Services
Richard F. Stenquist.............. 48 Vice President of Business Development
Joseph J. Freeman................. 67 Director
H. William Howard................. 65 Director
Edward P. Marram, Ph.D............ 63 Director
John P. McGrath................... 59 Director
</TABLE>
JOHN J. LUCAS has been our President and Chief Executive Officer since 1993
and our Chairman and a director since April 2000. From 1991 to 1993 Mr. Lucas
was President of Mitech Corporation, a developer and marketer of manufacturing
software. In 1986, Mr. Lucas founded Bechtel Software, Inc., a division of the
Bechtel Group, an engineering company, and served as President of Bechtel
Software from 1986 to 1991. From 1979 to 1986, Mr. Lucas served as Executive
Vice President of Project Software & Development, Inc., a provider of asset
management, project management and maintenance management software and services.
Mr. Lucas holds a B.S. in Engineering from the University of Notre Dame and an
M.B.A. in Management Science from the University of Buffalo.
STEPHEN M. GRANGE has been our Chief Financial Officer since 1990 and a
director since April 2000. From February 1993 to February 2000, Mr. Grange was
also our Vice President of Professional Services. From 1986 to 1989, Mr. Grange
was the Chief Financial Officer, and from 1988 to 1989 was also President, of
Atlantic Microsystems, Inc., a software company. Mr. Grange holds a B.S. in
Business Finance from Northwestern University and an M.B.A. from the Graduate
School of Business at the University of Chicago.
E. RICHARD ARTUS has been our Vice President of Marketing since 1996. From
1989 to 1995, Mr. Artus held various senior management positions at Productivity
Solutions, Inc., a developer of software solutions for managing projects,
workflow and resources, including Chairman, President and CEO. From 1987 to
1989, he was Senior Vice President of Bechtel Software. Mr. Artus holds a B.S.
in Engineering from Northeastern University.
MICHAEL J. BERINGER has been our Vice President of Sales since
January 1997. From 1993 to January 1997, Mr. Beringer was Vice President of
Sales and Marketing for Metra Corporation, a software developer and marketer of
manufacturing control systems. From 1992 to 1993, Mr. Beringer was Director of
Sales of Mitech. From 1989 to 1992, Mr. Beringer was Vice President of Sales for
CimTelligence Corporation, a software developer and marketer of manufacturing
process and expert
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systems software. Mr. Beringer holds a B.S. in Biology, a B.A. in Psychology and
an M.B.A. from Loyola University at Los Angeles.
DAVID M. COOPER has been our Chief Technology Officer since 1996 and our
Vice President of Development since January 2000. From 1993 to 1996, Mr. Cooper
was an independent software and Internet consultant. From 1988 to 1993,
Mr. Cooper was our Vice President of Product Development. Mr. Cooper holds a
B.S. in History and Psychology from Tufts University and an M.A. in Law and
Diplomacy from the Fletcher School of Law and Diplomacy at Tufts University.
STEPHEN M. FAHEY has been our Vice President of Sales, Eastern Region since
March 1998. From 1997 to 1998, Mr. Fahey served as Manager of Strategic Accounts
of InfoMation Publishing Corporation. From 1994 to 1997, he served as Vice
President of Sales and Marketing of 4Point Software, Inc. Mr. Fahey holds a B.A.
in Economics from the University of Massachusetts.
LOUIS A. PEREIRA has been our Vice President of Professional Services since
January 2000. From 1997 to 1999, Mr. Pereira served as our director of
Application Development. From 1996 to 1997, Mr. Pereira was an Assistant Vice
President and Senior Product Manager at Fidelity Investments. From 1990 to 1996,
Mr. Pereira served as a Client Service Officer for State Street Bank and Trust
Company. Mr. Pereira holds a B.S. in Accounting and Finance from Bridgewater
State College.
RICHARD F. STENQUIST has been our Vice President of Business Development
since January 2000. From 1994 to 1999, Mr. Stenquist served as a Manager for
KPMG L.L.P.'s consulting practice in the area of time and expense and labor
costing software. Mr. Stenquist holds a B.S. in Liberal Arts from the University
of Illinois at Urbana.
JOSEPH J. FREEMAN has served as one of our directors since April 1988. Since
1986, Mr. Freeman has been the President and a director of LRF
Investments, Inc., a privately held investment firm. Mr. Freeman also serves as
a director of Hanover Capital Mortgage Holdings, Inc. a publicly held mortgage
banking company, a director of Merrimack Mortgage Co., Inc., and a director of
the Newton Group, Inc. Mr. Freeman holds a B.S. in Business Administration from
Boston University.
H. WILLIAM HOWARD has served as one of our directors since April 2000. Since
1998, Mr. Howard has been Chief Information Officer of Sun Microsystems, Inc., a
publicly held provider of network computing environments. From 1990 to 1998,
Mr. Howard served as the Corporate Vice President of Information Technology and
Chief Information Officer for Inland Steel Industries, Inc. Prior to 1990,
Mr. Howard was Vice President of Information Technology of the Bechtel Group. He
has also held sales and management positions at IBM, Systems Industries, Inc.
and Memorex. Mr. Howard holds a B.S. in Science and Engineering from Princeton
University and an M.B.A. from Stanford University's Graduate School of Business.
EDWARD P. MARRAM, PH.D. has served as one of our directors since April 2000.
Dr. Marram is the Chairman and Chief Executive Officer of Geo-Centers, Inc., a
privately held high-technology professional services firm, which he founded in
1972. Dr. Marram is Entrepreneur-in-Residence at Babson College and an adjunct
professor at the European Institute of Business Administration in France.
Dr. Marram holds a B.S. in Chemistry and an M.S. in Physics from the University
of Massachusetts, and a Ph.D. in Physical Chemistry from Tufts University.
JOHN P. MCGRATH has served as one of our directors since April 2000. Since
1996 Mr. McGrath has served as Chairman of MFP Financial Services Limited, a
publicly held technology equipment lease financing company in Mississauga,
Ontario. Mr. McGrath is also a Senior Associate (limited partner) and, from 1971
to 1998 was a director and Vice President, of RBC Dominion Securities, an
investment banking firm and a division of Royal Bank of Canada. Mr. McGrath also
serves as a director of Atelier America, Inc., a manufacturer and distributor of
textured art work reproductions. Mr. McGrath holds a Bachelor of Commerce degree
from the University of Toronto.
41
<PAGE>
TERM OF DIRECTORS AND EXECUTIVE OFFICERS
Our directors are elected annually by our shareholders and serve until their
successors are elected and qualified. Our officers are elected annually by our
board of directors and serve until their successors are elected and qualified.
COMMITTEES OF THE BOARD OF DIRECTORS
Our Board of Directors has established an audit committee and compensation
committee. Our Board of Directors selects the directors who will serve as
members of these committees and may reduce or enlarge the size of the committees
or change the scope of their responsibilities. Our Board of Directors has no
current plans to take any of these actions. The rules of the Nasdaq National
Market, on which our common stock is proposed to be listed, require us to
maintain an audit committee consisting of at least 2 directors who are not our
employees.
The audit committee consists of Dr. Marram and Messrs. Freeman and McGrath.
The audit committee reviews the scope and timing of the audit services and any
other services our independent auditors are asked to perform, the auditor's
report on our financial statements following completion of their audit, and our
policies and procedures with respect to internal accounting and financial
controls. In addition, the audit committee makes annual recommendations to our
Board of Directors for the appointment of independent auditors for the following
year.
The compensation committee consists of Messrs. Howard and McGrath. The
compensation committee reviews and recommends to our Board of Directors the
salaries, incentive compensation and benefits of our senior officers and
administers our stock option and stock purchase plans and other employee benefit
plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our Board of Directors established the compensation committee in
April 2000. Prior to establishing the compensation committee, our Board of
Directors, with consultation from senior management, performed the functions
delegated to the compensation committee. No member of our compensation committee
has served as a member of our Board of Directors or compensation committee of
any entity that has one or more of its executive officers serving as a member of
our Board of Directors or compensation committee. Since the formation of the
compensation committee, none of its members has been one of our officers or
employees.
Employee directors, who currently include John J. Lucas and Stephen M.
Grange, are eligible to participate in our 2000 Employee Stock Purchase Plan.
COMPENSATION OF DIRECTORS
Members of our Board of Directors are reimbursed for expenses incurred in
attending any meeting of our Board of Directors or any committee thereof. In
addition, our non-employee directors receive annual compensation in the amount
of $8,000 for services performed in their capacity as directors. Also, each new
non-employee director receives a grant of a stock option to purchase 15,000
shares of our common stock on the date on which the person becomes a director.
The option vests over 3 years. One-third of the shares subject to such options
vest on the first anniversary of the date on which the person became a director,
and 1/36(th) of the total number of shares vest each month thereafter while such
individual continues to serve as a director.
EXECUTIVE COMPENSATION
The following table sets forth in summary form the compensation paid or
accrued by us during the years ended December 31, 1997, 1998 and 1999, to our
Chairman, President and Chief Executive
42
<PAGE>
Officer, and each of our 5 other most highly compensated officers. In accordance
with the rules of the SEC, the compensation described in this table does not
include perquisites and other personal benefits received by the executive
officers named in the table below that do not exceed the lesser of $50,000, or
10% of the total salary and bonus reported for these officers.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
- --------------------------- -------- --------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
John J. Lucas......................... 1999 189,915 121,766 -- --
Chairman, President and 1998 166,980 137,327 -- --
Chief Executive Officer 1997 166,980 150,025 -- --
Stephen M. Grange..................... 1999 154,596 99,943 -- --
Senior Vice President and 1998 139,150 112,884 -- --
Chief Financial Officer 1997 139,150 123,322 -- --
E. Richard Artus...................... 1999 109,167 6,346 -- --
Vice President of Marketing 1998 100,000 6,140 -- --
1997 90,000 7,115 126,655 --
Michael J. Beringer................... 1999 103,333 59,550 -- --
Vice President of Sales 1998 98,333 34,123 -- --
1997 82,500 48,061 101,324 --
David M. Cooper....................... 1999 109,167 6,346 -- --
Vice President of Development and 1998 100,000 5,769 -- --
Chief Technology Officer 1997 93,333 7,308 177,317 --
Stephen M. Fahey...................... 1999 78,417 126,919 25,331 --
Vice President of Sales, Eastern 1998 57,000 39,116 25,331 --
Region 1997 -- -- -- --
</TABLE>
STOCK OPTION GRANTS IN 1999
The following table sets forth, as to the named executive officers and key
employees, information concerning stock options granted during the year ended
December 31, 1999.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------- ANNUAL RATE OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ---------------------
GRANTED 1999 SHARE DATE 5% 10%
---------- ------------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Stephen M. Fahey............... 25,331 12.3% $.59 4/1/09 $533,400 $842,650
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST YEAR AND YEAR-END OPTION VALUES
The following tables sets forth for the named executive officers exercisable
and unexercisable options held by them as of December 31, 1999. The named
executive officers did not exercise any options during the year ended
December 31, 1999. All options granted to these executive officers in the last
year were granted under the 1997 Stock Plan. All options were granted at a fair
market value as determined by our Board of Directors on the date of the grant.
43
<PAGE>
The "Value of Unexercised In-the-Money Options at December 31, 1999" is
based on a value of $.59 per share, the fair market value of our common stock as
of December 31, 1999, as determined in good faith by our Board of Directors,
less the per share exercise price, multiplied by the number of shares issuable
upon exercise of the option.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT DECEMBER 31, 1999 AT DECEMBER 31, 1999
ACQUIRED VALUE ----------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ------------ -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John J. Lucas............ -- -- -- -- -- --
Stephen M. Grange........ -- -- -- -- -- --
E. Richard Artus......... -- -- -- 126,655 -- $ 74,750
Michael J. Beringer...... -- -- -- 101,324 -- $ 59,800
David M. Cooper.......... -- -- -- 177,317 -- $104,650
Stephen M. Fahey......... -- -- -- 50,662 -- $ 10,000
</TABLE>
BENEFIT PLANS
2000 EMPLOYEE STOCK PURCHASE PLAN
Our 2000 Employee Stock Purchase Plan was adopted by our Board of Directors
and shareholders in April 2000. The 2000 Employee Stock Purchase Plan provides
for the issuance of a maximum of 250,000 shares of our common stock.
Our 2000 Employee Stock Purchase Plan will be administered by the
compensation committee of our Board of Directors. All employees who have
completed at least 90 days of employment and whose customary employment is for
more than 20 hours per week and for more than 3 months in any calendar year are
eligible to participate in the 2000 Employee Stock Purchase Plan. Employees who
would own 5% or more of the total combined voting power or value of our capital
stock immediately after the grant of the option may not participate in the 2000
Employee Stock Purchase Plan. To participate, an employee must authorize us to
deduct an amount not less than one percent and not more than 10% of his or her
total cash compensation from his or her pay during 6-month payment periods. The
first payment period will commence on the earlier to occur of June 1, 2000 and
the first day of the first calendar month following the effective date of a
registration statement on Form S-8 to be filed with respect to the shares issued
under the 2000 Employee Stock Purchase Plan and shall end December 31, 2000.
Thereafter, the 6-month payment periods will commence on each January 1 and
July 1. In no case shall an employee be entitled to purchase more than
shares in any one payment period. The price of each share of common stock
purchased in each payment period is 85% of the lesser of the last reported sale
price of our common stock on the first or last business day of the payment
period, in either event rounded up to the nearest cent. If an employee is not a
participant on the last day of the payment period, such employee is not entitled
to purchase any shares of common stock for that period pursuant to the 2000
Employee Stock Purchase Plan, and the amount of his or her accumulated payroll
deductions will be refunded. Rights pursuant to the 2000 Employee Stock Purchase
Plan may not be transferred or assigned. An employee's rights under the 2000
Employee Stock Purchase Plan terminate upon his or her voluntary withdrawal from
the plan at any time or upon termination of employment. No rights have been
granted to date under the 2000 Employee Stock Purchase Plan.
1997 STOCK PLAN
Our 1997 Stock Plan was adopted by our Board of Directors and by our
shareholders in 1997. As of May 1, 2000, we had reserved a total of 2,401,379
shares of common stock for issuance under the plan, of which options to purchase
of 1,458,421 shares were outstanding. The 1997 Stock Plan provides
44
<PAGE>
for the granting to our employees of incentive stock options within the meaning
of Section 422 of the United States Internal Revenue Code, and for the granting
of restricted stock and non-statutory stock options to employees, including
officers and directors, non-employee directors and consultants.
Options and restricted stock granted under our 1997 Stock Plan are not
generally transferable by the option holder, and each option is exercisable
during the lifetime of the option holder only by the option holder. Options
granted under the 1997 Stock Plan must generally be exercised within 3 months of
the end of option holder's status as our employee or consultant, or within
180 days after termination by death or disability, but in no event later than
the expiration of the option's 10 year term.
401(K) PLAN
In 1989, we adopted a 401(k) plan to provide eligible employees with a tax
deferred savings and investment program. Eligible participants may elect to
reduce their current compensation up to the lesser of 15% of eligible
compensation or the statutorily prescribed annual limit, currently $10,500, and
have such reduction contributed to the 401(k) plan. Each participant can direct
the investment of his or her account among selected investment options.
Contributions by participants to the 401(k) plan, and income earned on plan
contributions, are generally not taxable to the participants until withdrawn.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Pursuant to the Delaware General Corporation Law we have adopted provisions
in our Certificate of Incorporation that eliminate the personal liability of our
directors and officers to us and our shareholders for monetary damages for
breach of the directors' fiduciary duties in certain circumstances. Our By-Laws
require us to indemnify our directors, officers, employees and other agents to
the fullest extent permitted by law.
We believe that the limitation of liability provisions in our Certificate of
Incorporation and the indemnification provisions of our By-Laws will enhance our
ability to continue to attract and retain qualified individuals to serve as
directors and officers.
There is no pending litigation or proceeding involving any of our directors,
officers or employees to which the indemnification provisions would apply. We
plan to purchase officers' and directors' liability insurance coverage.
45
<PAGE>
RELATED PARTY TRANSACTIONS
Other than the compensation and other arrangements which are described in
"Management", and the transactions described below, since we were formed, there
has not been nor is there currently proposed, any transaction or series of
similar transactions to which we were or will be a party:
- in which the amount involved exceeded or will exceed $60,000; and
- in which any of our directors, executive officers, holders of more than 5%
of our common stock or any member of their immediate families had or will
have a direct or material interest.
From 1988 to 1992 we borrowed funds from LRF Investments, Inc., a principal
shareholder. The following provides additional detail with respect to these
borrowings:
- $100,000 revolving credit line, interest at a bank's prime rate (9.50% at
March 31, 2000) plus
3.5%, due December 31, 2001, of which $45,564 is outstanding as of
March 31, 2000
- $400,000 of subordinated notes payable, interest at a bank's prime rate
(9.50% at March 31, 2000) plus 3.5%, due December 31, 2001
- $500,000 note payable, interest at a bank's prime rate (9.50% at
March 31, 2000) plus
3.5%, due December 31, 2001
- $240,000 line of credit, interest at a bank's prime rate (9.50% at
March 31, 2000) plus
3.5%, due December 31, 2001, of which $100,000 is outstanding as of
March 31, 2000
We have a consulting agreement with LRF Investments, Inc. pursuant to which
we pay approximately $1,000 each month during which there are any amounts
outstanding under these borrowings.
We believe that all of the above transactions were made on terms no less
favorable to us than could have been obtained from unaffiliated third parties on
an arm's-length basis. Following the completion of this offering, all
transactions with our shareholders, officers and directors, and their
affiliates, if any, will be subject to the approval of a majority of the
disinterested outside directors and will continue to be conducted on terms no
less favorable to us than could be obtained from unaffiliated third parties on
an arm's-length basis.
46
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our common stock as of May 1, 2000, and as adjusted to reflect our
sale of common stock in this offering, by:
- each of our directors;
- each shareholder known to us to be the beneficial owner of more than 5% of
our common stock; and
- all of our executive officers and directors as a group.
As of May 1, 2000 we had 11,384,521 shares of common stock issued and
outstanding. A person is deemed to be a beneficial owner of a security if that
person has or shares "voting power," which includes the power to vote or direct
the voting of a security, or "investment power," which includes the power to
dispose of or direct the disposition of a security. Except as otherwise
indicated, and subject to applicable community property laws, the persons named
below have sole voting and investment power with respect to all shares of common
stock beneficially owned by them. Unless otherwise indicated, the address of
each beneficial owner below is 75 Wells Avenue, Newton, Massachusetts 02459.
<TABLE>
<CAPTION>
PERCENTAGE OF
COMMON STOCK
OUTSTANDING(1)
NUMBER OF SHARES -------------------
BENEFICIALLY BEFORE AFTER
NAME OF BENEFICIAL OWNER OWNED(1) OFFERING OFFERING
- ------------------------ ---------------- -------- --------
<S> <C> <C> <C>
LRF Investments, Inc........................................ 5,687,194 50.0% 37.0%
John J. Lucas(2)(3)......................................... 2,342,697 20.6% 15.2%
Stephen M. Grange(4)(5)..................................... 2,255,265 19.8% 14.7%
Joseph J. Freeman(6)........................................ 5,687,194 50.0% 37.0%
H. William Howard........................................... -- --
Edward P. Marram, Ph.D...................................... -- --
John P. McGrath............................................. -- --
All directors and executive officers as a group (12
persons).................................................. 10,285,156 90.3% 66.9%
</TABLE>
- ------------------------
(1) If the underwriters exercise their overallotment option in full, LRF
Investments, Inc. will own 5,387,194 shares, or 35.0%, of our outstanding
shares; Mr. Lucas will own 2,217,697 shares, or 14.4%, of our outstanding
shares; and Mr. Grange will own 2,150,265 shares, or 14.0%, of our
outstanding shares.
(2) Excludes 785,261 shares as to which Mr. Lucas disclaims beneficial
ownership and which are owned beneficially by, or held in trust for,
Mr. Lucas' children.
(3) Includes 1,563,979 restricted shares which are subject to a repurchase
option that expires upon the completion of this offering. When this
repurchase option expires, Mr. Lucas will repay to us a $6,174.17 promissory
note with which he paid for these shares.
(4) Excludes 303,972 shares as to which Mr. Grange disclaims beneficial
ownership and which are held beneficially by Mr. Grange's children.
(5) Includes 1,279,618 restricted shares which are subject to a repurchase
option that expires upon the completion of this offering. When this
repurchase option expires, Mr. Grange will repay to us a $5,051.59
promissory note with which he paid for these shares.
(6) Represents shares owned by LRF Investments of which Mr. Freeman is
President and a director. Mr. Freeman disclaims beneficial ownership of
these shares.
47
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock is only a summary and is not
complete. You should read the full text of our Certificate of Incorporation and
By-Laws, which were filed as exhibits to the registration statement of which
this prospectus is a part.
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
Our authorized capital stock consists of 40,000,000 shares of common stock,
$.01 par value per share, and 10,000,000 shares of preferred stock, $.01 par
value per share. Upon the completion of this offering, there will be
15,384,521 shares of common stock outstanding.
COMMON STOCK
As of May 1, 2000, there were outstanding 11,384,521 shares of common stock
held by 12 shareholders of record. There will be 15,384,521 shares of common
stock outstanding assuming no exercise of outstanding options after May 1, 2000,
after giving effect to the sale of our common stock in this offering. There are
outstanding options to purchase a total of 1,458,421 shares of our common stock.
Holders of our common stock are entitled to one vote per share on all matters
upon which shareholders have the right to vote. Cumulative voting is not
permitted. Subject to preferences that may be applicable to any outstanding
preferred stock, holders of our common stock are entitled to receive ratably any
dividends as may be declared by our Board of Directors out of legally available
funds. In the event of our liquidation, dissolution or winding up, holders of
our common stock are entitled to share ratably in all assets remaining after
payment of liabilities, and after payment of any preferential amounts to which
holders of our preferred stock may be entitled. Holders of our common stock have
no preemptive or other subscription or conversion rights. There are no
redemption or sinking fund provisions applicable to our common stock.
PREFERRED STOCK
Our Certificate of Incorporation authorizes our Board of Directors to issue,
without further action by the holders of the common stock, shares of preferred
stock in one or more series and to fix any preferences, conversion and other
rights, voting powers, restrictions, limitations, qualifications and terms and
conditions of redemption as shall be set forth in resolutions adopted by our
Board of Directors. A certificate of designation or a certificate of amendment
must be filed with the Delaware Secretary of State prior to the issuance of any
shares of preferred stock of the applicable series. Any preferred stock so
issued may rank senior to the common stock with respect to the payment of
dividends or amounts payable upon liquidation, dissolution or winding-up, or
both. In addition, any shares of preferred stock issued may have class or series
voting rights. Issuances of preferred stock, while providing us with flexibility
in connection with general corporate purposes, may, among other things, have an
adverse effect on the rights of holders of common stock and could have the
effect of discouraging or making it more difficult for a third party to acquire
a majority of our outstanding voting stock or the effect of decreasing the
market price of our common stock. As of the date of this prospectus, no shares
of preferred stock are outstanding, and we have no present plan to issue any
shares of preferred stock.
CHARTER PROVISIONS AND DELAWARE LAWS THAT MAY HAVE AN ANTI-TAKEOVER EFFECT
Some provisions of Delaware law and our Certificate of Incorporation and
By-Laws could make the following more difficult:
- acquisition of us by means of a tender offer;
- acquisition of us by means of a proxy contest or otherwise; or
48
<PAGE>
- removal of our incumbent officers and directors.
These provisions, summarized below, are expected to discourage coercive
takeover practices and inadequate takeover bids. These provisions are also
designed to encourage persons seeking to acquire control of us to first
negotiate with our Board of Directors. We believe that the benefits of increased
protection of our potential ability to negotiate with the proponent of an
unfriendly and unsolicited proposal to acquire or restructure us outweigh the
disadvantages of discouraging such proposals because negotiation of such
proposals could result in an improvement of their terms.
REQUIREMENTS FOR ADVANCE NOTIFICATION OF SHAREHOLDER NOMINATIONS AND PROPOSALS
Our By-Laws establish advance notice procedures with respect to shareholder
proposals and the nomination of candidates for election as directors, other than
nominations made by or at the direction of our Board of Directors or one of its
committees.
SHAREHOLDER MEETINGS
Under our By-Laws, only our Board of Directors, Chairman of the Board or
Chief Executive Officer may call special meetings of shareholders.
DELAWARE ANTI-TAKEOVER LAW
We are subject to Section 203 of the Delaware General Corporation Law, an
anti-takeover law. In general, Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
shareholder" for a period of 3 years following the date the person became an
interested shareholder, unless the "business combination" or the transaction in
which the person became an interested shareholder is approved in a prescribed
manner. Generally, a "business combination" includes a merger, asset or stock
sale, or other transaction resulting in a financial benefit to the interested
shareholder. Generally, an "interested shareholder" is a person who, together
with affiliates and associates, owns or within 3 years prior to the
determination of interested shareholder status, did own, 15% or more of a
corporation's voting stock. The existence of this provision may have an
anti-takeover effect with respect to transactions not approved in advance by the
Board of Directors, including discouraging attempts that might result in a
premium over the market price for the shares of common stock held by
shareholders.
AMENDMENT OF CHARTER PROVISIONS
The amendment of any of the above provisions requires approval by holders of
at least 66 2/3% of our outstanding common stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is ChaseMellon
Shareholder Services, LLC.
LISTING
We have applied for listing of our common stock on the Nasdaq National
Market under the symbol "AFOR".
49
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Immediately prior to this offering, there was no public market for our
common stock. Future sales of substantial amounts of our common stock in the
public market could adversely affect the market price of our common stock.
Upon completion of this offering, based on shares outstanding as of May 1,
2000, we will have 15,384,521 outstanding shares of common stock, assuming no
exercise of options after May 1, 2000. All of the shares sold in this offering
will be freely tradable without restriction or further registration under the
Securities Act. However, the sale of any of these shares, if purchased by
"affiliates," as that term is defined in Rule 144, are subject to certain
limitations and restrictions that are described below.
The 11,384,521 shares of common stock held by existing shareholders were
issued and sold by us in reliance on exemptions from the registration
requirements of the Securities Act. These shares are "restricted shares" as that
term is defined in Rule 144 and therefore may not be sold publicly unless they
are registered under the Securities Act or are sold pursuant to Rule 144 or
another exemption from registration. In addition, our directors and officers as
well as certain other shareholders and option holders have entered into "lock-up
agreements" with the underwriters. These lock-up agreements provide that, except
under limited exceptions, the shareholder or option holder may not offer, sell,
contract to sell, pledge or otherwise dispose of any of our common stock or
securities that are convertible into or exchangeable for, or that represent the
right to receive, our common stock for a period of 180 days after the effective
date of this prospectus without the prior written consent of The
Robinson-Humphrey Company, LLC.
As of May 1, 2000, there were a total of 1,458,421 shares of common stock
subject to outstanding options, none of which were vested, and nearly all of
which are subject to lock-up agreements. Immediately after the completion of
this offering, we intend to file a registration statement on Form S-8 under the
Securities Act to register all of the shares of common stock issued or reserved
for future issuance under our 1997 Stock Plan and our 2000 Employee Stock
Purchase Plan. On the date 180 days after the date of this prospectus, the date
that the lock-up agreements expire, a total of 676,338 shares of our common
stock subject to outstanding options will be vested. After the effective date of
the registration statement on Form S-8, shares purchased upon exercise of
options granted pursuant to our 1997 Stock Plan and our 2000 Employee Stock
Purchase Plan generally would be available for resale in the public market.
<TABLE>
<CAPTION>
DAYS AFTER THE DATE APPROXIMATE SHARES
OF THIS PROSPECTUS ELIGIBLE FOR FUTURE SALE COMMENT
- ----------------------------------- ------------------------ -----------------------------------
<S> <C> <C>
Immediately........................ 4,010,132 Freely tradable shares sold in this
offering and restricted shares
salable under Rule 144(k) that are
not subject to 180-day lockup.
180 Days........................... 11,374,389 Lockup released; restricted shares
salable under Rule 144, 144(k)
</TABLE>
50
<PAGE>
UNDERWRITING
The Robinson-Humphrey Company, LLC, Gerard Klauer Mattison & Co., Inc. and
FAC/Equities, a division of First Albany Corporation and are acting as
representatives of the underwriters named below. Subject to the terms and
conditions contained in the underwriting agreement between us, the selling
shareholders and the representatives of the underwriters, each underwriter named
below has separately agreed to purchase from us the number of shares of common
stock indicated opposite the name of each underwriter, at the public offering
price less the underwriting discount set forth on the cover page of this
prospectus:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
- ----------- ----------------
<S> <C>
The Robinson-Humphrey Company, LLC..........................
Gerard Klauer Mattison & Co., Inc...........................
FAC/Equities, a division of First Albany Corporation........
----------
Total................................................... 4,000,000
==========
</TABLE>
The underwriters are obligated to purchase all of the shares, other than
those covered by the over-allotment option described below, if they purchase any
of the shares. The offering is a firm underwritten offering. However, the
underwriting agreement generally contains standard terms found in an
underwriting agreement for an offering of this type that gives the underwriters
the right to withdraw, cancel or modify the offering and to reject orders in
whole or in part. These rights would generally be exercised upon the occurrence
of a materially adverse change in our business, financial condition or results
of operations or upon the occurrence of a major downturn in the general economy.
The underwriters propose to offer part of the shares directly to the public
at the public offering price set forth on the cover page of this prospectus and
part of the shares to dealers at that price less a concession not in excess of
$ per share. The underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share on sales to other dealers. After
the initial public offering, the representatives may change the public offering
price and the other selling terms.
Certain of our shareholders have granted to the underwriters an option,
exercisable for 30 days from the date of this prospectus, to purchase up to
600,000 additional shares of common stock at the public offering price less the
underwriting discount. The underwriters may exercise the option solely for the
purpose of covering over-allotments, if any, in connection with this offering.
To the extent the option is exercised, each underwriter will be obligated,
subject to certain conditions, to purchase a number of additional shares
approximately proportionate to each underwriter's initial purchase commitment.
We and the selling shareholders will pay the underwriters a commission of
[ ]% of the per share public offering price for each share of common stock that
the underwriters purchase in the offering. The following table shows the
underwriting fees that we and the selling shareholders will pay to the
underwriters in connection with the offering. These amounts are shown assuming
both no exercise and full exercise of the underwriters' over-allotment option to
purchase additional shares of our common stock.
<TABLE>
<CAPTION>
TO BE PAID BY TO BE PAID BY SELLING
ACCOUNT4.COM SHAREHOLDERS
---------------------- ----------------------
FULL FULL
NO EXERCISE EXERCISE NO EXERCISE EXERCISE
----------- -------- ----------- --------
<S> <C> <C> <C> <C>
Per share................................................... $ $ $-- $
Total....................................................... $ $ $-- $
</TABLE>
51
<PAGE>
We estimate our expenses of this offering, exclusive of the underwriting
discount, will be approximately $ million. Additionally, we and the selling
shareholders have agreed to indemnify the underwriters against specified
liabilities, including civil liabilities under the Securities Act, or to
contribute to payments the underwriters may be required to make in respect
thereof.
The representatives have informed us that the underwriters do not expect to
make sales of common stock offered by this prospectus to accounts over which
they exercise discretionary authority in excess of 5% of the number of shares of
common stock offered by this prospectus.
The underwriters have reserved for sale, at the initial public offering
price, up to shares of common stock for our employees, directors and other
persons we have designated, who have expressed an interest in purchasing shares
of our common stock. The number of shares available for sale to the general
public in this offering will be reduced to the extent those persons purchase the
reserved shares. Any reserved shares not so purchased will be offered to the
general public on the same basis as other shares offered by this prospectus.
Substantially all of our shareholders have agreed that during the 180-day
period following the date of the prospectus, they will not, without the prior
written consent of The Robinson-Humphrey Company, LLC:
- directly or indirectly make, agree to or cause any offer, sale (including
short sale), loan, pledge or other disposition of, or grant any options,
rights or warrants to purchase with respect to, or otherwise transfer or
reduce any risk of ownership of, directly or indirectly, any shares of our
common stock or any securities convertible into or exchangeable or
exercisable for our common stock;
- enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of the common
stock; or
- make any demand for, or exercise any right with respect to, the
registration of shares of our common stock or any securities convertible
into or exchangeable or exercisable for our common stock.
In addition, during the 180-day period, we have also agreed not to issue, or
to file any registration statement with respect to the registration of, any
shares of our common stock or any securities convertible into or exercisable for
our common stock, except that we intend to file a registration statement on
Form S-8 under the Securities Act within 90 days after the completion of the
offering to register shares of common stock issuable under outstanding stock
options or reserved for issuance under our 1997 Stock Plan and 2000 Employee
Stock Purchase Plan. This will permit holders of those shares to sell them in
the public market without compliance with any holding period requirement.
Before this offering, there has been no public trading market for our common
stock. Consequently, the initial public offering price of our common stock will
be determined by negotiations among us, the representatives of the selling
shareholders, and the representatives of the underwriters. The factors to be
considered in determining the initial public offering price will include the
following:
- our history and future prospects and those of our industry;
- our past and present revenues and earnings and the propects for growth in
our revenues and earnings;
- the present state of our development;
- an assessment of our management;
- the general condition of the economy and the securities markets at the
time of this offering; and
52
<PAGE>
- the market prices of and demand for publicly traded common stock of
comparable companies at the time of the offering.
Until the distribution of our common stock is completed, rules of the SEC
may limit the ability of the underwriters and specified selling group members to
bid for and purchase our common stock. As an exception to these rules, the
representatives of the underwriters are permitted to engage in specified
transactions that stabilize the price of our common stock. These transactions
may occur on the Nasdaq National Market or otherwise. These transactions consist
of bids or purchases for the purpose of pegging, fixing or maintaining the price
of our common stock. If the underwriters create a short position in our common
stock in connection with this offering (that is, if they sell more shares of
common stock than are set forth on the cover page of this prospectus), the
representatives may reduce that short position by purchasing common stock in the
open market. The representatives of the underwriters may also elect to reduce
any short position by exercising all or part of the over-allotment option
described above. The representatives of the underwriters may also impose a
penalty bid on underwriters and selling group members in some cases. This means
that if the representatives purchase shares of common stock in the open market
to reduce the underwriters' short position or to stabilize the price of the
common stock, they may reclaim the amount of the selling concession from the
underwriters and selling group members who sold those shares as part of the
offering.
In general, purchase of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of those purchases. The imposition of a penalty bid
might also have an effect on the price of a security if it discourages resales
of the security. Neither we, the selling shareholders nor any of the
underwriters make any representation or prediction as to the direction or
magnitude of any effect that the transactions described above may have on the
price of our common stock. In addition, the underwriters are not required to
engage in these activities and may end any of these activities at any time. The
representatives intend to make a market in our common stock after the completion
of the offering.
From time-to-time in the future in the ordinary course of business, the
representatives may provide investment banking services to us.
There are restrictions on the offer and sale of our common stock in the
United Kingdom. All applicable provisions of the Financial Services Act 1986 and
the Public Offers of Securities Regulations 1995 with respect to anything done
by any person in relation to our common stock in, from or otherwise involving
the United Kingdom must be complied with.
Each underwriter has also agreed that it has:
- not offered or sold, and prior to the date six months after the date of
issue of the shares of common stock will not offer or sell, any shares of
common stock to persons in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purpose of their
businesses or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995;
- complied, and will comply with, all applicable provisions of the Financial
Services Act 1986 of Great Britain with respect to anything done by it in
relating to the shares of common stock in, from or otherwise involving the
United Kingdom; and
- only issued or passed on, and will only issue or pass on, in the United
Kingdom any document received by it in connection with the issuance of the
shares of common stock to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 (as amended) of Great Britain or
is a person to whom the document may otherwise lawfully be issued or
passed on.
53
<PAGE>
EXPERTS
The audited financial statements as of December 31, 1998 and 1999 and for
each of the years in the 3-year period ended December 31, 1999 included in this
prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in giving said
report.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us
by Choate, Hall & Stewart, Boston, Massachusetts. Certain legal matters relating
to this offering will be passed upon for the underwriters by Epstein Becker &
Green, P.C., Boston, Massachusetts.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act to register the common stock we are offering. This prospectus is
part of that registration statement and, as permitted by SEC rules, omits some
of the information in the registration statement and the exhibits and schedules
to the registration statement. For further information about us and our common
stock, you should read the registration statement, together with the
accompanying exhibits and schedules. Statements contained in this prospectus
regarding the content of any contract or other document are necessarily
summaries. You should read the exhibit for a more complete description of the
contract or document. We qualify each statement contained in this prospectus
regarding the contents of any contract or document filed as an exhibit to the
registration statement by reference to the exhibit.
You may read the registration statement at the SEC's Public Reference Room
at 450 Fifth Street, N.W., Washington, D.C. 20549 and may obtain copies of the
registration statement from the Public Reference Room at prescribed rates. You
may obtain information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. Additionally, the SEC maintains an Internet site at
www.sec.gov through which you may review the registration statement.
We are not presently a reporting company and do not file reports or other
information with the SEC. On the effective date of the registration statement,
however, we will become a reporting company, and we will register our securities
under the Securities Exchange Act of 1934. Accordingly, the additional reporting
requirements of the Exchange Act will apply to us, and we will be required to
file reports, proxy statements and other information with the SEC. In addition,
after the completion of this offering, we intend to furnish our shareholders
with annual reports containing audited financial statements, and with quarterly
reports, containing unaudited summary financial information for each of the
first 3 quarters of each fiscal year.
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with additional or different
information. We are not making an offer of these securities in any state where
the offer is not permitted. You should not assume that the information contained
in this prospectus is accurate as of any date other than the date on the front
of this prospectus.
54
<PAGE>
INDEX TO FINANCIAL STATEMENTS
ACCOUNT4.COM, INC.
<TABLE>
<CAPTION>
PAGES
--------
<S> <C>
Report of Independent Public Accountants.................... F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statements of Stockholders' Equity (Deficit)................ F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Account4.com, Inc.:
We have audited the accompanying balance sheets of Account4.com, Inc. (a
Delaware corporation) as of December 31, 1998 and 1999 and the related
statements of operations, stockholders' equity (deficit) and cash flows for each
of the three years in the period ended December 31, 1999. 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 auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Account4.com, Inc. as of
December 31, 1998 and 1999 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999 in conformity
with accounting principles generally accepted in the United States.
Arthur Andersen LLP
Boston, Massachusetts
February 23, 2000 (except with respect to the matters
discussed in Note 7 to the financial statements,
as to which the date is April 26, 2000)
F-2
<PAGE>
ACCOUNT4.COM, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- MARCH 31,
1998 1999 2000
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.............................. $ 729,149 $1,751,660 $ 476,816
Accounts receivable, net of allowance for bad debts of
approximately $25,000, $44,000 and $64,000 at
December 31, 1998 and 1999 and March 31, 2000,
respectively......................................... 1,479,678 1,097,770 1,413,482
Refundable income taxes................................ -- -- 260,000
Prepaid expenses and other current assets.............. 83,201 134,986 200,567
---------- ---------- -----------
Total current assets............................... 2,292,028 2,984,416 2,350,865
---------- ---------- -----------
Property and Equipment, at cost.......................... 250,750 386,890 410,598
Less--Accumulated depreciation......................... 117,962 207,410 234,260
---------- ---------- -----------
132,788 179,480 176,338
---------- ---------- -----------
Other Assets............................................. 4,300 6,646 5,846
---------- ---------- -----------
$2,429,116 $3,170,542 $ 2,533,049
========== ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current portion of capital lease obligations........... $ 3,884 $ 4,700 $ 4,931
Current portion of long-term debt...................... 1,095,564 -- --
Accounts payable....................................... 126,419 219,123 335,525
Accrued expenses....................................... 636,613 677,171 475,196
Deferred revenue....................................... 548,749 989,834 666,939
---------- ---------- -----------
Total current liabilities............................ 2,411,229 1,890,828 1,482,591
Capital Lease Obligations, less current portion.......... 15,425 10,724 9,400
Long-term Debt, less current portion..................... -- 1,095,564 1,095,564
---------- ---------- -----------
Total liabilities.................................... 2,426,654 2,997,116 2,587,555
---------- ---------- -----------
Commitments and Contingencies (Note 5)
Stockholders' Equity (Deficit):
Preferred stock, $.01 per value; 10,000,000 shares
authorized and none outstanding (Note 7)
Common stock, $.01 par value--
Authorized--40,000,000 shares (Note 7)
Issued and outstanding--11,384,521 shares............ 113,845 113,845 113,845
Additional paid-in capital........................... 522,803 837,074 3,037,713
Subscriptions receivable............................. (11,226) (11,226) (11,226)
Deferred compensation................................ -- (288,220) (2,327,140)
Accumulated deficit.................................. (622,960) (478,047) (867,698)
---------- ---------- -----------
Total stockholders' equity (deficit)............... 2,462 173,426 (54,506)
---------- ---------- -----------
$2,429,116 $3,170,542 $ 2,533,049
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
ACCOUNT4.COM, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, QUARTER ENDED MARCH 31,
----------------------------------------- -------------------------
1997 1998 1999 1999 2000
----------- ------------ ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses........ $ 1,563,787 $ 1,065,645 $ 2,422,707 $ 913,291 $ 795,750
Consulting, support
services and
maintenance............ 2,749,153 4,953,531 5,638,496 1,397,108 1,077,753
----------- ------------ ------------ ----------- -----------
Total revenues......... 4,312,940 6,019,176 8,061,203 2,310,399 1,873,503
Costs and expenses:
Software licenses........ 436,264 280,790 242,274 80,100 --
Consulting, support
services and
maintenance............ 1,190,314 2,167,821 2,376,885 653,139 456,826
Sales and marketing...... 1,027,980 1,475,077 2,939,044 574,035 1,195,910
Product development...... 560,522 925,476 1,433,636 348,572 454,774
General and
administrative......... 456,217 663,313 707,999 189,490 233,115
Stock-based
compensation(1)........ -- -- 26,051 -- 161,719
----------- ------------ ------------ ----------- -----------
Total costs and
expenses............. 3,671,297 5,512,477 7,725,889 1,845,336 2,502,344
Income (loss) from
operations................. 641,643 506,699 335,314 465,063 (628,841)
----------- ------------ ------------ ----------- -----------
Interest income.............. 49,805 38,148 66,391 12,259 17,918
Interest expense............. (150,951) (150,020) (146,792) (35,552) (38,728)
----------- ------------ ------------ ----------- -----------
Interest income (expense),
net........................ (101,146) (111,872) (80,401) (23,293) (20,810)
----------- ------------ ------------ ----------- -----------
Income (loss) before
income taxes......... 540,497 394,827 254,913 441,770 (649,651)
Provision for (benefit from)
income taxes............... 6,241 5,950 110,000 176,600 (260,000)
----------- ------------ ------------ ----------- -----------
Net income (loss)...... $ 534,256 $ 388,877 $ 144,913 $ 265,170 $ (389,651)
=========== ============ ============ =========== ===========
Net income (loss) per share
Basic.................. $ 0.07 $ 0.05 $ 0.02 $ 0.03 $ (0.05)
=========== ============ ============ =========== ===========
Diluted................ $ 0.06 $ 0.03 $ 0.01 $ 0.02 $ (0.05)
=========== ============ ============ =========== ===========
Weighted average shares
Basic.................. 7,684,633 8,540,924 8,540,924 8,540,924 8,540,924
=========== ============ ============ =========== ===========
Diluted................ 9,688,911 12,206,297 12,193,896 12,193,896 8,540,924
=========== ============ ============ =========== ===========
(1) The following table summarizes the departmental allocation of stock-based compensation:
Consulting, support
services and
maintenance............ $ -- $ -- $ 2,605 $ -- $ 21,649
Sales and marketing...... -- -- 13,677 -- 98,490
Product development...... -- -- 3,908 -- 22,626
General and
administrative......... -- -- 5,861 -- 18,954
----------- ------------ ------------ ----------- -----------
Total stock-based
compensation......... $ -- $ -- $ 26,051 $ -- $ 161,719
=========== ============ ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
ACCOUNT4.COM, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
---------------------- ADDITIONAL STOCKHOLDERS'
NUMBER OF $.01 PAID-IN SUBSCRIPTIONS DEFERRED ACCUMULATED EQUITY
SHARES PAR VALUE CAPITAL RECEIVABLE COMPENSATION DEFICIT (DEFICIT)
---------- --------- ---------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996....................... 5,687,194 $ 56,872 $ 566,550 $ -- $ -- $(1,546,093) $(922,671)
Issuance of common stock to
principal officers of the
Company.................. 5,687,195 56,872 (45,646) (11,226) -- -- --
Exercise of stock
options.................. 10,132 101 1,899 -- -- -- 2,000
Net income................. -- -- -- -- -- 534,256 534,256
---------- -------- ---------- -------- ----------- ----------- ---------
Balance at December 31,
1997....................... 11,384,521 113,845 522,803 (11,226) -- (1,011,837) (386,415)
Net income................. -- -- -- -- -- 388,877 388,877
---------- -------- ---------- -------- ----------- ----------- ---------
Balance at December 31,
1998....................... 11,384,521 113,845 522,803 (11,226) -- (622,960) 2,462
Deferred compensation on
stock options............ -- -- 314,271 -- (314,271) -- --
Amortization of deferred
compensation............. -- -- -- -- 26,051 -- 26,051
Net income................. -- -- -- -- -- 144,913 144,913
---------- -------- ---------- -------- ----------- ----------- ---------
Balance at December 31,
1999....................... 11,384,521 113,845 837,074 (11,226) (288,220) (478,047) 173,426
Deferred compensation on
stock options
(unaudited).............. -- -- 2,200,639 -- (2,200,639) -- --
Amortization of deferred
compensation
(unaudited).............. -- -- -- -- 161,719 -- 161,719
Net loss (unaudited)....... -- -- -- -- -- (389,651) (389,651)
---------- -------- ---------- -------- ----------- ----------- ---------
Balance at March 31, 2000
(unaudited)................ 11,384,521 $113,845 $3,037,713 $(11,226) $(2,327,140) $ (867,698) $ (54,506)
========== ======== ========== ======== =========== =========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
ACCOUNT4.COM, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, QUARTER ENDED MARCH 31,
----------------------------------- ------------------------
1997 1998 1999 1999 2000
---------- --------- ---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss)................................. $ 534,256 $ 388,877 $ 144,913 $ 265,170 $ (389,651)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating
activities--
Depreciation.................................... 33,378 69,747 89,448 20,504 26,850
Stock-based compensation expense................ -- -- 26,051 -- 161,719
Changes in current assets and liabilities--
Accounts receivable........................... (676,872) (401,012) 381,908 (305,997) (315,712)
Refundable and deferred income taxes.......... -- -- -- -- (260,000)
Prepaid expenses and other current assets..... (15,858) (48,426) (51,785) 18,809 (65,581)
Accounts payable.............................. 230,088 (191,335) 92,704 248,005 116,402
Accrued expenses.............................. 134,187 144,289 40,558 58,465 (201,975)
Deferred revenue.............................. 42,810 (197,124) 441,085 86,441 (322,895)
---------- --------- ---------- ---------- -----------
Net cash provided by (used in) operating
activities................................ 281,989 (234,984) 1,164,882 391,397 (1,250,843)
---------- --------- ---------- ---------- -----------
Cash Flows from Investing Activities:
Purchases of property and equipment............... (89,795) (75,641) (136,140) (34,024) (23,708)
(Increase) decrease in other assets............... (2,154) (2,146) (2,346) (4,329) 800
---------- --------- ---------- ---------- -----------
Net cash used in investing activities....... (91,949) (77,787) (138,486) (38,353) (22,908)
---------- --------- ---------- ---------- -----------
Cash Flows from Financing Activities:
Payments on capital lease obligations............. (1,389) (3,209) (3,885) (903) (1,093)
Proceeds from exercise of stock options........... 2,000 -- -- -- --
---------- --------- ---------- ---------- -----------
Net cash provided by (used in) financing
activities................................ 611 (3,209) (3,885) (903) (1,093)
---------- --------- ---------- ---------- -----------
Net Increase (Decrease) in Cash and Cash
Equivalents....................................... 190,651 (315,980) 1,022,511 352,141 (1,274,844)
Cash and Cash Equivalents, beginning of period.... 854,478 1,045,129 729,149 729,149 1,751,660
---------- --------- ---------- ---------- -----------
Cash and Cash Equivalents, end of period.......... $1,045,129 $ 729,149 $1,751,660 $1,081,290 $ 476,816
========== ========= ========== ========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for--
Interest.......................................... $ 126,880 $ 139,403 $ 134,796 $ 33,557 $ 34,848
========== ========= ========== ========== ===========
Income taxes...................................... $ -- $ 10,580 $ 58,169 $ 5,820 $ 47,400
========== ========= ========== ========== ===========
Supplemental Disclosure of Noncash Investing and
Financing Activities:
Purchases of equipment through capital leases..... $ 23,907 $ -- $ -- $ -- $ --
========== ========= ========== ========== ===========
Stock issued in exchange for subscriptions
receivable...................................... $ 11,226 $ -- $ -- $ -- $ --
========== ========= ========== ========== ===========
Deferred compensation on stock options............ $ -- $ -- $ 314,271 $ -- $ 2,200,639
========== ========= ========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
ACCOUNT4.COM, INC.
NOTES TO FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(1) NATURE OF BUSINESS
Account4.com, Inc. (the Company), formerly known as Work Management
Solutions, Inc., was incorporated in December 1987. The Company provides
Internet-based software products and services that enable professional services
organizations (PSOs) and corporate information technology (IT) departments to
successfully manage projects and to increase the utilization, productivity,
effectiveness and retention of their workforces.
The Company is subject to a number of risks common to rapidly growing
technology-based companies, including rapid technological change, the ability to
obtain adequate financing, competition from substitute products and larger
companies, dependence on key individuals, and the need for successful
development and marketing of commercial products and services.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements reflect the application of certain
accounting policies described in this note and elsewhere in the notes to
financial statements.
(A) INTERIM FINANCIAL STATEMENTS
The accompanying balance sheet as of March 31, 2000 and the statements of
operations, cash flows and stockholders' equity (deficit) for the three months
ended March 31, 1999 and 2000 are unaudited, but, in the opinion of management,
include all adjustments, consisting only of normal recurring adjustments
necessary for a fair presentation of results for these interim periods. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States have been omitted, although the Company believes that the
disclosures included are adequate to make the information presented not
misleading. The results of operations for the three months ended March 31, 2000
are not necessarily indicative of the results to be expected for the entire
fiscal year or any other interim period.
(B) REVENUE RECOGNITION
The Company recognizes revenue in accordance with the provisions of
Statement of Position (SOP) No. 97-2, SOFTWARE REVENUE RECOGNITION, as amended,
issued by the American Institute of Certified Public Accountants (AICPA).
Revenue is derived from the licensing of computer software products and the sale
of software maintenance contracts and consulting services. Revenues from
software products are recognized upon execution of a persuasive evidence of an
arrangement, provided that the license fee is fixed and determinable, delivery
of product has occurred via physical shipment or electronically, a determination
has been made by management that collection is probable, and the Company has no
remaining obligations. The Company executes separate contracts that govern the
terms and conditions of each software license, maintenance arrangement and each
professional services arrangement. These contracts may be elements in a
multiple-element arrangement. Revenues under multiple-element arrangements,
which may include several different software products or services sold together,
are allocated to each element based on their respective fair values, with these
fair values being determined using the price charged when that element is sold
separately.
F-7
<PAGE>
ACCOUNT4.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company recognizes revenues from maintenance support contracts ratably
over the contract period. The Company has time and materials contracts for the
consulting services and recognizes consulting revenues as the services are
performed.
Software license costs consist primarily of the media on which the product
is delivered and any related third-party royalties. The costs of consulting and
support services consist primarily of salaries and benefits related to
consulting personnel and the customer support group.
(C) CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and investments with original
maturities of 3 months or less. Cash equivalents consist of money market
investments.
(D) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated using the
straight-line method over the estimated useful lives of the respective assets,
as follows:
<TABLE>
<CAPTION>
ESTIMATED USEFUL
ASSET CLASSIFICATION LIFE
- -------------------- ----------------
<S> <C>
Furniture and fixtures...................................... 3 years
Computer and office equipment............................... 3 years
Equipment under capital lease............................... useful life
</TABLE>
(E) DEFERRED REVENUE
Deferred support revenue consists of advance payments for maintenance and
support services that have not yet been performed. Deferred product revenue
consists of orders for which the software has been shipped, yet post-delivery
obligations remain.
(F) USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of expenses during the
reporting period. Actual results may differ from those estimates.
(G) CONCENTRATION OF CREDIT RISK
Statement of Financial Accounting Standards (SFAS) No. 105, DISCLOSURE OF
INFORMATION ABOUT FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET-RISK AND
FINANCIAL INSTRUMENTS WITH CONCENTRATIONS OF CREDIT RISK, requires disclosure of
any significant off-balance-sheet and credit risk concentrations. As of
December 31, 1999 and March 31, 2000, the Company had no significant off-balance
sheet risks, such as foreign currency exchange contracts or other hedging
instruments. Financial instruments that potentially expose the Company to
significant concentrations of credit risk consist primarily of cash and cash
equivalents and trade accounts receivable. The Company places its cash and cash
equivalents in
F-8
<PAGE>
ACCOUNT4.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
several highly rated financial institutions. The Company maintains an allowance
for potential bad debt but historically has not experienced any significant
losses related to individual customers or groups of customers in any particular
industry or geographic area.
The following table represents customers that account for more than 10% of
revenue in any of the periods reported:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, QUARTER ENDED MARCH 31,
------------------------------ -----------------------
CUSTOMER 1997 1998 1999 1999 2000
- -------- -------- -------- -------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
A................................... 13% 45% 36% 37% 16%
B................................... * * 11 33 *
C................................... * * * * 12
</TABLE>
* REVENUES DERIVED FROM THIS CUSTOMER WERE LESS THAN 10% OF THE COMPANY'S TOTAL
REVENUE FOR THE PERIOD.
The following table represents customers that account for more than 10% of
total accounts receivable at any of the dates reported:
<TABLE>
<CAPTION>
DECEMBER
31, MARCH 31,
------------------- -------------------
CUSTOMER 1998 1999 1999 2000
- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
A.................................................... 59% 35% 53% 16%
B.................................................... * * 23 *
C.................................................... * * * 19
D.................................................... * * 11 *
</TABLE>
* ACCOUNTS RECEIVABLE FROM THIS CUSTOMER WERE LESS THAN 10% OF THE COMPANY'S
TOTAL ACCOUNTS RECEIVABLE AT THE DATE REPORTED.
(H) BASIC AND DILUTED NET INCOME (LOSS) PER SHARE
Basic net loss per share is computed by dividing the net income (loss) for
the period by the weighted average number of unrestricted common shares
outstanding during the period. Diluted net loss per share is computed by
dividing the net income (loss) for the period by the weighted average number of
unrestricted common shares and potential common stock outstanding during the
period, if dilutive. Potential common stock is comprised of restricted shares of
common stock and the incremental common shares issuable upon the exercise of
stock options. The following illustrates a
F-9
<PAGE>
ACCOUNT4.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
reconciliation of the number of shares used in the calculation of basic and
diluted net income (loss) per share for all periods presented:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, QUARTER ENDED MARCH 31,
-------------------------------------- -------------------------
1997 1998 1999 1999 2000
---------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net income (loss).................... $ 534,256 $ 388,877 $ 144,913 $ 265,170 $ (389,651)
========== =========== =========== =========== ===========
Weighted average common shares
outstanding........................ 7,388,588 11,384,521 11,384,521 11,384,521 11,384,521
Less-weighted average restricted
common shares outstanding.......... 849,184 2,843,597 2,843,597 2,843,597 2,843,597
---------- ----------- ----------- ----------- -----------
Shares used in computing basic net
income (loss) per share............ 7,684,633 8,540,924 8,540,924 8,540,924 8,540,924
---------- ----------- ----------- ----------- -----------
Restricted shares--of common stock
and the dilutive effect of assumed
exercise of stock options.......... 2,004,278 3,665,373 3,652,972 3,652,972 --
---------- ----------- ----------- ----------- -----------
Shares used in computing diluted net
income (loss) per share............ 9,688,911 12,206,297 12,193,896 12,193,896 8,540,924
---------- ----------- ----------- ----------- -----------
Basic net income (loss) per share.... $ 0.07 $ 0.05 $ 0.02 $ 0.03 $ (0.05)
========== =========== =========== =========== ===========
Diluted net income per share......... $ 0.06 $ 0.03 $ 0.01 $ 0.02 $ (0.05)
========== =========== =========== =========== ===========
Antidilutive potential common
stock.............................. -- -- -- -- 4,072,152
========== =========== =========== =========== ===========
</TABLE>
(I) COMPREHENSIVE INCOME
The Company is required to disclose all components of comprehensive income
on an annual and interim basis. Comprehensive income is defined as the change in
equity of a business enterprise during a period from transactions or other
events and circumstances from nonowner sources. The Company has no such items
for the years ended December 31, 1997, 1998 and 1999, or for the quarter ended
March 31, 1999 and 2000.
(J) ACCOUNTING FOR DERIVATIVES
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. This
statement requires companies to record derivatives on the balance sheet as
assets or liabilities, measured at fair value. Gains or losses resulting from
changes in the values of these derivatives would be accounted for depending on
the use of the derivative and whether it qualifies for hedge accounting. The
Company has no derivative instruments at December 31, 1998 and 1999, or at
March 31, 2000.
F-10
<PAGE>
ACCOUNT4.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(K) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS,
requires disclosure of an estimate of the fair value of certain financial
instruments. The Company's financial instruments consist of cash equivalents,
accounts receivable, accounts payable and debt. The estimated fair value of
these financial instruments approximates their carrying value at December 31,
1998 and 1999 and March 31, 2000. The estimated fair values have been determined
through information obtained from market sources and management estimates.
(L) SOFTWARE DEVELOPMENT COSTS
SFAS No. 86, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE TO BE SOLD,
LEASED OR OTHERWISE MARKETED, requires capitalization of certain computer
software development costs upon the establishment of technological feasibility.
The Company has determined that the costs incurred from the time of
technological feasibility to the completion of development are minimal and,
therefore, expenses all costs to product development as incurred.
(M) ACCOUNTING FOR THE COST OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR
INTERNAL USE
In March 1998, AICPA issued SOP 98-1, ACCOUNTING FOR THE COST OF COMPUTER
SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE. SOP 98-1 is effective for
financial statements with fiscal years beginning after December 15, 1998.
SOP 98-1 provides guidance regarding accounting for computer software developed
or obtained for internal use, including the requirement to capitalize specified
costs and amortization of such costs. The adoption of this standard has not had
a significant impact on the Company's financial results.
(N) RECENT ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101, REVENUE RECOGNITION IN FINANCIAL STATEMENTS. This
bulletin summarizes certain views of the staff on applying accounting principles
generally accepted in the United States to revenue recognition in financial
statements. The staff believes that revenue is realized or realizable and earned
when all of the following criteria are met: persuasive evidence of an
arrangement exists; delivery has occurred or services have been rendered; the
seller's price to the buyer is fixed or determinable; and collectibility is
reasonably assured. The Company believes that its current revenue recognition
policy complies with the SEC guidelines.
(O) STOCK-BASED COMPENSATION
SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, requires the
measurement of the fair value of stock options or warrants to be included in the
statements of operations or disclosed in the notes to financial statements. The
Company has determined that it will account for stock-based compensation for
employees under the intrinsic-value method of the Accounting Principles Board
(APB) Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and elect the
disclosure-only alternative under SFAS No. 123. The Company accounts for
stock-based compensation for
F-11
<PAGE>
ACCOUNT4.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
nonemployees under the fair value method prescribed by SFAS No. 123. To date,
there have been no material grants to nonemployees.
(3) PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999 2000
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Furniture and fixtures...................................... $ 5,208 $ 26,897 $ 26,897
Computer and office equipment............................... 221,635 336,086 359,794
Equipiment under capital lease.............................. 23,907 23,907 23,907
-------- -------- --------
250,750 386,890 410,598
Less-Accumulated depreciation........................... 117,962 207,410 234,260
-------- -------- --------
$132,788 $179,480 $176,338
======== ======== ========
</TABLE>
(4) ACCRUED EXPENSES
Accrued expenses consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- MARCH 31,
1998 1999 2000
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Accrued commissions......................................... $226,428 $135,827 $ 80,574
Accrued royalties........................................... -- 17,380 15,588
Accrued payroll and related expenses........................ 294,156 310,121 250,017
Other accrued expenses...................................... 116,029 213,843 129,017
-------- -------- --------
$636,613 $677,171 $475,196
======== ======== ========
</TABLE>
In 1993, the Company executed a nonexclusive value added reseller agreement
with PlanView, Inc. (PlanView), which gives the Company rights to market and
sell the PlanView work management system and obligates the Company to pay
royalties to PlanView for all sales of the PlanView system. The agreement is
renewable on an annual basis and is contingent upon the Company attaining
specified minimum quarterly revenue targets. For the years ended December 31,
1997, 1998 and 1999 and for the three months ended March 31, 1999 and 2000, the
Company recognized license revenues of approximately $1,070,000, $568,000,
$322,000, $113,136 and $0, respectively, and expensed the related royalties as a
component of software licenses, of $436,000, $281,000, $204,000, $80,000, and
$0, under this reseller arrangement. Effective January 1, 1999, the agreement
was modified to create a joint and cooperative marketing program. Under the
modified agreement, the Company may continue to perform consulting services for
existing and future PlanView customers. The Company is liable to PlanView for a
15% fee on all future referrals by PlanView of the Company's Account4 software.
In addition, PlanView will be liable to the Company for a 15% fee on all future
referrals by the Company of the PlanView system. At December 31, 1999 and
March 31, 2000, the Company had approximately
F-12
<PAGE>
ACCOUNT4.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(4) ACCRUED EXPENSES (CONTINUED)
$124,000 and $73,490, respectively, due to PlanView for royalties which is
included as a component of accounts payable and accrued expenses in the
accompanying balance sheet.
(5) COMMITMENTS AND CONTINGENCIES
The Company leases certain equipment and office space under noncancelable
operating and capital lease agreements, which expire at various dates through
2002.
Future minimum lease payments under noncancelable operating leases and the
present value of future minimum capital lease payments as of December 31, 1999
are as follows:
<TABLE>
<CAPTION>
CAPITAL LEASES OPERATING LEASES
-------------- ----------------
<S> <C> <C>
Year ended December 31,
2000...................................................... $ 7,265 $384,236
2001...................................................... 7,265 369,330
2002...................................................... 5,448 219,508
------- --------
Total future minimum lease payments................... 19,978 $973,074
========
Less--Amounts representing interest......................... 4,554
-------
Present value of future minimum net capital lease
payments............................................ 15,424
Less--Current portion....................................... 4,700
-------
Capital lease obligations, less current portion....... $10,724
=======
</TABLE>
Total rent expense under operating leases was approximately $158,000,
$340,000, $387,000, $93,000 and $113,000 for the years ended December 31, 1997,
1998 and 1999 and for the quarters ended March 31, 1999 and 2000, respectively.
F-13
<PAGE>
ACCOUNT4.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(6) LONG-TERM DEBT
Notes payable to a stockholder consists of the following for all periods
presented:
<TABLE>
<S> <C>
$100,000 revolving credit line, interest at a bank's prime
rate (9.50% at March 31, 2000) plus 3.5%, due December 31,
2001...................................................... $ 45,564
Subordinated notes payable, interest at a bank's prime rate
plus 3.5%, due December 31, 2001.......................... 400,000
Note payable, interest at a bank's prime rate plus 3.5%, due
December 31, 2001......................................... 500,000
$240,000 line of credit, interest at a bank's prime rate
plus 3.5%, due December 31, 2001.......................... 100,000
----------
$1,045,564
----------
Notes payable to a non-stockholder consisting of the
following for all periods presented:
Note payable, subordinated to stockholder notes, interest at
a bank's prime rate plus 3.5%, due December 31, 2001...... 50,000
----------
Total long-term debt.................................... $1,095,564
==========
</TABLE>
All debt was classified as current as of December 31, 1998. During 1999, all
debt instruments were amended to be due December 31, 2001 and, therefore, are
classified as long-term as of December 31, 1999 and March 31, 2000. During the
years ended December 31, 1997, 1998, 1999 and for the quarters ended March 31,
1999 and 2000, the Company incurred approximately $136,000, $134,000, $131,000,
$32,000 and $35,000, respectively, of interest expense related to the notes
payable.
The Company also has a consulting agreement with the stockholder noted
above. The Company paid approximately $12,000 under this agreement for services
provided in each of the years ended December 31, 1997, 1998 and 1999 and $3,000
in the quarter ended March 31, 1999 and 2000. This agreement expires upon the
repayment of all debt owed to this stockholder.
(7) STOCKHOLDERS' EQUITY (DEFICIT)
On April 26, 2000, the Company declared a 5.0662-for-1 stock split and
authorized 50,000,000 shares of capital stock of which 40,000,000 shares are
designated as common stock, $.01 par value and 10,000,000 shares are
undesignated preferred stock, $0.01 par value per share. All share and per share
amounts in the accompanying financial statements and notes have been
retroactively adjusted in all periods presented to reflect this stock split.
In April 1997, the Company issued 5,687,195 shares of common stock to two
principal officers of the Company at a price of $0.002 per share, which was the
fair market value at the date of issuance as determined by the Board of
Directors. As a condition of the common stock issuance, the two officers each
executed a Restricted Stock and Voting Agreement under which the Company retains
the right to repurchase any or all of the restricted shares until a minimum
liquidation level is achieved, or upon the occurrence of certain trigger events,
as defined, including a qualified initial public offering, for the shorter of
the duration of the officers' employment with the Company or 10 years. The
agreement further states that certain transactions, as defined, require the
approval of all stockholders prior to execution of the transaction. As of
December 31, 1999, 2,843,598 shares were subject to restrictions.
F-14
<PAGE>
ACCOUNT4.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(7) STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
The two principal officers executed promissory notes totaling approximately
$11,000 in connection with this issuance. The promissory notes are payable on
demand with annual interest at a fixed rate of 8%.
(8) STOCK OPTION PLAN
The Company has a stock plan (1997 Stock Plan) pursuant to which the Board
of Directors may grant an aggregate of 2,401,379 shares of common stock through
incentive and nonqualified stock options and restricted stock grants and
opportunities to make direct purchases of stock to certain employees, directors
and consultants. Incentive stock options may not be less than the fair market
value of the stock at the date of the grant, as determined by the Board of
Directors. The exercise price of nonqualified options is determined by the Board
of Directors at the date of the grant. Options may be exercised, subject to
certain vesting requirements, for a period up to 10 years from the date of
grant. At March 31, 2000 there are 1,162,693 options available for future grant.
At December 31, 1999 and March 31, 2000, there were no stock options
exercisable.
The following is a summary of the stock option activity through March 31,
2000:
<TABLE>
<CAPTION>
RANGE OF
EXERCISE
SHARES PRICES
--------- ------------
<S> <C> <C>
Outstanding at December 31, 1996............... 476,223 $ 0.197
Granted...................................... 754,864 0.002
Exercised.................................... (10,132) 0.197
Canceled..................................... (288,774) 0.197
--------- ------------
Outstanding at December 31, 1997............... 932,181 $0.002-0.197
Granted...................................... 93,725 0.197-0.276
Canceled..................................... (111,457) 0.002-0.197
--------- ------------
Outstanding at December 31, 1998............... 914,449 $0.002-0.276
Granted...................................... 206,447 0.592
Canceled..................................... (136,787) $0.002-0.592
--------- ------------
Outstanding at December 31, 1999............... 984,109 $0.002-0.592
Granted (unaudited).......................... 257,110 0.592
Canceled (unaudited)......................... (12,665) 0.592
--------- ------------
Outstanding at March 31, 2000 (unaudited)...... 1,228,554 $0.002-0.592
========= ============
Exercisable March 31, 2000..................... 0 --
========= ============
Exercisable December 31, 1999.................. 0 .197
========= ============
Exercisable December 31, 1998.................. 96,258 .197
========= ============
Exercisable December 31, 1997.................. 116,523 .197
========= ============
</TABLE>
Based upon the Company's vesting schedule, there are no options exerciseable
at December 31, 1997, 1998, 1999 and March 31, 2000.
F-15
<PAGE>
ACCOUNT4.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(8) STOCK OPTION PLAN (CONTINUED)
In connection with the granting of stock options to our employees in the
year ended December 31, 1999 and the quarter ended March 31, 2000, we recorded
deferred stock-based charges totaling approximately $314,000 in the year ended
December 31, 1999 and $2.2 million in the quarter ended March 31, 2000. These
amounts represent the difference between the exercise prices at which the stock
options were granted, and the deemed fair value of our common stock on the date
of the grants. This amount is included as a component of shareholders' equity
(deficit) and, in accordance with the method described in Financial Accounting
Standards Board Interpretation No. 28. The Company recorded amortization of
approximately $23,000 and $162,000 in the year ended December 31, 1999 and the
quarter ended March 31, 2000. At March 31, 2000, the remaining unamortized
stock-based compensation totaled approximately $2.3 million and will be
amortized over the following periods:
<TABLE>
<CAPTION>
<S> <C>
9 months ending December 31, 2000 $ 493,000
Year ending December 31, 2001 657,000
Year ending December 31, 2002 646,000
Year ending December 31, 2003 370,000
Year ending December 31, 2004 162,000
----------
Total $2,328,000
==========
</TABLE>
In April 2000, the Company granted 240,000 shares of common stock at $3.00
per share.
The following table summarizes information regarding the Company's stock
options outstanding at March 31, 2000:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------------
WEIGHTED
AVERAGE WEIGHTED
REMAINING AVERAGE
CONTRACTUAL EXERCISE
RANGE OF EXERCISE PRICES NUMBER LIFE PRICE
- ------------------------ --------- ----------- --------
<S> <C> <C> <C>
$0.002.................................................... 701,674 7.4 $0.002
$0.197-0.276.............................................. 86,126 8.4 0.229
$0.592.................................................... 440,754 9.5 0.592
--------- --- ------
1,228,554 8.2 $ 0.22
========= === ======
</TABLE>
F-16
<PAGE>
ACCOUNT4.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(8) STOCK OPTION PLAN (CONTINUED)
The Company has computed the pro forma disclosures required under SFAS
No. 123 for all stock options granted as of March 31, 2000 using the
Black-Scholes option pricing model prescribed by SFAS No. 123. The weighted
average information and assumptions used are as follows:
<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------- -----------------------
1997 1998 1999 1999 2000
--------- --------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Risk-free interest rate........... 5.83-6.20% 4.65-5.72% 4.65% 4.65% 5.80%
Expected dividend yield........... -- -- -- -- --
Expected lives.................... 7 years 7 years 7 years 7 years 7 years
Expected volatility............... -- -- -- -- --
</TABLE>
The following table summarizes the weighted average grant date fair value
and weighted average exercise price of options granted during the years ended
December 31, 1997, 1998 and 1999 and during the quarter ended March 31, 2000.
For purposes of the table below, the weighted average grant date fair value was
computed using the Black-Scholes option pricing model.
<TABLE>
<CAPTION>
WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES FAIR VALUE EXERCISE PRICE
--------- ---------------- ----------------
<S> <C> <C> <C>
Exercise price equals fair value.................... 928,382 $0.10 $0.10
Exercise price less than fair value................. 300,172 8.70 0.59
--------- ----- -----
1,228,554 $2.20 $0.22
========= ===== =====
</TABLE>
The pro forma effect of applying SFAS No. 123 would be as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------------ --------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net income (loss)--
As reported............................ $534,256 $388,877 $144,913 $265,170 $(389,651)
Pro forma.............................. 534,224 388,154 139,486 264,735 (395,937)
Diluted net income (loss) per share--
As reported............................ $ 0.06 $ 0.03 $ 0.01 $ 0.02 $ (0.05)
Pro forma.............................. 0.06 0.03 0.01 0.02 (0.05)
</TABLE>
(9) INCOME TAXES
The Company provides for income taxes in accordance with the provisions of
SFAS No. 109, ACCOUNTING FOR INCOME TAXES. Accordingly, the Company recognizes a
current tax liability or asset for current taxes payable or refundable and a
deferred tax liability or asset for the estimated future tax effects of
temporary differences and carryforwards to the extent that they are realizable.
F-17
<PAGE>
ACCOUNT4.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(9) INCOME TAXES (CONTINUED)
The Company provides deferred income taxes for temporary differences between
assets and liabilities recognized for financial reporting and income tax
purposes. The income tax effects of these temporary differences at December 31
are as follows:
<TABLE>
<CAPTION>
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Nondeductible reserves and accruals......................... $ 2,591 $ 31,791 $ 79,969
Deferred revenue............................................ (15,384) (19,782) 1,418
Credit carryforwards........................................ 293,318 205,192 185,192
Net operating loss carryforwards............................ 152,075 -- --
--------- --------- ---------
Total deferred tax asset................................ 432,600 217,201 266,579
Less--Valuation allowance................................... (432,600) (217,201) (266,579)
--------- --------- ---------
$ -- $ -- $ --
========= ========= =========
</TABLE>
The Company has certain tax credit carryforwards of approximately $185,192.
If not utilized, these carryforwards expire at various dates beginning 2008.
A reconciliation of the statutory rate to the Company's effective tax rate
is as follows:
<TABLE>
<CAPTION>
YEAR ENDED QUARTER ENDED
DECEMBER 31, MARCH 31,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Income tax provision at federal statutory rate.............. 34% 34% 34% 34% (34)%
State tax expense (net of federal benefit).................. 6 6 6 6 (6)
Permanent timing differences................................ 2 2 3 -- --
Utilization of credits and net operating loss
carryforwards............................................. (41) (40) -- -- --
--- --- -- -- ---
Effective tax rate.................................... 1% 2% 43% 40% (40)%
=== === == == ===
</TABLE>
(10) EMPLOYEE BENEFIT PLAN
In 1989, the Company established a 401(k) Employee Savings Plan (the Plan).
The Plan is open to eligible full-time employees, as defined, and operates on a
payroll deduction basis. All eligible employees, as defined, may contribute
specified percentages of their salaries up to a maximum of 15%, subject to
Internal Revenue Service limitations. Employee contributions are 100% vested at
all times. To date, the Company has not made any contributions to the Plan.
(11) SEGMENT INFORMATION
Operating segments are defined as components of an enterprise about which
separate discrete financial information is available for evaluation by the chief
operating decision maker, or decision making group, in making decisions how to
allocate resources and assess performance. The Company's chief decision maker is
the chief executive officer. Based on criteria established by SFAS No. 131,
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION, the Company
has one reportable operating segment, the results of which are disclosed in the
accompanying financial statements.
F-18
<PAGE>
ACCOUNT4.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(11) SEGMENT INFORMATION (CONTINUED)
The following table represents a breakdown of revenues by individual
products:
<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------ -----------------------
1997 1998 1999 1999 2000
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Account4 software licenses......... $ 24,750 $ 250,550 $1,948,810 $ 770,000 $ 795,750
Account4 services.................. 15,450 45,105 989,335 107,415 568,231
Other software licenses............ 1,539,037 815,095 473,897 143,291 --
Other services..................... 2,733,703 4,908,426 4,649,161 1,289,693 509,522
---------- ---------- ---------- ---------- ----------
$4,312,940 $6,019,176 $8,061,203 $2,310,399 $1,873,503
========== ========== ========== ========== ==========
</TABLE>
(12) VALUATION AND QUALIFYING ACCOUNTS
The following is a rollforward of the Company's allowance for bad debts:
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING END OF
OF PERIOD ADDITIONS DEDUCTIONS PERIOD
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1997........................ $ -- $ -- $ -- $ --
======= ======== ========= =======
Year ended December 31, 1998........................ $ -- $ 25,140 $ -- $25,140
======= ======== ========= =======
Year ended December 31, 1999........................ $25,140 $136,894 $(118,294) $43,740
======= ======== ========= =======
Quarter ended March 31, 2000 (unaudited)............ $43,740 $ 20,000 $ -- $63,740
======= ======== ========= =======
</TABLE>
F-19
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4,000,000 SHARES
[LOGO]
COMMON STOCK
---------------
P R O S P E C T U S
------------------------
The Robinson-Humphrey Company
Gerard Klauer Mattison & Co., Inc.
FAC/Equities
, 2000
Until , 2000, all dealers that buy, sell or trade our common
stock, whether or not participating in this offering, may be required to deliver
a prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the registrant in connection
with the sale of the securities being registered. All amounts are estimates
except the SEC registration fee, the NASD fee and the Nasdaq National Market
listing fee. None of the following expenses will be paid by the selling
shareholders.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 17,002
NASD filing fee............................................. 6,940
Nasdaq National Market listing fee.......................... 90,500
Printing.................................................... 150,000
Legal fees and expenses..................................... 150,000
Accounting fees and expenses................................ 100,000
Blue sky fees and expenses.................................. *
Transfer agent and registrar fees........................... *
Directors and officers insurance............................ *
Miscellaneous............................................... *
-----------
Total................................................. $
===========
- ------------------------
* To be filed by amendment
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (the "Securities
Act").
As permitted by the Delaware General Corporation Law, the registrant's
Certificate of Incorporation includes a provision that eliminates the personal
liability of its directors for monetary damages for breach of fiduciary duty as
a director, except to the extent that exculpation from liability is not
permitted under the Delaware General Corporation Law as in effect at the time
such liability is determined.
As permitted by the Delaware General Corporation Law, the By-Laws of the
registrant provide that (i) the registrant is required to indemnify its
directors, officers, employees and agents to the fullest extent permitted by the
Delaware General Corporation Law, subject to certain very limited exceptions,
(ii) the registrant is required to advance expenses, as incurred, to its
directors, officers, employees and agents in connection with a legal proceeding
to the fullest extent permitted by the Delaware General Corporation Law, subject
to certain very limited exceptions and (iii) the rights conferred in the By-Laws
are not exclusive.
Reference is also made to Section of the Underwriting Agreement, the
form of which has been filed as Exhibit number to this registration
statement, which provides for the indemnification of officers, directors and
controlling persons of the registrant against certain liabilities. The
indemnification provisions in the registrant's Certificate of Incorporation and
By-Laws may be sufficiently broad to permit indemnification of the registrant's
directors and executive officers for liabilities arising under the Securities
Act of 1933.
The registrant intends to purchase directors and officers liability
insurance.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the past 3 years, the following securities were sold or issued by the
registrant without registration under the Securities Act of 1933, as amended
(the "Act"):
(a) Issuances of Capital Stock
- In 1997, the registrant issued and sold to John J. Lucas, in exchange for
a promissory note in the amount of $6,174.17, and subject to a restricted
stock and voting agreement, 3,127,958 shares of our common stock
- In 1997, the registrant issued and sold to Stephen M. Grange, in exchange
for a promissory note in the amount of $5,051.59, and subject to a
restricted stock and voting agreement, 2,559,237 shares of our common
stock
- In 1997, the registrant issued and sold to John Sayles upon the exercise
of stock options, 10,132 shares of our common stock at an exercise price
of $1.00 per share.
(b) Grants of stock options
- Our 1997 Stock Plan was adopted by the board of directors in 1997. At
various times since 1997 we issued 1,552,147 options for shares of our
common stock to employees at purchase prices of between $.002 per share
and $.59 per share, and 60,000 options for shares of common stock to
directors at purchase prices of $3.00 per share pursuant to our 1997 Stock
Plan.
The above securities were issued in reliance on the exemption from
registration under Section 4(2) as not involving any public offering. Claims of
such exemptions are based upon the following: (i) all of the purchasers in such
transactions were sophisticated investors with the requisite knowledge and
experience in financial and business matters to evaluate the merits and risks of
an investment in the registrant, were able to bear the economic risk of an
investment in the registrant, had access to or were furnished with the kinds of
information that registration under the Act would have provided and acquired
securities for their own accounts in transactions not involving any general
solicitations or advertising, and not with a view to the distribution thereof,
(ii) a restrictive legend was placed on each certificate evidencing the
securities; and (iii) each purchaser acknowledged in writing that he knew the
securities were not registered under the Act or any State securities laws, and
were "Restricted Securities" as that term defined in Rule 144 under the Act,
that the securities may not be offered for sale, sold or otherwise transferred
within the United States except pursuant to an effective Registration Statement
under the Act and any applicable State securities laws, or pursuant to any
exemption from registration under the Act, the availability of which is to be
established to the satisfaction of the registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
The following exhibits are filed as part of this registration statement:
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement
3.1 Certificate of Incorporation of the registrant, as amended
to date
3.2 By-Laws of the registrant, as amended to date
4.1* Form of registrant common stock certificate
5.1* Opinion of Choate, Hall & Stewart regarding the legality of
the securities being registered
10.1 2000 Employee Stock Purchase Plan
10.2* 1997 Stock Plan
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------
<C> <S>
10.3** Proprietary Software License Agreement between registrant
and Keane, Inc., dated February 22, 1999
10.4 Services Agreement between registrant and State Farm Mutual
Automobile Insurance Company, dated September 26, 1996
10.5 Master Consulting Services Agreement between registrant and
State Farm Mutual Automobile Insurance Company, dated
July 16, 1998
10.6 Wells Research Center Office Lease between Wells Avenue
Senior Holdings LLC and registrant, dated May 6, 1997
10.7 Restricted Stock and Voting Agreement between registrant,
LRF Investments, Inc., Echo Services, Inc. and Stephen M.
Grange, dated April 10, 1997
10.8 Restricted Stock and Voting Agreement between registrant,
LRF Investments, Inc., Echo Services, Inc. and John J.
Lucas, dated April 10, 1997
10.9 Extension of Maturity of Promissory Notes dated
December 14, 1999 between registrant and LRF Investments,
Inc.
10.10 Maturity extension letter dated April 30, 1992 between
registrant and LRF Investments, Inc.
10.11 $240,000 Line of Credit Note payable by the registrant to
LRF Investments, Inc., dated January 29, 1990
10.12 $500,000 Note payable by the registrant to LRF Investments,
Inc., dated August 15, 1989
10.13 $160,000 Subordinated Note payable by the registrant to LRF
Investments, Inc., dated October 25, 1988
10.14 $50,000 Promissory Note payable by the registrant to
Michael B. Shattow, dated July 22, 1988
10.15 $100,000 Revolving Credit Note payable by the registrant to
LRF Investments, Inc., dated April 20, 1988
10.16 $240,000 Subordinated Note payable by the registrant to LRF
Investments, Inc., dated April 20, 1988
10.17 Securities Purchase Agreement between the registrant,
Michael Shattow, and LRF Investments, Inc., dated April 20,
1988
23.1+ Consent of Arthur Andersen LLP
23.2* Consent of Choate, Hall & Stewart (included in Exhibit 5.1)
24.1+ Power of Attorney (contained on page II-5)
27.1+ Financial Data Schedule
</TABLE>
- ------------------------
+ Previously filed.
* To be filed by amendment.
** Confidential treatment has been requested with regard to certain portions of
this document. Such portions were filed separately with the Securities and
Exchange Commission.
(b) Financial Statements and Schedule
See Index to Financial Statements on page F-1 of the prospectus which
forms a part of this registration statement.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 14 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
II-3
<PAGE>
and Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act of 1933, as amended 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 of 1933 and will be governed by the
final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a) of the Securities
Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities being offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, 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 the City of
Boston, Commonwealth of Massachusetts, on the 25th day of May, 2000.
<TABLE>
<S> <C> <C>
ACCOUNT4.COM, INC.
By: /s/ JOHN J. LUCAS
-----------------------------------------
John J. Lucas
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE
OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 25, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Chairman, President and
/s/ JOHN J. LUCAS Chief Executive Officer
------------------------------------------- (principal executive May 25, 2000
John J. Lucas officer)
Senior Vice President and
/s/ STEPHEN M. GRANGE Chief Financial Officer
------------------------------------------- (principal financial and May 25, 2000
Stephen M. Grange accounting officer)
*
------------------------------------------- Director May 25, 2000
Joseph J. Freeman
*
------------------------------------------- Director May 25, 2000
E. William Howard
*
------------------------------------------- Director May 25, 2000
Edward P. Marram
*
------------------------------------------- Director May 25, 2000
John P. McGrath
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ JOHN J. LUCAS
-------------------------------------- Attorney-in-fact May 25, 2000
John J. Lucas
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement
3.1 Certificate of Incorporation of the registrant, as amended
to date
3.2 By-Laws of the registrant, as amended to date
4.1* Form of registrant common stock certificate
5.1* Opinion of Choate, Hall & Stewart regarding the legality of
the securities being registered
10.1 2000 Employee Stock Purchase Plan
10.2* 1997 Stock Plan
10.3** Proprietary Software License Agreement between registrant
and Keane, Inc., dated February 22, 1999
10.4 Services Agreement between registrant and State Farm Mutual
Automobile Insurance Company, dated September 26, 1996
10.5 Master Consulting Services Agreement between registrant and
State Farm Mutual Automobile Insurance Company, dated
July 16, 1998
10.6 Wells Research Center Office Lease between Wells Avenue
Senior Holdings LLC and registrant, dated May 6, 1997
10.7 Restricted Stock and Voting Agreement between registrant,
LRF Investments, Inc., Echo Services, Inc. and Stephen M.
Grange, dated April 10, 1997
10.8 Restricted Stock and Voting Agreement between registrant,
LRF Investments, Inc., Echo Services, Inc. and John J.
Lucas, dated April 10, 1997
10.9 Extension of Maturity of Promissory Notes dated
December 14, 1999 between registrant and LRF Investments,
Inc.
10.10 Maturity extension letter dated April 30, 1992 between
registrant and LRF Investments, Inc.
10.11 $240,000 Line of Credit Note payable by the registrant to
LRF Investments, Inc., dated January 29, 1990
10.12 $500,000 Note payable by the registrant to LRF Investments,
Inc., dated August 15, 1989
10.13 $160,000 Subordinated Note payable by the registrant to LRF
Investments, Inc., dated October 25, 1988
10.14 $50,000 Promissory Note payable by the registrant to
Michael B. Shattow, dated July 22, 1988
10.15 $100,000 Revolving Credit Note payable by the registrant to
LRF Investments, Inc., dated April 20, 1988
10.16 $240,000 Subordinated Note payable by the registrant to LRF
Investments, Inc., dated April 20, 1988
10.17 Securities Purchase Agreement between the registrant,
Michael Shattow, and LRF Investments, Inc., dated April 20,
1988
23.1+ Consent of Arthur Andersen LLP
23.2* Consent of Choate, Hall & Stewart (included in Exhibit 5.1)
24.1+ Power of Attorney (contained on page II-5)
27.1+ Financial Data Schedule
</TABLE>
- ------------------------
+ Previously filed.
* To be filed by amendment.
** Confidential treatment has been requested with regard to certain portions of
this document. Such portions were filed separately with the Securities and
Exchange Commission.
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ACCOUNT4.COM, INC.
-----------------------
1. The date of filing of the corporation's original Certificate
of Incorporation with the Secretary of State of Delaware was December 14, 1987,
under the name of Eiffel Software.
2. This Amended and Restated Certificate of Incorporation amends,
restates and integrates the provisions of the Certificate of Incorporation filed
with the Secretary of State of Delaware on December 14,1987, as thereafter
amended through the date hereof, and was proposed and declared advisable by the
Board of Directors of the corporation on April 26, 2000 and was consented to in
writing by the corporation's stockholders on the same date, in accordance with
the Certificate of Incorporation and with Sections 228, 242 and 245 of the
Delaware General Corporation Law.
3. The terms of this Amended and Restated Certificate of
Incorporation are as follows:
FIRST: The name of this corporation shall be:
ACCOUNT4.COM, INC.
SECOND: Its registered office in the State of Delaware is to be
located at 1209 Orange Street, in the City of Wilmington, County of New Castle,
19801, and its registered agent at such address is: THE CORPORATION TRUST
COMPANY.
THIRD: The purpose or purposes of the corporation shall be:
To carry on any and all business and to engage in any lawful act or
activity for which corporations may be organized under the Delaware General
Corporation Law.
FOURTH: The total number of shares of all classes of capital stock
which the corporation shall have authority to issue shall be 50,000,000
consisting solely of: (i) 10,000,000 shares of preferred stock, $.01 par value
per share (the "PREFERRED STOCK") and (ii) 40,000,000 shares of common stock,
$.01 par value per share (the "COMMON STOCK").
A description of the respective classes of stock and a statement of the
designations, preferences, voting powers (or no voting powers), relative,
participating, optional or other special rights and privileges and the
qualifications, limitations and restrictions of the Preferred Stock and Common
Stock are as follows.
<PAGE>
SECTION 1: COMMON STOCK.
1. RELATIVE RIGHTS OF PREFERRED STOCK AND COMMON STOCK.
All preferences, voting powers, relative, participating, optional or other
special rights and privileges, and qualifications, limitations or restrictions
of the Common Stock are expressly made subject and subordinate to those that may
be fixed with respect to any shares of the Preferred Stock.
2. VOTING RIGHTS. Except as otherwise required by law or
this Certificate of Incorporation, each holder of Common Stock shall have one
vote in respect of each share of stock held by him of record on the books of the
corporation for the election of directors and on all matters submitted to a vote
of stockholders of the corporation. As used herein, "CERTIFICATE OF
INCORPORATION" shall mean this Amended and Restated Certificate of Incorporation
as the same may be amended from time to time, and shall include any certificates
filed pursuant to the terms of Section 2 of this Article FOURTH.
3. INCREASE/DECREASE OF COMMON STOCK. Notwithstanding
the provisions of Section 242(b)(2) of the Delaware General Corporation Law, the
number of authorized shares of Common Stock may be increased or decreased (but
not below the number of shares then outstanding) by the affirmative vote of the
holders of a majority of the outstanding shares of capital stock of the
corporation, voting as a single class, with each such share being entitled to
such number of votes per share as is provided in this Article FOURTH.
4. DIVIDENDS. Subject to the preferential rights of the
Preferred Stock, if any, the holders of shares of Common Stock shall be entitled
to receive, when and if declared by the Board of Directors, out of the assets of
the corporation which are by law available therefor, dividends payable either in
cash, in property or in shares of capital stock.
5. DISSOLUTION, LIQUIDATION OR WINDING UP. In the event
of any dissolution, liquidation or winding up of the affairs of the corporation,
after distribution in full of the preferential amounts, if any, to be
distributed to the holders of shares of the Preferred Stock, holders of Common
Stock shall be entitled, unless otherwise provided by law or this Certificate of
Incorporation, to receive all of the remaining assets of the corporation of
whatever kind available for distribution to stockholders ratably in proportion
to the number of shares of Common Stock held by them respectively.
SECTION 2. PREFERRED STOCK.
The Preferred Stock may be issued in one or more series at such time or
times and for such consideration or considerations as the corporation's Board of
Directors may determine. Each series of Preferred Stock shall be so designated
as to distinguish the shares thereof from the shares of all other series and
classes. Except as otherwise provided in this Certificate of Incorporation,
different series of Preferred Stock shall not be construed to constitute
different classes of shares for the purpose of voting by classes.
-2-
<PAGE>
Except as otherwise expressly provided in this Certificate of
Incorporation, the Board of Directors is expressly authorized to provide for the
issuance of all or any shares of the Preferred Stock in one or more series, each
with such designations, preferences, voting powers (or no voting powers),
relative, participating, optional or other special rights and privileges and
such qualifications, limitations or restrictions thereof as shall be stated in
the resolution or resolutions adopted by the Board of Directors to create such
series, and a certificate of said resolution or resolutions shall be filed in
accordance with the Delaware General Corporation Law of the State of Delaware.
The authority of the Board of Directors with respect to each such series shall
include, without limitation of the foregoing, the right to provide that the
shares of each such series may: (i) have such distinctive designation and
consist of such number of shares; (ii) be subject to redemption at such time or
times and at such price or prices; (iii) be entitled to the benefit of a
retirement or sinking fund for the redemption of such series on such terms and
in such amounts; (iv) be entitled to receive dividends (which may be cumulative
or non-cumulative) at such rates, on such conditions, and at such times, and
payable in preference to, or in such relation to, the dividends payable on any
other class or classes or any other series of stock; (v) be entitled to such
rights upon the voluntary or involuntary liquidation, dissolution or winding up
of the affairs, or upon any distribution of the assets of the corporation in
preference to, or in such relation to, any other class or classes or any series
of stock; (vi) be convertible into, or exchangeable for, shares of any other
class or classes or any other series of stock at such price or prices or at such
rates of exchange and with such adjustments, if any; (vii) be entitled to the
benefit of such conditions, limitations or restrictions, if any, on the creation
of indebtedness or new classes of capital stock, the issuance of additional
shares of such series or shares of any other series of Preferred Stock, the
amendment of this Certification of Incorporation or the corporation's By-laws,
the reclassification of any class of capital stock of the corporation, the
payment of dividends or the making of other distributions on, or the purchase,
redemption or other acquisition by the corporation of, any other class or
classes or series of stock, the merger, liquidation, dissolution, winding up or
sale of assets by the corporation, or any other corporate action; or (viii) be
entitled to such other preferences, powers, qualifications, rights and
privileges, all as the Board of Directors may deem advisable and as are not
inconsistent with law and the provisions of this Certificate of Incorporation.
FIFTH: The corporation hereby expressly elects to be governed by
Section 203 of the Delaware General Corporation Law.
SIXTH: In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware:
A. The board of directors of the corporation is expressly
authorized to adopt, amend, or repeal the By-laws of the corporation.
B. Elections of directors need not be by written ballot unless
the By-laws of the corporation shall so provide.
-3-
<PAGE>
C. The books of the corporation may be kept at such place within
or without the State of Delaware as the By-laws of the corporation may
provide or as may be designated from time to time by the board of
directors of the corporation.
SEVENTH. The corporation eliminates the personal liability of each
member of its Board of Directors to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided, however,
that, to the extent provided by applicable law, the foregoing shall not
eliminate the liability of a director (i) for any breach of such director's duty
of loyalty to the corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the Delaware General Corporation Law or (iv)
for any transaction from which such director derived an improper personal
benefit. No amendment to or repeal of this provision shall apply to or have any
effect on the liability or alleged liability of any director for or with respect
to any acts or omissions of such director occurring prior to such amendment or
repeal.
EIGHTH. The corporation shall, to the fullest extent permitted by the
provisions of Section 145 of the Delaware General Corporation Law, as the same
may be amended and supplemented, indemnify any and all persons whom it shall
have power to indemnify under said section from and against any and all of the
expenses, liabilities, or other matters referred to in or covered by said
Section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any Bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in such person's official capacity and as to action
in another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee, or agent and shall inure to
the benefit of the heirs, executors, and administrators of such person.
IN WITNESS WHEREOF, the undersigned Assistant Secretary of the
corporation has executed, signed, and acknowledged this Amended and Restated
Certificate of Incorporation this 1st day of May, 2000.
/s/ William C. Rogers, P.C.
---------------------------------------
William C. Rogers, P.C.
-4-
<PAGE>
Exhibit 3.2
ADOPTED APRIL 26, 2000
AMENDED AND RESTATED BYLAWS
OF
ACCOUNT4.COM, INC.
(A DELAWARE CORPORATION)
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
ACCOUNT4.COM, INC.
(A DELAWARE CORPORATION)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION......................................................1
Section 1.1 Contents..........................................................................................1
Section 1.2 Certificate in Effect.............................................................................1
ARTICLE 2 MEETINGS OF STOCKHOLDERS...............................................................................1
Section 2.1 Place.............................................................................................1
Section 2.2 Annual Meeting....................................................................................1
Section 2.3 Special Meetings..................................................................................1
Section 2.4 Notice of Meetings................................................................................2
Section 2.5 Affidavit of Notice...............................................................................2
Section 2.6 Quorum............................................................................................2
Section 2.7 Voting Requirements...............................................................................2
Section 2.8 Proxies and Voting................................................................................3
Section 2.9 Action Without Meeting............................................................................3
Section 2.10 Stockholder List.................................................................................3
Section 2.11 Record Date......................................................................................3
Section 2.12 Introduction of Business at Meetings.............................................................4
ARTICLE 3 DIRECTORS.............................................................................................8
Section 3.1 Number; Election and Term of Office...............................................................8
Section 3.2 Duties............................................................................................8
Section 3.3 Compensation......................................................................................8
Section 3.4 Reliance on Books.................................................................................8
ARTICLE 4 MEETINGS OF THE BOARD OF DIRECTORS.....................................................................9
Section 4.1 Place.............................................................................................9
Section 4.2 Annual Meeting....................................................................................9
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 4.3 Regular Meetings..................................................................................9
Section 4.4 Special Meetings..................................................................................9
Section 4.5 Quorum............................................................................................9
Section 4.6 Action Without Meeting............................................................................9
Section 4.7 Telephone Meetings................................................................................9
ARTICLE 5 COMMITTEES OF DIRECTORS..............................................................................10
Section 5.1 Designation......................................................................................10
Section 5.2 Records of Meetings..............................................................................10
ARTICLE 6 NOTICES...............................................................................................10
Section 6.1 Method of Giving Notice..........................................................................11
Section 6.2 Waiver...........................................................................................11
ARTICLE 7 OFFICERS..............................................................................................11
Section 7.1 In General.......................................................................................11
Section 7.2 Election of President, Secretary and Treasurer...................................................11
Section 7.3 Election of Other Officers.......................................................................11
Section 7.4 Salaries.........................................................................................12
Section 7.5 Term of Office...................................................................................12
Section 7.6 Duties of President and Chairman of the Board....................................................12
Section 7.7 Duties of Vice President.........................................................................12
Section 7.8 Duties of Secretary..............................................................................12
Section 7.9 Duties of Assistant Secretary....................................................................12
Section 7.10 Duties of Treasurer.............................................................................12
Section 7.11 Duties of Assistant Treasurer...................................................................13
ARTICLE 8 RESIGNATIONS, REMOVALS AND VACANCIES..................................................................13
Section 8.1 Directors........................................................................................13
Section 8.2 Officers.........................................................................................14
ARTICLE 9 CERTIFICATE OF STOCK..................................................................................14
Section 9.1 Issuance of Stock................................................................................14
Section 9.2 Right to Certificate; Form.......................................................................14
Section 9.3 Facsimile Signature..............................................................................15
Section 9.4 Lost Certificates................................................................................15
Section 9.5 Transfer of Stock................................................................................15
Section 9.6 Registered Stockholders..........................................................................15
ARTICLE 10 INDEMNIFICATION......................................................................................15
Section 10.1 Third Party Actions.............................................................................15
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 10.2 Derivative Actions..............................................................................16
Section 10.3 Expenses........................................................................................16
Section 10.4 Authorization...................................................................................16
Section 10.5 Advance Payment of Expenses.....................................................................16
Section 10.6 Non-Exclusiveness...............................................................................16
Section 10.7 Insurance.......................................................................................17
Section 10.8 Constituent Corporations........................................................................17
Section 10.9 Additional Indemnification......................................................................17
ARTICLE 11 TRANSACTIONS WITH INTERESTED PARTIES..................................................................17
ARTICLE 12 EXECUTION OF PAPERS..................................................................................18
ARTICLE 13 FISCAL YEAR..........................................................................................18
ARTICLE 14 SEAL.................................................................................................18
ARTICLE 15 OFFICES...............................................................................................18
ARTICLE 16 AMENDMENTS...........................................................................................19
</TABLE>
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ACCOUNT4.COM, INC.
AMENDED AND RESTATED BYLAWS
ARTICLE 1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
SECTION 1.1 CONTENTS. The name, location of principal office and
purposes of the Corporation shall be as set forth in its Amended and Restated
Certificate of Incorporation. These Amended and Restated Bylaws, the powers of
the Corporation and of its Directors and stockholders, and all matters
concerning the conduct and regulation of the business of the Corporation shall
be subject to such provisions in regard thereto, if any, as are set forth in
said Amended and Restated Certificate of Incorporation. The Amended and Restated
Certificate of Incorporation is hereby made a part of these Amended and Restated
Bylaws.
SECTION 1.2 CERTIFICATE IN EFFECT. All references in these Amended and
Restated Bylaws to the Amended and Restated Certificate of Incorporation shall
be construed to mean the Amended and Restated Certificate of Incorporation of
the Corporation as from time to time amended, including (unless the context
shall otherwise require) all certificates and any agreement of consolidation or
merger filed pursuant to the Delaware General Corporation Law, as amended.
ARTICLE 2
MEETINGS OF STOCKHOLDERS
SECTION 2.1 PLACE. All meetings of the stockholders may be held at such
place either within or without the State of Delaware as shall be designated from
time to time by the Board of Directors, the Chairman of the Board or the
President and stated in the notice of the meeting or in any duly executed waiver
of notice thereof.
SECTION 2.2 ANNUAL MEETING. The annual meetings of stockholders for the
election of Directors and for the transaction of such other business as may
properly be brought before the meeting shall be held on a date to be fixed by
the Board of Directors, the Chairman of the Board or the President (which shall
not be a legal holiday in the place where the meeting is to be held) at the time
and place to be fixed by the Board of Directors, the Chairman of the Board or
the President and stated in the notice of the meeting.
SECTION 2.3 SPECIAL MEETINGS. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Amended and Restated Certificate of Incorporation, may be called only by the
Chairman of the Board, the President, or by a majority of the Board of Directors
acting by vote or by written instruments signed by them and shall be held at
such place, on such date and at such time as shall be fixed by the Board of
Directors or
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the person calling such meeting. Business transacted at any special meeting of
stockholders shall be limited to matters relating to the purpose or purposes
stated in the notice of the meeting.
SECTION 2.4 NOTICE OF MEETINGS. A written notice of all meetings of
stockholders stating the place, date and hour of the meeting and, in the case of
a special meeting, the purpose or purposes for which the special meeting is
called, shall be given to each stockholder entitled to vote at such meeting.
Except as otherwise provided by law, such notice shall be given not less than
ten nor more than sixty days before the date of the meeting.
SECTION 2.5 AFFIDAVIT OF NOTICE. An affidavit of the Secretary or an
Assistant Secretary or the transfer agent of the Corporation that notice of a
stockholders meeting has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein.
SECTION 2.6 QUORUM. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Amended and Restated Certificate of Incorporation. If, however, such quorum
shall not be present or represented by proxy at any meeting of the stockholders,
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, except as hereinafter provided, until a
quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented any business may be transacted which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
SECTION 2.7 VOTING REQUIREMENTS. When a quorum is present at any
meeting, the vote of the holders of a majority of the stock having voting power
present in person or represented by proxy shall decide any question brought
before such meeting, unless the question is one upon which by express provision
of any applicable statute or of the Amended and Restated Certificate of
Incorporation or these Amended and Restated Bylaws, a different vote is required
in which case such express provision shall govern and control the decision of
such question.
SECTION 2.8 PROXIES AND VOTING. Unless otherwise provided in the
Amended and Restated Certificate of Incorporation, each stockholder shall at
every meeting of the stockholders be entitled to one vote in person or by proxy
for each share of the capital stock having voting power held by such
stockholder, but no proxy shall be voted on after three years from its date,
unless the proxy provides for a longer period. Persons holding stock in a
fiduciary capacity shall be entitled to vote the shares so held, and persons
whose stock is pledged shall be entitled to vote the pledged shares, unless in
the transfer by the pledgor on the books of the Corporation he shall have
expressly empowered the pledgee to vote said shares, in which case only the
pledgee, or his proxy, may represent and vote such shares. Shares of the capital
stock of the Corporation owned by the Corporation shall not be voted, directly
or indirectly.
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In the election of Directors, voting shall be by written ballot, and
for any other action, voting need not be by ballot. All voting, including on the
election of Directors but excepting where otherwise required by law or the
Amended and Restated Certificate of Incorporation, may take place via a voice
vote. Any vote not taken by voice shall be taken by ballots, each of which shall
state the name of the stockholder or proxy voting and such other information as
may be required under the procedure established for the meeting.
The Corporation may, and to the extent required by law or the Amended
and Restated Certificate of Incorporation, shall, in advance of any meeting of
stockholders, appoint one or more inspectors to act at such meeting and make a
written report thereof. The Corporation may designate one or more persons as
alternate inspectors to replace any inspector who fails to act. If no inspector
or alternate is able to act at a meeting of stockholders, the person presiding
at such meeting may, and to the extent required by law or the Amended and
Restated Certificate of Incorporation, shall, appoint one or more inspectors to
act at such meeting. Each inspector, before entering upon the discharge of his
duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartially and according to the best of his or her
ability.
SECTION 2.9 ACTION WITHOUT MEETING. Unless otherwise provided in the
Amended and Restated Certificate of Incorporation, any action required to be
taken at any annual or special meeting of stockholders of the Corporation or any
action which may be taken at any annual or special meeting of such stockholders,
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
SECTION 2.10 STOCKHOLDER LIST. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The original or duplicate stock ledger shall be the only evidence as to
who are the stockholders entitled to examine such list, the stock ledger or the
books of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
SECTION 2.11 RECORD DATE. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment
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of any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
If no record date is fixed by the Board of Directors:
a) The record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held.
b) The record date for determining stockholders entitled
to express consent to corporate action in writing without a meeting, when no
prior action by the Board of Directors is necessary, shall be the day on which
the first written consent is expressed.
c) The record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
SECTION 2.12 INTRODUCTION OF BUSINESS AT MEETINGS.
(a) ANNUAL MEETINGS OF STOCKHOLDERS.
(i) Nominations of persons for election to the Board of
Directors and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (a)
pursuant to the Corporation's notice of meeting, (b) by or at the
direction of the Board of Directors or (c) by any stockholder of the
Corporation who was a stockholder of record at the time of giving of
notice provided for in this Section 2.12, who is entitled to vote at
the meeting and who complies with the notice procedures set forth in
this Section 2.12.
(ii) For nominations or other business to be properly
brought before an annual meeting by a stockholder pursuant to clause
(c) of paragraph (a)(i) of this Section 2.12, the stockholder must have
given timely notice thereof in writing to the Secretary of the
Corporation and such other business must otherwise be a proper matter
for stockholder action. To be timely, a stockholder's notice shall be
delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the one hundred
twentieth (120th) day nor earlier than the close of business on the one
hundred fiftieth (150th) day prior to the first anniversary of the date
of the proxy statement delivered to stockholders in connection with the
preceding year's annual meeting; provided, however, that if either (i)
the date of the annual meeting is more than
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thirty (30) days before or more than sixty (60) days after the first
anniversary date of the preceding year's annual meeting or (ii) no
proxy statement was delivered to stockholders in connection with the
preceding year's annual meeting, notice by the stockholder to be timely
must be so delivered not earlier than the close of business on the
ninetieth (90th) day prior to such annual meeting and not later than
the close of business on the sixtieth (60th) day prior to such annual
meeting or the close of business on the tenth (10th) day following the
day on which public announcement of the date of such meeting is first
made by the Corporation. Such stockholder's notice shall set forth (a)
as to each person whom the stockholder proposes to nominate for
election or reelection as a Director, all information relating to such
person that is required to be disclosed in solicitations of proxies for
election of Directors, or is otherwise required, in each case pursuant
to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (including such person's written consent to being
named in the proxy statement as a nominee and to serving as a Director
if elected); (b) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business
desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business
of such stockholder and the beneficial owner, if any, on whose behalf
the proposal is made; and (c) as to the stockholder giving the notice
and the beneficial owner, if any, on whose behalf the nomination or
proposal is made (i) the name and address of such stockholder, as they
appear on the Corporation's books, and of such beneficial owner and
(ii) the class and number of shares of capital stock of the Corporation
that are owned beneficially and held of record by such stockholder and
such beneficial owner.
(iii) Notwithstanding anything in the second sentence of
paragraph (a)(ii) of this Section 2.12 to the contrary, in the event
that the number of Directors to be elected to the Board of Directors of
the Corporation is increased and there is no public announcement by the
Corporation naming all of the nominees for Director or specifying the
size of the increased Board of Directors at least seventy (70) days
prior the first anniversary of the preceding year's annual meeting (or,
if the annual meeting is held more than thirty (30) days before or
sixty (60) days after such anniversary date, at least seventy (70) days
prior to such annual meeting), a stockholder's notice required by this
Section 2.12 shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall be
delivered to the Secretary at the principal executive office of the
Corporation not later than the close of business on the tenth (10th)
day following the day on which such public announcement is first made
by the Corporation.
(b) SPECIAL MEETINGS OF STOCKHOLDERS. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which Directors are to be elected pursuant to the
Corporation's notice of meeting (i) by or at the direction of the Board of
Directors or (ii) provided that the Board of Directors has determined that
Directors shall be elected at such meeting, by any stockholder of the
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Corporation who is a stockholder of record at the time of giving notice of the
special meeting, who shall be entitled to vote at the meeting and who complies
with the notice procedures set forth in this Section 2.12. If the Corporation
calls a special meeting of stockholders for the purpose of electing one or more
Directors to the Board of Directors, any such stockholder may nominate a person
or persons (as the case may be), for election to such position(s) as specified
in the Corporation's notice of meeting, if the stockholder's notice required by
paragraph (a)(i) of this Section 2.12 shall be delivered to the Secretary at the
principal executive offices of the Corporation not earlier than the ninetieth
(90th) day prior to such special meeting nor later that the later of (x) the
close of business on the sixtieth (60th) day prior to such special meeting or
(y) the close of business on the tenth (10th) day following the day on which
public announcement is first made of the date of such special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting.
(c) GENERAL.
(i) Only such persons who are nominated in accordance
with the procedures set forth in this Section 2.12 shall be eligible to
serve as Directors and only such business shall be conducted at a
meeting of stockholders as shall have been brought before the meeting
in accordance with the procedures set forth in this Section 2.12.
Except as otherwise provided by law, the Amended and Restated
Certificate of Incorporation or these Amended and Restated Bylaws, the
chairman of the meeting shall have the power and duty to determine
whether a nomination or any business proposed to be brought before the
meeting was made or proposed, as the case may be, in accordance with
the procedures set forth in this Section 2.12 and, if any proposed
nomination or business is not in compliance herewith, to declare that
such defective proposal or nomination shall be disregarded.
(ii) For purposes of this Section 2.12, "public
announcement" shall mean disclosure in a press release reported by the
Dow Jones News Service, Associated Press, PR Newswire, Reuters or
comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
(iii) Notwithstanding the foregoing provisions of this
Section 2.12, a stockholder shall also comply with all applicable
requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth herein. Nothing in
this Section 2.12 shall be deemed to affect any rights of the holders
of any series of Preferred Stock to elect directors under specified
circumstances.
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ARTICLE 3
DIRECTORS
SECTION 3.1 NUMBER; ELECTION AND TERM OF OFFICE. There shall be a Board
of Directors of the Corporation consisting of not less than one member, the
number of members to be determined by resolution of the Board of Directors or by
the stockholders at the annual or any special meeting, unless the Amended and
Restated Certificate of Incorporation fixed the number of Directors, in which
case a change in the number of Directors shall be made only by amendment of the
Certificate. Subject to any limitation which may be contained within the Amended
and Restated Certificate of Incorporation or pursuant to a written agreement
entered into among the stockholders of the Corporation, the number of the Board
of Directors may be increased at any time by vote of a majority of the Directors
then in office. The Directors shall be elected at the annual meeting of the
stockholders, except as provided in paragraph (c) of Section 8.1, and each
Director elected shall hold office until his successor is elected and qualified
or until his earlier resignation or removal. Directors need not be stockholders.
SECTION 3.2 DUTIES. The business of the Corporation shall be managed by
or under the direction of its Board of Directors which may exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
statute or by the Amended and Restated Certificate of Incorporation or by these
Amended and Restated Bylaws directed or required to be exercised or done by the
stockholders.
SECTION 3.3 COMPENSATION. Unless otherwise restricted by the Amended
and Restated Certificate of Incorporation or these Amended and Restated Bylaws,
the Board of Directors shall have the authority to fix the compensation of
Directors. The Directors may be paid their expenses, if any, of attendance at
each meeting of the Board of Directors and may be paid a fixed sum for
attendance at each meeting of the Board of Directors or a stated salary as
Directors. No such payment shall preclude any Director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
SECTION 3.4 RELIANCE ON BOOKS. A member of the Board of Directors or a
member of any committee designated by the Board of Directors shall, in the
performance of his duties, be fully protected in relying in good faith upon the
books of account or reports made to the Corporation by any of its officers, or
by an independent certified public accountant, or by an appraiser selected with
reasonable care by the Board of Directors or by any committee, or in relying in
good faith upon other records of the Corporation.
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ARTICLE 4
MEETINGS OF THE BOARD OF DIRECTORS
SECTION 4.1 PLACE. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
SECTION 4.2 ANNUAL MEETING. The first meeting of each newly elected
Board of Directors shall be held immediately following the annual meeting of
stockholders or any special meeting held in lieu thereof, and no notice of such
meeting shall be necessary to the newly elected Directors in order legally to
constitute the meeting.
SECTION 4.3 REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as shall
from time to time be determined by the Board.
SECTION 4.4 SPECIAL MEETINGS. Special meetings of the Board may be
called by the President on two days' notice to each Director; special meetings
shall be called by the President or Secretary on like notice on the written
request of two Directors unless the Board consists of only one Director, in
which case special meetings shall be called by the President or Secretary on
like notice on the written request of the sole Director.
SECTION 4.5 QUORUM. At all meetings of the Board a majority of the
Directors then in office shall constitute a quorum for the transaction of
business and the act of a majority of the Directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the Amended and Restated
Certificate of Incorporation. If a quorum shall not be present at any meeting of
the Board of Directors, the Directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
SECTION 4.6 ACTION WITHOUT MEETING. Unless otherwise restricted by the
Amended and Restated Certificate of Incorporation or these Amended and Restated
Bylaws, any action required or permitted to be taken at any meeting of the Board
of Directors or of any committee thereof may be taken without a meeting, if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or committee.
SECTION 4.7 TELEPHONE MEETINGS. Unless otherwise restricted by the
Amended and Restated Certificate of Incorporation or these Amended and Restated
Bylaws, members of the Board of Directors, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of Directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
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ARTICLE 5
COMMITTEES OF DIRECTORS
SECTION 5.1 DESIGNATION.
(a) The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the Directors of the Corporation. The Board may
designate one or more Directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
(b) In the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
(c) Any such committee, to the extent provided in the
resolution of the Board of Directors designating the committee, shall have and
may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to amending the
Amended and Restated Certificate of Incorporation, adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets,
recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the Amended and Restated Bylaws of the
Corporation; and, unless the resolution or the Amended and Restated Certificate
of Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors.
SECTION 5.2 RECORDS OF MEETINGS. Each committee shall keep regular
minutes of its meetings and report the same to the Board of Directors when
required.
ARTICLE 6
NOTICES
SECTION 6.1 METHOD OF GIVING NOTICE. Whenever, under any provision of
the law or of the Amended and Restated Certificate of Incorporation or of these
Amended and Restated Bylaws, notice is required to be given to any Director or
stockholder, such notice shall be given in writing by the Secretary or the
person or persons calling the meeting by delivering such notice by hand to such
Director or stockholder at his residence or usual place of business or by
mailing
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such notice first-class mail, postage prepaid, addressed to such Director or
stockholder, or by delivering such notice to an overnight courier service
addressed to such Director or stockholder, in either case at his address as it
appears on the records of the Corporation, with postage or delivery charges
thereon prepaid, and such notice shall be deemed to be given at the time when
the same shall be deposited in the United States mail or with said overnight
courier. Notice to Directors may also be given by facsimile transmission or by
electronic mail, with receipt electronically acknowledged.
SECTION 6.2 WAIVER. Whenever any notice is required to be given under
any provision of law or of the Amended and Restated Certificate of Incorporation
or of these Amended and Restated Bylaws, a waiver thereof in writing, signed by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends the meeting for the express purpose of objecting at the beginning
of the meeting to the transaction of any business because the meeting is not
lawfully called or convened.
ARTICLE 7
OFFICERS
SECTION 7.1 IN GENERAL. The officers of the Corporation shall be chosen
by the Board of Directors and shall include a President, a Secretary and a
Treasurer. The Board of Directors may also choose a Chairman of the Board, one
or more Vice-Presidents, Assistant Secretaries and Assistant Treasurers. Any
number of offices may be held by the same person, unless the Amended and
Restated Certificate of Incorporation or these Amended and Restated Bylaws
otherwise provide.
SECTION 7.2 ELECTION OF PRESIDENT, SECRETARY AND TREASURER. The Board
of Directors at its first meeting after each annual meeting of stockholders
shall choose a President, a Secretary and a Treasurer.
SECTION 7.3 ELECTION OF OTHER OFFICERS. The Board of Directors may
appoint such other officers and agents as it shall deem appropriate who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the Board.
SECTION 7.4 SALARIES. The salaries of all officers and agents of the
Corporation may be fixed by the Board of Directors.
SECTION 7.5 TERM OF OFFICE. The officers of the Corporation shall hold
office until their successors are chosen and qualify or until their earlier
resignation or removal. Any officer elected or appointed by the Board of
Directors may be removed at any time in the manner specified in Section 8.2.
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SECTION 7.6 DUTIES OF PRESIDENT AND CHAIRMAN OF THE BOARD. The
President shall be the chief executive officer of the Corporation, shall preside
at all meetings of the stockholders and, if he is a Director, at all meetings of
the Board of Directors if there shall be no Chairman of the Board or in the
absence of the Chairman of the Board, shall have general and active management
of the business of the Corporation and shall see that all orders and resolutions
of the Board of Directors are carried into effect. The President shall execute
bonds, mortgages and other contracts requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the Corporation. The Chairman of the Board, if any, shall make his counsel
available to the other officers of the Corporation, shall be authorized to sign
stock certificates on behalf of the Corporation, shall preside at all meetings
of the Directors at which he is present, and, in the absence of the President at
all meetings of the stockholders, and shall have such other duties and powers as
may from time to time be conferred upon him by the Directors.
SECTION 7.7 DUTIES OF VICE PRESIDENT. In the absence of the President
or in the event of his inability or refusal to act, the Vice-President (or in
the event there be more than one Vice-President, the Vice-Presidents in the
order designated by the Directors, or in the absence of any designation, then in
the order of their election) shall perform the duties of the President not
otherwise conferred upon the Chairman of the Board, if any, and when so acting,
shall have all the powers of and be subject to all the restrictions upon the
President. The Vice-Presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
SECTION 7.8 DUTIES OF SECRETARY. The Secretary shall attend all
meetings of the Board of Directors and all meetings of the stockholders and
record all the proceedings of the meetings of the Corporation and of the Board
of Directors in a book to be kept for that purpose and shall perform like duties
for the standing committees when required. He shall give, or cause to be given,
notice of all meetings of the stockholders and special meetings of the Board of
Directors, except as otherwise provided in these Amended and Restated Bylaws,
and shall perform such other duties as may be prescribed by the Board of
Directors or President, under whose supervision he shall be. He shall have
charge of the stock ledger (which may, however, be kept by any transfer agent or
agents of the Corporation under his direction) and of the corporate seal of the
Corporation.
SECTION 7.9 DUTIES OF ASSISTANT SECRETARY. The Assistant Secretary, or
if there be more than one, the Assistant Secretaries in the order determined by
the Board of Directors (or if there be no such determination, then in the order
of their election) shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
SECTION 7.10 DUTIES OF TREASURER. The Treasurer shall have the custody
of the corporate funds and securities and shall keep full and accurate accounts
of receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the
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name and to the credit of the Corporation in such depositories as may be
designated by the Board of Directors. The Treasurer shall disburse the funds of
the Corporation as may be ordered by the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the President and the Board
of Directors, at its regular meetings, or when the Board of Directors so
requires, an account of all of his transactions as Treasurer and of the
financial condition of the Corporation. If required by the Board of Directors,
he shall give the Corporation a bond in such sum and with such surety or
sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of this office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
SECTION 7.11 DUTIES OF ASSISTANT TREASURER. The Assistant Treasurer, or
if there shall be more than one, the Assistant Treasurers in the order
determined by the Board of Directors (or if there be no such determination, then
in the order of their election), shall, in the absence of the Treasurer or in
the event of his inability or refusal to act, perform the duties and exercise
the powers of the Treasurer and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
ARTICLE 8
RESIGNATIONS, REMOVALS AND VACANCIES
SECTION 8.1 DIRECTORS.
(a) RESIGNATIONS. Any Director may resign at any time by
giving written notice to the Board of Directors or the President or the
Secretary. Such resignation shall take effect at the time specified therein; and
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
(b) REMOVALS. Subject to any provisions of the Amended
and Restated Certificate of Incorporation or a written agreement entered among
the stockholders of the Corporation, the holders of stock entitled to vote for
the election of Directors may, at any meeting called for the purpose, by vote of
at least sixty-six and two-thirds percent (66 2/3%) of the shares of such stock
outstanding, remove any Director or the entire Board of Directors with cause and
fill any vacancies thereby created. This Section 8.1(b) may not be altered,
amended or repealed except by the holders of at least sixty-six and two-thirds
percent (66 2/3%) of the shares of stock issued and outstanding and entitled to
vote for the election of the Directors.
(c) VACANCIES. Vacancies occurring in the office of
Director and newly created Directorships resulting from any increase in the
authorized number of Directors shall be filled by a majority of the Directors
then in office, though less than a quorum, unless previously filled by the
stockholders entitled to vote for the election of Directors, whether pursuant to
a written agreement entered into among the stockholders of the Corporation or
otherwise, and the Directors so chosen shall hold office subject to the Amended
and Restated Bylaws until the next
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annual election and until their successors are duly elected and qualify or until
their earlier resignation or removal. If there are no Directors in office, then
an election of Directors may be held in the manner provided by statute.
SECTION 8.2 OFFICERS.
Any officer may resign at any time by giving written notice to the
Board of Directors or the President or the Secretary. Such resignation shall
take effect at the time specified therein; and unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective. The Board of Directors may, at any meeting called for the purpose, by
vote of a majority of their entire number, remove from office any officer of the
Corporation or any member of a committee, with or without cause. Any vacancy
occurring in the office of President, Secretary or Treasurer shall be filled by
the Board of Directors and the officers so chosen shall hold office subject to
the Amended and Restated Bylaws for the unexpired term in respect of which the
vacancy occurred and until their successors shall be elected and qualify or
until their earlier resignation or removal.
ARTICLE 9
CERTIFICATE OF STOCK
SECTION 9.1 ISSUANCE OF STOCK. The Directors may, at any time and from
time to time, if all of the shares of capital stock which the Corporation is
authorized by its Amended and Restated Certificate of Incorporation to issue
have not been issued, subscribed for, or otherwise committed to be issued, issue
or take subscriptions for additional shares of its capital stock up to the
amount authorized in its Amended and Restated Certificate of Incorporation. Such
stock shall be issued and the consideration paid therefor in the manner
prescribed by law.
SECTION 9.2 RIGHT TO CERTIFICATE; FORM. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the Chairman of the Board, the President or a
Vice-President and the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary of the Corporation, certifying the number of shares owned
by him in the Corporation; provided that the Directors may provide by one or
more resolutions that some or all of any or all classes or series of the
Corporation's stock shall be uncertified shares. Certificates may be issued for
partly paid shares and in such case upon the face or back of the certificates
issued to represent any such partly paid shares, the total amount of the
consideration to be paid therefor, and the amount paid thereon shall be
specified.
SECTION 9.3 FACSIMILE SIGNATURE. Any of or all the signatures on the
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
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SECTION 9.4 LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
SECTION 9.5 TRANSFER OF STOCK. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
SECTION 9.6 REGISTERED STOCKHOLDERS. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware.
ARTICLE 10
INDEMNIFICATION
SECTION 10.1 THIRD PARTY ACTIONS. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he is or was a Director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a Director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
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SECTION 10.2 DERIVATIVE ACTIONS. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a Director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a Director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless and only to
the extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
SECTION 10.3 EXPENSES. To the extent that a Director, officer, employee
or agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 10.1 and 10.2,
or in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith.
SECTION 10.4 AUTHORIZATION. Any indemnification under Sections 10.1 and
10.2 (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
Director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in Sections 10.1 and 10.2.
Such determination shall be made (a) by the Board of Directors by a majority
vote of a quorum consisting of Directors who were not parties to such action,
suit or proceeding, or (b) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested Directors so directs, by independent legal
counsel in a written opinion, or (c) by the stockholders.
SECTION 10.5 ADVANCE PAYMENT OF EXPENSES. Expenses incurred by an
officer or Director in defending a civil or criminal action, suit or proceeding
may be paid by the Corporation in advance of the final disposition of such
action, suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf of such officer or
Director to repay such amount unless it shall ultimately be determined that he
is entitled to be indemnified by the Corporation as authorized in this Article
10. Such expenses incurred by other employees and agents may be so paid upon
such terms and conditions, if any, as the Board of Directors deems appropriate.
SECTION 10.6 NON-EXCLUSIVENESS. The indemnification provided by this
Article 10 shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested Directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
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office, and shall continue as to a person who has ceased to be a Director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 10.7 INSURANCE. The Corporation shall have power to purchase
and maintain insurance on behalf of any person who is or was a Director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a Director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under the provisions of this
Article 10.
SECTION 10.8 CONSTITUENT CORPORATIONS. The Corporation shall have power
to indemnify any person who is or was a Director, officer, employee or agent of
a constituent corporation absorbed in a consolidation or merger with this
Corporation or is or was serving at the request of such constituent corporation
as a Director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, in the same manner as hereinabove
provided for any person who is or was a Director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
SECTION 10.9 ADDITIONAL INDEMNIFICATION. In addition to the foregoing
provisions of this Article 10, the Corporation shall have the power, to the full
extent provided by law, to indemnify any person for any act or omission of such
person against all loss, cost, damage and expense (including attorney's fees) if
such person is determined (in the manner prescribed in Section 10.4 hereof) to
have acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interest of the Corporation.
ARTICLE 11
TRANSACTIONS WITH INTERESTED PARTIES
No contract of transaction between the Corporation and one or more of
the Directors or officers, or between the Corporation and any other corporation,
partnership, association, or other organization in which one or more of the
Directors or officers are Directors or officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely because such
Director or officer is present at or participates in the meeting of the Board of
Directors or a committee of the Board of Directors which authorizes the contract
or transaction or solely because his, her or their votes are counted for such
purpose; if:
(a) The material facts as to his or her relationship or
interest and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative vote of a majority of
the disinterested Directors, even though the disinterested Directors be less
than a quorum;
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(b) The material facts as to his or her relationship or
interest and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified, by the Board
of Directors, a committee of the Board of Directors, or the stockholders.
Common or interested Directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
ARTICLE 12
EXECUTION OF PAPERS
Except as otherwise provided in these Amended and Restated Bylaws or as
the Board of Directors may generally or in particular cases otherwise determine,
all deeds, leases, transfers, contracts, bonds, notes, checks, drafts and other
instruments authorized to be executed on behalf of the Corporation shall be
executed by the President or the Treasurer.
ARTICLE 13
FISCAL YEAR
Except as from time to time otherwise determined by the Board of
Directors, the fiscal year of the Corporation shall be the twelve months ending
on December 31.
ARTICLE 14
SEAL
The Corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the word "Delaware". The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
ARTICLE 15
OFFICES
In addition to its principal office, the Corporation may have offices
at such other places both within and without the State of Delaware as the Board
of Directors may from time to time determine or the business of the Corporation
may require.
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ARTICLE 16
AMENDMENTS
SECTION 16.1 BY THE BOARD OF DIRECTORS. Except as is otherwise set
forth in these Amended and Restated Bylaws, these Amended and Restated Bylaws
may be altered, amended or repealed, or new Amended and Restated Bylaws may be
adopted, by the affirmative vote of a majority of the Directors present at any
regular or special meeting of the Board of Directors at which quorum is present.
SECTION 16.2 BY THE STOCKHOLDERS. Except as otherwise set forth in
these Amended and Restated Bylaws, these Amended and Restated Bylaws may be
altered, amended or repealed or new Amended and Restated Bylaws may be adopted
by the affirmative vote of the holders of at least sixty-six and two-thirds
percent (66 2/3%) of the shares of the capital stock of the Corporation issued
and outstanding and entitled to vote at any regular meeting of stockholders, or
at any special meeting of stockholders, provided notice of such alteration,
amendment, repeal or adoption of new Amended and Restated Bylaws shall have been
stated in the notice of such special meeting.
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Exhibit 10.1
ACCOUNT4.COM, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
ARTICLE 1 - PURPOSE.
This 2000 Employee Stock Purchase Plan (the "PLAN") is intended to
encourage stock ownership by all eligible employees of Account4.com, Inc. (the
"COMPANY"), a Delaware corporation, and its participating subsidiaries (as
defined in Article 17) so that they may share in the growth of the Company by
acquiring or increasing their proprietary interest in the Company. The Plan is
designed to encourage eligible employees to remain in the employ of the Company
and its participating subsidiaries. The Plan is intended to constitute an
"employee stock purchase plan" within the meaning of Section 423(b) of the
Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE 2 - ADMINISTRATION OF THE PLAN.
The Plan may be administered by a committee appointed by the Board of
Directors of the Company (the "COMMITTEE"). The Board of Directors may from time
to time remove members from, or add members to, the Committee. Vacancies on the
Committee, howsoever caused, shall be filled by the Board of Directors. The
Committee may select one of its members as Chairman, and shall hold meetings at
such times and places as it may determine. Acts by a majority of the Committee,
or acts reduced to or approved in writing by a majority of the members of the
Committee, shall be the valid acts of the Committee.
The interpretation and construction by the Committee of any provisions
of the Plan or of any right granted under it shall be final, unless otherwise
determined by the Board of Directors. The Committee may from time to time adopt
such rules and regulations for carrying out the Plan as it may deem best,
provided that any such rules and regulations shall be applied on a uniform basis
to all employees under the Plan. No member of the Board of Directors or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any right granted under it.
In the event the Board of Directors fails to appoint or refrains from
appointing a Committee, the Board of Directors shall have all power and
authority to administer the Plan. In such event, the word "Committee" wherever
used herein shall be deemed to mean the Board of Directors.
ARTICLE 3 - ELIGIBLE EMPLOYEES.
All employees of the Company or any of its participating subsidiaries
who have completed at least ninety (90) days of employment and whose customary
employment is more
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than 20 hours per week and for more than three (3) months in any calendar year
shall be eligible to receive rights under the Plan to purchase common stock of
the Company, and all eligible employees shall have the same rights and
privileges hereunder. Persons who are eligible employees on the first business
day of any Payment Period (as defined in Article 5) shall receive their rights
as of such day. Persons who become eligible employees after any date on which
rights are granted under the Plan shall be granted rights on the first day of
the next succeeding Payment Period on which rights are granted to eligible
employees under the Plan. In no event, however, may an employee be granted a
right if such employee, immediately after the right was granted, would be
treated as owning stock possessing five percent or more of the total combined
voting power or value of all classes of stock of the Company or of any parent
corporation, or subsidiary corporation, as the terms "parent corporation" and
"subsidiary corporation" are defined in Section 424(e) and (f) of the Code. For
purposes of determining stock ownership under this paragraph, the rules of
Section 424(d) of the Code shall apply, and stock which the employee may
purchase under outstanding rights shall be treated as stock owned by the
employees.
ARTICLE 4 - STOCK SUBJECT TO THE PLAN.
The stock subject to the rights under the Plan shall be shares of the
Company's authorized but unissued common stock, par value $.01 per share (the
"COMMON STOCK"), or shares of Common Stock reacquired by the Company, including
shares purchased in the open market. The aggregate number of shares of Common
Stock which may be issued pursuant to the Plan is 250,000, subject to adjustment
as provided in Article 12. If any right granted under the Plan shall expire or
terminate for any reason without having been exercised in full or shall cease
for any reason to be exercisable in whole or in part, the unpurchased shares
subject thereto shall again be available under the Plan.
ARTICLE 5 - PAYMENT PERIOD AND STOCK RIGHTS.
The first Payment Period during which payroll deductions will be
accumulated under the Plan shall commence on the later to occur of July 1, 2000
and the first day of the first calendar month following effectiveness of the
Form S-8 registration statement filed with the Securities and Exchange
Commission covering the shares to be issued pursuant to the Plan and shall end
on December 31, 2000. For the remainder of the duration of the Plan, Payment
Periods shall consist of the six-month periods commencing on January 1 and July
1 and ending on June 30 and December 31 of each calendar year.
Twice each year, on the first business day of each Payment Period, the
Company will grant to each eligible employee who is then a participant in the
Plan a right to purchase on the last day of such Payment Period, at the Price
hereinafter provided for, a maximum of [five hundred (500)] shares, on condition
that such employee remains eligible to participate in the Plan throughout the
remainder of such Payment Period. The participant shall be entitled to exercise
the right so granted only to the extent of the participant's accumulated payroll
deductions on the
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last day of such Payment Period. If the participant's accumulated payroll
deductions on the last day of the Payment Period would enable the participant to
purchase more than [five hundred (500)] shares except for the [five hundred
(500)]-share limitation, the excess of the amount of the accumulated payroll
deductions over the aggregate purchase price of the [five hundred (500)] shares
shall be promptly refunded to the participant by the Company, without interest.
The price per share (the "PRICE") for each Payment Period shall be the lesser of
(i) 85% of the average market price of the Common Stock on the first business
day of the Payment Period and (ii) 85% of the average market price of the Common
Stock on the last business day of the Payment Period, in either event rounded up
to the nearest cent. The foregoing limitation on the number of shares subject to
right and the Price shall be subject to adjustment as provided in Article 12.
For purposes of the Plan, the term "average market price" on any date
means (i) the average (on that date) of the high and low prices of the Common
Stock on the principal national securities exchange on which the Common Stock is
traded, if the Common Stock is then traded on a national securities exchange; or
(ii) the last reported sale price (on that date) of the Common Stock on the
Nasdaq National Market, if the Common Stock is not then traded on a national
securities exchange; or (iii) the average of the closing bid and asked prices
last quoted (on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the Nasdaq
National Market; or (iv) if the Common Stock is not publicly traded, the fair
market value of the Common Stock as determined by the Committee after taking
into consideration all factors which it deems appropriate, including, without
limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
For purposes of the Plan, the term "business day" means a day on which
there is trading on the Nasdaq National Market or the aforementioned national
securities exchange, whichever is applicable pursuant to the preceding
paragraph; and if neither is applicable, a day that is not a Saturday, Sunday or
legal holiday in State of Connecticut.
No employee shall be granted an right which permits the employee's
right to purchase stock under the Plan, and under all other Section 423(b)
employee stock purchase plans of the Company and any parent or subsidiary
corporations, to accrue at a rate which exceeds $25,000 of fair market value of
such stock (determined on the date or dates that rights on such stock were
granted) for each calendar year in which such right is outstanding at any time.
The purpose of the limitation in the preceding sentence is to comply with
Section 423(b)(8) of the Code. If the participant's accumulated payroll
deductions on the last day of the Payment Period would otherwise enable the
participant to purchase Common Stock in excess of the Section 423(b)(8)
limitation described in this paragraph, the excess of the amount of the
accumulated payroll deductions over the aggregate purchase price of the shares
actually purchased shall be promptly refunded to the participant by the Company,
without interest.
ARTICLE 6 - EXERCISE OF RIGHT.
Each eligible employee who continues to be a participant in the Plan on
the last day of a
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Payment Period shall be deemed to have exercised his or her right on such date
and shall be deemed to have purchased from the Company such number of full
shares of Common Stock reserved for the purpose of the Plan as the participant's
accumulated payroll deductions on such date will pay for at the Price, subject
to the [five hundred (500)]-share limit of the right and the Section 423(b)(8)
limitation described in Article 5. If the individual is not a participant on the
last day of a Payment Period, then he or she shall not be entitled to exercise
his or her right. Only full shares of Common Stock may be purchased under the
Plan. Unused payroll deductions remaining in a participant's account at the end
of a Payment Period by reason of the inability to purchase a fractional share
shall be carried forward to the next Payment Period.
ARTICLE 7 - AUTHORIZATION FOR ENTERING THE PLAN.
An employee may elect to enter the Plan by filling out, signing and
delivering to the Company an authorization:
A. Stating the percentage to be deducted regularly from
the employee's pay;
B. Authorizing the purchase of stock for the employee in
each Payment Period in accordance with the terms of
the Plan; and
C. Specifying the exact name or names in which stock
purchased for the employee is to be issued as
provided under Article 11 hereof.
Such authorization must be received by the Company at least ten days before the
first day of the next succeeding Payment Period and shall take effect only if
the employee is an eligible employee on the first business day of such Payment
Period.
Unless a participant files a new authorization or withdraws from the
Plan, the deductions and purchases under the authorization the participant has
on file under the Plan will continue from one Payment Period to succeeding
Payment Periods as long as the Plan remains in effect.
The Company will accumulate and hold for each participant's account the
amounts deducted from his or her pay. No interest will be paid on these amounts.
ARTICLE 8 - MAXIMUM AMOUNT OF PAYROLL DEDUCTIONS.
An employee may authorize payroll deductions in an amount (expressed as
a whole percentage) not less than one percent (1%) but not more than ten percent
(10%) of the employee's total compensation, including base pay or salary and any
overtime, bonuses or commissions.
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ARTICLE 9 - CHANGE IN PAYROLL DEDUCTIONS.
Deductions may not be increased or decreased during a Payment Period.
However, a participant may withdraw in full from the Plan.
ARTICLE 10 - WITHDRAWAL FROM THE PLAN.
A participant may withdraw from the Plan (in whole but not in part) at
any time prior to the last day of a Payment Period by delivering a withdrawal
notice to the Company.
To re-enter the Plan, an employee who has previously withdrawn must
file a new authorization at least ten days before the first day of the next
Payment Period in which he or she wishes to participate. The employee's re-entry
into the Plan becomes effective at the beginning of such Payment Period,
provided that he or she is an eligible employee on the first business day of the
Payment Period.
ARTICLE 11 - ISSUANCE OF STOCK.
Certificates for stock issued to participants shall be delivered as
soon as practicable after each Payment Period by the Company's transfer agent.
Stock purchased under the Plan shall be issued only in the name of the
participant, or if the participant's authorization so specifies, in the name of
the participant and another person of legal age as joint tenants with rights of
survivorship.
ARTICLE 12 - ADJUSTMENTS.
Upon the happening of any of the following described events, a
participant's rights under any rights granted under the Plan shall be adjusted
as hereinafter provided:
A. In the event that the shares of Common Stock shall be
subdivided or combined into a greater or smaller
number of shares or if, upon a reorganization,
split-up, liquidation, recapitalization or the like
of the Company, the shares of Common Stock shall be
exchanged for other securities of the Company, each
participant shall be entitled, subject to the
conditions herein stated, to purchase such number of
shares of Common Stock or amount of other securities
of the Company as were exchangeable for the number of
shares of Common Stock that such participant would
have been entitled to purchase except for such
action, and appropriate adjustments shall be made in
the purchase price per share to reflect such
subdivision, combination or exchange; and
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B. In the event the Company shall issue any of its
shares as a stock dividend upon or with respect to
the shares of stock of the class which shall at the
time be subject to right hereunder, each participant
upon exercising such an right shall be entitled to
receive (for the purchase price paid upon such
exercise) the shares as to which the participant is
exercising his or her right and, in addition thereto
(at no additional cost), such number of shares of the
class or classes in which such stock dividend or
dividends were declared or paid, and such amount of
cash in lieu of fractional shares, as is equal to the
number of shares thereof and the amount of cash in
lieu of fractional shares, respectively, which the
participant would have received if the participant
had been the holder of the shares as to which the
participant is exercising his or her right at all
times between the date of the granting of such right
and the date of its exercise.
Upon the happening of any of the foregoing events, the class and
aggregate number of shares set forth in Article 4 hereof which are subject to
rights which have been or may be granted under the Plan and the limitations set
forth in the second paragraph of Article 5 shall also be appropriately adjusted
to reflect the events specified in paragraphs A and B above. Notwithstanding the
foregoing, any adjustments made pursuant to paragraphs A or B shall be made only
after the Committee, based on advice of counsel for the Company, determines
whether such adjustments would constitute a "modification" (as that term is
defined in Section 424 of the Code). If the Committee determines that such
adjustments would constitute a modification, it may refrain from making such
adjustments.
If the Company is to be consolidated with or acquired by another entity
in a merger, a sale of all or substantially all of the Company's assets or
otherwise (an "ACQUISITION"), the Committee or the board of directors of any
entity assuming the obligations of the Company hereunder (the "SUCCESSOR BOARD")
shall, with respect to rights then outstanding under the Plan, either (i) make
appropriate provision for the continuation of such rights by arranging for the
substitution on an equitable basis for the shares then subject to such rights
either (a) the consideration payable with respect to the outstanding shares of
the Common Stock in connection with the Acquisition, (b) shares of stock of the
successor corporation, or a parent or subsidiary of such corporation, or (c)
such other securities as the Successor Board deems appropriate, the fair market
value of which shall not materially exceed the fair market value of the shares
of Common Stock subject to such rights immediately preceding the Acquisition; or
(ii) terminate each participant's rights in exchange for a cash payment equal to
the excess of (a) the fair market value on the date of the Acquisition, of the
number of shares of Common Stock that the participant's accumulated payroll
deductions as of the date of the Acquisition could purchase, at a price
determined with reference only to the first business day of the applicable
Payment Period and subject to the [five hundred (500)] share limit, Code Section
423(b)(8) and fractional-share limitations on the amount of stock a participant
would be entitled to purchase, over (b) the result of multiplying such number of
shares by such right price.
-6-
<PAGE>
The Committee or Successor Board shall determine the adjustments to be
made under this Article 12, and its determination shall be conclusive.
ARTICLE 13 - NO TRANSFER OR ASSIGNMENT OF EMPLOYEE'S RIGHTS.
A right granted under the Plan may not be transferred or assigned and
may be exercised only by the participant.
ARTICLE 14 - TERMINATION OF EMPLOYEE'S RIGHTS.
Whenever a participant ceases to be an eligible employee because of
retirement, voluntary or involuntary termination, resignation, layoff,
discharge, death or for any other reason, his or her rights under the Plan shall
immediately terminate, and the Company shall promptly refund, without interest,
the entire balance of his or her payroll deduction account under the Plan.
Notwithstanding the foregoing, eligible employment shall be treated as
continuing intact while a participant is on military leave, sick leave or other
bona fide leave of absence, for up to 90 days, or for so long as the
participant's right to re-employment is guaranteed either by statute or by
contract, if longer than 90 days.
ARTICLE 15 - TERMINATION AND AMENDMENTS TO PLAN.
Unless terminated sooner as provided below, the Plan shall terminate on
January 1, 2010. The Plan may be terminated at any time by the Company's Board
of Directors but such termination shall not affect rights then outstanding under
the Plan. It will terminate in any case when all or substantially all of the
unissued shares of stock reserved for the purposes of the Plan have been
purchased. If at any time shares of stock reserved for the purpose of the Plan
remain available for purchase but not in sufficient number to satisfy all then
unfilled purchase requirements, the available shares shall be apportioned among
participants in proportion to the amount of payroll deductions accumulated on
behalf of each participant that would otherwise be used to purchase stock, and
the Plan shall terminate. Upon such termination or any other termination of the
Plan, all payroll deductions not used to purchase stock will be refunded,
without interest.
The Committee or the Board of Directors may from time to time adopt
amendments to the Plan provided that, without the approval of the stockholders
of the Company, no amendment may (i) increase the number of shares that may be
issued under the Plan; (ii) change the class of employees eligible to receive
rights under the Plan, if such action would be treated as the adright of a new
plan for purposes of Section 423(b) of the Code; or (iii) cause Rule 16b-3 under
the Securities Exchange Act of 1934 to become inapplicable to the Plan.
-7-
<PAGE>
ARTICLE 16 - LIMITS ON SALE OF STOCK PURCHASED UNDER THE PLAN.
The Plan is intended to provide shares of Common Stock for investment
and not for resale. The Company does not, however, intend to restrict or
influence any employee in the conduct of his or her own affairs. An employee
may, therefore, sell stock purchased under the Plan at any time the employee
chooses, subject to compliance with any applicable federal or state securities
laws and subject to any restrictions imposed under Article 21 to ensure that tax
withholding obligations are satisfied. THE EMPLOYEE ASSUMES THE RISK OF ANY
MARKET FLUCTUATIONS IN THE PRICE OF THE STOCK.
ARTICLE 17 - PARTICIPATING SUBSIDIARIES.
The term "participating subsidiary" shall mean any present or future
subsidiary of the Company, as that term is defined in Section 424(f) of the
Code, which is designated from time to time by the Board of Directors to
participate in the Plan. The Board of Directors shall have the power to make
such designation before or after the Plan is approved by the stockholders.
ARTICLE 18 - EMPLOYEE'S RIGHTS AS STOCKHOLDER.
Neither the granting of a right to an employee nor the deductions from
his or her pay shall constitute such employee a stockholder of the shares
covered by a right until such shares have been actually purchased by the
employee.
ARTICLE 19 - APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Common Stock
pursuant to rights granted under the Plan will be used for general corporate
purposes.
ARTICLE 20 - NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.
By electing to participate in the Plan, each participant agrees to
notify the Company in writing immediately after the participant transfers Common
Stock acquired under the Plan, if such transfer occurs within two years after
the first business day of the Payment Period in which such Common Stock was
acquired. Each participant further agrees to provide any information about such
a transfer as may be requested by the Company or any subsidiary corporation in
order to assist it in complying with the tax laws. Such dispositions generally
are treated as "disqualifying dispositions" under Sections 421 and 424 of the
Code, which have certain tax consequences to participants and to the Company and
its participating subsidiaries.
ARTICLE 21 - WITHHOLDING OF ADDITIONAL INCOME TAXES.
By electing to participate in the Plan, each participant acknowledges
that the Company and its participating subsidiaries are required to withhold
taxes with respect to the amounts
-8-
<PAGE>
deducted from the participant's compensation and accumulated for the benefit of
the participant under the Plan, and each participant agrees that the Company and
its participating subsidiaries may deduct additional amounts from the
participant's compensation, when amounts are added to the participant's account,
used to purchase Common Stock or refunded, in order to satisfy such withholding
obligations. Each participant further acknowledges that when Common Stock is
purchased under the Plan the Company and its participating subsidiaries may be
required to withhold taxes with respect to all or a portion of the difference
between the fair market value of the Common Stock purchased and its purchase
price, and each participant agrees that such taxes may be withheld from
compensation otherwise payable to such participant. It is intended that tax
withholding will be accomplished in such a manner that the full amount of
payroll deductions elected by the participant under Article 7 will be used to
purchase Common Stock. However, if amounts sufficient to satisfy applicable tax
withholding obligations have not been withheld from compensation otherwise
payable to any participant, then, notwithstanding any other provision of the
Plan, the Company may withhold such taxes from the participant's accumulated
payroll deductions and apply the net amount to the purchase of Common Stock,
unless the participant pays to the Company, prior to the exercise date, an
amount sufficient to satisfy such withholding obligations. Each participant
further acknowledges that the Company and its participating subsidiaries may be
required to withhold taxes in connection with the disposition of stock acquired
under the Plan and agrees that the Company or any participating subsidiary may
take whatever action it considers appropriate to satisfy such withholding
requirements, including deducting from compensation otherwise payable to such
participant an amount sufficient to satisfy such withholding requirements or
conditioning any disposition of Common Stock by the participant upon the payment
to the Company or such subsidiary of an amount sufficient to satisfy such
withholding requirements.
ARTICLE 22 - GOVERNMENTAL REGULATIONS.
The Company's obligation to sell and deliver shares of Common Stock
under the Plan is subject to the approval of any governmental authority required
in connection with the authorization, issuance or sale of such shares.
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
identify shares of Common Stock issued under the Plan on its stock ownership
records and send tax information statements to employees and former employees
who transfer title to such shares.
ARTICLE 23 - GOVERNING LAW.
The validity and construction of the Plan shall be governed by the laws
of the State of Delaware, without giving effect to the principles of conflicts
of law thereof.
-9-
<PAGE>
ARTICLE 24 - APPROVAL OF BOARD OF DIRECTORS AND STOCKHOLDERS OF THE COMPANY.
The Plan was adopted by the Board of Directors on April 26, 2000 and
was approved by the stockholders of the Company on April 26, 2000.
-10-
<PAGE>
Exhibit 10.3
01A4-0199-102
--------------
License Number
WORK MANAGEMENT SOLUTIONS, INC.
75 Wells Avenue
Newton, MA 02459
(617) 964-1633
PROPRIETARY SOFTWARE LICENSE AGREEMENT
for Account4(TM) Work Management System
Subject to the provisions contained herein. Work Management Solutions. Inc.
("Work Management Solutions") hereby grants to Keane Inc. ("Customer") a
non-exclusive license to use the proprietary computer software products
("Licensed Program") and materials ("Licensed Materials") specified below.
SOFTWARE
Work Management Solutions will furnish one (1) copy of the Licensed Program to
Customer in machine-readable object code form and provide one (1) copy of the
Licensed Materials to Customer containing detailed specifications for the
operation and use of the Licensed Program.
PRODUCT LICENSE AND SERVICE FEES
- -----------------------------------------------------------------------------
Software License Fee [***]
(See Schedule 1, Section A)
- -----------------------------------------------------------------------------
Professional Services Fee [***]
(See Schedule 1, Section B
- -----------------------------------------------------------------------------
Software Maintenance Fee [***]
-----------
(See Schedule 1. Section C)
- -----------------------------------------------------------------------------
Total Fees Due & Payable [***]
===========
- --------------------------------------------------------------------------------
PROPRIETARY SOFTWARE LICENSE AGREEMENT
*** Certain information on this page has been omitted and filed separately
with the commission. Confidential treatment has been requested with respect
to the omitted portions.
<PAGE>
01A4-0199-102
--------------
License Number
WORK MANAGEMENT SOLUTIONS, INC.
CUSTOMER INFORMATION
Customer Name: Keane Inc.
------------------------------------------
Address: Ten City Square
------------------------------------------
Boston, MA 02129
------------------------------------------
Attention: Mr. David Dengler
------------------------------------------
Telephone Number:
------------------------------------------
------------------------------------------
Customer's Designated Site
Designated Site: Keane, Inc.
------------------------------------------
Corporate IT Dept.
------------------------------------------
Mystic Center
------------------------------------------
Address: 10 President's Landing, Suite 200
------------------------------------------
Medford, MA 02155
------------------------------------------
------------------------------------------
Billing Address: Same
------------------------------------------
------------------------------------------
------------------------------------------
Attention: David Dengler
------------------------------------------
Telephone: 617-241-9200 x1330
------------------------------------------
------------------------------------------
Shipping Address:
------------------------------------------
(If different from above)
------------------------------------------
------------------------------------------
Attention: David Dengler
------------------------------------------
Telephone:
------------------------------------------
PROPRIETARY SOFTWARE LICENSE AGREEMENT
<PAGE>
01A4-0199-102
--------------
License Number
WORK MANAGEMENT SOLUTIONS, INC.
TERMS AND CONDITIONS
1. LICENSE. Work Management Solutions, Inc. hereby grants to Customer a
non-exclusive, non-transferable license (the "License") to use the Licensed
Program and Licensed Materials on the Designated Site, identified on Page 2 of
this Agreement, subject to the terms and conditions contained herein. The term
of this license is perpetual, commencing upon acceptance of this Agreement by
Work Management Solutions.
This Agreement, the Licensed Program and Licensed Materials to which it applies,
may not be assigned, sub licensed, or transferred by the Customer without prior
written consent from Work Management Solutions which will not be unreasonably
withheld nor delayed.
2. USE. Work Management Solutions shall be responsible for the delivery of the
Licensed Program(s) together with the documentation. The Customer shall be
exclusively responsible for the supervision, management and control of its use
of the Licensed Program(s), including without limitation; (i) assuring proper
machine configurations, audit controls and operating methods: (ii) establishing
adequate backup plans, based on alternative procedures and access to qualified
programming personnel; and (iii) implementing sufficient recovery procedures and
checkpoints to satisfy its requirements for security and accuracy of input, as
well as, system restart and recovery in the event of a malfunction.
The Licensed Program and Licensed Materials may be used only in the furtherance
of the internal operations of the Customer or its wholly owned or majority owned
subsidiaries. In no event shall the Licensed Program be used to process
information by or for the benefit of third parties.
The Customer may, from time to time, change the Designated Site and/or the
location thereof to any computer site of the Customer or a subsidiary, provided
that in each case the Customer gives timely written notice thereof to Work
Management Solutions. During the term of this Agreement, and at any given time,
the Customer is authorized to use the Licensed Program on only one (1) of the
Customer's computers or on a cluster of computers; the Customer may license
additional copies of the Licensed Program pursuant to the then current Work
Management Solutions multiple installation pricing policy.
The Customer may not copy or otherwise reproduce the Licensed Program, or any
part thereof (except such copying, strictly limited in number, as is essential
for system backup, testing, maintenance or recovery purposes). The Customer may
reproduce the Licensed Materials solely for its own internal use provided that
all titles, trademarks, trade names, copyright notices, and other proprietary
notices of Work Management Solutions, Inc. are retained.
3. CONFIDENTIALITY. The ideas and the expressions hereof contained in the
Licensed Program and Licensed Materials are confidential, proprietary
information and trade secrets that the Customer will receive in confidence. The
Customer shall not in any manner or form disclose, provide or otherwise make
available, in whole or in part, any Licensed Program and/or Licensed Materials
to any third parties except for Customer's employees and consultants who are
bound by appropriate non-disclosures. The obligations expressed within this
Section 3 shall survive termination of this Agreement.
The Parties acknowledge and agree that all Parties' information that is marked
"Confidential", except as specified below, that comes to be known by reason of
work under this Agreement, is confidential to each Party and will not be
disclosed to unauthorized third parties. The Parties will use the same standard
of care, and will bind their employees, agents or representatives to such
standard, to prevent disclosure of such confidential information as each uses to
protect its own confidential information and trade secrets. Information received
by either Party under this Agreement will not be considered confidential if the
information: (a) is not marked "Confidential"; (b) is known to the other Party
or is in the other Party's possession at the time of executing this Agreement;
(c) is in the public domain at the time of disclosure; (d) is independently
developed by the other Party; or (e) is disclosed to the other Party by a third
party with written approval of the first Party.
PROPRIETARY SOFTWARE LICENSE AGREEMENT
<PAGE>
01A4-0199-102
--------------
License Number
WORK MANAGEMENT SOLUTIONS, INC.
The obligations expressed within this Section 3 shall survive termination of
this Agreement.
4. WARRANTIES. Work Management Solutions warrants that (i) it may lawfully grant
the License, (ii) neither the Licensed Program or Licensed Materials, or the use
thereof within the scope of the License, infringes a patent or copyright or is
claimed to be a trade secret of any person who has not consented to the granting
of the License, (iii) at the time of installation, and for so long thereafter as
Customer pays Maintenance Fees hereunder, the Licensed Program, will conform to
applicable printed documentation (i.e., all Licensed Materials, including User
Guides and Reference Manuals) delivered by Work Management Solutions to the
Customer; (iv) neither the Licensed Program nor the Licensed Materials contain
any virus, time bomb mechanism or other software or code that can disable or
adversely affect any and all of the Licensed Program or the Licensed Materials
or destroy any data or other software; and (v) both the Licensed Program and the
Licensed Materials are Year 2000 Compliant. THE FOREGOING WARRANTY IS IN LIEU OF
ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE
IMPLIED WARRANTIES OF TITLE, MERCHANTABILITY, AND FITNESS FOR A PARTICULAR
PURPOSE. No employee or agent of Work Management Solutions is authorized to give
a greater or different warranty.
5. INDEMNIFICATION. Work Management Solutions, at its own expense, will defend
and indemnify against any action brought against the Customer based on a claim
that any Licensed Program infringed a United States patent, copyright or
trademark provided that (i) Work Management Solutions shall be notified promptly
in writing by the Customer of any notice of such claim; (ii) Work Management
Solutions shall have the sole control of the defense of any action on such claim
and all negotiations for its settlement or compromise; and (iii) the Customer
shall permit Work Management Solutions, at Work Management Solutions' option and
expense, either to procure for the Customer the right to continue using the
Licensed Program or modify the Licensed Program so that it becomes
non-infringing.
6. LIABILITY. Except as provided for in Section 5 above, Work Management
Solutions' liability for damages to the Customer for any cause whatsoever, and
regardless of the form of action, shall be limited to the License Fees paid by
the Customer hereunder with respect to the affected Licensed Program. In no
event will Work Management Solutions be liable for any lost profits, goodwill,
or other consequential, special or indirect damages suffered by the Customer in
connection with or arising from the performance of the Licensed Program, even if
Work Management Solutions has been advised of the possibility of such damages.
or for any claim against the Customer by any other party.
7. MAINTENANCE PLAN. Upon due and punctual payment of the applicable Maintenance
Fees, the Customer shall receive:
New Releases: From time to time Work Management Solutions may issue modified or
enhanced versions of the Licensed Program, herein referred to as a "New
Release", and will provide the Customer with one (1) complete copy of such New
Release and one (1) copy of the documentation updates. Following shipment of the
New Release materials, the previous release shall remain "current". for purposes
hereof, for a period of six (6) months: thereafter only the New Release will be
current. New Releases will only be issued to Customers who have a current
Maintenance Plan in effect. Work Management Solutions shall have no obligation
hereunder to furnish the Customer with separately priced components to a
Licensed Program or Licensed Materials except as explicitly described in this
License Agreement, unless Customer has entered into an additional License
Agreement for such separately priced components. Work Management Solutions shall
continue to provide maintenance to the Licensed Program so long as it continues
to make the Licensed Program commercially available.
Service: Upon receipt of telephone or written notice(s) from the Customer
specifying failures or errors found in a Licensed Program, and upon receipt of
such additional information as Work Management Solutions may request, Work
Management Solutions will act in an expeditious manner to correct defects in the
current release of such Licensed Program, as long as it has not been
substantially altered by Customer. Work Management Solutions will provide Hot
Line Support services during normal business hours. Monday through Friday (8:30
AM - 5:30 PM, Eastern Time). Work Management Solutions is not obligated to
perform investigation and/or correction of defects found by Work Management
Solutions to be (i) in other than a current release which has not been
substantially altered by the Customer.
PROPRIETARY SOFTWARE LICENSE AGREEMENT
<PAGE>
01A4-0199-102
--------------
License Number
WORK MANAGEMENT SOLUTIONS, INC.
or (ii) caused by negligence or modification of the Licensed Program or use
thereof in combination with software not provided by Work Management Solutions.
The Maintenance Plan shall be automatically renewed on an annual basis and the
Customer shall pay therefore according to the then current Maintenance Fee,
unless the Customer elects to cancel the annual renewal of the Maintenance Plan,
effective upon any anniversary date of the commencement of the Maintenance Plan,
by providing written notice to Work Management Solutions no less than thirty
(30) days prior to such anniversary date. Work Management Solutions shall
deliver to Customer an invoice no less than sixty (60) days prior to such
anniversary date. Such invoice shall be due and payable within 60 days. Customer
may elect at the execution of this Agreement, or upon any anniversary date
hereof, to purchase a Multi-Year Maintenance Plan by paying in advance to Work
Management Solutions maintenance fees for two or more years and receiving a
maintenance prepayment discount.
Maintenance Fees payable under this Section shall be established by Work
Management Solutions in its sole discretion. Notwithstanding the above, for the
first three years after contract execution, the annual Maintenance Fees shall
not be increased. For years thereafter, any Maintenance Fee increases shall be
limited to the percent change in the U.S. Department of Labor Consumer Price
Index for the calendar year prior to the renewal date of the Maintenance Plan.
8. PAYMENT. All Product License and Services Fees outlined on Page 1 of this
Agreement are due and payable as described in Schedule 1, Section D ("Payment
Terms"). All other fees and charges hereunder are due and payable in full upon
receipt of Work Management Solutions invoice by Customer. There shall be added
to all charges hereunder (i) all reasonable shipping, handling, travel and other
reasonable out-of-packet expenses incurred by Work Management Solutions in
connection with this Agreement or its performance; and (ii) amounts equal to any
taxes paid or payable by Work Management Solutions, however designated, levied,
or based on this Agreement, or on any Licensed Program or Licensed Materials,
its charges or its use, including without limitation, any value-added, royalty,
federal, state or local sales, use, and property taxes, and any taxes or amounts
in lieu thereof, exclusive, however, of taxes based on the net income of Work
Management Solutions. Customer will be charged interest at the rate of one and
one-half percent (1-1/2%) per month on all sums hereunder which remain unpaid
thirty (30) days after due, with such interest to commence on the due date.
9. GENERAL. The Customer acknowledges that he has read this Agreement,
understands it and agrees to be bound by all terms and conditions hereof. All
subsequent modifications, amendments, and waivers to this Agreement must be by
written instrument, executed by authorized representatives of the parties
hereto. In the event that any provision under this Agreement shall be deemed
illegal or otherwise unenforceable by any applicable statute or rule of law,
such provision shall be omitted and the entire Agreement shall not fail on
account thereof and the remainder of the Agreement shall continue in full force
and effect. No waiver of any breach of any provision of this Agreement shall
constitute a waiver of any other breach of any other provision hereof. Work
Management Solutions shall not be liable for delay or failure to perform its
obligations herein set forth if such delay or failure is due to any cause or
condition beyond its reasonable control. This Agreement shall be binding upon
and inure to the benefit of any successor of the Customer, who, whether by
merger, purchase, or otherwise, acquires all or substantially all of the assets
or business of the Customer.
Both parties agree that neither party shall solicit or hire the other party's
employees involved directly in the relationship established by this Agreement as
an employee or as a consultant in the same geographical region. This provision
shall remain in effect until one (1) year has passed since the date the last
services were provided by Work Management Solutions to Customer. Both parties
recognize that their employees are valuable resources whose loss may be damaging
to their respective businesses, and therefore, violation of this restriction
shall result in the violating party making an immediate restitution payment of
$250,000 to the other, payable within 30 days of the start date of the hired
employee or consultant.
All notices and other communications hereunder shall be by written instrument
and shall be deemed given upon certified mailing with return receipt, addressed
to the party to be notified at the address set forth on Page 2 of this
PROPRIETARY SOFTWARE LICENSE AGREEMENT
<PAGE>
01A4-0199-102
--------------
License Number
WORK MANAGEMENT SOLUTIONS, INC.
Agreement, or, if to Work Management Solutions, addressed to Chief Financial
Officer, Work Management Solutions, Inc., 75 Wells Avenue, Newton, MA 02459.
This Agreement is governed and construed by the laws of the Commonwealth of
Massachusetts.
This Agreement, including all Addenda, attached hereto, represents the complete
and exclusive statement of the agreements between the parties and supersedes all
prior agreements and representations between them. In the event of conflict
between general Terms and Conditions, Schedule 1 and the Addenda, the following
order of precedence shall apply: Schedule 1, Addenda. Terms and Conditions. This
Agreement is binding upon the parties upon execution by Customer and acceptance
by Work Management Solutions.
Accepted By:
KEANE INC. WORK MANAGEMENT SOLUTIONS, INC.
- ----------------------------- ------------------------------------
By: By:
/s/ Wallace A. Cataldo /s/ John J. Lucas
- ----------------------------- ------------------------------------
(Authorized Signature) (Authorized Signature)
John J. Lucas, President
- ----------------------------- ------------------------------------
Wallace A. Cataldo (Name and Title)
Vice President, Finance
2/19/99 2/22/99
- ----------------------------- ------------------------------------
(Date) (Date)
PROPRIETARY SOFTWARE LICENSE AGREEMENT
<PAGE>
01A4-0199-102
--------------
License Number
WORK MANAGEMENT SOLUTIONS, INC.
SCHEDULE 1
Keane Inc.
Account4 Work Management System
Product Pricing, Configuration and Service Schedule
A. Licensed Program(s): License Fee
-------------------- -----------
- -----------------------------------------------------------------------------
Account4 Work Management Software System
Application: Professional Services [***]
Database: Oracle
Licensed number of Users: Unlimited
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Total License Fees (after all applicable discounts): [***]
- -----------------------------------------------------------------------------
Note that the Customer is fully responsible for providing the relational
database management software and other third party software and systems
required for the operation of the Account4 Work Management System.
B. Professional Services:
No Professional Services are purchased by Customer at this time.
C. Software Maintenance Fee:
Customer hereby purchases, as part of this Agreement, a Software
Maintenance Plan, commencing upon delivery of the Licensed Program to
Customer and extending for a term of one (1) year. Customer will pay a
software maintenance fee equal to [***] for this Software Maintenance
Plan.
D. Payment Terms:
Fifty Percent (50%) of all Software License and Software Maintenance fees
[***] are due and payable upon contract execution; balance [***] due and
payable thirty (30) days after delivery of the Licensed Program and
Licensed Materials to Customer.
E. License Fee Basis:
Customer acknowledges that the License Fees described herein are based on
the number of users of the Licensed Program. The total number of licensed
users is equal to the number of Active Resource ID's plus the number of
unique User ID's who do not have a Resource ID. Each person who logs into
the Licensed Program must have a unique User ID. The sharing of User ID's
is not permitted under this Agreement. Customer may be asked by Work
Management Solutions to affirm, in writing, the number of users on the
anniversary date of this License or the Maintenance Plan. The license fee
described herein is based on an unlimited number of users.
PROPRIETARY SOFTWARE LICENSE AGREEMENT
*** Certain information on this page has been omitted and filed separately
with the commission. Confidential treatment has been requested with respect
to the omitted portions.
<PAGE>
01A4-0199-102
--------------
License Number
WORK MANAGEMENT SOLUTIONS, INC.
F. Account4 Editor Use & Restrictions:
Customer shall be limited to the use of the Account4 Editor to the
modification and enhancement of the Licensed Program and Applications as
defined in this schedule. Customer shall not be permitted to develop other
Account4 applications without first obtaining a license for the Account4
Editor and paying all appropriate license and maintenance fees. The
Account4 Editor shall be licensed by amendment to this Agreement if not
included in the original license parameter on Schedule 1, Section A above.
Accepted By:
KEANE INC. WORK MANAGEMENT SOLUTIONS, INC.
- ----------------------------- ------------------------------------
By: By:
/s/ Wallace A. Cataldo /s/ John J. Lucas
- ----------------------------- ------------------------------------
(Authorized Signature) (Authorized Signature)
John J. Lucas, President
- ----------------------------- ------------------------------------
Wallace A. Cataldo (Name and Title)
Vice President, Finance
2/19/99 2/22/99
- ----------------------------- ------------------------------------
(Date) (Date)
PROPRIETARY SOFTWARE LICENSE AGREEMENT
<PAGE>
01A4-0199-102
--------------
License Number
WORK MANAGEMENT SOLUTIONS, INC.
ADDENDUM 1
ACCOUNT4 SOURCE CODE
ESCROW AGREEMENT
Work Management Solutions warrants that the current Account4 System source code
is on deposit with Data Securities International, Inc., (Escrow Agent) located
at 49 Stevenson Street, Suite 550, San Francisco, CA 94105, (619) 457-5199,
Account # 2315016-00001, and that Customer shall be enrolled as a SAFE
Beneficiary under Work Management Solutions' Deposit Agreement with Data
Securities International.
Upon due and punctual payment by Customer of the applicable Maintenance fees,
Work Management Solutions shall (a) continue its Deposit Agreement with Data
Securities International without interruption and in substantially the same form
as it currently exists, and (b) shall continue Customer as a SAFE Beneficiary
under this Deposit Agreement without interruption.
In the event that Work Management Solutions (i) breaches this Addendum 1; (ii)
discontinues its business of maintaining the Licensed Programs; or (iii) ceases
to do business, Customer shall be entitled to obtain release from escrow of a
copy of the source code escrowed under this provision, subject to the following
conditions:
1. Such source code shall be deemed to be Confidential Information of
Work Management Solutions and shall be subject to the terms and
provisions of the Agreement which govern Confidential Information.
2. Customer shall have a nonexclusive right to use such source code
version for the limited purpose of maintaining the object code
version of the applicable Licensed Programs so that the Licensed
Programs can be used by Customer at the sites authorized by this
Agreement.
PROPRIETARY SOFTWARE LICENSE AGREEMENT
<PAGE>
01A4-0199-102
--------------
License Number
WORK MANAGEMENT SOLUTIONS, INC.
ADDENDUM 2
ACCEPTANCE PERIOD
This License may be canceled at any time during the first forty-five (45) days
following installation of the complete Licensed Program (such installation to
occur within thirty (30) days of delivery of the Licensed Program), if the
Licensed Program does not perform as described in the technical documentation
provided as part of the Licensed Materials (i.e. User Guides and Reference
Manuals), or as described in the various marketing materials which may have been
provided to Customer. For the purposes of this Addendum, "installation of the
complete Licensed Program" shall have occurred upon Customer's execution of the
Installation Verification form (to be provided to Customer upon Licensed Program
delivery), and shall not include the installation of any customizations to be
delivered to Customer.
In the event that the Licensed Program shall fail to meet the above cited
conditions and Customer desires to terminate this License, Customer shall
provide Work Management Solutions with written notice of its intent to cancel
("Cancellation Notice"), including explanation of each area of unsatisfactory
performance by the Licensed Program. Work Management Solutions shall have
forty-five (45) days after receipt of said notice in which to cure such
unsatisfactory performance. Failure by Work Management Solutions to effect said
cure within forty-five (45) days after receipt of a Cancellation Notice shall
result in immediate cancellation of this License.
If Customer cancels this License under the provisions of this Addendum, Customer
agrees to pay Work Management Solutions for any training and consulting services
provided prior to cancellation, by Work Management Solutions, at a rate of one
thousand six hundred dollars ($1,600.00) per person per day, plus reasonable and
customary out-of-pocket expenses. These fees shall be the sole financial
responsibility of Customer in the event of cancellation. In the event of
cancellation, Work Management Solutions shall promptly refund all license and
maintenance fees paid by Customer, pursuant to Terms and Conditions Section 8 of
this Agreement, minus fees payable to Work Management Solutions for training and
consulting services rendered, as described in this Addendum.
Acceptance ("Acceptance") shall occur automatically at the close of business on
the forty-fifth day after installation of the Licensed Program or on the
seventy-fifth day after delivery of the Licensed Program, whichever comes first,
in the absence of receipt by Work Management Solutions of any Cancellation
Notice.
PROPRIETARY SOFTWARE LICENSE AGREEMENT
<PAGE>
Exhibit 10.4
SERVICES AGREEMENT
Agreement #4620899S-RLS
Agreement between Work Management Solutions, Inc., a company whose address
is 119 Beach Street, Boston, Massachusetts 02111-2520 ("WMS"), and State Farm
Mutual Automobile Insurance Company, a mutual insurance company having its
corporate headquarters at One State Farm Plaza, Bloomington, Illinois, its
subsidiaries and affiliates ("STATE FARM").
W I T N E S S E T H
WHEREAS, certain services are required by STATE FARM related to consulting
and the training of STATE FARM personnel; and
WHEREAS, WMS has agreed to provide such services.
NOW THEREFORE, the parties agree as follows:
1. WMS expressly agrees that it shall perform the services (the "Services")
set out in each individual mutually agreed work order (the "Work Order"),
the form of which is attached hereto and incorporated herein on Exhibit A.
In consideration of WMS performing and completing its responsibilities
hereunder, STATE FARM shall compensate WMS as stated in each applicable
Work Order. Such compensation shall be due and payable at the later of (i)
thirty (30) days following completion of the Service or (ii) thirty (30)
days following STATE FARM's receipt of an accurate invoice. Such
compensation shall include any and all travel expenses incurred by WMS. In
no event shall any such travel and out-of-pocket expenses be reimbursed by
STATE FARM to WMS in excess of the compensation stated in each applicable
Work Order.
2. In order to provide the Services, WMS agrees that at STATE FARM's request
it shall meet with STATE FARM personnel at STATE FARM's offices in
Bloomington, Illinois. The meeting times shall be mutually agreeable. Both
parties acknowledge that it shall be necessary to cooperate in order to
carry out this Agreement, and each agrees to reasonably cooperate with the
other.
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3. WMS shall, and shall ensure that all of its employees and agents involved
with the performance of the Services, keep confidential any proprietary,
trade secret, business secret, copyright, patent or other such information
of STATE FARM, or of any of its vendors, suppliers, or customers, which it
learns as the result of carrying out its obligations hereunder. WMS
expressly further agrees that it shall return any such information and
copies thereof to STATE FARM upon completion of WMS's duties under this
Agreement, or upon STATE FARM's request. The terms of this Section 3 shall
survive the termination of this Agreement.
STATE FARM shall keep confidential any proprietary, trade secret, business
secret, copyright, patent or other such information of WMS, or any of its
subsidiaries or affiliates, which it learns as a result of the Services
provided hereunder. STATE FARM further agrees that it shall return any
such information and copies thereof to WMS upon the completion of the
Services or at WMS's request. The terms of the paragraph shall survive the
termination of this Agreement. Notwithstanding the foregoing, STATE FARM
shall not have any obligation with respect to any such information
contained in or made a part of the Reports (as such term is defined in
Exhibit A attached hereto). The parties hereto specifically agree that
STATE FARM will be the sole and absolute owner of the ideas and techniques
contained in the Reports with respect to STATE FARM's business and that
STATE FARM may disclose such to any party without violation of this
paragraph.
4. WMS expressly warrants to STATE FARM that:
(i) It has the ability and expertise to perform its responsibilities
hereunder and in doing so shall use the highest standards of
professional workmanship. STATE FARM shall have the right to reject
at any time any employees of WMS or its subsidiaries, affiliates or
assignees whose qualifications, in STATE FARM's sole judgment, do
not meet the standards hereunder.
(ii) All Reports provided to STATE FARM by WMS as a product of the
Services, and the ideas and techniques contained therein with
respect to STATE FARM's business, shall be the sole and absolute
property of STATE FARM, subject to a nonexclusive license to use and
disclose any preexisting proprietary materials of WMS contained
therein.
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(iii) Any Reports, or Services furnished or used under this
Agreement do not or will not infringe upon or violate a patent,
copyright, license or other property or proprietary right held, or
misappropriate a trade secret or other property right claimed by a
third party. WMS at its own expense shall defend and hold STATE FARM
fully harmless against any action asserted against STATE FARM (and
specifically including costs and reasonable attorneys' fees
associated with any such action) to the extent that it is based on a
claim that use of the Reports within the scope of this Agreement
infringes any patent, copyright, license or other property right or
proprietary right of any third party except to the extent such
Reports have been altered or modified by anyone other than WMS, or
its affiliates or assignees. STATE FARM shall promptly notify WMS in
writing of any such claim. In the event of an action for
infringement WMS may, in its sole discretion, at its expense, (i)
obtain for STATE FARM the right to use the Reports; (ii) modify the
Reports so as to render them non-infringing; (iii) provide STATE
FARM with functionally equivalent substitute Reports; or (iv) if
none of the other options set forth in this paragraph can be
reasonably achieved, refund to STATE FARM all fees paid to WMS under
this Agreement in full satisfaction of WMS's obligations, except for
those obligations set forth in Sections 4(iii) and 8 hereunder.
(iv) STATE FARM shall not have an obligation to effect any or all of
the recommendations or proposals of WMS as set forth in the Reports.
5. Subject to the provision of Section 4(ii) of this Agreement, the parties
agree that the Reports produced hereunder shall be considered a work made
for hire. WMS transfer, assigns, sells and conveys all rights to the
Reports produced hereunder to STATE FARM, including but not limited to
copyright, trade secret, trademark and patent.
6. WMS shall not disclose or otherwise identify STATE FARM orally or in any
of WMS's advertising, publications, or other media to be displayed or
disseminated to WMS's customers or other parties.
7. The parties expressly agree that the WMS shall be an independent
contractor for all purposes in the performance of this Agreement and shall
not be an employee of STATE FARM.
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8. WMS expressly agrees anything herein to the contrary notwithstanding, that
it shall indemnify and hold STATE FARM fully harmless against any damages
of any kind whatsoever, including costs and reasonable attorneys' fees,
STATE FARM shall incur as a result of injuries to persons or damage to
tangible property caused by the negligent acts of, or negligent failure to
act by WMS, its employees or agents while on STATE FARM's premises.
STATE FARM expressly agrees anything to the contrary notwithstanding, that
it shall indemnify and hold WMS fully harmless against any damages of any
kind whatsoever, including costs and reasonable attorneys' fees, WMS shall
incur as a result of the negligent acts of, or negligent failure to act by
STATE FARM, its employees or agents while on WMS's premises.
9. EXCEPT AS SET FORTH IN SECTIONS 4(iii) AND 8 OF THIS AGREEMENT, NEITHER
PARTY WILL BE LIABLE TO THE OTHER FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR
INCIDENTAL LOSSES OR DAMAGES OF ANY KIND OR NATURE WHATSOEVER, INCLUDING
BUT NOT LIMITED TO LOST PROFITS, LOST RECORDS OR DATA, LOST SAVINGS, LOSS
OF USE OF FACILITY OR EQUIPMENT, LOSS BY REASON OF FACILITY SHUT-DOWN OR
NON-OPERATION OR INCREASED EXPENSE OF OPERATIONS, OR OTHER COSTS, CHARGES,
PENALTIES, OR LIQUIDATED DAMAGES, REGARDLESS OF WHETHER ARISING FROM
BREACH OF CONTRACT, WARRANTY, TORT, STRICT LIABILITY OR OTHERWISE, EVEN IF
ADVISED OF THE POSSIBILITY OF SUCH LOSS OR DAMAGE OR IF SUCH LOSS OR
DAMAGE COULD HAVE BEEN REASONABLY FORESEEN.
EXCEPT FOR SECTIONS 4(iii) AND 8 OF THIS AGREEMENT, STATE FARM AGREES THAT
WMS'S LIABILITY HEREUNDER REGARDLESS OF FORM OF ACTION, SHALL NOT EXCEED
THE TOTAL AMOUNT PAID FOR SERVICES UNDER THIS AGREEMENT. EXCEPT FOR
SECTIONS 4(iii) AND 8 OF THIS AGREEMENT, IN NO EVENT WHATSOEVER SHALL
STATE FARM'S LIABILITY TO WMS FOR ANY OTHER REASON WHATSOEVER EXCEED IN
THE AGGREGATE THE MUTUALLY AGREED TO COMPENSATION FOR SERVICES PROVIDED
UNDER THE AGREEMENT.
10. No action, whether in contract or tort, including negligence, arising out
of the performance of services under this Agreement may be brought by
either party more than eighteen (18) months after the cause of action
accrues.
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11. It is expressly understood that if either party, on any occasion fails to
perform any term of this Agreement, and the other party does not enforce
that term, the failure to enforce on that occasion shall not constitute a
waiver of that term by the other party.
12. If either party neglects or fails to perform any of its obligations under
this Agreement and such failure continues for a period of ten (10) days
after notice thereof, the other party shall have the right to terminate
this Agreement. Both parties acknowledge that the determination of actual
damages in the case of nonperformance by either party will be difficult or
impossible. Both parties therefore agree that damages under this Agreement
will be as follows: In the event of WMS's default, WMS shall forfeit its
fees hereunder and no fee shall be payable to it; and in the event of
STATE FARM's default, WMS shall receive only the portion of the total fee
representing work previously completed, but in no event shall this amount
exceed the total fee. This measure of damages shall be interpreted as
liquidated damages, and not as a penalty.
13. Anything in the Agreement to the contrary notwithstanding, WMS may not
delegate or assign any or all of its duties under the Agreement to any
other entity, including an entity which affiliates or merges with or
acquires WMS, except when such delegation or assignment is approved in
advance by STATE FARM in writing, which approval STATE FARM may in its
sole discretion grant or deny. WMS is authorized by STATE FARM to
subcontract its obligations hereunder with Plan View, Inc., an affiliated
company, provided Plain View, Inc., its employees and agents will meet all
of the requirements under this Agreement and WMS will remain primarily
liable under this Agreement.
14. This Agreement together with the Exhibits attached hereto shall be an
agreement binding upon each of the parties hereto, their successors, and
to the extent permitted their assigns. This Agreement shall be governed by
the laws of the State of Illinois without regard to conflict of laws
provisions. This Agreement cannot be amended or otherwise modified except
as agreed to in writing by each of the parties hereto. This Agreement and
the Exhibits attached hereto represent the sole agreement between the
parties and supersedes and merges any prior agreement oral or written
between the parties with respect to the subject matter hereof.
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<PAGE>
IN WITNESS WHEREOF, WMS and STATE FARM have caused this Agreement to be executed
by their respective, duly authorized officers. This Agreement shall become
effective on the date the second of the two parties to sign executes this
Agreement below.
WORK MANAGEMENT STATE FARM MUTUAL AUTOMOBILE
SOLUTIONS, INC. INSURANCE COMPANY
119 Beach Street One State Farm Plaza
Boston, MA 02111 Bloomington, IL 61710
/s/ S.M. Grange /s/ Dennis McCormick
- ----------------------------------- --------------------------------------
Signature Signature
S.M. GRANGE Dennis McCormick
- ----------------------------------- --------------------------------------
Printed or Typed Name Printed or Typed Name
V.P. Consulting Services Assistant VP, Administrative Services
- ----------------------------------- --------------------------------------
Title Title
Sep. 25, 1996 9-26-96
- ----------------------------------- --------------------------------------
Date Date
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<PAGE>
Exhibit 10.5
MASTER CONSULTING SERVICES AGREEMENT
Agreement #4814224
This is an agreement (the "Agreement") between Work Management Solutions
("CONSULTANT"), a company whose address is 75 Wells Avenue, Newton,
Massachusetts 02159 and State Farm Mutual Automobile Insurance Company, its
subsidiaries and affiliates ("STATE FARM"), having its corporate headquarters at
One State Farm Plaza, Bloomington, Illinois, 61710.
W I T N E S S E T H
WHEREAS, it is the desire of the parties that, in accordance with the
terms and conditions hereof, the CONSULTANT shall, from time to time, provide
consulting services to STATE FARM; and
WHEREAS, both parties wish to enter into an agreement which will govern
the relationship of the parties.
ACCORDINGLY, the parties agree as follows:
1. Services. STATE FARM shall from time to time request CONSULTANT to
provide consulting services (the "Consulting Services"). STATE FARM shall make
its request on a work order, the form of which is attached hereto and
incorporated herein as Exhibit A (the "Work Order"). Each Work Order shall be in
the format prescribed in Exhibit A and shall set forth, among other things, the
topics, the location, the materials to be presented to STATE FARM, the hours to
complete the work, the completion date, and the fee to be paid to CONSULTANT.
2. Work Order; Fees. Upon execution of the Work Order by both parties,
CONSULTANT shall provide the Consulting Services as set forth in the particular
Work Order. In consideration of CONSULTANT performing and completing its
responsibilities hereunder, STATE FARM shall pay the CONSULTANT the fee set
forth in the particular Work Order. Such compensation shall be due and payable
on the later of (i) thirty (30) days following completion of the Consulting
Services or (ii) thirty (30) days following STATE FARM's receipt of an accurate
invoice. Additionally STATE FARM shall reimburse CONSULTANT its reasonable
travel expenses.
3. Meetings. In order to provide Consulting Services, CONSULTANT agrees
that at STATE FARM's request it shall meet with STATE FARM personnel at STATE
FARM's office in Bloomington, Illinois. The meeting times shall be mutually
agreeable. Both parties acknowledge that it shall be necessary to cooperate in
order to carry out this Agreement, and each agrees to reasonably cooperate with
the other.
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<PAGE>
4. Confidentiality: a. The parties expressly acknowledge that in the
course of their performance hereunder, they may learn or have access to certain
confidential, patent, copyright, business, trade secret, proprietary or other
like information or products of the other party or of third parties, including
but not limited to the other party's vendors, consultants, suppliers or
customers (the Information). Anything in the Agreement to the contrary
notwithstanding, the parties expressly agree that they will keep strictly
confidential any such Information that they learn.
b. STATE FARM and CONSULTANT agree that, for the purposes of the
Agreement, third parties whose duties for STATE FARM require access to the
Information provided under the Agreement shall have access to the Information as
required by such duties, provided that: i) such third parties have agreed in
writing with either STATE FARM or CONSULTANT, in terms no less restrictive than
the confidentiality obligations of the Agreement, to keep confidential the
Information, ii) such third parties have agreed in writing with either STATE
FARM or CONSULTANT not to use the Information for their own benefit or the
benefit of any person or entity besides STATE FARM, and iii) STATE FARM, when
allowing such third parties access to CONSULTANT's Information, will not exceed
the license or use restrictions in the Agreement.
c. CONSULTANT agrees not to use a third party's Information for its own
benefit or the benefit of any person besides STATE FARM.
d. For purposes of this Section 4, the term "Disclosing Party" shall
refer to the party to the Agreement providing the Information to the other
party. The term "Receiving Party" shall refer to the party receiving the
Information in the course of its performance under this Agreement. The term
"Information" shall not include products or information that (i) are in the
public domain or in the possession of the Receiving Party without restriction at
the time of receipt under this Agreement; (ii) are used or released with the
prior written approval of the Disclosing Party; (iii) are independently
developed by the Receiving Party; or (iv) are ordered to be produced by a court
of competent jurisdiction or appropriate regulatory authority, but in such case
the Receiving Party producing the Information agrees to notify the Disclosing
Party immediately and cooperate with the Disclosing Party in asserting a
confidential or protected status for the Information.
e. Each party expressly further agrees that it shall return to Disclosing
Party upon the Disclosing Party's request any such Information and copies
thereof. The provisions of this Section 4 shall survive termination of the
Agreement.
5. Performance Standards; Infringement Indemnification. CONSULTANT
expressly warrants to STATE FARM that:
a. It has the ability and expertise to perform its responsibilities
hereunder and in doing so shall use the highest standards of professional
workmanship. STATE FARM shall have the right to reject any of CONSULTANT's
employees whose qualifications, in STATE FARM's judgment, cannot meet the
standards hereunder.
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b. All materials (the "Materials") provided to STATE FARM by
CONSULTANT as a product of the Consulting Services, and the ideas and techniques
contained therein with respect to STATE FARM's business, shall be the sole and
absolute property of STATE FARM.
c. Any Materials, or Consulting Services furnished or used under
this Agreement do not or will not infringe upon or violate a patent, copyright,
license or other property or proprietary right held, or misappropriate a trade
secret or other property right claimed by a third party. CONSULTANT at its own
expense shall defend and hold STATE FARM fully harmless against any action
asserted against STATE FARM (and specifically including costs and reasonable
attorneys' fees associated with any such action) to the extent that it is based
on a claim that use of the Materials within the scope of this Agreement
infringes any patent, copyright, license or other property right or proprietary
right of any third party. STATE FARM shall promptly notify CONSULTANT in writing
of any such claim. If as a result of any claim of infringement against any
patent, copyright, license or other property right or proprietary right of any
third party, STATE FARM is enjoined from using the Materials, or if either party
believes that the Materials are likely to become the subject of a claim of
infringement, STATE FARM at its option may terminate this Agreement and receive
a full refund of any fees paid hereunder, or request that CONSULTANT at its
option and expense procure the right for STATE FARM to continue to use the
Materials, or replace or modify the Materials so as to make it non-infringing.
6. Work Made for Hire. The parties agree that the Materials produced
hereunder shall be considered a work made for hire. CONSULTANT further
transfers, assigns, sells, and conveys all rights to the Materials hereunder,
including but not limited to copyright, trademark, trade secret, and patent
rights.
7. Use of State Farm Name. CONSULTANT shall not disclose or otherwise
identify STATE FARM or any of its affiliates or subsidiaries orally or in any of
CONSULTANT's advertising, publications, or other media to be displayed or
disseminated to CONSULTANT's customers or other parties.
8. Independent Contractor. The parties expressly agree that the
CONSULTANT shall be an independent contractor for all purposes in the
performance of this Agreement and shall not be an employee of STATE FARM.
9. Hold Harmless. CONSULTANT expressly agrees anything herein to the
contrary notwithstanding, that it shall indemnify and hold harmless STATE FARM
against any damages of any kind whatsoever, including costs and reasonable
attorneys' fees, STATE FARM shall incur as a result of the negligent acts or
omissions of CONSULTANT, its employees or agents, while on STATE FARM's
premises.
10. LIMITATION OF LIABILITY. UNDER NO CIRCUMSTANCES WHATSOEVER SHALL
STATE FARM BE LIABLE TO CONSULTANT FOR ANY SPECIAL,
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CONSEQUENTIAL, INDIRECT, OR INCIDENTAL DAMAGES OF ANY KIND WHATSOEVER. IN NO
EVENT WHATSOEVER SHALL STATE FARM'S LIABILITY TO CONSULTANT FOR ANY REASON
WHATSOEVER EXCEED IN THE AGGREGATE THE MUTUALLY AGREED TO COMPENSATION FOR
SERVICES PROVIDED UNDER THE WORK ORDER.
11. Limitation of Actions. No action, whether in contract or tort,
including negligence, arising out of the performance of services under this
Agreement may be brought by either party more than eighteen (18) months after
the cause of action accrues.
12. No Waiver. It is expressly understood that if either party, on any
occasion fails to perform any term of this Agreement, and the other party does
not enforce that term, the failure to enforce on that occasion shall not prevent
enforcement on any other occasion.
13. Liquidated Damages. If either party neglects or fails to perform any
of its obligations under this Agreement and such failure continues for a period
of ten (10) days after notice thereof, the other party shall have the right to
terminate this Agreement. On written notification to CONSULTANT, STATE FARM may
at any time terminate the services of individual employees or agents of
CONSULTANT for reasons of performance or conduct. Both parties acknowledge that
the determination of actual damages in the case of nonperformance by either
party will be difficult or impossible. Both parties therefore agree that damages
under this Agreement will be as follows: In the event of CONSULTANT's default,
CONSULTANT shall forfeit its fees hereunder and no fee shall be payable to it;
in the event of STATE FARM's default, CONSULTANT shall receive only the portion
of the total fee representing work previously completed, but in no event shall
this amount exceed the total fee. This measure of damages shall be interpreted
as liquidated damages, and not as a penalty.
14. Assignment. CONSULTANT may not assign its duties under the Agreement
to any other entity, including an entity which affiliates or merges with or
acquires CONSULTANT, except when such assignment is approved in advance by STATE
FARM in writing, which approval STATE FARM may in its sole discretion grant or
deny.
15. Time is of the Essence. CONSULTANT acknowledges that time is of the
essence to STATE FARM.
16. In the event STATE FARM, in its sole discretion, decides to loan
equipment to CONSULTANT to facilitate CONSULTANT's performance of the Consulting
Services, CONSULTANT shall be responsible for any loss or damage to such
equipment.
This Agreement together with the exhibit attached hereto shall be an agreement
binding upon each of the parties hereto, their successors, and to the extent
permitted their assigns. This Agreement shall be governed by the laws of the
State of Illinois without regard to its conflicts of law principles. This
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<PAGE>
Agreement cannot be amended or otherwise modified except as agreed to in writing
by each of the parties hereto. This Agreement and the exhibit attached hereto
represent the sole agreement between the parties and supersedes and merges any
prior agreement oral or written between the parties with respect to the subject
matter hereof. This Agreement shall become effective on the date the second of
the two parties to sign executes this Agreement below.
WORK MANAGEMENT SOLUTIONS STATE FARM MUTUAL AUTOMOBILE
75 Wells Avenue INSURANCE COMPANY
Newton, MA 02159 One State Farm Plaza
Bloomington, IL 61710
/s/ S. M. Grange /s/ Ron Mitchell
- ------------------------------------- -------------------------------------
Signature Signature
S. M. GRANGE Ron Mitchell
- ------------------------------------- -------------------------------------
Printed or Typed Name Printed or Typed Name
V.P. Consulting Services Director
- ------------------------------------- -------------------------------------
Title Title
July 10, 1998 7/18/98
- ------------------------------------- -------------------------------------
Date Date
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<PAGE>
Exhibit 10.6
WELLS RESEARCH CENTER
OFFICE LEASE
WORK MANAGEMENT SOLUTIONS
Made this 6th day of May, in the year one thousand nine hundred and ninety seven
by and between Wells Avenue Senior Holdings LLC (hereinafter called the
"Landlord", which expression shall include its successors and assigns where the
context so admits), and Work Management Solutions, a Delaware corporation
(hereinafter called the "Tenant", which expression shall include its successors
and assigns where the context so admits).
WITNESSETH, that in consideration of the rent and covenants herein reserved and
contained on the part of Tenant to be paid, performed and observed, Landlord
does hereby demise and lease unto Tenant, and Tenant does hereby lease from
Landlord the Premises described in Article II hereof.
W I T N E S S E T H :
ARTICLE 1
Reference Data and Definitions
1.01. Reference Data.
LANDLORD'S REPRESENTATIVE: Carleton G. Tarpinian
LANDLORD'S ADDRESS (FOR PAYMENT OF RENT):
Wells Avenue Deposit Account # 01-96-02545
c/o Federal Savings Bank
P.O. Box 1275
Waltham, MA 02154
LANDLORD'S ADDRESS (FOR NOTICES AND COMMUNICATIONS):
Saracen Companies, Inc.
Attn: Carleton Tarpinian
57 Wells Avenue
Newton, Massachusetts 02159
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TENANT'S ADDRESS (FOR NOTICE AND BILLING): 75 Wells Avenue, Newton, MA 02159
TENANT'S REPRESENTATIVE: John Lucas
BUILDING ADDRESS: 75 Wells Avenue, Newton, MA 02159
LEVEL: One
RENTABLE AREA OF PREMISES: 11,946 Rentable Square Feet
(Rent only on 8,000 r.s.f. through 2/28/98)
GROSS AREA OF THE BUILDING: 228,250 Square Feet (Premises Plan enclosed)
TENANT'S SPACE PLAN DELIVERY DATE: May 5, 1997
TERM COMMENCEMENT DATE: July 1, 1997
RENT COMMENCEMENT DATE: July 15, 1997
LEASE TERMINATION DATE: July 31, 2002
INITIAL TERM: 5 YEARS
BASIC RENT: July 15, 1997 through February 28, 1998
---------------------------------------
8,000 x $27.50 = $220,000/Year.; $18,333.33/Month
March 1, 1998 through July 31, 1998
-----------------------------------
11,946 x $27.50 = $328,515/Year; $27,376.25/Month
August 1, 1998 through July 31, 1999
------------------------------------
11,946 x $28.50 = $340,461/Year; $28,371.75/Month
August 1, 1999 through July 31, 2000
------------------------------------
11,946 x $29.50 = $352,407/Year; $29,367.25/Month
August 1, 2000 through July 31, 2001
------------------------------------
11,946 x $30.50 = $364,353/Year; $30,362.75/Month
August 1, 2001 through July 31, 2002
------------------------------------
11,946 x $31.50 = $376,299/Year; $31,358.25/Month
1 1/2% penalty automatically assessed if rent not paid within ten
(10) days of due date.
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OPTION TERM: Tenant shall have one three (3) year renewal option at Fair
Market Value for the period of August 1, 2002 through July 1,
2005 (the "Extended Expiration Date").
OPERATING EXPENSE BASE: $(1997 Actual Base Year) Per Square Foot of Rentable
Area Per Year
KEYS: Landlord will provide Tenant with five keys with no charge to Tenant.
Additional keys will be charged to Tenant.
SECURITY DEPOSIT: $18,333.33 (One Month Rent)
GUARANTOR: N/A
PERMITTED USES: GENERAL OFFICE, SALES, TRAINING AND RESEARCH AND DEVELOPMENT
CONSISTENT WITH A FIRST CLASS OFFICE BUILDING.
1.02. General Provisions. For all purposes of this Lease unless otherwise
expressed and provided herein or therein or unless the context otherwise
requires:
(a) The words herein, hereof, hereunder and other words of similar import refer
to this Lease as a whole and not to any particular article, section or other
subdivision of this Lease.
(b) A pronoun in one gender includes and applies to the other gender as well.
(c) Each definition stated in Section 1.01 or 1.03 of this Lease applies equally
to the singular and the plural forms of the term or expression defined.
(d) Any reference to a document defined in Section 1.03 of this Lease is to such
document as originally executed, or, if modified, amended or supplemented in
accordance with the provisions of this Lease, to such document as so modified,
amended or supplemented and in effect at the relevant time of reference thereto.
(e) All accounting terms not otherwise defined herein have the meanings assigned
to them in accordance with generally accepted accounting principles.
(f) All references in Section 1.01 hereof are subject to the specific
definitions thereof (if any) in Section 1.03 hereof.
1.03. Terms Defined. Each term or expression set forth above in Section 1.01
hereof or below in this Section 1.03 has the meaning stated immediately after
it.
Additional Rent. All sums and other charges (other than Basic Rent) due from
Tenant to Landlord or incurred by Landlord as the result of a Default.
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Additional Services. Services provided to Tenant or in respect of the Premises
which are not described in Exhibit A hereto.
Adjusted Operating Expense Base. The amount determined by multiplying the
Operating Expense Base by the Adjustment Factor.
Adjustment Factor. With respect to the First Calendar Year and the Last Calendar
Year, the percentage computed by dividing (i) the number of days of each such
period falling within the Lease Term by (ii) 365.
Affiliate. With respect to any specified Person, any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition, the
term control when used with respect to any specified Person means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms controlling and controlled by have meanings correlative to the
foregoing.
Authorizations. All franchises, licenses, permits and other governmental
consents issued by Governmental Authorities pursuant to Legal Requirements which
are or may be required for the use and occupancy of the Premises and the conduct
or continuation of a Permitted Use therein.
Basic Rent. Rent agreed upon by Landlord and Tenant and referred to in Section
1.01.
Basic Services. The services described in Exhibit A hereto.
Building. The building currently existing on the Land.
Building Standard Tenant Finishes. The standards set by Landlord for the quality
of work done on the Premises described in Exhibit E. (Turnkey on mutually agreed
to Plan.)
Business Day. A day which is not a Saturday, Sunday or other day on which banks
in Boston, Massachusetts, are authorized or required by law or executive order
to remain closed.
Calendar Year. The First Calendar Year, the Last Calendar Year and any full
calendar year (January 1 through December 31) occurring during the Lease Term.
Common Areas. All areas devoted to the common use of occupants of the Building
or the provision of Services to the Building as agreed and represented in the
Space Plan, including but not limited to the atrium, all corridors, elevator
foyers, air shafts, elevator shafts and elevators, stairwells and stairs,
restrooms, mechanical rooms, janitor closets, vending areas and other similar
facilities for the provision of Services or the use of all occupants of
multi-tenant floors or all occupants of the Building.
Control. As defined in the definition of Affiliate.
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Corporation. A corporation, company, association, business trust or similar
organization wherever formed.
First Calendar Year. The partial Calendar Year period commencing on the Term
Commencement Date and ending on the next succeeding December 31.
Force Majeure. Acts of God, strikes, lock outs, labor troubles, inability to
procure materials, failure of power, restrictive Legal Requirements, riots and
insurrection, acts of the public enemy, wars, earthquakes, hurricanes and other
natural disasters, fires, explosions, any act, failure to act or Default of the
other party to this Lease or any other reason beyond the control of any party to
this Lease; provided, however, lack of money shall not be deemed such a cause.
Governmental Authority. United States of America, the Commonwealth of
Massachusetts, the City of Newton, and any political subdivision thereof and any
agency, department, commission, board, bureau or instrumentality of any of them.
Insolvency. The occurrence with respect to any Person of one or more of the
following events: the death, dissolution, termination of existence (other than
by merger or consolidation), insolvency, appointment of a receiver for all or
substantially all of the property of such Person, the making of a fraudulent
conveyance or the execution of an assignment or trust mortgage for the benefit
of creditors by such Person, or the filing of a petition of bankruptcy or the
commencement of any proceedings by or against such Person under a bankruptcy,
insolvency or other law relating to the relief or the adjustment of
indebtedness, rehabilitation or reorganization of debtors; provided that if such
petition or commencement is involuntarily made against such a Person and is
dismissed within sixty (60) days of the date of such filing or commencement,
such events shall not constitute an insolvency hereunder.
Insurance Requirements. All terms of any policy of insurance maintained by
Landlord or Tenant and applicable to (or affecting any condition, operation, use
or occupancy of) the Building or the Premises or any part or parts of either and
all requirements of the issuer of any such policy and all orders, rules,
regulations and other requirements of the National Board of Fire Underwriters
(or any other body exercising similar functions).
Land. The Land at 75/85/95 Wells Avenue, in the City of Newton, Commonwealth of
Massachusetts.
Landlord's Contribution. The amount contributed by Landlord as a credit toward
the cost of finishing the Premises shown on Exhibit E.
Landlord's Work. The work to be done by Landlord with respect to the Premises
described in the Work Letter (see Exhibit E).
Last Calendar Year. The partial Calendar Year commencing on January 1 of the
Calendar Year in which the Lease Termination Date occurs of the Lease Term and
ending on the Lease Termination Date.
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Lease Term. The period commencing on the Term Commencement Date and ending on
the Lease Termination Date.
Lease Termination Date. The earlier to occur of (1) the Stated Expiration Date,
(2) the termination of this Lease by Landlord as the result of an Event of
Default, (3) the termination of this Lease pursuant to Articles 17 (Damage or
Destruction) or 18 (Eminent Domain) hereof.
Lease Year. A period commencing on the Term Commencement Date (or an anniversary
thereof) and ending on the day before the next succeeding anniversary thereof.
For example, the first Lease Year is a period commencing on the Term
Commencement Date and ending on the day before the first anniversary thereof.
The last Lease Year shall end on the Lease Termination Date.
Legal Requirements. All statutes, codes, ordinances (and all rules and
regulations thereunder), all executive orders and other administrative orders,
judgments, decrees, injunctions and other judicial orders of or by any
Governmental Authority which may at any time be applicable to parts of
appurtenances of the Premises or Building or to any condition or use thereof and
the provisions of all Authorizations.
Occupancy Arrangement. With respect to the Premises or any portion thereof or
the Lease, and whether (a) written or unwritten or (b) for all or any portion of
the Lease Term, an assignment, a sublease, any tenancy at will, a tenancy at
sufferance, or any other arrangement (including but not limited to a license or
concession) pursuant to which a Person occupies the Premises for any purpose.
Operating Expense Base. Set forth in Section 1.01 as Landlord's contribution
towards the payment of Tenant's operating expenses. Tenant agrees to pay any
operating expenses on an annual basis in excess of the 1997 Actual Operating
Expense Base.
Operating Expenses. All expenses, costs, and disbursements of every kind and
nature which Landlord shall pay or become obligated to pay in connection with
the ownership, operation and maintenance of the Building (including all
facilities in operation on the Term Commencement Date and such additional
facilities in subsequent years as may be reasonably determined by Landlord to be
necessary or beneficial for the operation of the Building) and Land and the
provision of Basic Services, including but not limited to (a) wages, salaries,
fees and cost to Landlord of all Persons engaged in connection therewith,
including all Taxes, insurance, and benefits relating thereto, (b) the cost of
(i) all supplies and materials, electricity and lighting, (ii) water, heat, air
conditioning, and ventilating for the Building, (iii) all maintenance,
janitorial, and service agreements, (iv) all insurance, including the cost of
casualty and liability insurance applicable to the Building consistently applied
and Landlord's personal property used in connection therewith, (v) repairs, snow
plowing and general maintenance, (vi) capital items which are primarily for the
purpose of reducing Operating Expenses or which may be required by a
Governmental Authority, amortized over the reasonable life of the capital items
with the reasonable life and amortization schedule being determined by Landlord
in accordance with generally accepted accounting principles, (vii) all real
estate taxes or other taxes associated
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with the Building, (viii) pursuing an application for an abatement of taxes
pursuant to Section 6.06 hereof to the extent not deducted from the abatement,
if any, received, (ix) independent auditors, (x) professional fees related to
the operation of the property including accounting, engineering and legal, (xi)
office space for the manager of the Building, (c) management fees and (d) a
share (equal to percentage computed by a fraction the numerator of which is the
Gross Area of the Building and the denominator of which is the aggregate Gross
Area of all constructed buildings (including the Building) at 75/85/95 Wells
Avenue, Newton, MA of the cost to Landlord of operating, repairing and
maintaining exterior common areas and facilities of 75/85/95 Wells Avenue,
Newton, MA (of which development the Building is a part) which may not be
located entirely on the Land but which are available for use by Tenant,
including but not limited to snow removal, landscaping, security and maintenance
for common roadways and open areas. Operating Expenses shall not include (i)
capital items except as provided above; (ii) specific costs billed to and paid
by specific tenants; (iii) costs of tenant alterations; (iv) interest and
principal payments on mortgages; (v) advertising expenses and leasing
commissions; (vi) any cost or expenditure for which Landlord is reimbursed
whether by insurance proceeds or otherwise; (vii) the cost of any kind of
service furnished to any other tenant in the Building which Landlord does not
generally make available to all Tenants in the Building; (vii) legal expenses of
negotiating and enforcing leases; and (ix) depreciation. Operating expenses
shall be determined on the accrual basis in accordance with generally accepted
accounting principles which shall be consistently applied. (See Exhibit D
attached hereto.)
Parking. Tenant shall have five (5) assigned parking spaces, located nearest to
the Premises and previously assigned to Guardian Insurance.
Partial Taking. Any Taking which is not a Total Taking.
Permitted Exceptions. Any liens or encumbrances on the Premises in the nature of
(a) liens for Taxes assessed but not yet due and payable, (b) easements,
reservations, restrictions and rights of way encumbering or affecting the Land
on the date of this Lease, (c) the rights of Landlord, Tenant and any other
Persons to whom Landlord has granted such rights to exercise in common with
respect to the Land and the Common Areas the rights granted to Tenant hereunder,
(d) mortgages of record, and (e) Title Conditions, provided that the same do not
interfere with Tenant's rights hereunder.
Person. An individual, a Corporation, a company, a voluntary association, a
partnership, a trust, an unincorporated organization or a government or any
agency, instrumentality or political subdivision thereof.
Premises. The space in the Building shown and outlined in Exhibit E hereto.
Proceeds. With respect to any Taking or occurrence described in Article 17
hereof, with respect to which any Person is obligated to pay any amount to or
for the account of Landlord, the aggregate of (i) all sums payable or receivable
under or in respect of any insurance policy, and (ii) all sums or awards payable
in respect to a Taking.
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Prohibited Occupancy Arrangement. An Occupancy Arrangement which provides for
any rent or other payment based in whole or in part on the net income or profits
derived by any Person from the Premises.
Rent. Basic Rent and all Additional Rent.
Rent Commencement Date. Set at July 15, 1997, but shall be extended for the
length of any period which Landlord delays the completion of the Landlord's Work
beyond July 1,1997.
Rentable Area of the Premises. The number of square feet stated in Section 1.01,
whether the same should be more or less as a result of minor variations
resulting from actual construction and completion of the Building or Premises.
Rules and Regulations. Reasonable Rules and Regulations promulgated by Landlord
and uniformly applicable to Persons occupying the Building regulating the
details of the operation and use of the Building. The initial Rules and
Regulations are attached hereto as Exhibit C.
Services. Basic Services and Additional Services.
Special Work. Work done in or with respect to the Premises which is not part of
Landlord's Work or the cost of which exceeds Landlord's Contribution.
Stated Expiration Date. The later to occur of (i) the day before the 5th
anniversary of the Term Commencement Date, or (ii) the Extended Expiration Date
(if Tenant exercises the Extension Option).
Substantial Completion Date. The date on which the Premises together with the
appurtenant areas of the Building necessary for access and service thereto, have
been completed in accordance with Article 7 hereof except for items of work and
adjustment of equipment and fixtures which are not necessary to make the
Premises reasonably tenantable for the Permitted Uses and because of season or
weather or nature of the item cannot practicably be done at the time.
Taking. The taking or condemnation of title to all or any part of the Land or
the possession or use of the Building or the Premises by a competent Person for
any public use or purpose or any proceeding or negotiations which might result
in such taking or any sale or lease in lieu of or in anticipation of such a
taking.
Taxes. All taxes, special or general assessments, real estate, water rents,
rates and charges, sewer rents and other impositions and charges imposed by
Governmental Authorities of every kind and nature whatsoever, extraordinary as
well as ordinary and each and every installment thereof which shall or may
during the term of this Lease be charged, levied, laid, assessed, imposed,
become due and payable or become liens upon or for or with respect to the Land
or any part thereof and the Building or the Premises, appurtenances or equipment
owned by Landlord thereon or therein or any part thereof or on this Lease under
or by virtue of all present
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or future Legal Requirements and any tax based on a percentage fraction or
capitalized value of the Rent (whether in lieu of or in addition to the taxes
hereinbefore described). Taxes are included in the Operating Expense Base (see
definition of Operating Expense Base and Article 6). Taxes shall not include
inheritance, estate, excise, succession, transfer, gift, franchise, income,
gross receipt, or profit taxes except to the extent such are in lieu of or in
substitution for Taxes as now imposed on the Building, the Land, the Premises or
this Lease.
Tenant. As defined in the preamble hereof.
Tenant's Share. Tenants pro rata share of the Building. Tenant's share is
calculated by dividing it's Rentable Area of the Premises by Gross Area of the
Building (228,250 s.f.).
Term Commencement Date. The earlier of (a) the Substantial Completion Date, (b)
any other date for such commencement determined in accordance with said Article
7, or (c) the date on which Tenant first occupies the Premises for the Permitted
Uses.
Title Conditions. All covenants, agreements, restrictions, easements and
declarations of record on the date hereof so far as the same may be from time to
time in force and applicable.
Total Taking. (i) a Taking of: (a) the fee interest in all or substantially all
of the Building or (b) such title to or easement in, over, under or such rights
to occupy and use any part or parts of the Building to the exclusion of Landlord
as shall have the effect, in the good faith judgment of the Landlord, of
rendering the portion of the Building remaining after such Taking (even if
restoration were made) unsuitable for the continued use and occupancy of the
Building for the Permitted Uses or (ii) a Taking of all or substantially all of
the Premises or such title to or easement in, on or over the Premises to the
exclusion of Tenant which in the good faith judgment of the Landlord prohibits
access to the Premises or the exercise by Tenant of any rights under this Lease.
Working Drawings. The Working Drawings for the finishing of the Premises
developed by Landlord and Tenant in accordance with the Work Letter, which shall
be substantially in the form attached hereto as Exhibit E.
Work Letter. The agreement between Landlord and Tenant with respect to the
finishing of the Premises, which shall be substantially in the form attached
hereto as Exhibit E.
ARTICLE 2
Premises; Appurtenances
2.01. Premises. Landlord hereby leases and lets to Tenant, and Tenant hereby
takes and hires from Landlord, upon and subject to the terms, conditions,
covenants and provisions hereof, the Premises subject to the Permitted
Exceptions. Landlord reserves the right to relocate within or without the
Premises pipes, ducts, vents, flues, conduits, wires and appurtenant fixtures
which service other parts of the Building; provided that such work is done in
such a manner that it does not unreasonably interfere with Tenant's use of the
Premises.
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2.02. Appurtenances. Tenant may exclusively use the Parking and use the Common
Areas and the Land as appurtenant to the Premises for the purposes for which
they were designed.
ARTICLE 3
Term
3.01. Term Commencement. The Lease Term shall commence on the Term Commencement
Date.
3.02. Termination. The Lease Term shall end on the Lease Termination Date unless
extended as provided for in Section 3.03 hereof. The term "Lease Year" as used
herein shall mean (i) the twelve (12) consecutive months following the
Commencement Date, except that if the Commencement Date does not fall on the
first day of the month, then the first Lease Year shall consist of the balance
of the month in which the Commencement Date falls, plus the twelve (12)
consecutive full months immediately thereafter, and (ii) each subsequent twelve
(12) month period during the Term (or portion thereof during the last year of
the Term), commencing with the anniversary of the first day of the first full
month of the first Lease Year.
3.03 Option to Extend Term. Tenant shall have the option to extend the Lease
Term for the Option Term. Tenant shall exercise its option to extend by giving
written notice to Landlord no later than 5:00 p.m. on the date which is 180 days
prior to the termination date of the Initial Term of this Lease that it desires
to so extend the Term ("Tenant's Notice"). After receipt of such notice and no
later than 150 days prior to the termination date of the Initial Term of this
Lease, Landlord shall provide Tenant with its determination of the fair market
rental value of the Premises for such Option Term (the "Landlord's
Determination"). Tenant shall have 30 days from the date of the Landlord's
Determination to accept or reject the rental rate provided for in the Landlord's
Determination. If the Tenant accepts the Landlord's Determination, then the
Tenant shall so notify Landlord and the rental rate set forth therein shall be
the "Fair Rental Value," and the amount of Basic Rent due for the Option Term.
If the Tenant rejects the Landlord's Determination, then the Tenant shall so
notify Landlord and Landlord shall thereafter have a right of first refusal to
lease the Premises. If at any time after receipt of the Tenant's Notice,
Landlord shall receive an offer to lease the Premises, which offer Landlord
shall desire to accept, Tenant shall have the right to Lease the Premises upon
the rental rate and terms as set forth in such offer. Upon receipt of any such
offer, Landlord shall notify Tenant of the terms of such offer. Tenant shall
have fifteen (15) days from receipt of such notice to elect to rent the Premises
upon the terms set forth therein, which election shall be deemed exercised only
upon receipt by Landlord of a notice from Tenant accept the rental rate within
said fifteen (15) day period. If Tenant shall waive or be deemed to have waived
its right of first refusal with respect to an offer, but such offer is not
consummated by Landlord entering into a lease for the Premises with the offer or
on the terms set forth in Landlord's notice, Tenant's right of first refusal as
set forth herein shall remain applicable to all subsequent offers.
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ARTICLE 4
Rent
4.01. Basic Rent. Tenant shall pay Landlord for the Premises, without offset or
deduction and without previous demand therefor, the Basic Rent as annual rent
for each Lease Year. Notwithstanding the preceding sentence, no Basic Rent shall
be due or payable hereunder prior to the Rent Commencement Date. Basic Rent
shall be paid in equal monthly installments in advance on the first day of each
calendar month during the Lease Term occurring after the Rent Commencement Date.
The first installment of Basic Rent shall be paid on the Rent Commencement Date.
Subsequent installments of Basic Rent shall be paid on the first day of every
calendar month thereafter. Basic Rent for partial months at the beginning or end
of the Lease Term shall be pro-rated and paid on the Rent Commencement Date and
the first day of the calendar month in which the Stated Expiration Date is to
occur.
4.02. Computation of Basic Rent. The Basic Rent for each of the first five (5)
Lease Years shall be as stated in Article 1.01 hereof. Notwithstanding the
preceding sentence, no Basic Rent shall be due or payable hereunder, nor shall
any Basic Rent accrue, prior to the Rent Commencement Date. The Basic Rent for
each Lease Year in the Extension Period shall be the greater of (i) Basic Rent
stated in Article 1.01 hereof, or (ii) the Fair Rental Value thereof determined
in accordance with Section 3.03 hereof. Basic Rent so determined shall be
exclusive of (and in addition to) amounts due hereunder for Taxes, Operating
Expenses and estimated costs of electrical service.
4.03. Late Penalty. Tenant agrees to pay a late charge of one and one-half (1
1/2%) percent per month of any monthly rental payment which is not made on or
before the 10th day of the month in which it is due. In addition, Tenant agrees
to pay Landlord's reasonable collection fees (including legal expenses) in the
event that Tenant fails to pay Rent when due.
ARTICLE 5
Use of Premises
5.01. Use Restricted. The Premises may be used for the Permitted Uses and for no
other purpose. No improvements may be made in or to the Premises except as
otherwise provided in this Lease.
5.02 Hazardous Materials. Tenant shall not (either with or without negligence)
cause or permit the escape, disposal or release of any biologically or
chemically active or other hazardous substances, or materials. Tenant shall not
allow the storage or use of such substances or materials in any manner not
sanctioned by law or by the highest standards prevailing in the industry for the
storage and use of such substances or materials, nor allow to be brought into
the Building any such materials or substances except to use in the ordinary
course of Tenant's business, and then only after written notice is given to
Landlord of the identity of such substances or materials. Without limitation,
hazardous substances and materials shall include those described in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601 et seq., the
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Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901 et
seq., any applicable state or local laws and the regulations adopted under these
acts. If, any lender or governmental agency shall ever require testing to
ascertain whether or not there has been any release of hazardous materials as a
direct result of Tenant's acts or omissions, then the reasonable costs thereof,
including but not limited to engineering and legal fees, shall be paid by Tenant
to Landlord, upon demand as additional charges if such requirement applies to
the Premises. In addition, Tenant shall execute affidavits, representations and
the like from time to time at Landlord's request concerning Tenant's best
knowledge and belief regarding the presence of hazardous substances or materials
on the Premises. In all events, Tenant shall indemnify Landlord in the manner
elsewhere provided in this lease from any release of hazardous materials on the
Premises occurring while Tenant is in possession, or elsewhere if determined by
lawful authority to be caused by Tenant or persons acting under Tenant. The
within covenants shall survive the expiration or earlier termination of the
lease term. The Tenant shall not be responsible for any remedial action or
expense necessary to correct any release of hazardous materials, substances or
oil on the Land, the Premises or the premises adjacent to the land which took
place prior to the Commencement Date. The costs of any such remedial action for
such prior release shall be borne entirely by Landlord and shall not be included
in Operating Expenses.
ARTICLE 6
Operating Expenses
6.01. Operating Expenses. If with respect to any Calendar Year, Tenant's Share
of Operating Expenses exceeds the Operating Expense Base, Tenant shall pay to
Landlord the amount of each such excess. Any amount due with respect to this
Section 6.01 shall be due on the date which is thirty (30) days after receipt by
the Tenant of the statement described in Section 6.02 hereof. If said payment is
not made within thirty (30) days Tenant agrees to pay a late charge of 1 1/2%
per month.
6.02. Annual Statement of Additional Rent Due. Within a reasonable time after
the end of each Calendar Year, Landlord shall render to Tenant a statement,
prepared in accordance with generally accepted accounting practices, showing
(i) for the Calendar Year just ended (a) Taxes and (b) Operating Expenses and
(ii) for the then current Calendar Year, an estimate for (a) Operating Expenses
and (b) Tenant's obligation under Section 6.01.
6.03. Monthly Payments of Additional Rent. Tenant shall pay to Landlord in
advance for each calendar month of the Lease Term falling between receipt by
Tenant of the statement described in Section 6.02 and receipt by Tenant of the
next such statement, as Additional Rent an amount equal to 1/12th of Tenant's
estimated obligation under Section 6.01 shown thereon. Any amounts due shall be
paid in advance on the first day of each calendar month during the Lease Term.
Tenant agrees to pay a late charge of one and one half (1 1/2%) percent per
month of any Additional Rent payment which is not made on or before the 10th day
of the month in which it is due. In addition, Tenant agrees to pay Landlord's
reasonable collection fees (including legal expenses) in the event that Tenant
fails to pay any Additional Rent when due. The amount due under this Section
6.03 shall be paid with Tenant's monthly payments of Basic
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Rent and shall be credited by Landlord to Tenant's obligations under Section
6.01. If the total amount paid hereunder exceeds the amount due under such
Section, such excess shall be credited by Landlord against the monthly
installments of Additional Rent next falling due or refunded to Tenant upon the
expiration or termination of this Lease, even upon termination due to Tenant's
default, unless it is determined that Tenant owes Landlord more than such
reimbursable amount as a result of such default.
6.04. Accounting Periods. Landlord shall have the right from time to time to
change the periods of accounting hereunder to any annual period other than a
Calendar Year, and upon any such change, all items referred to in this Article 6
shall be appropriately apportioned. In all statements rendered under Section
6.02, amounts for periods partially within and partially without the accounting
periods shall be appropriately apportioned, and any items which are not
determinable at the time of a statement shall be included therein on the basis
of Landlord's estimate and with respect thereof Landlord shall render promptly
after determination a supplemental statement and appropriate adjustment shall be
made according thereto.
6.05. Abatement of Taxes. Landlord may at any time and from time to time make
application to the appropriate Governmental Authority for an abatement of Taxes.
Landlord shall make such an application at any time tenants occupying more than
60% of the Rentable Area of the Building under written Occupancy Arrangements
directly with the Landlord request that Landlord do so. If (i) such an
application is successful and (ii) Tenant has made any payment in respect of
Taxes pursuant to this Article 6 for the period with respect to which the
abatement was granted, Landlord shall (a) deduct from the amount of the
abatement all expenses incurred by it in connection with the application (b) pay
to Tenant Tenant's Share (adjusted for any period for which Tenant had made a
partial payment) of abatement, with interest, if any, paid by the Governmental
Authority on such abatement and (c) retain the balance, if any. Landlord will
adjust the tax portion of the operating expense base to reflect any abatement.
ARTICLE 7
Improvements, Repairs, Additions, Replacements
7.01. Preparation of the Premises. Landlord shall do Landlord's Work. All other
work must be of a quality equal to or better than the Building Standard Tenant
Finishes. Landlord shall also do the work described in the Working Drawings,
subject to the provisions of the Work Letter. If (i) the cost of such work
exceeds Landlord's Contribution or (ii) Landlord further agrees to do, at
Tenant's request, any Special Work, Tenant shall pay the amount of Tenant's Cost
to Landlord in accordance with the Work Letter. If Tenant delays Landlord's work
for any reason including but not limited to Tenants delays in providing plans or
change orders in work to be completed, then the rent commencement date shall be
adjusted to reflect said delays and rent shall commence on an earlier date
reflecting the number of days Tenant's delay has caused.
7.02. Tenant's Access to the Premises. Tenant and Tenant's agents, at Tenant's
sole risk, may, with Landlord's prior consent, enter the Premises prior to the
Term Commencement Date in order to do such work as may be required to make the
Premises ready for Tenant's use and
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occupancy thereof. If Landlord permits such entry prior to the Term Commencement
Date, such permission shall be conditioned upon Tenant and Tenant's agents,
contractors, workmen, mechanics, suppliers and invitees, working in harmony with
Landlord and the general contractor and with other tenants and occupants of the
Building. If at any time such entry shall cause or threaten to cause disharmony
or otherwise interfere with the orderly completion or operation of the Building,
Landlord shall have the right to withdraw such permission upon twenty-four (24)
hours written notice to Tenant. Any such entry into and occupation of the
Premises shall be deemed to be under all of the terms, covenants, conditions and
provisions of this Lease except the covenant to pay Rent. Landlord shall not be
liable in any way for any injury, loss or damage which may occur to any of
Tenant's work and installations made in the premises or to properties placed
therein prior to the Term Commencement Date, the same being at Tenant's sole
risk.
7.03. Alterations and Improvements. Landlord shall install a sign on the
Premises, in accordance with Landlord's signage program for the Building,
stating Tenant's name, and shall also list Tenant's name on the building
directory. Tenant may install a sign immediately outside the Premises, subject
to Landlord's approval which shall not be unreasonably withheld or delayed.
Tenant shall not make alterations or additions to the Premises except in
accordance with plans and specifications therefor first approved by Landlord.
Tenant shall not hang shades, curtains, signs, awnings or other materials,
attach any materials to or make any change in the appearance of any glass
visible from outside of the Premises, add any window treatment of any kind or
make improvements or install furniture visible from outside of the Premises,
without Landlord's prior written consent. Without limitation, Landlord shall not
be deemed unreasonable for withholding approval of any alterations or additions
which would (a) delay completion of the Premises or the Building, or (b) require
unusual expense to readapt the Premises to normal office use upon termination of
this Lease or increase (i) the cost of (a) construction or (b) insurance or (ii)
Taxes. All alterations and additions shall be part of the Premises unless and
until Landlord shall specify the same for removal in a notice delivered to
Tenant on or before the Lease Termination Date. All of Tenant's alterations and
additions and installation of furnishings shall be performed by Landlord or it's
agent at competitive costs, unless approved otherwise by Landlord.
7.04. Maintenance and Repair. (a) Landlord shall maintain and repair all
structural portions of the Building, including, the roof, the foundation and all
support walls, columns and exterior facings, unless such repairs are due to the
fault or negligence of Tenant or its servants, agents, employees, licensees or
invitees.
(b) Landlord shall maintain and repair all floors, ceilings, window and door
frames, conduits and pipes and the plumbing, electrical, heating and air
conditioning systems of the Building as well as all Common Areas, unless such
repairs are due to the fault or negligence of Tenant or of its servants, agents,
employees, licensees or invitees.
(c) Landlord shall maintain and repair all exterior areas of the Property,
including the watering, cutting and pruning of grass and shrubs in landscaped
areas, the removal of snow, ice, refuse and debris from the sidewalks, walkways
and parking areas of the Property and the
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striping, repairing and lighting of said parking and walkway areas, unless such
repairs are due to the fault or negligence of Tenant or its servants, agents,
employees, licensees or invitees.
(d) Except for repairs which are Landlord's express responsibility as set forth
in Section 8.01, Tenant shall keep the Premises in the same condition and repair
as they were in at the beginning of the Term, reasonable wear and tear, damage
by fire or other casualty, or act or omission of Landlord or its employees or
agents and Taking by eminent domain excepted. Tenant shall replace any glass
which may be damaged or broken with glass of the same quality at Tenant's
expense (if caused by the action of Tenant or its employees or agents). Tenant,
upon vacating the Premises, shall shampoo all carpets. Tenant further agrees to
clean and repair walls, ceilings and millwork to Landlord's satisfaction.
(e) Tenant shall make no alterations, improvements, or additions to the Premises
of a structural nature. Tenant may make only non-structural alterations and only
after obtaining Landlord's prior written consent. All such alterations by Tenant
shall be done in good and workmanlike manner and by Landlord or its Affiliates
at competitive costs. Tenant agrees to pay for Landlord's reasonable supervision
expenses in the event that Landlord consents to Tenant hiring an outside
contractor to make any alterations or improvements to Tenant's Premises. At the
expiration or other termination of this Lease, Landlord shall have the option to
require Tenant either to restore in whole or in part the Premises to the
condition in which they were in at the beginning of the Term or to have the
demised premises remain in their altered condition with all improvements and
additions becoming the property of the Landlord, except as to improvements or
additions which are personal property of Tenant and are removable without damage
to the Premises.
(f) Tenant covenants that it will permit Landlord and its agents to examine the
Premises at reasonable times, and that it will permit Landlord to enter the
Premises without charge or reduction in rent to make such repairs, improvements,
alterations or additions as may be required in order to comply with the
requirements of this Lease or of any public authority having jurisdiction, or to
make repairs which Tenant may have failed promptly to make pursuant to Tenant's
covenants hereunder. If such work is not of an emergency nature, it shall be
done only after reasonable notice to Tenant and in such a manner as will least
interfere with Tenant's operations.
7.05. Redelivery. On the Lease Termination Date, Tenant shall quit and surrender
the Premises free and clear of all tenants, occupants, liens, and encumbrances
holding by, through or under or caused by Tenant, as the case may be. Tenant
shall, subject to the provisions of Articles 17 and 18 hereof, surrender the
Premises to Landlord broom clean and in good condition and repair (ordinary wear
and tear, damage by fire or casualty only excepted) with all damages occasioned
by Tenant's removal of Tenant's fixtures or equipment repaired to Landlord's
satisfaction.
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ARTICLE 8
Building Services
8.01. Building Services. Landlord shall furnish, or cause to be furnished,
during the Lease Term the Basic Services.
8.02. Other Janitors. No persons shall be employed by Tenant to do janitorial
work in the Premises and no persons other than the janitors of the Building
shall clean the Premises unless Landlord shall give its written consent thereto.
Any person employed by Tenant with Landlord's consent to do janitorial work
shall, while in the Building, either inside or outside the Premises, be subject
to and under the control and direction of the superintendent of the Building
(but not as agent or servant of said superintendent or of Landlord).
8.03. Additional Services. Tenant will pay the Landlord a reasonable charge for
any extra cleaning (including periodic shampooing of carpets as needed) of the
Premises required because of the carelessness or indifference of Tenant and for
any Additional Services rendered at the request of Tenant. If the cost of
cleaning the Premises shall be increased due to the installation in the
Premises, at Tenant's request, of any unique or special materials, finish or
equipment, Tenant shall pay the Landlord an amount equal to such increase in
cost. All charges for Additional Services shall be due and payable within ten
(10) days of the date on which they are billed.
8.04. Limitations on Landlord's Liability. Except as provided in Section 25.01
hereof, Landlord shall not be liable in damages, nor in default hereunder, for
any failure or delay in furnishing any Basic Service or Additional Service when
such failure or delay is occasioned by Force Majeure or by the act or Default of
Tenant.
ARTICLE 9
Tenant's Particular Covenants
9.01. Pay Rent. Tenant shall pay when due all Rent, Additional Rent and, all
charges of Landlord for Additional Services rendered to the Premises. In
addition, Tenant agrees to pay Landlord's reasonable collection fees (including
legal expenses) in the event that Tenant fails to pay rent when due. If Tenant
is ever two (2) months behind in rent payments at any time all of Tenant's
options shall become null and void.
9.02. Occupancy of the Premises. Tenant shall occupy the Premises continuously
from the Term Commencement Date for the Permitted Uses only. Tenant shall not
(i) injure or deface the Premises or the Building, (ii) install any sign in or
on any window, demising wall or Common Area, (iii) permit in the Premises any
inflammable fluids or chemicals not reasonably related to the Permitted Uses nor
(iv) permit any nuisance or any use thereof which is improper, offensive,
contrary to any Legal Requirement or Insurance Requirement or liable to render
necessary any alteration or addition to the Building. Tenant agrees to give
Landlord at least five (5) days prior written notice before moving any furniture
or equipment into the Building or prior to vacating the Premises.
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9.03. Rules and Regulations. Tenant shall not obstruct in any manner any portion
of the Building or the Land. Tenant will comply with all Rules and Regulations.
9.04. Safety. Tenant shall keep the Premises equipped with all safety appliances
required by Legal Requirements or Insurance Requirements because of any
particular use made by Tenant. Tenant shall procure all Authorizations so
required because of such use and, if requested by Landlord, shall do any work so
required because of such particular use, it being understood that the foregoing
provisions shall not be construed to broaden in any way the Permitted Uses.
9.05. Equipment. Tenant shall not place a load upon the floor of the Premises
exceeding the live load for which the floor has been designed; and shall not
move any safe or other heavy equipment in, about or out of the Premises except
in such manner and at such time as Landlord shall in each instance authorize.
Tenant shall isolate and maintain all of Tenant's business machines and
mechanical equipment which cause or may cause air-borne or structure-borne
vibration or noise, whether or not it may be transmitted to any other premises
so as to eliminate such vibration or noise.
9.06. Electrical Equipment. Tenant shall not, without prior written notice to
Landlord in each instance (i) connect to the Building electric distribution
system anything other than normal office equipment or (ii) operate such
equipment on a regular basis beyond normal Building operating hours. Tenant's
use of electrical energy in the Premises shall not at any time exceed the
capacity of any of the electrical conductors or equipment in or otherwise
serving the Premises. Tenant shall not, without prior written notice to Landlord
in each instance, connect to the Building electric distribution system any
fixtures, appliances or equipment which operate on a voltage in excess of 120
volts nominal or make any alteration or addition to the electric system of the
Premises.
9.07. Pay Taxes. Tenant shall pay promptly when due all taxes upon its personal
property (including, without limitation, fixtures and equipment) in the Premises
to whomsoever assessed.
9.08. Financials. Tenant shall provide Landlord with its most recent audited
financials within ten (10) days of such request.
ARTICLE 10
Requirements of Public Authority
10.01. Legal Requirements. Tenant shall, at its own cost and expense, promptly
observe and comply with all Legal Requirements relating to its particular use of
the Premises and shall act in conformity with all applicable laws, ordinances,
by-laws, rules and regulations of the appropriate governmental authorities.
Tenant shall pay all costs, expenses, liabilities, losses, damages, fines,
penalties, claims and demands, that may in any manner arise out of or be imposed
because of the failure of Tenant to comply with the covenants of this Article
10. Landlord represents that the Land and the Building are not currently in
violation under any
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Federal, State and/or municipal codes, ordinances, zoning laws or regulations.
Landlord is responsible for making the Building comply with the American with
Disabilities Act of 1990 and the regulations adopted pursuant thereto.
10.02. Contests. Tenant shall have the right to contest by appropriate legal
proceedings diligently conducted in good faith, in the name of the Tenant, or
Landlord (if legally required), or both (if legally required), without cost,
expense, liability or damage to Landlord, the validity or application of any
Legal Requirement and, if compliance with any of the terms of any such Legal
Requirement may legally be delayed pending the prosecution of any such
proceeding, Tenant may delay such compliance therewith until the final
determination of such proceeding.
ARTICLE 11
Covenant Against Liens
11.01. Mechanics Liens. Landlord's right, title and interest in the Premises or
the Land or the Building shall not be subject to or liable for liens of
mechanics or materialmen for work done on behalf of Tenant in connection with
improvements to the Premises. Notwithstanding such restriction, if because of
any act or omission of Tenant, any mechanic's lien or other lien, charge or
order for payment of money shall be filed against any portion of the Premises or
the Land or the Building, Tenant shall, at its own cost and expense, cause the
same to be discharged of record or bonded within ninety (90) days after the
filing thereof.
11.02. Right to Discharge. Without otherwise limiting any other remedy of
Landlord for default hereunder, if Tenant shall fail to cause such liens to be
discharged of record or bonded within the aforesaid ninety (90) day period or to
satisfy such liens within ninety (90) days after any judgment in favor of such
lien holders from which no further appeal might be taken then Landlord shall
have the right to cause the same to be discharged. All amounts paid by Landlord
to cause such liens to be discharged shall constitute Additional Rent.
ARTICLE 12
Access to Premises
12.01. Access. Landlord or Landlord's agents and designees shall have the right,
but not the obligation, to enter upon the Premises at all reasonable times
during ordinary business hours to examine same and to exhibit the Premises to
prospective purchasers and tenants given Landlord provides Tenant with
sufficient advanced notice, but in the latter case only during the last nine (9)
months of the Lease Term.
ARTICLE 13
Assignment and Subletting:
Occupancy Arrangements
13.01. Subletting and Assignment. Tenant shall not (either voluntarily or by
operation of law) enter (nor may Landlord cause, suffer or permit Tenant to
enter) into a Prohibited Occupancy Arrangement, and any Prohibited Occupancy
Arrangement shall be absolutely void and
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ineffective for any purpose. Tenant shall not enter into any other Occupancy
Arrangement, either voluntarily or by operation of law, (other than with a
Person who is a Subsidiary Company or Affiliate of Tenant) without the prior
written consent of Landlord, such consent not to be unreasonably withheld or
delayed. Landlord may withhold approval of any Subtenant if Tenant is in default
under the Lease or if the Subtenant is one of Landlord's existing Tenants.
If the Landlord consents to such Occupancy Arrangement Tenant shall remain
liable for the payment and performance of the terms and covenants of this Lease.
Tenant agrees to disclose the terms of any sublease arrangement to Landlord
prior to signing said sublease. Landlord shall have the right of first refusal
on any sublease space under the same terms and conditions as offered to the
potential Subtenant. If Tenant enters into such an occupancy Arrangement, Tenant
shall pay to Landlord when received fifty percent (50%) of the Excess Rent (as
defined below), received in respect of such Occupancy Arrangement. Tenant agrees
to pay Landlord's reasonable legal fees associated with any sublease or
assignment.
Excess Rent shall be the amount by which (a) rent received from such subtenant
less all costs incurred by Tenant in procuring such subtenant, including without
limitations, broker's and attorney's fees and commissions exceeds (b) the Rent.
ARTICLE 14
Indemnity
14.01. Tenant's Indemnity. To the fullest extent permitted by law, Tenant shall
indemnify and save harmless Landlord from and against any and all liability,
damage, penalties or judgments and from and against any claims, actions,
proceedings and expenses and costs in connection therewith, including reasonable
counsel fees arising from injury to person or property sustained by anyone in
and about the Premises or the Building or the Land resulting from any act or
omission of Tenant, or Tenant's officers, agents, servants, employees,
contractors, sublessees or invitees. Tenant shall, at its own cost and expense,
defend any and all suits or actions (just or unjust) in which Landlord may be
impleaded with others upon any such above-mentioned matter, claim or claims,
except as may result from the acts as set forth in Section 14.02. All
merchandise, furniture, fixtures and property of every kind, nature and
description of Tenant or Tenant's employees, agents, contractors, invitees,
visitors or guests which may be in or upon the Premises, the Land or the
Building during the Lease Term shall be at the sole risk and hazard of Tenant,
and that if the whole or any part thereof shall be damaged, destroyed, stolen or
removed by reason of any cause or reason whatsoever, other than the negligence
or willful default of Landlord, no part of said damage or loss shall be charged
to or borne by Landlord.
14.02. Landlord's Liability. To the fullest extent permitted by law, Landlord
shall indemnify and save harmless Tenant from and against any and all liability,
damage, penalties or judgments and from and against any claims, actions,
proceedings and expenses and costs in connection therewith, including reasonable
counsel fees arising from injury to person or property sustained by anyone in
and about the Premises or the Building or the Land resulting from any act or
omission of Landlord, or Landlord's officers, agents, servants, employees,
contractors, sublessees or invitees. Landlord shall, at its own cost and
expense, defend any and all suits
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or actions (just or unjust) in which Tenant may be impleaded with others upon
any such above-mentioned matter, claim or claims. All merchandise, furniture,
fixtures and property of every kind, nature and description of Tenant or
Tenant's employees, agents, contractors, invitees, visitors or guests which may
be in or upon the Premises, the Land or the Building during the Lease Term shall
be at the sole risk and hazard of Tenant, and that if the whole or any part
thereof shall be damaged, destroyed, stolen or removed by reason of any cause or
reason whatsoever, other than the negligence or willful default of Landlord, no
part of said damage or loss shall be charged to or borne by Landlord.
ARTICLE 15
Insurance
15.01. Liability Insurance. Tenant shall provide or cause to be provided at its
expense, and keep in force during the Lease Term, general comprehensive
liability insurance in a good and solvent insurance company or companies
licensed to do business in the Commonwealth of Massachusetts, selected by
Tenant, and reasonably satisfactory to Landlord, and in an amount reasonably
required by Landlord but in any event not less than One Million Dollars
($1,000,000.00) with respect to injury or death to any one person and One
Million Dollars ($1,000,000.00) with respect to injury or death to more than one
person in any one accident or other occurrence and One Hundred Thousand Dollars
($100,000.00) with respect to damages to property. Such policy or policies shall
include Landlord as an additional insured. Tenant agrees to deliver certificates
of such insurance to Landlord as of the date hereof and thereafter not less than
ten (10) days prior to the expiration of any such policy. Such insurance shall
not be cancelable without ten (10) days' written notice to Landlord.
15.02. Casualty Insurance. Tenant shall cause its improvements to the Premises
to be insured for the benefit of Landlord and Tenant as their respective
interests may appear, against loss or damage by fire and customary extended
coverage in an amount equal to (i) the replacement value thereof, if insurance
in such amount is available, or (ii) the amount necessary to avoid the effect of
co-insurance provisions of the applicable policies. Certificates thereof shall
be delivered to Landlord. Landlord shall, at Tenant's cost and expense,
cooperate fully with Tenant and execute any and all consents and other
instruments and take all other actions necessary to obtain the largest possible
recovery. Landlord shall not carry any insurance concurrent in coverage and
contributing in the event of loss with any insurance required to be furnished by
Tenant hereunder if the effect of such separate insurance would be to reduce the
protection or the payment to be made under Tenant's insurance.
ARTICLE 16
Waiver of Subrogation
16.01. Waiver of Subrogation. All insurance policies carried by either party
covering the Premises, including but not limited to contents, fire and casualty
insurance, shall expressly waive any right on the part of the insurer to make
any claim against the other party. The parties hereto agree that their policies
will include such waiver clause or endorsement.
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16.02. Waiver of Rights. Landlord and Tenant each hereby waive all claims,
causes of action and rights or recovery against the other and their respective
partners, agents, officers and employees, for any damage to or destruction of
persons, property or business which shall occur on or about the Premises and
shall result from any of the perils insured under any and all policies of
insurance maintained by Landlord and Tenant, regardless of cause, including the
negligence and intentional wrongdoing of either party and their respective
agents, officers and employees but only to the extent of recovery, if any, under
such policy or policies of insurance; provided, however, that this waiver shall
be null and void to the extent that any such insurance shall be invalidated by
reason of this waiver.
ARTICLE 17
Damage or Destruction
17.01. Substantial Damage. If the Building or any part thereof shall be damaged
by fire or other casualty to the extent that substantial alteration or
reconstruction of the Building shall, in Landlord's or Tenant's opinion, be
required (whether or not the Premises shall have been damaged) or if as a result
any mortgagee of the Building requires that Proceeds payable be used to retire
the mortgage debt, either Landlord or Tenant may, terminate this Lease by
notifying Tenant in writing of such termination within thirty (30) days after
the date of such damage. If this Lease is so terminated, Rent shall be abated as
of the date of such damage.
17.02. Restoration. If this Lease is not terminated pursuant to Section 17.01,
Landlord shall, proceed with reasonable diligence to repair and restore the
Building (subject to Force Majeure) to substantially the same condition in which
it was immediately prior to the occurrence of the casualty to the extent of
Landlord's Work and the value of Landlord's Contribution. Tenant shall have the
right to terminate this Lease if such restoration is not complete within ninety
(90) days after the date of such damage. Landlord shall not be required to
rebuild, repair, or replace any part of Tenant's furniture, furnishings or
fixtures or equipment. Landlord shall not be liable for any inconvenience or
annoyance to Tenant or injury to the business of Tenant resulting in any way
from such damage or the repair thereof, except that, Landlord shall allow Tenant
a fair diminution of Rent during the time and to the extent the Premises are
wholly or partially untenable.
The term "untenable" shall mean damage or destruction to the Premises or the
Building which shall prevent the Tenant from carrying on its business in
substantially the manner in which it has previously conducted such business at
the Premises.
ARTICLE 18
Eminent Domain
18.01. Total Taking. If the Premises or the Building should be the subject of a
Total Taking, then this Lease shall terminate as of the date when physical
possession of the Building or the Premises is taken by the condemning authority.
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18.02. Partial Taking. If there occurs a Partial Taking, Landlord (whether or
not the Premises are affected thereby) may terminate this Lease by giving
written notice thereof to Tenant within thirty (30) days after the right of
election accrues, in which event this Lease shall terminate as of the date when
physical possession of such portion of the Building or Premises is taken by the
condemning authority. If upon any such Partial Taking this lease is not
terminated, Rent shall be abated by an amount representing that part of the Rent
allocated to the portion of the Premises so taken and Landlord shall, at
Landlord's sole expense, restore and reconstruct the Building and the Premises
to substantially their former condition to the extent that the same, in
Landlord's judgment, may be feasible, but such work shall not exceed the scope
of Landlord's Work and the value of Landlord's Contribution.
18.03. Awards and Proceeds. All Proceeds payable in respect of a Taking shall be
the property of Landlord. Tenant hereby assigns to Landlord all rights of Tenant
in or to such Proceeds, provided that Tenant shall be entitled to separately
petition the condemning authority for a separate award for its moving expenses
and trade fixtures but only if such a separate award will not diminish the
amount of Proceeds payable to Landlord.
ARTICLE 19
Quiet Enjoyment
19.01. Landlord's Covenant. Provided that an Event of Default has not occurred
and is not then continuing, Tenant shall, subject to the Permitted Exceptions,
quietly have and enjoy the Premises during the Lease Term, without hindrance or
molestation from any Person lawfully claiming by, through or under Landlord.
19.02. Subordination. This Lease and all terms, covenants and provisions thereof
and all rights, remedies and options of Tenant under this Lease as the same may
hereafter be modified, amended or extended are and shall remain subject and
subordinate to any mortgage now or hereafter on the Building and to each advance
made or hereafter to be made under any mortgage, and to all renewals,
modifications, consolidations, replacements and extensions thereof and all
substitutions therefor. This Section 19.02 shall be self-operative and no
further instrument of subordination shall be required. In confirmation of such
subordination, Tenant shall execute and deliver promptly any certificate that
Landlord or any mortgagee may request in form satisfactory to Tenant. Tenant
waives the provisions of any statute or rule of law now or hereafter in effect
which may give or purport to give Tenant any right to terminate or otherwise
adversely affect this Lease or Tenant's obligations in the event of any
foreclosure proceeding is prosecuted or completed or in the event the Land, the
Building or Landlord's interest therein is sold at a foreclosure sale or by deed
in lieu of foreclosure. In the event that any mortgagee shall succeed to the
interest of Landlord then, this Lease shall nevertheless continue in full force
and effect and Tenant shall and does hereby agree to (1) attorn to such
mortgagee and to recognize such mortgagee as its Landlord, and upon request of
such mortgagee, Tenant shall execute and deliver to such mortgagee an agreement
of attornment in a form satisfactory to Tenant, or, at such mortgagee's option,
(2) enter into a new lease with such mortgagee, as Landlord, for the remaining
term of this Lease and otherwise on the identical terms and conditions and with
the same options, if any, then remaining, including all
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modifications set forth in this Article provided that, notwithstanding anything
contained in this Article, the provisions of any mortgage held by such mortgagee
encumbering the Land and/or the Building (a "Mortgage") shall govern with
respect to the proceeds of any award in condemnation or of any fire or casualty
insurance policies affecting the Building.
19.03. Notice to Mortgagee. No act or failure to act on the part of Landlord
which would entitle Tenant under the terms of this Lease, or by law, to be
relieved of Tenant's obligations hereunder or to terminate this Lease, shall
result in a release or termination of such obligations or a termination of this
Lease unless Tenant shall have first given written notice of Landlord's act or
failure to act to Landlord's mortgagees of record, if any, specifying the act or
failure to act on the part of Landlord which could or would give basis to
Tenant's rights; and such mortgagees, after receipt of such notice, have failed
or refused to correct or cure the condition complained of within a reasonable
time thereafter. "Reasonable time" as used above shall mean a period of not more
than thirty (30) Calendar Days.
19.04. Other Provisions Regarding Mortgagees. (a) If this Lease or the Rent due
hereunder is assigned to a mortgagee as collateral security for a loan, no such
mortgagee shall be deemed to have assumed any of Landlord's obligations
hereunder solely as a result of said assignment. A mortgagee to whom this Lease
has been so assigned shall be deemed to have assumed such obligations only if
(i) by the terms of the instrument of assignment such mortgagee specifically
elects to assume such obligations and (ii) such mortgagee has (a) foreclosed its
mortgage (b) accepted a deed in lieu thereof, or (c) taken possession of the
Premises by entry or otherwise. Even if such mortgagee or its designee so
assumes the obligations of Landlord hereunder, (i) any such obligation under
Section 24.01 to return the Security Deposit to the Tenant shall be limited to
the amount actually received by the mortgagee, or its designee with respect
thereto, (ii) such mortgagee or its designee will be liable for breaches of any
of Landlord's obligations hereunder only to the extent such breaches occur
during the period of ownership by the mortgagee or its designee after
foreclosure (or any conveyance by a deed in lieu thereof), (iii) such mortgagee
or its designee shall not have any liability to Tenant in the event of damage or
destruction to the Building or the Premises, for any repairs, replacements,
rebuilding or restoration, unless required to be made under the provisions of
this Lease and in any event, except as can reasonably be accomplished from the
deductible and net proceeds of insurance actually received by, or made available
to such mortgagee or its designee and not applied in reduction and/or repayment
of the loan secured by any Mortgage and (iv) such mortgagee or its designee
shall not have any liability to Tenant for or be subject to any credits,
offsets, abatements, or claims against the rent under this Lease accruing to
Tenant as a result of any acts or omissions of Landlord, its successors or
assigns, occurring or committed prior to the date upon which such mortgagee or
its designee shall become the owner of or obtain possession or control of the
Building and the Land.
(b) If required by any such mortgagee, Tenant shall promptly join in any
non-disturbance agreement to indicate its concurrence with the provisions
hereof, in a form satisfactory to Tenant.
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(c) If any such mortgagee or its designee shall succeed to the interest of
Landlord, or any successor to Landlord, any such mortgagee or its designee shall
have no personal liability as successor to Landlord and Tenant shall look only
to the estate and property of any mortgagee or its designee in the Land and in
the Building for the satisfaction of Tenant's remedies for the collection of a
money judgment (or other judicial process) requiring the payment of money in the
event of any default by any such mortgagee or its designee, as Landlord under
the Lease, and no other property or assets of any such mortgagee or its designee
shall be subject to levy, execution or other enforcement procedure for the
satisfaction of Tenant's remedies under or with respect to this Lease, the
relationship of Landlord and Tenant thereunder or Tenant's use or occupancy of
the Premises.
(d) Tenant agrees that no prepayment of rent or additional rent due under this
Lease of more than one month in advance, and no amendment, modification,
surrender or cancellation of this Lease shall be binding upon or as against any
such mortgagee whose name shall have been provided to Tenant in writing prior to
such amendment, modification, surrender or cancellation and as Landlord under
this Lease if it succeeds to that position, unless consented to in writing by
any such mortgagee.
(e) Any such mortgagee shall not be obligated to undertake or complete any
specific renovations or additions to the Premises specifically provided for in
this Lease to be performed by Landlord or pay the cost of any construction or
other special landlord work (either now or concurrently under way or hereafter
to be undertaken, whether or not the same is set forth in this Lease or any
other agreement).
(f) In the event any mortgagee requires, as a condition to providing any
construction or permanent financing or any refinancing for the Land and/or the
Building, that modifications to this Lease be obtained, and provided that such
modifications (i) are reasonable, (ii) do not adversely affect in a material
manner Tenant's use of the Premises as herein permitted, or Tenant's rights
hereunder and (iii) do not increase the Rent and other sums to be paid by Tenant
or other of Tenant's obligations hereunder, Landlord may submit to Tenant a
written amendment to this Lease incorporating such required changes, and Tenant
hereby covenants and agrees to execute and deliver such amendment to Landlord
within fifteen (15) days of Tenant's receipt thereof.
ARTICLE 20
Defaults: Events of Default
20.01. Defaults. The following shall, if any requirement for notice or lapse of
time or both has not been met, constitute Defaults, and, if such conditions have
been met, constitute Events of Default hereunder:
(1) The occurrence of any event set forth in Article 21 hereof;
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(2) The failure of Tenant to pay rent when the same shall be due and payable and
the continuance of such failure for a period of ten (10) days after receipt by
Tenant of notice in writing from Landlord specifying such failure;
(3) The failure of Tenant to observe any covenant made by it in Sections 13.01,
15.01 and 25.03 hereof; and
(4) The failure of Tenant to keep, observe or perform any of the other
covenants, conditions and agreements herein contained on Tenant's part to be
kept, observed or performed and the continuance of such failure without the
curing of same for a period of twenty (20) days after receipt by Tenant of
notice in writing from Landlord specifying in reasonable detail the nature of
such failure.
(5) If Tenant defaults under the terms of this Lease all of Tenant's options
contained in this Lease shall become null and void.
20.02. Tenant's Best Efforts. In the event that the Default of which Landlord
gives notice is of such a nature that it cannot be cured within such twenty (20)
day period, then such Default shall not be deemed to continue so long as Tenant,
after receiving such notice, proceeds to cure the Default as soon as reasonably
possible and continues to take all steps necessary to complete the same within a
period of time which, under all prevailing circumstances, shall be reasonable.
No Default shall be deemed to continue if and so long as Tenant shall be so
proceeding to cure the same in good faith or be delayed in or prevented from
curing the same by reason of Force Majeure.
ARTICLE 21
Insolvency
21.01. Insolvency. If (1) there occurs with respect to Tenant an Insolvency or
(2) any execution or attachment is issued against Tenant or any of its property
and as a result thereof the Premises are taken or occupied by some Person other
than the Tenant, except as may herein be permitted, then an Event of Default
hereunder shall be deemed to have occurred so that the provisions of Article 22
hereof shall become effective and Landlord shall have the rights and remedies
provided for therein.
ARTICLE 22
Landlord's Remedies: Damages on Default
22.01. Landlord's Remedies. If an Event of Default shall occur and be
continuing, Landlord may, at its option, give to Tenant a notice terminating
this Lease upon a date specified in such notice, which date shall be not less
than three (3) Business Days after the date of receipt by Tenant of such notice
from Landlord, and upon the date specified in said notice, the term and estate
hereby vested in Tenant shall cease and any and all other right, title and
interest of Tenant hereunder shall likewise cease without further notice or
lapse of time, as fully and with
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like effect as if the entire Lease Term has elapsed, but Tenant shall continue
to be liable to Landlord as hereinafter provided.
If such event of Default results from Tenant's failure to pay a charge for an
Additional Service pursuant to Section 8.03 hereof, Landlord may, without
further notice to Tenant, discontinue any or all of such Additional Services.
22.02. Surrender. Upon any termination of this Lease as the result of an Event
of Default, Tenant shall quit and peacefully surrender the Premises to Landlord.
Upon or at any time after any such termination, may without further notice,
enter the Premises and possess itself thereof by summary proceedings or
otherwise, and may dispossess Tenant and remove Tenant and all other Persons and
property from the Premises and may have, hold and enjoy the Premises and the
right to receive all rental income of and from the same.
22.03. Right to Relet. At any time or from time to time after any such
termination, Landlord may relet the Premises or any part thereof, in the name of
Landlord or otherwise, for such term or terms (which may be greater or less than
the period which would otherwise have constituted the balance of the Lease term)
and on such conditions (which may include concessions or free rent) as Landlord,
in its reasonable discretion, may determine and may collect and receive the
rents therefor. Landlord shall in no way be responsible or liable for any
failure to relet the Premises or any part thereof, or for any failure to collect
any rent due upon any such reletting. In the event of Tenant's default, Tenant
shall be liable to Landlord for all expenses including but not limited to legal,
brokerage, construction, vacancy, expenses associated with reletting, it's
construction and rent differential.
22.04. Survival of Covenants. No such termination of this Lease shall relieve
Tenant of its liability and obligations under this Lease and such liability and
obligations shall survive any such termination. Tenant shall indemnify and hold
Landlord harmless from all loss, cost, expense, damage or liability arising out
or in connection with such termination.
In the event of any such termination, Tenant shall pay to the Landlord the Rent
up to the date of such termination. Tenant shall also pay to Landlord, on
demand, as and for liquidated and agreed damages for Tenant's Default the
present value of:
(1) The aggregate Rent which would have been payable under this Lease by Tenant
from the date of such termination until the Stated Expiration Date minus the
fair rental value of the Premises, plus
(2) All of Landlord's reasonable estimate of expenses to be incurred in
connection with reletting the Premises, including, without limitation, all
repossession costs, brokerage commissions, legal expenses, reasonable attorneys'
fees, alteration costs, and expenses of preparation for such reletting.
If the Premises or any part thereof are relet by the Landlord before
presentation of proof of such liquidated damages to any court, commission or
tribunal, the amount of rent reserved
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upon such reletting shall be, prima facie, the fair and reasonable rental value
for the part or the whole of the Premises so relet during the term of the
reletting.
Nothing herein contained shall limit or prejudice the right of the Landlord to
prove 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.
22.05. Right to Equitable Relief. If there shall occur a Default or threatened
Default, Landlord shall be entitled to enjoin such default or threatened Default
and shall have the right to invoke any right and remedy allowed at law or in
equity or by statute or otherwise as though re-entry, summary proceedings, and
other remedies were not provided for in this Lease.
22.06. Right to Self Help; Interest On Overdue Rent. If an Event of Default
shall occur and be continuing, either Landlord or Tenant shall have the right,
but shall not be obligated, to enter upon the Premises and to perform such
obligation notwithstanding the fact that no specific provision for such
substituted performance by either Landlord or Tenant is made in this Lease with
respect to such Default. In performing such obligation, either Landlord or
Tenant may make any payment of money or perform any other act. The aggregate of
(i) all sums so paid by either Landlord or Tenant (ii) interest (at the rate of
1-1/2% per month or the highest rate permitted by law, whichever is less) on
such sum plus all Rent not paid when due and (iii) all necessary incidental
costs and expenses in connection with the performance of any such act by either
Landlord or Tenant, shall be deemed to be Rent under this Lease and shall be
payable to either Landlord or Tenant immediately upon demand. Either Landlord or
Tenant may exercise the foregoing rights without waiving any other of its rights
or releasing either Landlord or Tenant from any of its obligations under this
Lease.
22.07. Further Remedies. Upon any termination of this Lease pursuant to Section
22.01, or at any time thereafter, Landlord may, in addition to and without
prejudice to any other rights and remedies Landlord shall have at law or in
equity, re-enter the Premises, and recover possession thereof and may dispossess
any or all occupants of the Premises in the manner prescribed by the statute
relating to summary proceedings, or similar statutes; but Tenant in such case
shall remain liable to Landlord as hereinbefore provided. In the event of
Tenant's default under Article 20 or 21, Tenant shall be liable to Landlord for
the legal expenses incurred in the event of Tenant's default.
ARTICLE 23
Waivers
23.01. No Waivers. Failure of Landlord to complain of any act or omission on the
part of Tenant no matter how long the same may continue, shall not be deemed to
be a waiver by said Landlord of any of its rights hereunder. No waiver by
Landlord at any time, expressed or implied, of any breach of any provision of
this Lease shall be deemed a waiver of a breach of any other provision of this
Lease or a consent to any subsequent breach of the same or any
27
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other provision. No acceptance by Landlord of any partial payment shall
constitute an accord or satisfaction but shall only be deemed a partial payment
on account.
ARTICLE 24
Security Deposit
Tenant deposited $18,333.33 as security for the premises. Landlord may deduct
late penalties, past due Rent and damages from this security deposit. The
balance of said Security Deposit shall be fully refunded to Tenant within ten
(10) days of termination of this Lease.
ARTICLE 25
General Provisions
25.01. Force Majeure. In the event that Landlord or Tenant shall be delayed,
hindered in or prevented from the performance of any act required hereunder by
reason of Force Majeure, then performance of such act shall be excused for the
period of the delay and the period for the performance of any such act shall be
extended for a period equivalent to the period of such delay as well as rent
abated for the period of the delay.
25.02. Notices and Communications. All notices, demands, requests and other
communications provided for or permitted under this Lease shall be in writing,
either delivered by hand or sent by first-class mail, postage prepaid, to the
following addresses:
(a) if to Landlord at the address stated in Section 1.01 hereof, or at such
other address as the Landlord shall have designated in writing to the Tenant,
with a copy to such Persons as Landlord shall have designated in writing to
Tenant, or
(b) if to Tenant at the address stated in Section 1.01 hereof, or at such other
address as the Tenant shall have designated in writing to the Landlord, with a
copy to such Persons as Tenant shall have designated in writing to Landlord.
Any notice provided for herein shall become effective only upon and at the time
of receipt by the Person to whom it is given, unless such notice is mailed by
first-class registered or certified mail, in which case it shall be deemed to be
received on (i) the third Business Date following the mailing thereof or (ii)
the day of its receipt, if a Business Date, or the next succeeding Business Day,
whichever of (i) or (ii) shall be the earlier.
25.03. Certificates, Estoppel Letter. Either party shall, without charge, at any
time and from time to time hereafter, within ten (10) days after written request
of the other, certify to the best of Tenant's knowledge by written instrument
duly executed and acknowledged to any mortgagee or purchaser, or proposed
mortgagee or proposed purchaser, or any other Person specified in such request:
(a) as to whether this Lease has been supplemented or amended, and if so, the
substance and manner of such supplement or amendment, (b) as to the validity and
force and effect of this Lease, in accordance with its tenor as then
constituted, (c) as to the existence of any Default or Event of Default, (d) as
to the existence of any offsets,
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counterclaims or defenses thereto on the part of such other party, (e) as to the
Term Commencement Date and Stated Expiration Date, (f) Tenant is the owner and
holder of the Tenant's interest under this Lease, (g) the premises demised under
this Lease have been completed and Tenant has taken possession of the same on a
rent-paying basis, (h) all rents, additional rents and other sums due and
payable under this Lease have been paid in full for the date due and no rents,
additional rents or other sums payable under this Lease have been paid for more
than one (1) month in advance of the due date thereof; and (i) as to any other
matters as may reasonably be so requested. Any such certificate may be relied
upon by the party requesting it and any other Person to whom the same may be
exhibited or delivered, and the contents of such certificate shall be binding on
the party executing same.
Tenant shall in addition, within five (5) Business Days of the Term Commencement
Date, execute and deliver to Landlord a tenant estoppel letter substantially in
the form attached hereto as Exhibit B.
25.04. Holding Over. If Tenant occupies the Premises after the Lease Termination
Date without having entered into a new lease of the Premises with Landlord,
Tenant shall be a tenant-at-sufferance only subject to all of the terms and
provisions of this Lease at the greater of one and one-quarter of the then
effective Basic Rent or Fair Market Rent. Such a holding over, even if with the
consent of Landlord, shall not constitute an extension or renewal of this Lease.
25.05. Governing Law. This Lease and the performance thereof shall be governed,
interpreted, construed and regulated by the laws of the Commonwealth of
Massachusetts.
25.06. Partial Invalidity. If any term, covenant, condition or provision of this
Lease or the application thereof to any person or circumstance shall, at any
time or to any extent, be invalid or unenforceable, the remainder of this Lease,
or the application of such term or provision to persons or circumstances other
than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term, covenant, condition and provision of this Lease
shall be valid and be enforced to the fullest extent permitted by law.
25.07. Notice of Lease. The parties will at any time, at the request of either
one, promptly execute duplicate originals of an instrument, in recordable form,
which will constitute a Notice of Lease, setting forth a description of the
Premises, the Lease Term and any other portions thereof, excepting the rental
provisions, as either party may request.
25.08. Interpretation: Consents. The section headings used herein are for
reference and convenience only, and shall not enter into the interpretation
hereof. This Lease may be executed in several counterparts, each of which shall
be an original, but all of which shall constitute one and the same instrument.
The term "Landlord" whenever used herein, shall mean only the owner at the time
of Landlord's interest herein and upon any sale or assignment (other than as
collateral security for a loan) of the interest of Landlord herein, its
respective successors in interest and/or assigns shall, during the term of
ownership of its respective
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estates herein, be deemed to be Landlord and the liability of Landlord, if any,
hereunder shall in any event be limited to the Landlord's interest in the
Building.
Subject to the provisions of the third sentence of Section 7.05 and except for
the consents of Landlord required pursuant to the second sentence of Section
7.05 hereof, consents of approvals required or requested of either Landlord or
Tenant shall not be unreasonably withheld or delayed.
25.09. Entire Agreement. No oral statement or prior written matter shall have
any force or effect. This Agreement shall not be modified or canceled except by
a writing executed by all parties.
25.10. Parties. Except as herein otherwise expressly provided, the covenants,
conditions and agreements contained in this Lease shall be binding upon the
heirs, successors and assigns of the parties hereto.
25.11. Brokers. Tenant warrants that it has had no dealings with any broker or
agent in connection with this Lease other than Carleton G. Tarpinian of Saracen
Companies, Inc., Newton, Massachusetts or James F. Boudrout of Hunneman
Commercial Company. Boston, Massachusetts for whose services Landlord agrees to
pay. Landlord and Tenant covenant to hold harmless and indemnify each other from
and against any and all cost, expense or liability for any compensation,
commission or charges claimed by any other broker or agent with respect to or in
connection with this Lease or the negotiation thereof. In the event Tenant
renews this Lease, Tenant agrees that it will pay for it's agent should Tenant
choose to have representation.
25.12 Tenant agrees to pay for any plans, copies of plans or keys requested
after Tenant's occupancy of the Premises.
25.13 Premises. Tenant acknowledges review and acceptance of the Premises plan
and measurement thereof.
25.14 Security. Landlord will provide Tenant with locks and keys for it's
premises. Tenant will be responsible for securing it's premises and for
providing any additional security if contracted by Tenant. Landlord will not be
liable for burglary, theft or damage caused by unauthorized persons on the
property.
This Lease is subject to Lender's consent to this Lease within fifteen (15) days
of the execution date. If the Landlord fails to obtain the Lender's consent to
this Lease within said time period for any reason or for no reason, then the
obligations of the parties hereto shall cease upon written notification and a
copy of such refusal by Lender, by Landlord to Tenant, this Lease shall be of no
further force or effect, and neither party shall be liable to the other for any
damages resulting from the execution of this Lease.
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IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease as an
instrument under seal as of the day and year first above written.
LANDLORD: Wells Avenue Senior Holdings LLC
BY: Wells Avenue Senior Holdings Inc.
Its Managing Member
BY: /s/ Kurt W. Saraceno
-----------------------------------
Kurt W. Saraceno
TITLE: President
TENANT: Work Management Solutions
BY: /s/ John Lucas
-----------------------------------
TlTLE: President/CEO
-----------------------------------
DATE: 5/6/97
-----------------------------------
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EXHIBIT A
WELLS RESEARCH CENTER
LANDLORD'S SERVICES
I. CLEANING
A. Lobby and Common Areas (nightly)
1. Empty all trash receptacles; clean receptacle as needed.
2. Empty and wipe clean all cigarette urns and ashtrays; replace
sand and water as needed.
3. Vacuum all carpets.
4. Vacuum all floor mats.
5. Clean all entrance doors.
6. Clean and shine all mullions and metal work.
7. Dust all picture frames.
8. Dust all architectural or sculpted works or art.
9. Dust all furniture.
10. Clean building directory.
11. Clean all baseboards.
12. Vacuum elevator carpets; remove stains as needed.
13. Vacuum and wash all elevator tracks.
14. Clean, wash and shine all doors, walls, and metal work in
elevators.
15. Clean all exit signs, and hanging fixtures.
B. Office Areas (nightly)
1. Remove trash; replace liners as needed.
2. Wash out trash basket as needed.
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3. Empty and damp wipe all ashtrays.
4. Clean all blackboards when requested.
5. Dust all clothing closets, shelving and coat racks.
6. Clean all glass furniture tops, and display cases.
7. Vacuum all carpeting.
8. Vacuum all floor mats.
9. Dry mop all tile floors.
10. Remove waste to designated area.
11. Upon completion of work shut off lights and secure doors.
C. Office Areas (weekly or as needed)
1. Dust all desk tops, office furniture, picture frames, window
sills, horizontal surfaces.
2. Remove fingerprints from doors, walls, light switches.
3. Damp mop kitchen and eating area floors.
D. Office Areas (yearly)
1. Strip and wax kitchen and eating area floors.
2. Window cleaning twice yearly.
E. Lavatories (nightly)
1. Sweep and wash floors using a disinfectant cleaner.
2. Wash and polish all mirrors, shelves, brightwork, and enameled
surfaces.
3. Wash and shine all flushometers, piping, and toilet seat
hinges.
4. Wash and wipe dry both sides of all toilet seats.
5. Wash and disinfect all basins, bowls, and urinals.
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6. Wipe down all tile walls, partitions, dispensers and
receptacles.
7. Dust and clean all powder room fixtures.
8. Empty and clean paper towel and sanitary napkin receptacles.
9. Remove wastepaper and refuse from the premises.
10. Refill all toilet paper, paper towel, soap and sanitary napkin
dispensers, materials to be supplied by Landlord unless
otherwise arranged with Janitronics.
F. Offices will not be cleaned on the following Holidays:
o New Years Day
o Martin Luther King Day
o Washington's Birthday
o Patriot's Day
o Memorial Day
o Independence Day
o Labor Day
o Columbus Day
o Veteran's Day
o Thanksgiving Day
o Christmas Day
If individual Tenants wish to arrange for additional cleaning
services, please contact Jim Knights at (617) 965-8030.
II. HEATING, VENTILATING, AND AIR CONDITIONING
1. Heating, ventilating, and air conditioning ("HVAC") as
required to provide reasonably comfortable temperatures for
normal occupancy on Business Days (excepting holidays listed
above); Monday through Friday from 8:00 a.m. to 6:00 p.m. and
Saturday from 8:00 a.m. to 1:00 p.m.
2. Maintenance of any additional or special air conditioning
equipment, i.e. for any computer rooms, etc., and the
associated operating cost will be at Tenant's expense.
III. WATER
Hot water for lavatory purposes and cold water for drinking,
lavatory and toilet purposes.
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IV. ELEVATORS
Elevators for the use of all tenants and the general public for
access to and from all floors of the Building, Programming of
elevators (including, but not limited to, service elevators) shall
be as Landlord from time to time determines best for the Building as
a whole.
V. RELAMPING OF LIGHT FIXTURES
Tenant will reimburse Landlord for the cost of replacement lamps,
ballasts and starters.
VI. CAFETERIA AND VENDING INSTALLATIONS
1. Any space to be used primarily for lunchroom or cafeteria
operation within the Premises shall be Tenant's responsibility
to keep clean and sanitary, it being understood that
Landlord's approval of such use must be first obtained in
writing.
2. Vending machines or refreshment service installations by
Tenant must be approved by Landlord in writing and shall be
restricted to use to employees and business callers. All
cleaning necessitated by such installations shall be at
Tenant's expense.
VII. STRUCTURAL AND EXTERIOR MAINTENANCE
Landlord will maintain the structural components of the Building
(roof, elevators, HVAC system (other than the HVAC system dedicated
to Tenant's computer room, etc.) in good condition and working
order. Landlord will remove snow and maintain landscaped areas of
the Land as necessary.
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EXHIBIT B
WELLS RESEARCH CENTER
TENANT ESTOPPEL LETTER
Attached to and incorporated by reference into a Lease (the "Lease") between
_____________________ and Landlord") and ("Tenant"). Terms
defined in or by reference in the Lease not otherwise defined herein shall have
the same meanings herein as therein.
date
Gentlemen:
It is our understanding that you have committed to place a mortgage upon the
subject premises and as a condition precedent thereof have required this
certification by the undersigned.
Reference is made to our Lease dated , made with the Landlord
(the "Lease"). Terms defined in or by reference the Lease used herein but not
otherwise defined herein shall have the same meanings herein as therein.
The undersigned, as Tenant, hereby ratifies the Lease and certifies that:
1. the Term Commencement Date is ;
2. the undersigned presently occupies the Premises;
3. the Basic Rent of $ was (is) payable beginning ______ ( )
months after the Term Commencement Date;
4. the Lease is in full force and effect and has not been assigned by
us, modified, supplemented or amended in any way (except by
agreement(s) dated) and neither party thereto is in default
thereunder except as specified herein;
5. the Lease represents the entire agreement between Landlord and
Tenant;
6. the Stated Expiration Date is ;
7. all conditions under said Lease to be performed by the Landlord have
been performed satisfactorily;
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8. Landlord's Contribution has been made and received;
9. on this date there are no existing defenses or offsets which the
undersigned has against the enforcement of said Lease by the
Landlord;
10. no Rent has been paid in advance other than the Security Deposit;
and,
11. Basic Rent for ,19 , has been paid.
Very truly yours,
____________________ (Tenant)
By:_________________ (Title)
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EXHIBIT C
WELLS RESEARCH CENTER
RULES AND REGULATIONS
1. Sidewalks, doorways, vestibules, halls, stairways and other similar areas
shall not be obstructed by tenants or used by any tenant for any purpose other
than ingress and egress to and from the Premises and for going from one part of
the Building to another part of the Building.
2. Plumbing fixtures and appliances shall be used only for the purpose for which
designated, and no sweepings, rubbish, rags or other unsuitable material shall
be thrown or placed therein. Repairs resulting from such damage to any such
fixtures or appliances from misuse by a tenant shall be paid by him, and
Landlord shall not in any case be responsible therefor.
3. No signs, advertisements or notices shall be painted or affixed on or to any
windows, doors, corridors or other parts of the Building except as shall be
first approved by Landlord.
4. Landlord will provide and maintain an alphabetical directory board for all
tenants in the Building, and no other directory shall be permitted unless
previously consented to by Landlord in writing.
5. Movement of furniture or office equipment, or dispatch or receipt by tenants
of any bulky material, merchandise or materials which requires use of elevators
or stairways, or movement through the Building entrances or lobby, shall be
restricted to such hours as Landlord may designate, and such movement shall be
subject to control of Landlord.
6. Landlord shall have the authority to prescribe the weight and manner that
safes, file cabinets and other heavy equipment are positioned.
7. All routine deliveries to a tenant's Premises shall be made through the
freight elevators. Passenger elevators are to be used only for the movement of
persons, unless an exception is approved by the Landlord in writing.
8. All locks for doors in each tenant's Premises shall be building standard and
no tenant shall place any additional lock or locks on any door in its leased
area without Landlord's written consent. Landlord agrees to furnish tenant three
(3) keys without charge.
9. Corridor doors, when not in use, shall be kept closed.
10. Tenants shall lock all office doors leading to corridors and turn out all
lights at the close of their working day.
11. Tenants shall not tamper with or attempt to adjust temperature control
thermostats in their respective Premises. Landlord shall adjust thermostats to
maintain required temperatures for heating, ventilating and air conditioning.
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12. Tenants will comply with any measures instituted for the security of the
building which may include the signing in or out in a register in the building
lobby after hours and on weekends.
13. Tenants shall not make or permit any improper noises in the building or
otherwise interfere in any way with other tenants or persons having business
with them.
14. All freight elevator lobbies are to be kept neat and clean. The disposal of
trash or storage or materials in these areas is prohibited.
15. No vending machines of any type shall be allowed in tenant space without the
prior written consent of Landlord.
16. No birds or animals shall be brought into or kept in, on or about public or
tenant areas.
17. Landlord will not be responsible for lost or stolen personal property, money
or jewelry from tenant's Leased Premises or public areas regardless of whether
such loss occurs when area is locked against entry or not.
18. Landlord reserves the right to rescind any of these rules and regulations
and to make such other and further rules and regulations as in its judgment
shall from time to time, be required for the safety, protection, care and
cleanliness of the building, the operation thereof, the preservation of good
order therein and the protection and comfort of the tenants and their agent,
employees and invitees. Such rules and regulations, when made and written notice
thereof is given to a tenant, shall be binding upon it in like manner as if
originally herein prescribed.
19. These rules and regulations shall be uniformly applied to all tenants in the
Building.
20. Tenant shall not use extension cords for normal day-to-day electrical needs.
21. All build-out items which Tenant is unsatisfied with and wants addressed
after the Term Commencement Date must be brought to Landlord's attention in
writing within fourteen (14) days of Tenant's Term Commencement Date. If said
list is not updated every fourteen (14) days, Landlord will assume that all
items have been completed and any additional work will be billed to Tenant.
22. Tenant is required to provide chair mats under all office chairs. In the
event that Tenant does not provide chair mats, Tenant agrees to pay for the
replacement of any damaged carpet.
23. Tenant is responsible for the repair of any appliances located within
Tenant's office within the rentable area of Tenant's office.
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EXHIBIT D
WELLS RESEARCH CENTER
OPERATING EXPENSE BASE
The Operating Expense Base for this Lease is $(1997 Actual Base Year). Tenant
agrees to pay Tenant's share of Operating Expenses if with respect to any
Calendar Year, actual Operating Expenses exceed the Operating Expense Base as
outlined in Article 6. Tenant understands that the Operating Expense Base
represents Landlord's contribution toward Operating Expenses and is not a
reflection of actual Operating Expenses.
Expense Item
------------
Building Repairs and Maintenance
R&M - Misc.
R&M - HVAC
R&M - Electrical
R&M - Locks & Keys
R&M - Plumbing & Sprinklers
R&M - Roofing
Elevator Contracts
Elevator Repair & Maint.
Elevator & HVAC Monitoring
Fire Alarm Repair & Maint.
R&M - Payroll
Lawn Sprinkler R&M
Interior Plant Care
Parking Lot R&M
Floor & Carpet Repair
Glass Repair
Pest Control
HVAC Contracts
Landscape & Lawn Maint.
Generator R&M
Generator Contracts
Snow Removal
Rubbish
TOTAL
Cleaning
Standard
Floors
Windows
Supplies
TOTAL
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<PAGE>
Electricity
Gas and Oil
Water/Sewer
Real Estate Taxes
Insurance
Management Fee
Other Taxes
TOTAL EXPENSE
41
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EXHIBIT E
WELLS RESEARCH CENTER
---------------------
TENANT WORK LETTER
42
<PAGE>
Exhibit 10.7
WORK MANAGEMENT SOLUTIONS, INC.
RESTRICTED STOCK AND VOTING AGREEMENT
AGREEMENT made as of this 10th day of April, 1997, between Work Management
Solutions, Inc., a Delaware corporation (the "Company"), LRF Investments, Inc.
("LRF"), Echo Services, Inc. ("Echo") (LRF and Echo hereinafter collectively
referred to herein as the "Investors"), and Stephen M. Grange (the
"Stockholder").
WITNESSETH:
WHEREAS, the above-named purchaser of shares of Common Stock, par value
$.01 per share (the "Common Stock") of the Company is serving, and will
henceforth serve, as an employee and officer with the Company;
WHEREAS, the Company and the Investors wish for the Stockholder to have a
proprietary interest in the Company's financial success and the Company wishes
to sell to such Stockholder 505,159 shares of the Company's authorized, but
unissued, Common Stock (the "Restricted Shares"); and
WHEREAS, one of the conditions to the sale of Common Stock to the
Stockholder and to John J. Lucas, another employee and principal officer (Mr.
Grange, together with Mr. Lucas, referred to herein as the "Stockholders") is
the execution of a voting agreement relating to cooperation between the
Stockholders and the Investors, with respect to certain significant transactions
undertaken by the Company;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1 -- ACQUISITION OF SHARES
1.1(a) Surrender and Cancellation. As a condition to the opportunity to
purchase shares hereunder, the Stockholder is contemporaneously surrendering for
cancellation all existing stock option agreements previously awarded to him,
consisting of grants for 25,000 shares awarded on December 17, 1990 and June 15,
1990, respectively. The Stockholder hereby authorizes the Company to reflect
such cancellation on the Company's option ledger.
1.1(b) Purchase of Shares. The Stockholder represents and warrants to the
Company that the Stockholder has no present equity, or claims to equity,
contingent or otherwise, in the Company, other than the Restricted Shares being
purchased hereunder. Contemporaneously with the execution of this Agreement,
Stockholder is purchasing the Restricted Shares, subject to the terms and
conditions set forth in this Agreement, at a purchase price of $.01 per
Restricted Share ("Purchase Price"), such amount representing
<PAGE>
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the fair market value of such shares on the date hereof. The aggregate purchase
price for the Restricted Shares is being paid by the Stockholder by check
payable to the order of Work Management Solutions, Inc. or such other method as
may be acceptable to the Company. Upon receipt of payment by the Company for the
Restricted Shares, the Company shall issue to the Stockholder one or more
certificates in the name of the Stockholder for that number of Restricted Shares
being purchased.
1.2 Investment Representations. The Stockholder represents, warrants and
covenants as follows:
(a) The Stockholder is acquiring the Restricted Shares for his own
account for investment only, and not with a view to, or for sale in connection
with, any distribution of the Restricted Shares in violation of the Securities
Act of 1933, as amended (the "Securities Act"), or any rule or regulation under
the Securities Act.
(b) He has had such opportunity as he has deemed adequate to obtain
from representatives of the Company such information as is necessary to permit
him to evaluate the merits and risks of an investment in the Company.
(c) He has sufficient experience in business, financial and
investment matters to be able to evaluate the risks involved in an investment in
the Restricted Shares and to make an informed investment decision with respect
to such investment.
(d) He can afford the complete loss of the value of the Restricted
Shares and is able to bear the economic risk of holding such Restricted Shares
for an indefinite period.
(e) He understands that (i) the Restricted Shares have not been
registered under the Securities Act and are "restricted securities" within the
meaning of Rule 144 under the Securities Act; (ii) the Restricted Shares cannot
be sold, transferred or otherwise disposed of unless they are subsequently
registered under the Securities Act or an exemption from registration is then
available; (iii) in any event, the exemption from registration under Rule 144
will not be available unless a public market then exists for the Common Stock,
adequate information concerning the Company is then available to the public, and
other terms and conditions of Rule 144 are complied with; and (iv) there is now
no registration statement on file with the Securities and Exchange Commission
with respect to any stock of the Company and the Company has no obligation or
current intention to register the Restricted Shares under the Securities Act;
(v) the Restricted Shares are also subject to certain contractual restrictions
on transfer contained in Article 2 of this Restricted Stock and Voting
Agreement; and (vi) all certificates representing such Restricted Shares shall
bear a legend in the form described in Section 4.5 hereof.
<PAGE>
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ARTICLE 2 -- COMPANY REPURCHASE RIGHT; RIGHTS OF FIRST REFUSAL
2.1 Repurchase Option; Vesting Resulting from Lapse of Time and Other
Events.
(a) The Company shall retain the right, under certain circumstances
and as hereinafter set forth, to repurchase any or all of the Restricted Shares
(the "Repurchase Option") from the Stockholder or his valid transferees (as
defined in and pursuant to Section 2.5 herein), at the original Purchase Price
(the "Option Price") until such time as a portion or all of the Restricted
Shares shall become Vested Shares (as defined below).
(b) During the period beginning with the date hereof and ending on
December 31, 1998: (i) if there has occurred a Trigger Event in which the
Minimum Liquidation Value has been achieved (as such terms are defined in
subsections 2.4(d) and 2.9 hereof), and the Stockholder remains at the time of
the Trigger Event in the employ of the Company, then the Company's Repurchase
Option shall immediately expire with respect to 252,579 Restricted Shares and
also to such additional number of Restricted Shares as shall have vested in the
Stockholder pursuant to subsection 2.9: or (ii) if no such Trigger Event has
occurred within such two year period, and the Stockholder remains in the employ
of the Company on the second anniversary of the date hereof, then the Company's
Repurchase Option shall immediately expire with respect to 252,579 Restricted
Shares and shall remain applicable to the balance of the Stockholder's
Restricted Shares; or (iii) if prior to the occurrence of a Trigger Event in
which the Minimum Liquidation Value has been achieved, and if the Stockholder
shall (A) die, or (B) suffer a permanent Disability (as hereinafter defined) or
(C) be terminated other than For Cause (as hereinafter defined), then the
Company's Repurchase Option shall immediately expire with respect to 252,579
Restricted Shares. Implicit in the foregoing is the construct that if the
Stockholder ceases to be employed by the Company prior to the second anniversary
of the date hereof because the Stockholder voluntarily ceases his employment
relationship with the Company, or is terminated For Cause, then the Company
shall retain its Repurchase Option with respect to all of the Restricted Shares.
(c) For purposes of this Agreement, "Disability" shall mean that an
independent medical doctor (selected by the Company's health insurance carrier
or disability insurer) has certified that the Stockholder has for three (3)
months, consecutive or nonconsecutive, in any twelve (12) month period, been
disabled in a manner which seriously interferes with his ability to perform his
responsibilities as an employee of the Company. For purposes of this Agreement,
"For Cause" shall mean the determination by the Company or the Company's Board
of Directors that any one or more of the following has occurred: (i) the
Stockholder has committed an act of fraud, embezzlement, misappropriation or
breach of fiduciary duty against the Company, ii) the Stockholder shall have
been convicted by a court of competent jurisdiction of, or pleaded guilty or
nolo contendere to, any felony or any misdemeanor (other than minor traffic
violations or crimes not involving a criminal intent), (iii) the Stockholder
shall have failed to perform
<PAGE>
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the duties incident to his employment with the Company on a regular basis or the
Stockholder has been chronically absent from work (excluding vacations,
illnesses, or leaves of absence approved by the Company's Board of Directors),
and such failure or absence shall have continued for a period of thirty (30)
days after written notice to the Stockholder specifying such failure or absence
in reasonable detail, (iv) the Stockholder has refused, after explicit written
notice, to obey any lawful resolution of the of or direction by the Company's
Board of Directors which is consistent with the duties incident to his
employment, (v) the Stockholder shall have engaged in the unlawful use including
being under the influence or possession of illegal drugs on the Company's
premises, or (vi) the Stockholder shall have materially breached any of the
provisions of this Agreement or any other agreements of employment or otherwise,
between the Stockholder and the Company which have been entered into on the date
of this Agreement, as such agreements are amended from time to time and in
effect, on the date of such breach, or any other agreements between the
Stockholders and the Company entered into after the hereof and in effect on the
date of such breach.
2.2 Exercise of Repurchase Option and Closing.
(a) The Company may exercise the Repurchase Option on the Restricted
Shares by delivering or mailing to the Stockholder (or his estate), in
accordance with Section 4.7, written notice of exercise within 120 days after
the cessation of employment of the Stockholder with the Company. Such notice
shall specify the number of shares to be purchased. If and to the extent the
Repurchase Option is not so exercised within such 120-day period, the Repurchase
Option shall automatically terminate effective upon the expiration of such
120-day period.
(b) Within 10 days after his receipt of the Company's notice of the
exercise of the Repurchase Option pursuant to subsection (a) above, the
Stockholder (or his estate) shall tender to the Company at its principal
offices, the certificate or certificates representing the Restricted Shares
which the Company has elected to purchase, duly endorsed in blank by the
Stockholder or with duly executed stock powers attached thereto, all in form
suitable for the transfer of such Restricted Shares to the Company or its
assignee. Upon the receipt of such Restricted Shares, the Company shall deliver
or mail to the Stockholder a check in the amount of the aggregate Option Price
there for.
(c) After the time at which any Restricted Shares are required to be
delivered to the Company pursuant to subsection (b) above, the Company shall not
pay any dividend to the Stockholder on account of such Restricted Shares or
permit the Stockholder to exercise any of the privileges or rights of a
stockholder with respect to such Restricted Shares.
(d) The Option Price may be payable, at the option of the Company,
by cancellation of all or a portion of any outstanding indebtedness of the
Stockholder to the Company or in cash (by check), or both.
<PAGE>
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(e) The Company shall not purchase any fraction of a Restricted
Share upon exercise of the Repurchase Option, and any fraction of a Restricted
Share resulting from a computation made pursuant to Section 2.1 of this
Agreement shall be rounded to the nearest whole Restricted Share (with any
one-half Restricted Share being rounded upward).
2.3 Restrictions on Transfer. The Stockholder shall not, during the term
of this Agreement, sell, assign, transfer, pledge, hypothecate or otherwise
dispose of, by operation of law or otherwise (collectively "transfer"), any of
the Restricted Shares, or any interest therein; except that Restricted Shares
which are no longer subject to the Repurchase Option may be transferred in
compliance with Section 2.4 or 2.5 hereof and subject to the limitations on
transfer set forth in Section 2.6 and 2.7 hereof.
2.4 Company's Rights of First Refusal.
(a) Exercise of Right: If the Stockholder or any Authorized
Transferee (the "Transferor") desires to transfer all or any part of the
Restricted Shares as to which the Company's Repurchase Option has expired
("Vested Shares") to any person other than the Company (an "Offeror"), the
Transferor shall: (i) obtain in writing an irrevocable and unconditional bona
fide offer (the "Offer") for the purchase thereof from the Offeror; and (ii)
give written notice (the "Transfer Notice") to the Company setting forth the
Stockholder's desire to transfer such shares, which Transfer Notice shall be
accompanied by a photocopy of the Offer and shall set forth at least the name
and address of the Offeror and the price and terms of the bona fide offer. Upon
receipt of the Transfer Notice, the Company shall have a non-assignable option
to purchase all (and not less than all) of such shares (the "Option Shares")
specified in the Transfer Notice, such option to be exercisable by giving,
within 15 days after receipt of the Transfer Notice, a written counter-notice to
the Transferor. If the Company elects to repurchase all of such Option Shares,
it shall be obligated to purchase, and the Stockholder shall be obligated to
sell such Option Shares, at the price and terms indicated in the Offer within 15
days from the date of delivery by the Company of such counter-notice.
(b) Sale of Option Shares to Offeror: The Transferor may, for 60
days after the expiration of the 15-day and 10-day periods during which the
Company and the Investors, pursuant to 2.4(e), may give the counter-notice,
sell, pursuant to the terms of the Offer, all of such Option Shares not
purchased or agreed to be purchased by the Company; provided, however, that the
Transferor shall not sell such Option Shares to the Offeror if the Offeror is a
Competitor or Strategic Partner (both terms as hereinafter defined) of the
Company and the Company gives written notice to the Transferor, within 15 days
of its receipt of the Transfer Notice, stating that the Transferor shall not
sell such Option Shares to such Offeror; and provided, further, that prior to
the sale of such Option Shares to the Offeror, the Offeror shall execute an
agreement with the Company pursuant to which the Offeror agrees to be subject to
the restrictions set forth in this Section 2.4. For purposes of this Agreement,
a Competitor shall mean a person, company or other
<PAGE>
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entity who competes with the Company on a consistent and frequent basis for the
same clients and customers in the marketplace, such entities presently
including, Computer Sciences Corporation, through its Artemis product line, and
Applied Business Technologies, Inc. For purposes of this Agreement only, a
Strategic Partner shall mean any person, company or other entity with whom the
Company has a significant business relationship, which presently would consist
of Planview, Inc. If any or all of such Option Shares are not sold pursuant to
an Offer within the time permitted above, the unsold Option Shares shall remain
subject to the terms of this Section 2.4.
(c) Adjustments for Changes in Capital Structure: If there shall be
any change in the Common Stock of the Company through recapitalization, stock
dividend, stock split, combination or exchange of shares, or the like, the
restrictions contained in this Section 2.4 shall apply with equal force to
additional and/or substitute securities of the Company, if any, received by the
Stockholder in exchange for, or by virtue of his ownership of, Option Shares.
(d) Trigger Event Defined: For purposes of this Agreement, a
"Trigger Event" shall mean a distribution of the Company's Common Stock pursuant
to (i) a liquidation, dissolution, winding-up of the Company, (ii) a merger in
which the Company is not the surviving entity, sale of assets, consolidation or
other disposition of the assets of the Company in which the Company is not the
surviving entity, or (iii) upon the first underwritten public offering under the
Securities Act or a successor statute by the Company of any of its equity
securities (a "Public Offering"), pursuant to a registration statement on Forms
S-1 or SB-1 or their then equivalents (a "Trigger Event"). The first refusal
rights of the Company set forth herein shall expire after the occurrence of a
Trigger Event as specified in Section 4.8.
(e) Investors' Rights of First Refusal. Should the Company not
exercise its rights of first refusal within 15 days as described in this
section, the same rights of first refusal shall then apply with equal force to
the Investors for a 10-day period under the same terms and limitations described
in this Section 2.4. The Investors' rights of first refusal shall likewise
automatically expire upon a Trigger Event.
2.5 Authorized Transferees. Notwithstanding anything to the contrary set
forth in Section 2.3 and 2.4. the Stockholder may transfer Vested Shares to the
following persons (hereinafter "Authorized Transferees"):
(i) the Stockholder as the sole trustee of a trust revocable by
the Stockholder alone:
(ii) the Stockholder's executor, administrator, guardian,
conservator or other legal representative;
<PAGE>
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(iii) the Stockholder's spouse, or to any of his children or their
issue (or to custodians for the benefit of minor children or
issue):
provided, that in any such case, the Authorized Transferee agrees in writing to
be bound by the provisions of this Agreement.
2.6 Market "Stand-Off' Agreement. The Stockholder hereby agrees that,
during the period of duration (not to exceed one hundred eighty (180) days)
specified by the Company and an underwriter of Common Stock or other securities
of the Company, following the effective date of a registration statement of the
Company filed under the Securities Act, such Stockholder shall not, to the
extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by the Stockholder at any time during such period except shares included in
such registration. The market "stand-off" agreement established pursuant to this
Section 2.6 shall have perpetual duration except as provided in the next
succeeding sentence. Notwithstanding the preceding sentence, such "stand-off"
agreement shall terminate if and only when the Stockholder owns less than 5% of
all of the outstanding shares of Common Stock, and the Stockholder ceases to be
employed by the Company or ceases to be involved in any active management of or
consultation to the Company.
2.7 Limitations on Transfer. The Stockholder agrees that he will not
mortgage, pledge, hypothecate or otherwise encumber his shares of Common Stock,
whether Restricted Shares or Vested Shares, without the prior written consent of
the holders of at least seventy-five (75%) of the outstanding Shares of Common
Stock.
2.8 Transfers in Violation of Agreement. If any transfer of the Restricted
Shares or the Vested Shares (the "Shares") is made or attempted contrary to the
provisions of this Agreement, the Company shall have the right to purchase the
Restricted Shares or the Vested Shares (the "Shares") from the owner thereof or
his transferee at any time before or after the transfer, as herein provided. In
the event that the Company elects to exercise its Repurchase Option or the
Company or the Investors elect to exercise their respective rights of first
refusal hereunder, it may do so by canceling the certificate(s) representing the
Shares and depositing the purchase price determined hereunder in a bank account
for the benefit of Stockholder, whereupon such Shares shall be, for all
purposes, canceled and neither the Stockholder nor any transferee shall have any
rights as one of its stockholders with respect to such Shares for any purpose,
including, without limitation, dividend and voting rights, until there has been
compliance with all applicable provisions of this Agreement. In addition to any
other legal or equitable remedies which it may have under this Agreement or
otherwise, the Company may enforce its rights by actions for specific
performance (to the extent permitted by law).
<PAGE>
- 8 -
2.9 Vesting of Shares Upon a Trigger Event. At any time during the term
hereof, if there shall occur a Trigger Event, then: (i) if the Liquidation Value
(as hereafter defined) shall exceed the amount of $1,000,000 (the "Minimum
Liquidation Value"), then the Company's Repurchase Option shall immediately
expire with respect to 5,051.6 Restricted Shares (2% of one half of the initial
total of Restricted Shares purchased hereunder) per million dollars (prorated
for any portion thereof) of Liquidation Value obtained from the Trigger Event;
or (ii) if the Liquidation Value is less than $1,000,000, then 252,580 shares of
Restricted Shares shall not become Vested Shares hereunder (in addition to any
portion of the remaining Restricted Shares which may not become Vested Shares
hereunder if the Stockholder leaves the employ of the Company under certain
circumstances as set forth in subsection 2.2 hereof). For purposes hereof,
Liquidation Value shall mean the value assigned to the Company as a whole or
paid therefor determined by (a) its assessed value in a court-ordered or
voluntary liquidation of the Company's assets, (b) the aggregate purchase price
paid for all of the assets or shares pursuant to any purchase and sale or merger
agreement for the assets or stock of the Company as a going concern, or (c) with
respect to a Public Offering, the dollar value per share taken at the mid-point
of the filing range and multiplied by the number of shares outstanding on a
fully diluted basis. Restricted Shares that remain unvested upon the occurrence
of a Trigger Event at a particular liquidation value, will be automatically
repurchased by the Company at the Purchase Price with such sum immediately due
and payable to the Stockholders in the respective amount representing the shares
of Common Stock not vested.
2.10 Dilution.
(a) Stock Option Plan. It is the intent of all parties to this Agreement
to establish a stock option plan for employees, officers, directors and
consultants of the Company (the "Stock Option Plan"). The Stock Option Plan
would initially allow an additional fifteen percent (15%) of the outstanding
shares of Common Stock of the Company to be available through options. The
Company, the Stockholder and the Investors hereby agree that the shares sold
pursuant to this Agreement and all shares previously and now held by the
Investors shall be subject to future dilution on a pro rata basis, including,
but not limited to those shares granted through options pursuant to the Stock
Option Plan.
(b) Debt Agreements. The Investors hereby agree not to enter into at any
time from the date hereof until the termination of this Agreement, any
agreements with any third party whereby the Investors' existing credit
extensions to the Company are converted into equity securities of the Company
without the written consent of each of the Stockholders.
2.11 Expiration of Repurchase Rights. Notwithstanding the provisions of
this Agreement relating to the automatic expiration of the Repurchase Rights
upon a Trigger Event, the rights of both the Company and the Investors to
repurchase shares pursuant to
<PAGE>
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this Agreement shall expire and otherwise be of no effect upon the lapse often
(10) years from the date hereof.
ARTICLE 3 - VOTING AGREEMENT
3.1. Corporate Action. Except as expressly provided herein or as required
by law, so long as any shares of Common Stock remain outstanding, the Company
shall not, and shall not permit any subsidiary to, nor shall either Stockholder
vote in favor of, without the approval by vote or written consent of the
Investors:
(i) authorize or issue, or obligate itself to authorize or issue,
any other equity security senior to or on a parity with the
Common Stock or create any other class of stock, as to rights
in liquidation, voting rights, dividend rights or otherwise,
or issue additional shares of Common Stock in an amount in
excess of 250,000 shares, other than shares issuable upon
exercise of options granted under the Company's Stock Option
Plan;
(ii) merge or consolidate with, or sell, assign, lease or otherwise
dispose of or voluntarily part with the control of (whether in
one transaction or in a series of transactions) all, or
substantially all, of its assets (whether now owned or
hereinafter acquired) or sell, assign or otherwise dispose of
(whether in one transaction or in a series of transactions)
any of its accounts receivable (whether now in existence or
hereinafter created) at a discount or with recourse, to any
person, or permit any subsidiary to do any of the foregoing,
except for sales or other dispositions of assets in the
ordinary course of business and except that (1) any subsidiary
may merge into or consolidate with or transfer assets to any
other subsidiary and (2) any subsidiary may merge into or
transfer assets to the Company;
(iii) authorize an initial underwritten public offering by the
Company under the Securities Act of any of its equity
securities for its own account pursuant to an offering
registered on Form S-1 or Form SB-1 or their then equivalents;
(iv) elect directors;
(v) increase compensation of either Stockholder by an amount in
excess of 20% of the amount paid in the then current fiscal
year; or
(vi) amend the Certificate of Incorporation or By-laws.
<PAGE>
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ARTICLE 4 -- MISCELLANEOUS
4.1 Adjustments for Stock Splits, Stock Dividends, etc. If from time to
time during the term of the Purchase Option there is any stock split-up, stock
dividend, stock distribution or other reclassification of the Common Stock of
the Company, any and all new, substituted or additional securities to which the
Stockholder is entitled by reason of his or her ownership of the Restricted
Shares shall be immediately subject to the Purchase Option, the restrictions on
transfer and the other provisions of this Agreement in the same manner and to
the same extent as the Restricted Shares, and the Option Price shall be
appropriately adjusted.
4.2 Withholding Taxes.
(a) The Stockholder acknowledges and agrees that the Company has the
right to deduct from payments of any kind otherwise due to the Stockholder any
federal, state or local taxes of any kind required by law to be withheld with
respect to the purchase of the Restricted Shares by the Stockholder.
(b) The Stockholder hereby agrees to make a timely election under
Section 83(b) of the Internal Revenue Code of 1986, as amended, and to recognize
ordinary income in the year of acquisition of the Restricted Shares, the Company
will require at the time of such election an additional payment for withholding
tax purposes based on the difference, if any, between the purchase price for
such Restricted Shares and the fair market value of such Restricted Shares as of
the date of the purchase of such Restricted Shares by the Stockholder.
4.3 No Obligation to Continue Employment. Nothing contained in this
Agreement shall be construed as giving the Stockholder any further employment
rights not any right to continue his employment with the Company.
4.4 Waiver; Disposition of Stock. From time to time the Company or the
Investor may waive their respective rights hereunder either generally or with
respect to one or more specific transfers which have been proposed, attempted or
made. All action to be taken by the Company hereunder shall be taken by vote of
a majority of its disinterested members of the Company's Board of Directors then
in office. Any Restricted Shares which the Company has elected to purchase
hereunder may be disposed of by the Company's Board of Directors in such manner
as it deems appropriate, with or without further restrictions upon the transfer
thereof.
4.5 Restrictive Legends. All certificates representing Restricted Shares
shall have affixed thereto legends in substantially the following form:
<PAGE>
- 11 -
"The shares of stock represented by this certificate are subject to
restrictions on transfer and an option to purchase set forth in a
certain Restricted Stock and Voting Agreement among the corporation
and the registered owner of this certificate (or his predecessor in
interest and certain other stockholders of the corporation) and
other Investors in the corporation, and such Agreement is available
for inspection without charge at the office of the Secretary of the
corporation."
"The shares represented by this certificate have not been registered
under the Securities Act, as amended, and may not be sold,
transferred or otherwise disposed of in the absence of an effective
registration statement under such Securities Act or an opinion of
counsel satisfactory to the corporation to the effect that such
registration is not required."
4.6 Successors and Assigns; Assignment. This Agreement shall be binding
upon the parties hereto and their heirs, representatives, successors and
assigns. The Company may assign its rights hereunder either generally or from
time to time.
4.7 Notices. All notices to a party hereto shall be in writing and shall
be deemed to have been adequately given if delivered in person or mailed,
postage pre-paid and registered or certified mail:
If to the Company:
Work Management Solutions, Inc.
119 Beach Street
Boston, Massachusetts 02111-2520
Attention: President
If to the Investors, both to:
LRF Investments, Inc.
60 Wells Avenue
Newton, Massachusetts 02159
If to Stockholder:
Stephen M. Grange
c/o Work Management Solutions, Inc.
119 Beach Street
Boston, Massachusetts 02111-2520
<PAGE>
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or to such other address as any party may from time to time designate for itself
by notice in writing given to the other parties hereto.
4.8 Term and Termination. This Agreement shall terminate upon the
happening of a Trigger Event in which the Minimum Liquidation Value has been
achieved, provided, however, that the Company shall have 60 days after the
occurrence of such Trigger Event to exercise its Repurchase Option as to any
then Unvested Restricted Shares. If such a Trigger Event fails to occur during
the period of ten years from the date hereof and the Stockholder continues at
such time to serve as an employee or director of the Company, then the Company
shall have no further right to exercise its Repurchase Option with respect to
any non-vested Restricted Shares on the tenth anniversary of the date hereof,
and thereafter, this Agreement shall automatically terminate, unless otherwise
amended by all the parties hereto, and all of the Restricted Shares shall
automatically vest and become Vested Shares and this Agreement shall no longer
be of any force and effect. This Agreement (other than the provisions of Section
2.6 and Article 3 hereof) shall otherwise remain in effect until all the
Restricted Shares covered by the Repurchase Option have been disposed of
pursuant to this Agreement and the Company and the Investors' rights of first
refusal with respect to the Restricted Shares have also expired pursuant to the
terms of Section 2.1, 2.2, 2.3 and 2.4 above. The provisions of Article 3 shall
terminate on the earliest to occur of the following: (a) immediately prior to
the Public Offering by the Company, or (b) immediately prior to the consummation
of the sale of all, or substantially all, of the Company's assets or capital
stock or a merger, consolidation, reorganization or other business combination.
The provisions of Section 2.6 shall have perpetual duration except as otherwise
specifically provided in Section 2.6.
4.9 Amendments. This Agreement nor any provision hereof may be amended,
changed, discharged or modified in whole or in part only by an instrument in
writing signed by the Company, the Investor and the Stockholder except as
otherwise specifically provided in Section 2.6.
4.10 Entire Agreement. This Agreement constitutes the entire agreement
between the parties, and all premises, representations, understandings,
warranties and agreements with reference to the subject matter hereof have been
expressed herein or in the documents incorporated herein by reference.
4.11 Applicable Law; Severability. This Agreement shall be governed by and
construed and enforced in accordance with Massachusetts law. Wherever possible,
each provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision hereof shall be
prohibited by or invalid under any such law, that provision shall be ineffective
only to the extent of such prohibition or invalidity, without invalidating or
nullifying the remainder of that provision or any other provisions of this
Agreement.
<PAGE>
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4.12 Injunctive Relief. It is acknowledged that it will be impossible to
measure the damages that would be suffered by the Investors and the Company if
the Stockholder fails to comply with the provisions of this Agreement and that
in the event of any such failure, the Investors and the Company will not have an
adequate remedy at law, and they shall therefore be entitled to obtain specific
performance of the Stockholder's obligations hereunder and to obtain immediate
injunctive relief.
4.13 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed in original but all of which
together shall constitute one and the same instrument.
4.14 Effect of Headings. Any table of contents, title of any article or
section heading herein contained is for convenience or reference only and shall
not affect the meaning of construction of any of the provisions hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
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IN WITNESS WHEREOF, the Stockholder has hereunto set his hand and the
Company has authorized this instrument to be signed by its officers thereunder
duly authorized, effective as an instrument under seal.
THE COMPANY: WORK MANAGEMENT SOLUTIONS,
INC.
By: /s/ John J. Lucas
-----------------------------------------
Name: JOHN J. LUCAS
Title: PRESIDENT/CEO
THE INVESTORS: LRF INVESTMENTS, INC.
By:
-----------------------------------------
Name:
Title:
ECHO SERVICES, INC.
By:
-----------------------------------------
Name:
Title:
THE STOCKHOLDER: /s/ Stephen M. Grange
--------------------------------------------
Stephen M. Grange
Address: c/o Work Management Solutions, Inc.
-----------------------------------
119 Beach Street
-----------------------------------
Boston, MA 02111
<PAGE>
- 14 -
IN WITNESS WHEREOF, the Stockholder has hereunto set his hand and the
Company has authorized this instrument to be signed by its officers thereunder
duly authorized, effective as an instrument under seal.
THE COMPANY: WORK MANAGEMENT SOLUTIONS,
INC.
By:
-----------------------------------------
Name:
Title:
THE INVESTORS: LRF INVESTMENTS, INC.
By: /s/ [ILLEGIBLE]
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Name:
Title: PRESIDENT
ECHO SERVICES, INC.
By: /s/ [ILLEGIBLE]
-----------------------------------------
Name:
Title:
THE STOCKHOLDER:
--------------------------------------------
Stephen M. Grange
Address:
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<PAGE>
Exhibit 10.8
WORK MANAGEMENT SOLUTIONS, INC.
RESTRICTED STOCK AND VOTING AGREEMENT
AGREEMENT made as of this 10th day of April, 1997, between Work Management
Solutions, Inc., a Delaware corporation (the "Company"), LRF Investments, Inc.
("LRF"), Echo Services, Inc. ("Echo") (LRF and Echo hereinafter collectively
referred to herein as the "Investors"), and John J. Lucas (the "Stockholder").
WITNESSETH:
WHEREAS, the above-named purchaser of shares of Common Stock, par value
$.01 per share (the "Common Stock") of the Company is serving, and will
henceforth serve, as an employee and officer with the Company;
WHEREAS, the Company and the Investors wish for the Stockholder to have a
proprietary interest in the Company's financial success and the Company wishes
to sell to such Stockholder 617,417 shares of the Company's authorized, but
unissued, Common Stock (the "Restricted Shares"); and
WHEREAS, one of the conditions to the sale of Common Stock to the
Stockholder and to Stephen M. Grange, another employee and principal officer
(Mr. Lucas, together with Mr. Grange, referred to herein as the "Stockholders")
is the execution of a voting agreement relating to cooperation between the
Stockholders and the Investors, with respect to certain significant transactions
undertaken by the Company;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1 -- ACQUISITION OF SHARES
1.1(a) Purchase of Shares. The Stockholder represents and warrants to the
Company that the Stockholder has no present equity, or claims to equity,
contingent or otherwise, in the Company, other than the Restricted Shares being
purchased hereunder. Contemporaneously with the execution of this Agreement,
Stockholder is purchasing the Restricted Shares, subject to the terms and
conditions set forth in this Agreement, at a purchase price of $.01 per
Restricted Share ("Purchase Price"), such amount representing the fair market
value of such shares on the date hereof. The aggregate purchase price for the
Restricted Shares is being paid by the Stockholder by check payable to the order
of Work Management Solutions, Inc. or such other method as may be acceptable to
the Company. Upon receipt of payment by the Company for the Restricted Shares,
the Company shall issue to the Stockholder one or more certificates in the name
of the Stockholder for that number of Restricted Shares being purchased.
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1.2 Investment Representations. The Stockholder represents, warrants and
covenants as follows:
(a) The Stockholder is acquiring the Restricted Shares for his own
account for Investment only, and not with a view to, or for sale in connection
with, any distribution of the Restricted Shares in violation of the Securities
Act of 1933, as amended (the "Securities Act"), or any rule or regulation under
the Securities Act.
(b) He has had such opportunity as he has deemed adequate to obtain
from representatives of the Company such information as is necessary to permit
him to evaluate the merits and risks of an investment in the Company.
(c) He has sufficient experience in business, financial and
investment matters to be able to evaluate the risks involved in an investment in
the Restricted Shares and to make an informed investment decision with respect
to such investment.
(d) He can afford the complete loss of the value of the Restricted
Shares and is able to bear the economic risk of holding such Restricted Shares
for an indefinite period.
(e) He understands that (i) the Restricted Shares have not been
registered under the Securities Act and are "restricted securities" within the
meaning of Rule 144 under the Securities Act, (ii) the Restricted Shares cannot
be sold, transferred or otherwise disposed of unless they are subsequently
registered under the Securities Act or an exemption from registration is then
available; (iii) in any event, the exemption from registration under Rule 144
will not be available unless a public market then exists for the Common Stock,
adequate information concerning the Company is then available to the public, and
other terms and conditions of Rule 144 are complied with: and (iv) there is now
no registration statement on file with the Securities and Exchange Commission
with respect to any stock of the Company and the Company has no obligation or
current intention to register the Restricted Shares under the Securities Act;
(v) the Restricted Shares are also subject to certain contractual restrictions
on transfer contained in Article 2 of this Restricted Stock and Voting
Agreement, and (vi) all certificates representing such Restricted Shares shall
bear a legend in the form described in Section 4.5 hereof.
ARTICLE 2 -- COMPANY REPURCHASE RIGHT: RIGHTS OF FIRST REFUSAL
2.1 Repurchase Option; Vesting Resulting from Lapse of Time and Other
Events.
(a) The Company shall retain the right, under certain circumstances
and as hereinafter set forth, to repurchase any or all of the Restricted Shares
(the "Repurchase Option") from the Stockholder or his valid transferees (as
defined in and pursuant to Section 2.5 herein), at the original Purchase Price
(the "Option Price") until
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such time as a portion or all of the Restricted Shares shall become Vested
Shares (as defined below).
(b) During the period beginning with the date hereof and ending on
December 31, 1998: (i) if there has occurred a Trigger Event in which the
Minimum Liquidation Value has been achieved (as such terms are defined in
subsections 2.4(d) and 2.9 hereof), and the Stockholder remains at the time of
the Trigger Event in the employ of the Company, then the Company's Repurchase
Option shall immediately expire with respect to 308,708 Restricted Shares and
also to such additional number of Restricted Shares as shall have vested in the
Stockholder pursuant to subsection 2.9; or (ii) if no such Trigger Event has
occurred within such two year period, and the Stockholder remains in the employ
of the Company on the second anniversary of the date hereof, then the Company's
Repurchase Option shall immediately expire with respect to 308,708 Restricted
Shares and shall remain applicable to the balance of the Stockholder's
Restricted Shares; or (iii) if prior to the occurrence of a Trigger Event in
which the Minimum Liquidation Value has been achieved, and if the Stockholder
shall (A) die, or (B) suffer a permanent Disability (as hereinafter defined) or
(C) be terminated other than For Cause (as hereinafter defined), then the
Company's Repurchase Option shall immediately expire with respect to 308.708
Restricted Shares. Implicit in the foregoing is the construct that if the
Stockholder ceases to be employed by the Company prior to the second anniversary
of the date hereof because the Stockholder voluntarily ceases his employment
relationship with the Company, or is terminated For Cause, then the Company
shall retain its Repurchase Option with respect to all of the Restricted Shares.
(c) For purposes of this Agreement, "Disability" shall mean that an
independent medical doctor (selected by the Company's health insurance carrier
or disability insurer) has certified that the Stockholder has for three (3)
months, consecutive or nonconsecutive, in any twelve (12) month period, been
disabled in a manner which seriously interferes with his ability to perform his
responsibilities as an employee of the Company. For purposes of this Agreement,
"For Cause" shall mean the determination by the Company or the Company's Board
of Directors that any one or more of the following has occurred: (i) the
Stockholder has committed an act of fraud, embezzlement, misappropriation or
breach of fiduciary duty against the Company, ii) the Stockholder shall have
been convicted by a court of competent jurisdiction of, or pleaded guilty or
nolo contendere to, any felony or any misdemeanor (other than minor traffic
violations or crimes not involving a criminal intent), (iii) the Stockholder
shall have failed to perform the duties incident to his employment with the
Company on a regular basis or the Stockholder has been chronically absent from
work (excluding vacations, illnesses, or leaves of absence approved by the
Company's Board of Directors), and such failure or absence shall have continued
for a period of thirty (30) days after written notice to the Stockholder
specifying such failure or absence in reasonable detail, (iv) the Stockholder
has refused, after explicit written notice, to obey any lawful resolution of the
of or direction by the Company's Board of Directors which is consistent with the
duties incident to his employment, (v) the Stockholder shall have engaged in the
unlawful use (including being under the influence) or possession of illegal
drugs on the Company's
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premises, or (vi) the Stockholder shall have materially breached any of the
provisions of this Agreement or any other agreements of employment or otherwise,
between the Stockholder and the Company which have been entered into on the date
of this Agreement, as such agreements are amended from time to time and in
effect, on the date of such breach, or any other agreements between the
Stockholders and the Company entered into after the hereof and in effect on the
date of such breach.
2.2 Exercise of Repurchase Option and Closing.
(a) The Company may exercise the Repurchase Option on the Restricted
Shares by delivering or mailing to the Stockholder (or his estate), in
accordance with Section 4.7, written notice of exercise within 120 days after
the cessation of employment of the Stockholder with the Company. Such notice
shall specify the number of shares to be purchased. If and to the extent the
Repurchase Option is not so exercised within such 120-day period, the Repurchase
Option shall automatically terminate effective upon the expiration of such
120-day period.
(b) Within 10 days after his receipt of the Company's notice of the
exercise of the Repurchase Option pursuant to subsection (a) above, the
Stockholder (or his estate) shall tender to the Company at its principal
offices, the certificate or certificates representing the Restricted Shares
which the Company has elected to purchase, duly endorsed in blank by the
Stockholder or with duly executed stock powers attached thereto, all in form
suitable for the transfer of such Restricted Shares to the Company or its
assignee. Upon the receipt of such Restricted Shares, the Company shall deliver
or mail to the Stockholder a check in the amount of the aggregate Option Price
therefor.
(c) After the time at which any Restricted Shares are required to be
delivered to the Company pursuant to subsection (b) above, the Company shall not
pay any dividend to the Stockholder on account of such Restricted Shares or
permit the Stockholder to exercise any of the privileges or rights of a
stockholder with respect to such Restricted Shares.
(d) The Option Price may be payable, at the option of the Company,
by cancellation of all or a portion of any outstanding indebtedness of the
Stockholder to the Company or in cash (by check), or both.
(e) The Company shall not purchase any fraction of a Restricted
Share upon exercise of the Repurchase Option, and any fraction of a Restricted
Share resulting from a computation made pursuant to Section 2.1 of this
Agreement shall be rounded to the nearest whole Restricted Share (with any
one-half Restricted Share being rounded upward).
2.3 Restrictions on Transfer. The Stockholder shall not, during the term
of this Agreement, sell, assign, transfer, pledge, hypothecate or otherwise
dispose of, by
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operation of law or otherwise (collectively "transfer"), any of the Restricted
Shares, or any interest therein; except that Restricted Shares which are no
longer subject to the Repurchase Option may be transferred in compliance with
Section 2.4 or 2.5 hereof and subject to the limitations on transfer set forth
in Section 2.6 and 2.7 hereof.
2.4 Company's Rights of First Refusal.
(a) Exercise of Right: If the Stockholder or any Authorized
Transferee (the "Transferor") desires to transfer all or any part of the
Restricted Shares as to which the Company's Repurchase Option has expired
("Vested Shares") to any person other than the Company (an "Offeror"), the
Transferor shall: (i) obtain in writing an irrevocable and unconditional bona
fide offer (the "Offer") for the purchase thereof from the Offeror; and (ii)
give written notice (the "Transfer Notice") to the Company setting forth the
Stockholder's desire to transfer such shares, which Transfer Notice shall be
accompanied by a photocopy of the Offer and shall set forth at least the name
and address of the Offeror and the price and terms of the bona fide offer. Upon
receipt of the Transfer Notice, the Company shall have a non-assignable option
to purchase all (and not less than all) of such shares (the "Option Shares")
specified in the Transfer Notice, such option to be exercisable by giving,
within 15 days after receipt of the Transfer Notice, a written counter-notice to
the Transferor. If the Company elects to repurchase all of such Option Shares,
it shall be obligated to purchase, and the Stockholder shall be obligated to
sell such Option Shares, at the price and terms indicated in the Offer within 15
days from the date of delivery by the Company of such counter-notice.
(b) Sale of Option Shares to Offeror: The Transferor may, for 60
days after the expiration of the 15-day and 10-day periods during which the
Company and the Investors, pursuant to 2.4(e), may give the counter-notice,
sell, pursuant to the terms of the Offer, all of such Option Shares not
purchased or agreed to be purchased by the Company; provided, however, that the
Transferor shall not sell such Option Shares to the Offeror if the Offeror is a
Competitor or Strategic Partner (both terms as hereinafter defined) of the
Company and the Company gives written notice to the Transferor, within 15 days
of its receipt of the Transfer Notice, stating that the Transferor shall not
sell such Option Shares to such Offeror; and provided, further, that prior to
the sale of such Option Shares to the Offeror, the Offeror shall execute an
agreement with the Company pursuant to which the Offeror agrees to be subject to
the restrictions set forth in this Section 2.4. For purposes of this Agreement,
a Competitor shall mean a person, company or other entity who competes with the
Company on a consistent and frequent basis for the same clients and customers in
the marketplace, such entities presently including, Computer Sciences
Corporation, through its Artemis product line, and Applied Business
Technologies, Inc. For purposes of this Agreement only, a Strategic Partner
shall mean any person, company or other entity with whom the Company has a
significant business relationship, which presently would consist of Planview,
Inc. If any or all of such Option Shares are not sold pursuant to an Offer
within the time permitted above, the unsold Option Shares shall remain subject
to the terms of this Section 2.4.
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(c) Adjustments for Changes in Capital Structure: If there shall be
any change in the Common Stock of the Company through recapitalization, stock
dividend, stock split, combination or exchange of shares, or the like, the
restrictions contained in this Section 2.4 shall apply with equal force to
additional and or substitute securities of the Company, if any, received by the
Stockholder in exchange for, or by virtue of his ownership of, Option Shares.
(d) Trigger Event Defined: For purposes of this Agreement, a
"Trigger Event" shall mean a distribution of the Company's Common Stock pursuant
to (i) a liquidation, dissolution, winding-up of the Company, (ii) a merger in
which the Company is not the surviving entity, sale of assets, consolidation or
other disposition of the assets of the Company in which the Company is not the
surviving entity, or (iii) upon the first underwritten public offering under the
Securities Act or a successor statute by the Company of any of its equity
securities (a "Public Offering"), pursuant to a registration statement on Forms
S-1 or SB-1 or their then equivalents (a "Trigger Event"). The first refusal
rights of the Company set forth herein shall expire after the occurrence of a
Trigger Event as specified in Section 4.8.
(e) Investors' Rights of First Refusal. Should the Company not
exercise its rights of first refusal within 15 days as described in this
section, the same rights of first refusal shall then apply with equal force to
the Investors for a 10-day period under the same terms and limitations described
in this Section 2.4. The Investors' rights of first refusal shall likewise
automatically expire upon a Trigger Event.
2.5 Authorized Transferees. Notwithstanding anything to the contrary set
forth in Section 2.3 and 2.4, the Stockholder may transfer Vested Shares to the
following persons (hereinafter "Authorized Transferees"):
(i) the Stockholder as the sole trustee of a trust revocable by
the Stockholder alone;
(ii) the Stockholder's executor, administrator, guardian,
conservator or other legal representative;
(iii) the Stockholder's spouse, or to any of his children or their
issue (or to custodians for the benefit of minor children or
issue):
provided, that in any such case, the Authorized Transferee agrees in writing to
be bound by the provisions of this Agreement.
2.6 Market "Stand-Off" Agreement. The Stockholder hereby agrees that,
during the period of duration (not to exceed one hundred eighty (180) days)
specified by the Company and an underwriter of Common Stock or other securities
of the Company, following the effective date of a registration statement of the
Company filed
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under the Securities Act, such Stockholder shall not, to the extent requested by
the Company and such underwriter, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale, grant any
option to purchase or otherwise transfer or dispose of (other than to donees who
agree to be similarly bound) any securities of the Company held by the
Stockholder at any time during such period except shares included in such
registration. The market "stand-off" agreement established pursuant to this
Section 2.6 shall have perpetual duration except as provided in the next
succeeding sentence. Notwithstanding the preceding sentence, such "stand-off"
agreement shall terminate if and only when the Stockholder owns less than 5% of
all of the outstanding shares of Common Stock, and the Stockholder ceases to be
employed by the Company or ceases to be involved in any active management of or
consultation to the Company.
2.7 Limitations on Transfer. The Stockholder agrees that he will not
mortgage, pledge, hypothecate or otherwise encumber his shares of Common Stock,
whether Restricted Shares or Vested Shares, without the prior written consent of
the holders of at least seventy-five (75%) of the outstanding Shares of Common
Stock.
2.8 Transfers in Violation of Agreement. If any transfer of the Restricted
Shares or the Vested Shares (the "Shares") is made or attempted contrary to the
provisions of this Agreement, the Company shall have the right to purchase the
Restricted Shares or the Vested Shares (the "Shares") from the owner thereof or
his transferee at any time before or after the transfer, as herein provided. In
the event that the Company elects to exercise its Repurchase Option or the
Company or the Investors elect to exercise their respective rights of first
refusal hereunder, it may do so by canceling the certificate(s) representing the
Shares and depositing the purchase price determined hereunder in a bank account
for the benefit of Stockholder, whereupon such Shares shall be, for all
purposes, canceled and neither the Stockholder nor any transferee shall have any
rights as one of its stockholders with respect to such Shares for any purpose,
including, without limitation, dividend and voting rights, until there has been
compliance with all applicable provisions of this Agreement. In addition to any
other legal or equitable remedies which it may have under this Agreement or
otherwise, the Company may enforce its rights by actions for specific
performance (to the extent permitted by law).
2.9 Vesting of Shares Upon a Trigger Event. At any time during the term
hereof, if there shall occur a Trigger Event, then: (i) if the Liquidation Value
(as hereafter defined) shall exceed the amount of $1,000,000 (the "Minimum
Liquidation Value"), then the Company's Repurchase Option shall immediately
expire with respect to 5,051.6 Restricted Shares (2% of one half of the initial
total of Restricted Shares purchased hereunder) per million dollars (prorated
for any portion thereof) of Liquidation Value obtained from the Trigger Event;
or (ii) if the Liquidation Value is less than $1,000,000, then 308.708 shares of
Restricted Shares shall not become Vested Shares hereunder (in addition to any
portion of the remaining Restricted Shares which may not become Vested Shares
hereunder if the Stockholder leaves the employ of the Company under certain
circumstances as set forth in subsection 2.2 hereof). For purposes hereof,
Liquidation
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Value shall mean the value assigned to the Company as a whole or paid therefor
determined by (a) its assessed value in a court-ordered or voluntary liquidation
of the Company's assets, (b) the aggregate purchase price paid for all of the
assets or shares pursuant to any purchase and sale or merger agreement for the
assets or stock of the Company as a going concern, or (c) with respect to a
Public Offering, the dollar value per share taken at the mid-point of the
filing range and multiplied by the number of shares outstanding on a fully
diluted basis. Restricted Shares that remain unvested upon the occurrence of a
Trigger Event at a particular liquidation value, will be automatically
repurchased by the Company at the Purchase Price with such sum immediately due
and payable to the Stockholders in the respective amount representing the shares
of Common Stock not vested.
2.10 Dilution.
(a) Stock Option Plan. It is the intent of all parties to this Agreement
to establish a stock option plan for employees, officers, directors and
consultants of the Company (the "Stock Option Plan"). The Stock Option Plan
would initially allow an additional fifteen percent (15%) of the outstanding
shares of Common Stock of the Company to be available through options. The
Company, the Stockholder and the Investors hereby agree that the shares sold
pursuant to this Agreement and all shares previously and now held by the
Investors shall be subject to future dilution on a pro rata basis, including,
but not limited to those shares granted through options pursuant to the Stock
Option Plan.
(b) Debt Agreements. The Investors hereby agree not to enter into at any
time from the date hereof until the termination of this Agreement, any
agreements with any third party whereby the Investors' existing credit
extensions to the Company are converted into equity securities of the Company
without the written consent of each of the Stockholders.
2.11 Expiration of Repurchase Rights. Notwithstanding the provisions of
this Agreement relating to the automatic expiration of the Repurchase Rights
upon a Trigger Event, the rights of both the Company and the Investors to
repurchase shares pursuant to this Agreement shall expire and otherwise be of no
effect upon the lapse often (10) years from the date hereof.
ARTICLE 3 - VOTING AGREEMENT
3.1. Corporate Action. Except as expressly provided herein or as required
by law, so long as any shares of Common Stock remain outstanding, the Company
shall not, and shall not permit any subsidiary to, nor shall either Stockholder
vote in favor of, without the approval by vote or written consent of the
Investors:
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(i) authorize or issue, or obligate itself to authorize or issue,
any other equity security senior to or on a parity with the
Common Stock or create any other class of stock, as to rights
in liquidation, voting rights, dividend rights or otherwise,
or issue additional shares of Common Stock in an amount in
excess of 250,000 shares, other than shares issuable upon
exercise of options granted under the Company's Stock Option
Plan;
(ii) merge or consolidate with, or sell, assign, lease or otherwise
dispose of or voluntarily part with the control of (whether in
one transaction or in a series of transactions) all, or
substantially all of its assets (whether now owned or
hereinafter acquired) or sell, assign or otherwise dispose of
(whether in one transaction or in a series of transactions)
any of its accounts receivable (whether now in existence or
hereinafter created) at a discount or with recourse, to any
person, or permit any subsidiary to do any of the foregoing,
except for sales or other dispositions of assets in the
ordinary course of business and except that (1) any subsidiary
may merge into or consolidate with or transfer assets to any
other subsidiary and (2) any subsidiary may merge into or
transfer assets to the Company;
(iii) authorize an initial underwritten public offering by the
Company under the Securities Act of any of its equity
securities for its own account pursuant to an offering
registered on Form S-1 or Form SB-1 or their then equivalents;
(iv) elect directors;
(v) increase compensation of either Stockholder by an amount in
excess of 20% of the amount paid in the then current fiscal
year; or
(vi) amend the Certificate of Incorporation or By-laws.
ARTICLE 4 -- MISCELLANEOUS
4.1 Adjustments for Stock Splits, Stock Dividends, etc. If from time to
time during the term of the Purchase Option there is any stock split-up, stock
dividend, stock distribution or other reclassification of the Common Stock of
the Company, any and all new, substituted or additional securities to which the
Stockholder is entitled by reason of his or her ownership of the Restricted
Shares shall be immediately subject to the Purchase Option, the restrictions on
transfer and the other provisions of this Agreement in the same
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manner and to the same extent as the Restricted Shares, and the Option Price
shall be appropriately adjusted.
4.2 Withholding Taxes.
(a) The Stockholder acknowledges and agrees that the Company has the
right to deduct from payments of any kind otherwise due to the Stockholder any
federal, state or local taxes of any kind required by law to be withheld with
respect to the purchase of the Restricted Shares by the Stockholder.
(b) The Stockholder hereby agrees to make a timely election under
Section 83(b) of the Internal Revenue Code of 1986, as amended, and to recognize
ordinary income in the year of acquisition of the Restricted Shares, the Company
will require at the time of such election an additional payment for withholding
tax purposes based on the difference, if any, between the purchase price for
such Restricted Shares and the fair market value of such Restricted Shares as of
the date of the purchase of such Restricted Shares by the Stockholder.
4.3 No Obligation to Continue Employment. Nothing contained in this
Agreement shall be construed as giving the Stockholder any further employment
rights not any right to continue his employment with the Company.
4.4 Waiver; Disposition of Stock. From time to time the Company or the
Investor may waive their respective rights hereunder either generally or with
respect to one or more specific transfers which have been proposed, attempted or
made. All action to be taken by the Company hereunder shall be taken by vote of
a majority of its disinterested members of the Company's Board of Directors then
in office. Any Restricted Shares which the Company has elected to purchase
hereunder may be disposed of by the Company's Board of Directors in such manner
as it deems appropriate, with or without further restrictions upon the transfer
thereof.
4.5 Restrictive Legends. All certificates representing Restricted Shares
shall have affixed thereto legends in substantially the following form:
"The shares of stock represented by this certificate are subject to
restrictions on transfer and an option to purchase set forth in a
certain Restricted Stock and Voting Agreement among the corporation
and the registered owner of this certificate (or his predecessor in
interest and certain other stockholders of the corporation) and
other Investors in the corporation, and such Agreement is available
for inspection without charge at the office of the Secretary of the
corporation."
"The shares represented by this certificate have not been registered
under the Securities Act, as amended, and may not be sold.
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transferred or otherwise disposed of in the absence of an effective
registration statement under such Securities Act or an opinion of
counsel satisfactory to the corporation to the effect that such
registration is not required."
4.6 Successors and Assigns; Assignment. This Agreement shall be binding
upon the parties hereto and their heirs, representatives, successors and
assigns. The Company may assign its rights hereunder either generally or from
time to time.
4.7 Notices. All notices to a party hereto shall be in writing and shall
be deemed to have been adequately given it delivered in person or mailed,
postage pre-paid and registered or certified mail:
If to the Company:
Work Management Solutions, Inc.
119 Beach Street
Boston, Massachusetts 02111-2520
Attention: President
If to the Investors, both to:
LRF Investments, Inc.
60 Wells Avenue
Newton, Massachusetts 02159
If to Stockholder:
John J. Lucas
c/o Work Management Solutions, Inc.
119 Beach Street
Boston, Massachusetts 02111
or to such other address as any party may from time to time designate for itself
by notice in writing given to the other parties hereto.
4.8 Term and Termination. This Agreement shall terminate upon the
happening of a Trigger Event in which the Minimum Liquidation Value has been
achieved, provided, however, that the Company shall have 60 day's after the
occurrence of such Trigger Event to exercise its Repurchase Option as to any
then Unvested Restricted Shares. If such a Trigger Event fails to occur during
the period of ten years from the date hereof and the Stockholder continues at
such time to serve as an employee or director of the Company, then the Company
shall have no further right to exercise its Repurchase
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Option with respect to any non-vested Restricted Shares on the tenth anniversary
of the date hereof, and thereafter, this Agreement shall automatically
terminate, unless otherwise amended by all the parties hereto, and all of the
Restricted Shares shall automatically vest and become Vested Shares and this
Agreement shall no longer be of any force and effect. This Agreement (other than
the provisions of Section 2.6 and Article 3 hereof) shall otherwise remain in
effect until all the Restricted Shares covered by the Repurchase Option have
been disposed of pursuant to this Agreement and the Company and the Investors'
rights of first refusal with respect to the Restricted Shares have also expired
pursuant to the terms of Section 2.1, 2.2, 2.3 and 2.4 above. The provisions of
Article 3 shall terminate on the earliest to occur of the following: (a)
immediately prior to the Public Offering by the Company, or (b) immediately
prior to the consummation of the sale of all, or substantially all, of the
Company's assets or capital stock or a merger, consolidation, reorganization or
other business combination. The provisions of Section 2.6 shall have perpetual
duration except as otherwise specifically provided in Section 2.6.
4.9 Amendments. This Agreement nor any provision hereof may be amended,
changed, discharged or modified in whole or in part only by an instrument in
writing signed by the Company, the Investor and the Stockholder except as
otherwise specifically provided in Section 2.6.
4.10 Entire Agreement. This Agreement constitutes the entire agreement
between the parties, and all premises, representations, understandings,
warranties and agreements with reference to the subject matter hereof have been
expressed herein or in the documents incorporated herein by reference.
4.11 Applicable Law; Severability. This Agreement shall be governed by and
construed and enforced in accordance with Massachusetts law. Wherever possible,
each provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision hereof shall be
prohibited by or invalid under any such law, that provision shall be ineffective
only to the extent of such prohibition or invalidity, without invalidating or
nullifying the remainder of that provision or any other provisions of this
Agreement.
4.12 Injunctive Relief. It is acknowledged that it will be impossible to
measure the damages that would be suffered by the Investors and the Company if
the Stockholder fails to comply with the provisions of this Agreement and that
in the event of any such failure, the Investors and the Company will not have an
adequate remedy at law, and they shall therefore, be entitled to obtain specific
performance of the Stockholder's obligations hereunder and to obtain immediate
injunctive relief.
4.13 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed in original but all of which
together shall constitute one and the same instrument.
<PAGE>
- 13 -
4.14 Effect of Headings. Any table of contents, title of any article or
section heading herein contained is for convenience or reference only and shall
not affect the meaning of construction of any of the provisions hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
- 14 -
IN WITNESS WHEREOF, the Stockholder has hereunto set his hand and the
Company has authorized this instrument to be signed by its officers thereunder
duly authorized, effective as an instrument under seal.
THE COMPANY: WORK MANAGEMENT SOLUTIONS,
INC.
By: /s/ John J. Lucas
-----------------------------
Name: John J. Lucas
Title: President/CEO
THE INVESTORS: LRF INVESTMENTS, INC.
By:
-----------------------------
Name:
Title:
ECHO SERVICES, INC.
By:
-----------------------------
Name:
Title:
THE STOCKHOLDER: /s/ John J. Lucas
---------------------------------
John J. Lucas
Address: 4 Putter Dr
------------------------
Acton MA 01720
------------------------
<PAGE>
- 14 -
IN WITNESS WHEREOF, the Stockholder has hereunto set his hand and the
Company has authorized this instrument to be signed by its officers thereunder
duly authorized, effective as an instrument under seal.
THE COMPANY: WORK MANAGEMENT SOLUTIONS,
INC.
By:
-----------------------------
Name:
Title:
THE INVESTORS: LRF INVESTMENTS, INC.
By: /s/ [ILLEGIBLE]
-----------------------------
Name:
Title: President
ECHO SERVICES, INC.
By: /s/ [ILLEGIBLE]
-----------------------------
Name:
Title:
THE STOCKHOLDER:
---------------------------------
John J. Lucas
Address:
------------------------
------------------------
<PAGE>
Exhibit 10.9
as of December 14, 1999
Work Management Solutions Inc.
75 Wells Avenue
Newton, Massachusetts 02457
Re: Extension of Maturity of Promissory Notes
Gentlemen:
Reference is made to the promissory notes between LRF Investments, Inc.
("LRF") and Work Management Solutions Inc. (the "Company") listed on the
attached Schedule A hereto (the "Promissory Notes"). Capitalized terms used
herein and not otherwise defined shall have the meanings assigned to them in the
Promissory Notes.
LRF hereby agrees with the Company to extent the maturity of the
Promissory Notes to December 31, 2001 unless otherwise amended in writing by the
parties hereto.
THIS LETTER AGREEMENT TO EXTEND MATURITY SHALL, FOR ALL PURPOSES, BE
GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE COMMONWEALTH
OF MASSACHUSETTS EXCLUDING CHOICE OF LAW PRINCIPLES, shall take effect as a
sealed instrument as of the date first hereinabove written and shall be binding
on the parties hereto and their respective successors and assigns.
This Letter Agreement may be executed in counterparts, each of which shall
be deemed an original, but which together shall constitute one and the same
instrument.
Sincerely yours,
LRF INVESTMENTS, INC.
By: /s/ Joseph Freeman, President
------------------------------
Name:
Title:
ACCEPTED AND AGREED TO
WORK MANAGEMENT SOLUTIONS, INC.
By: /s/ S.M. Grange
---------------------
Name: S.M. Grange
Title: C.F.O.
<PAGE>
Work Management Solutions, Inc. Exhibit A
Summary of Outstanding Promissory Notes
<TABLE>
<CAPTION>
===============================================================================================
===============================================================================================
Date of Original Note Currently
Note Description Current Terms Amount Amount Repaid Outstanding
===============================================================================================
<S> <C> <C> <C> <C> <C>
4/20/1988 Revolving Credit Due 12/31/99 100,000.00 54,435.53 45,564.47
- -----------------------------------------------------------------------------------------------
4/20/1988 Subordinated Note Due 12/31/99 240,000.00 0.00 240,000.00
- -----------------------------------------------------------------------------------------------
10/25/1988 Subordinated Note Due 12/31/99 160,000.00 0.00 160,000.00
- -----------------------------------------------------------------------------------------------
8/15/1989 Secured Note Due 12/31/99 500,000.00 0.00 500,000.00
- -----------------------------------------------------------------------------------------------
1/29/1990 Line of Credit Due 12/31/99 240,000.00 140,000.00 100,000.00
- -----------------------------------------------------------------------------------------------
9/15/1991 Secured Note Paid 250,000.00 250,000.00 0.00
- -----------------------------------------------------------------------------------------------
Sub Total Above 1,490,000.00 444,435.53 1,045,564.47
- -----------------------------------------------------------------------------------------------
===============================================================================================
</TABLE>
<PAGE>
Exhibit 10.10
Multitrak Software Development Corp.
119 Beach Street
Boston, MA 02111-2502
April 30, 1992
LRF Investments, Inc.
189 Wells Avenue Suite 4
Newton, MA 02159
Re: Multitrak Software Development Corp.
Dear Joe:
The purpose of this letter is to confirm the agreements that we have made
with respect to the maturity dates for certain debt obligations owed to LRF
Investments, Inc. ("LRF") by Multitrak Software Development Corp. ("Multitrak")
and the extension of certain rights which LRF has under certain warrants issued
by Multitrak to LRF. This letter will confirm our agreement that LRF hereby
extends the maturity dates for each of the debt obligations owed by it by
Multitrak by one year from the original maturity dates indicated on each of the
debt obligations described on the "Summary Data of Notes Payable" attached
hereto. Multitrak hereby agrees that the warrants issued by Multitrak to LRF and
originally dated August 15, 1989 respectively for what are now 40,000 shares and
80,000 shares of Multitrak and which originally expired on March 31, 1993 are
hereby extended to March 31, 1994. This agreement is signed as an instrument
under seal. These agreements are in consideration for each other. Please confirm
your agreement to the foregoing by signing where provision is made below and
returning a signed copy to me.
Sincerely yours,
Multitrak Software Development Corp.
By: /s/ Michael B. Shattow
-----------------------------
Michael B. Shattow, President
The foregoing is agreed to:
LRF Investments, Inc.
By: Joseph J. Freeman
-----------------------
<PAGE>
MULTITRAK SOFTWARE
SUMMARY DATA ON NOTES PAYABLE
- -----------------------------
<TABLE>
<CAPTION>
NAME DATE ORIGINAL REVISED CURRENT
OF OF FACE INTEREST MATURITY MATURITY SPECIAL PRINCIPAL
ISSUE ISSUE AMOUNT RATE DATE DATE FEATURES OUTSTANDING
<S> <C> <C> <C> <C> <C> <C> <C>
REVOLVING CREDIT LINE APR 20 88 $100,000.00 PRIME + 3.5% MAY 31 91 MAY 31 93 SUBORDINATED TO SENIOR DEBT. $45,564.47
SUBORDINATED TO BANK DEBT.
EQUITY REPURCHASE OPTION BY MSDC.
EXERCISE OF EQUITY REPURCHASE
OPTION MAY AFFECT ELECTION
OF DIRECTORS.
SECURED BY ASSETS.
SUBORDINATED NOTES APR 20 88 $240,000.00 PRIME + 3.5% APR 30 91 APR 30 93 SUBORDINATED TO SENIOR DEBT. $240,000.00
SUBORDINATED TO BANK DEBT.
EQUITY REPURCHASE OPTION BY MSDC.
EXERCISE OF EQUITY REPURCHASE
OPTION MAY AFFECT ELECTION
OF DIRECTORS.
SECURED BY ASSETS.
SUBORDINATED NOTES OCT 25 88 $160,000.00 PRIME + 3.5% APR 30 91 APR 30 93 SUBORDINATED TO SENIOR DEBT. $160,000.00
SUBORDINATED TO BANK DEBT.
EQUITY REPURCHASE OPTION BY MSDC.
EXERCISE OF EQUITY REPURCHASE
OPTION MAY AFFECT ELECTION
OF DIRECTORS.
SECURED BY ASSETS.
SECURED NOTE AUG 15 89 $500,000.00 PRIME + 3.5% APR 01 91 APR 01 93 SECURED BY ASSETS. $500,000.00
40,000 WARRANTS @ $1.75,
EXPIRING MAR 31 93.
80,000 WARRANTS @ $1.75,
EXPIRING MAR 31 93.
NOTE REPAYMENT BEGINS APR 01 93
@ APPROXIMATELY $17,000 PER
MONTH IF NOTE NOT REPAID
BY MAR 31 93.
LINE OF CREDIT JAN 29 90 $240,000.00 PRIME + 3.5% ON DEMAND ON DEMAND SECURED BY RECEIVABLES $240,000.00
TOTAL LRF NOTES: $1,240,000.00 $1,185,564.47
============= =============
</TABLE>
<PAGE>
Exhibit 10.11
LINE OF CREDIT NOTE
$ 240,000.00 January 29, 1990
Newton, Massachusetts
FOR VALUE RECEIVED, Multitrak Software Development Corp., a Massachusetts
corporation with an address of, 180 Lincoln Street, Boston, MA, (the
"Borrower"), promises(s) to pay to the order of LRF Investments, Inc., (together
with any successor holder or holders of this Note, the "Lender") at 189 Wells
Avenue, #4, Newton, MA 02159, or such other place as Lender may designate, the
principal sum of Two Hundred Forty Thousand and no/00 Dollars ($240,000.00), or
so much thereof as shall be advanced hereunder, together with interest thereon,
as hereinafter set forth.
Interest on the principal balance of this Note from time to time
outstanding shall accrue from the date hereof at a variable annual rate which
shall equal the "Prime Rate," as hereinafter defined, plus Three and One-Half
percentage points (3 1/2). Interest only shall be payable monthly in arrears on
the 15th day of each month beginning with the 15th day of February, 1990.
Interest shall be computed on the basis of a three hundred and sixty (360)-day
year and shall be paid for the actual number of days on which principal is
outstanding.
This Note represents indebtedness for one or more advances of funds or
extensions of credit made by the Lender to the Borrower, upon request by the
Borrower and at the Lender's sole discretion.
In any event, the entire outstanding principal balance of this Note,
together with any accrued interest as may be due hereunder, shall be paid on
demand.
In the event that any payment due hereunder is not paid within fourteen
(14) days after the date it is due or upon a default under any instrument, if
any, executed by Borrower in connection with the loan evidenced by this Note
(together with this Note, the "Loan Documents") which default is not cured
within the applicable grace period, if any, Lender, at its option, may declare
immediately due and payable the entire outstanding balance of principal and
interest, together with all other charges to which Lender may be entitled.
As used herein, the term Prime Rate shall mean the rate of interest
announced or published by the Wainwright Bank and Trust Co. from time to time as
its prime Rate. In the event that the Prime Rate changes, the interest rate
under this Note shall be adjusted to reflect any change in the Prime Rate as of
the date of such change.
<PAGE>
$240,000.00 Demand Note
Borrower agrees to pay all charges (including reasonable attorney's fees)
of Lender in connection with the collection and/or enforcement of this Note or
any other Loan Document, whither or not suit is brought against Borrower.
The failure of Lender at any time to exercise any option or right
hereunder shall not constitute a waiver of Lender's right to exercise such
option or right at any other time.
This Note shall be governed by, construed, and enforced in accordance with
the laws in the State of Massachusetts. If any provision of this Note is held to
be invalid or unenforceable by a court of competent jurisdiction, the other
provisions of this Note shall remain in full force and effect.
This Note shall have the effect of an instrument under seal.
Multitrak Software
Development Corporation
By: /s/ Michael B. Shattow
-----------------------
Michael B. Shattow, President
The above-stated terms and conditions have been reviewed and are accepted
by the Lender as the date first set forth above.
LRF INVESTMENTS, INC.
By: /s/ Joseph J. Freeman
-----------------------
Joseph J. Freeman, President
<PAGE>
Exhibit 10.12
2-8223-2-(C)
MULTITRAK SOFTWARE DEVELOPMENT CORP.
NOTE
$500,000 Boston, Massachusetts
August 15, 1989
FOR VALUE RECEIVED Multitrak Software Development Corp. (herein the
"Company"), a corporation organized and existing under the laws of the State of
Delaware with offices at 108 Lincoln Street Boston, Massachusetts 02111-2502,
hereby promises to pay to the order of LRF Investments, Inc. (herein "LRF") the
principal sum borrowed by Company from LRF under a letter agreement dated the
date of this Note (the "August 1989 Letter Agreement"). Said principal sum shall
not exceed Five Hundred Thousand ($500,000) Dollars and shall be paid as
follows. Interest on the average monthly unpaid balance of principal outstanding
shall be calculated at the end of each month at a rate per annum equal to the
average prevailing daily Prime Rate for such month as established from time to
time by Wainright Bank and Trust Company plus three and one-half (3 1/2%)
percent. Interest shall be paid in arrears at the close of business on the last
day of each month commencing on September 30, 1989, until this Note is paid in
full. Any unpaid principal balance on April 1, 1991 shall be paid in thirty six
(36) equal monthly payments of principal, which payments shall be made on the
last day of each month commencing on April 30, 1991.
Principal, interest and all other amounts due under this Note shall be
payable in immediately available funds at the office of LRF Investments, Inc.,
189 Wells Avenue, Newton, Massachusetts 02159, or at such other place as the
holder of this Note may from time to time designate in writing to the Company.
This Note is issued pursuant to and is entitled to benefits of the August
1989 Letter Agreement by and between the Company and LRF. Reference is hereby
made to the August 1989 Letter Agreement for a complete description of the
rights, obligations, limitations and restrictions of the Company and the holders
of this Note, and the terms and conditions of this Note set forth herein are
subject in every respect to the terms and conditions of the August 1989 Letter
Agreement.
The Company shall have the option to prepay all or any part of the
principal amount of this Note from time to time together with interest accrued
on the amount prepaid to the prepayment date; provided however that no
prepayment, except a final payment, shall be in an amount of less than $1000.
<PAGE>
This Note shall become immediately due and payable at the option of the
holder if any event of default occurs as hereinafter defined which remains
uncured after any applicable grace period relating thereto:
1. It shall be an event of default if the Company shall be in
default under the terms and conditions of a Security Purchase Agreement
dated April 20, 1988 by and among the Company, LRF and Michael B. Shattow
which event of default is not cured within any applicable grace period as
provided in said Securities Purchase Agreement.
2. It shall be an event of default if any payment to be made
hereunder or pursuant to any other promissory note issued by the Company
to LRF shall remain unpaid five (5) days after the due date for such
payment and five (5) days after notice of such nonpayment is given by LRF
to the Company.
The Company hereby waives demand, presentment for payment, notice of
dishonor, protest, notice of protest and diligence, and agrees that the holder
hereof may extend the time for payment or accept partial payment without
discharging or releasing the Company.
If after any default in the terms of this Note, the holder shall place
this Note with an attorney for collection, then, if permitted by law, the
undersigned agrees to pay all costs and expenses of such action including all
reasonable attorneys fees for the collection of this Note and the indebtedness
evidenced hereby.
IN WITNESS WHEREOF this Note has been executed and delivered as a sealed
instrument at the place and on the date set forth above by the duly authorized
representative of the Company.
Multitrak Software Development
Corp.
By: /s/ Michael B. Shattow
-----------------------------
Michael B. Shattow, President
[corporate seal]
<PAGE>
Exhibit 10.13
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
AND MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR (ii) FOLLOWING
RECEIPT BY THE ISSUER OF AN OPINION FROM ITS COUNSEL THAT NO REGISTRATION
STATEMENT IS NECESSARY IN CONNECTION WITH SUCH TRANSACTION. THE TRANSFER OF THIS
SECURITY IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE SECURITIES PURCHASE
AGREEMENT, DATED APRIL 20, 1988, TO WHICH THE ISSUER AND THE ORIGINAL HOLDER OF
THIS SECURITY ARE PARTIES. A COPY OF SUCH CONDITIONS WILL BE FURNISHED BY THE
ISSUER TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.
MULTITRAK SOFTWARE DEVELOPMENT CORP.
Subordinated Note
$160,000.00 Boston, Massachusetts
October 25, 1988
FOR VALUE RECEIVED Multitrak Software Development Corp. (herein the
"Company"), a corporation organized and existing under the laws of the State of
Delaware with offices at 108 Lincoln Street, Boston, MA 02111-2502, hereby
promises to pay to the order of LRF Investments, Inc. the principal sum of ONE
HUNDRED AND SIXTY THOUSAND DOLLARS ($160,000.00) on April 30, 1991 together with
interest at a rate per annum equal to the Prime Rate established from time to
time by Wainright Bank and Trust Company plus three and one-half percent
(3 1/2%) (computed on the basis of a 360-day year of twelve 30-day months) on
the unpaid balance of principal hereof, payable in arrears at the close of
business on the last day of each month commencing on November 30, 1988, and on
any overdue principal and interest until paid in full.
<PAGE>
Principal, interest and all other amounts due under this Note shall be
payable in immediately available funds at the office of LRF Investments, Inc.,
189 Wells Avenue, Newton, MA 02159, or at such other place as the holder of this
Note may from time to time designate in writing to the Company.
This Note is issued pursuant to and is entitled to the benefits of, a
Securities Purchase Agreement (herein the "Agreement") dated April 20, 1988 by
and among the Company, the original purchaser hereof and Michael B. Shattow.
Reference is hereby made to the Agreement for a complete description of the
rights, obligations, limitations and restrictions of the Company and the holders
of the Note, and the terms and conditions of the Note noted hereafter are
subject in every respect to the terms and conditions of the Agreement.
As provided in the Agreement, the Company shall have the option to prepay
all or any part of the principal amount of this Note from time to time together
with interest accrued on the amount prepaid to the prepayment date.
Payment of the principal of, and interest on, this Note is expressly
subordinated to the prior payment of Senior Debt as provided in the Agreement,
and by acceptance of this Note the holder hereof agrees to be bound by such
provisions of the Agreement.
If an Event of Default as defined in the Agreement should occur and be
continuing, the principal amount and accrued interest of this Note may be
declared immediately due and
2
<PAGE>
payable in the manner and to the extent provided for in the Agreement.
The Company hereby waives demand, presentment for payment, notice of
dishonor, protest, notice of protest and diligence, and agrees that the holder
hereof may extend the time for payment or accept partial payment without
discharging or releasing the Company.
IN WITNESS WHEREOF this Note has been executed and delivered as a sealed
instrument at the place and on the date set forth above by the duly authorized
representatives of the Company.
MULTITRAK SOFTWARE DEVELOPMENT
CORP.
[corporate seal]
By /s/ Michael B. Shattow
------------------------
Michael B. Shattow, President
ATTEST:
/s/ Peter Myerson,
- ------------------------------
Peter Myerson Assistant
Secretary
DP-3679/d
3
<PAGE>
Exhibit 10.14
PROMISSORY NOTE
$50,000 Boston, Massachusetts
July 22, 1988
FOR VALUE RECEIVED Multitrak Software Development Corp. (herein the
"Company"), a corporation organized and existing under the laws of the State of
Delaware with offices at 108 Lincoln Street, 3rd Floor, Boston, Massachusetts
02111-2502, hereby promises to pay to the order of Michael B. Shattow the
principal sum of FIFTY THOUSAND DOLLARS ($50,000) on July 30, 1991 together with
interest at a rate per annum equal to the Prime Rate established from time to
time by Wainright Bank and Trust Company plus three and one-half percent
(3 1/2%) (computed on the basis of a 360-day year of twelve 30-day months) on
the close of business on the last day of each month commencing on July 31, 1988,
and on any overdue principal and interest until paid in full.
Principal, interest and all other amounts due under this Note shall be
payable in immediately available funds at the Company's office, or at such other
place as the holder of this Note may from time to time designate in writing to
the Company.
This Note is issued pursuant to certain obligations of Michael B. Shattow
under a Securities Purchase Agreement (hereinafter the "Agreement") dated April
20, 1988 by and among Multitrak Software Development Corp., LRF Investments,
Inc. and Michael B. Shattow.
The Company shall have the option to prepay all or any part of the
principal amount of this Note from time to time together with interest accrued
on the amount prepaid to the prepayment date.
<PAGE>
Payment of the principal of, and interest on, this Note is expressly
subordinated to the prior payment of Senior Debt as provided in the Agreement,
and by acceptance of this Note the holder hereof agrees to be bound by such
provisions of the Agreement.
Reference is herewith made to the Agreement for the definition of certain
Notes and Revolving Credit Note. The indebtedness of the Company to Michael B.
Shattow under this Note shall be subordinated in right of payment of interest
and liquidation to the Notes and the Revolving Credit Note as defined in the
said Agreement.
If an Event of Default as defined in the Agreement should occur and be
continuing, the principal amount and accrued interest of this Note may be
declared immediately due and payable in the manner and to the extent provided
for in the Agreement.
The Company hereby waives demand, presentment for payment, notice of
dishonor, protest, notice of protest and diligence, and agrees that the holder
hereof may extend the time for payment or accept partial payment without
discharging or releasing the Company.
IN WITNESS WHEREOF this Note has been executed and delivered as a sealed
instrument at the place and on the date set forth above by the duly authorized
representatives of the Company.
MULTITRAK SOFTWARE DEVELOPMENT CORP.
By: /s/ Michael B. Shattow
-----------------------------
Michael B. Shattow, President
<PAGE>
Exhibit 10.15
COPY
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT
(i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR (ii)
FOLLOWING RECEIPT BY THE ISSUER OF AN OPINION FROM ITS COUNSEL THAT NO
REGISTRATION STATEMENT IS NECESSARY IN CONNECTION WITH SUCH TRANSACTION.
THE TRANSFER OF THIS SECURITY IS SUBJECT TO THE CONDITIONS SPECIFIED IN
THE SECURITIES PURCHASE AGREEMENT, DATED APRIL 20, 1988, TO WHICH THE
ISSUER AND THE ORIGINAL HOLDER OF THIS SECURITY ARE PARTIES. A COPY OF
SUCH CONDITIONS WILL BE FURNISHED BY THE ISSUER TO THE HOLDER HEREOF UPON
WRITTEN REQUEST AND WITHOUT CHARGE.
MULTITRAK SOFTWARE DEVELOPMENT CORP.
Revolving Credit Note
$100,000.00 Boston, Massachusetts
April 20, 1988
FOR VALUE RECEIVED Multitrak Software Development Corp. (herein the
"Company"), a corporation organized and existing under the laws of the State of
Delaware with offices at 250 Pond Street, Jamaica Plain, MA 02130, hereby
promises to pay to the order of LRF Investments, Inc. (the "Lender"), the
principal sum of ONE HUNDRED THOUSAND DOLLARS ($100,000.00) (or, if less, the
aggregate unpaid principal amount of all Advances made by the Lender to the
Company pursuant to the Securities Purchase Agreement (the "Agreement") dated
April 20, 1988), together with interest on the unpaid principal from time to
time outstanding at a fluctuating rate per annum equal to the Prime Rate
established from time to time by the Wainright Bank and Trust Company plus three
and one-half percent (3 1/2%) (computed on the basis of a 360-day year of
twelve 30-day months),
<PAGE>
payable in arrears at the close of business on the last day of each month
commencing on May 31, 1988, and on any overdue principal and interest until paid
in full. The entire balance of outstanding principal and accrued unpaid interest
shall be paid in full on or prior to May 31, 1991.
Principal, interest and all other amounts due under this Revolving Credit
Note shall be payable in immediately available funds at the office of the
Lender, 189 Wells Avenue, Newton, Massachusetts 02159, or at such other address
as the holder of this Revolving Credit Note may from time to time designate in
writing to the Company.
This Revolving Credit Note represents indebtedness for one or more
Advances made by the Lender to the Company under the Agreement. Reference is
hereby made to the Agreement for a complete description of the rights,
obligations, limitations and restrictions of the Company and the holders of the
Revolving Credit Note, and the terms and conditions of the Revolving Credit Note
noted hereafter are subject in every respect to the terms and conditions of the
Agreement.
As provided in the Agreement, the Company shall have the option to prepay
all or any part of the principal amount of this Revolving Credit Note from time
to time together with interest accrued on the amount prepaid to the prepayment
date.
Payment of the principal of, and interest on, this Revolving Credit Note
is expressly subordinated to the prior payment of the Senior Debt as provided in
the Agreement, and by
2
<PAGE>
acceptance of this Revolving Credit Note, the holder hereof agrees to be bound
by such provisions of the Agreement.
If an Event Of Default as defined in the Agreement should occur and be
continuing, the principal amount and accrued interest of this Revolving Credit
Note may be declared immediately due and payable in the manner and to the extent
provided in the Agreement.
The Company hereby waives demand, presentment for payment, notice of
dishonor, protest, notice of protest and diligence, and agrees that the holder
hereof may extend the time for payment or accept partial payment without
discharging or releasing the Company.
IN WITNESS WHEREOF, this Revolving Credit Note has been executed and
delivered as a sealed instrument at the place and on the date set forth above by
the duly authorized representative of the Company.
[Corporate Seal] MULTITRAK SOFTWARE DEVELOPMENT
CORP.
By /s/ Michael B. Shattow
-----------------------------
Michael B. Shattow, President
ATTEST:
/s/ Peter Myerson, Asst. Sec.
- ------------------------------
Peter Myerson Assistant
Secretary
DP-2001/d
<PAGE>
Exhibit 10.16
COPY
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED
EXCEPT (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
OR (ii) FOLLOWING RECEIPT BY THE ISSUER OF AN OPINION FROM ITS COUNSEL
THAT NO REGISTRATION STATEMENT IS NECESSARY IN CONNECTION WITH SUCH
TRANSACTION. THE TRANSFER OF THIS SECURITY IS SUBJECT TO THE CONDITIONS
SPECIFIED IN THE SECURITIES PURCHASE AGREEMENT, DATED APRIL 20, 1988, TO
WHICH THE ISSUER AND THE ORIGINAL HOLDER OF THIS SECURITY ARE PARTIES. A
COPY OF SUCH CONDITIONS WILL BE FURNISHED BY THE ISSUER TO THE HOLDER
HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.
MULTITRAK SOFTWARE DEVELOPMENT CORP.
Subordinated Note
$240,000.00 Boston, Massachusetts
April 20, 1988
FOR VALUE RECEIVED Multitrak Software Development Corp. (herein the
"Company"), a corporation organized and existing under the laws of the State of
Delaware with offices at 250 Pond Street, Jamaica Plain, MA 02130, hereby
promises to pay to the order of LRF Investments, Inc. the principal sum of TWO
HUNDRED AND FORTY THOUSAND DOLLARS ($240,000.00) on April 30, 1991 together with
interest at a rate per annum equal to the Prime Rate established from time to
time by Wainright Bank and Trust Company plus three and one-half percent
(3 1/2%) (computed on the basis of a 360-day year of twelve 30-day months) on
the unpaid balance of principal hereof, payable in arrears at the close of
business on the last day of each month commencing on May 31, 1988, and on any
overdue principal and interest until paid in full.
<PAGE>
Principal, interest and all other amounts due under this Note shall be
payable in immediately available funds at the office of LRF Investments, Inc.,
189 Wells Avenue, Newton, MA 02159, or at such other place as the holder of this
Note may from time to time designate in writing to the Company.
This Note is issued pursuant to and is entitled to the benefits of, a
Securities Purchase Agreement (herein the "Agreement") dated April 20, 1988 by
and among the Company, the original purchaser hereof and Michael B. Shattow.
Reference is hereby made to the Agreement for a complete description of the
rights, obligations, limitations and restrictions of the Company and the holders
of the Note, and the terms and conditions of the Note noted hereafter are
subject in every respect to the terms and conditions of the Agreement.
As provided in the Agreement, the Company shall have the option to prepay
all or any part of the principal amount of this Note from time to time together
with interest accrued on the amount prepaid to the prepayment date.
Payment of the principal of, and interest on, this Note is expressly
subordinated to the prior payment of Senior Debt as provided in the Agreement,
and by acceptance of this Note the holder hereof agrees to be bound by such
provisions of the Agreement.
If an Event of Default as defined in the Agreement should occur and be
continuing, the principal amount and accrued interest of this Note may be
declared immediately due and
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payable in the manner and to the extent provided for in the Agreement.
The Company hereby waives demand, presentment for payment, notice of
dishonor, protest, notice of protest and diligence, and agrees that the holder
hereof may extend the time for payment or accept partial payment without
discharging or releasing the Company.
IN WITNESS WHEREOF this Note has been executed and delivered as a sealed
instrument at the place and on the date set forth above by the duly authorized
representatives of the Company.
MULTITRAK SOFTWARE DEVELOPMENT
CORP.
[corporate seal]
By /s/ Michael B. Shattow
------------------------
Michael B. Shattow, President
ATTEST:
/s/ Peter Myerson, asst. sec.
- ------------------------------
Peter Myerson, Assistant
Secretary
DP-1978/d
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Exhibit 10.17
SECURITIES PURCHASE AGREEMENT
AGREEMENT dated April 20, 1988 by and among Multitrak Software Development
Corp., a Delaware corporation, with offices at 250 Pond Street, Jamaica Plain,
Massachusetts 02130 (herein the "Company"), Michael B. Shattow, a resident of
Jamaica Plain, Massachusetts ("Shattow"), and LRF Investments, Inc., a
Massachusetts corporation, with offices at 189 Wells Avenue, Newton,
Massachusetts (the "Purchaser").
In consideration of the mutual covenants and agreements set forth herein
and for good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1. DESCRIPTION OF PROPOSED FINANCING
1.1 Authorization of Common Stock, Subordinated Note and Revolving Credit
Note. The Company has authorized or will authorize the issuance of 55,000 shares
(the "Shares") of its Common Stock, par value $0.01, its Subordinated Notes in
the aggregate principal amount of $400,000 in substantially the form of Exhibit
A attached hereto (the "Note" or "Notes") and its Revolving Credit Note in the
principal amount of $100,000 in substantially the form of Exhibit B attached
hereto (the "Revolving Credit Note").
1.2 Purchase of Shares and Note. On the terms and subject to the
conditions of this Agreement and in reliance upon the representations and
warranties of the Company and Shattow, the Purchaser agrees to purchase from the
Company and the Company agrees to sell to the Purchaser on the Closing Date
(hereinafter defined) 33,000 Shares at an aggregate purchase price of $60,000
and the Note dated as of the Closing Date in the principal amount of $240,000 at
a purchase price of 100% of the principal amount of the Note.
1.3 Closing. The Closing of the purchase and sale of the Shares and the
Note contemplated by paragraph 1.2 (the "Closing," the date thereof being
referred to herein as the "Closing Date") is taking place concurrently with the
execution of this Agreement. At the Closing, the Company shall deliver to the
Purchaser share certificates evidencing the 33,000 Shares to be purchased by the
Purchaser hereunder registered in the name of the Purchaser and the Note to be
purchased by the Purchaser hereunder made payable to the order of the
Purchaser, against payment of the purchase prices therefor.
<PAGE>
1.4 Additional Purchase of Shares and Note. On the terms and subject to
the conditions of this Agreement and in reliance upon the representations and
warranties of the Company and Shattow contained herein, the Purchaser agrees to
purchase and the Company agrees to sell to the Purchaser additional Shares and
an additional Note, as set forth below:
(a) In the event, and only in the event, the Company shall have
executed and delivered contracts for the sale of its Multitrak software
system (the "System") to non-affiliates of the Company having an aggregate
sale price of at least $200,000 and one (1) such System shall have been
completely installed and accepted by the purchaser thereof, within the
six-month period ending on the date (the "Evaluation Date") six (6) months
following the Closing Date, the Purchaser shall purchase from the Company,
and the Company shall sell to the Purchaser, 22,000 Shares at an aggregate
purchase price of $40,000 and the Note dated the date of the Second
Closing (hereinafter defined) in the principal amount of $160,000 of a
purchase price of 100% of the principal amount of the Note. Promptly after
the Evaluation Date the Company shall give written notice (the "Evaluation
Notice") to the Purchaser stating the aggregate sale price of the
contracts for the System that have been executed and delivered and how
many Systems have been completely installed and accepted by the purchaser
thereof as of the Evaluation Date.
(b) In the event the Purchaser shall become obligated to purchase
the Shares and Note under paragraph 1.4(a), then within sixty (60) days
following receipt by the Purchaser of the Evaluation Notice, the Company
may deliver to the Purchaser a written demand (the "Purchase Demand") to
purchase the Shares and the Note under paragraph 1.4(a); provided said
Purchase Demand shall be accompanied by a certificate signed by the
President and the principal financial officer of the Company certifying
that the representations and warranties set forth in Sections 2 and 3
remain true and correct in all material respects on and as of the date
thereof and that the Company has conformed and complied in all material
respects with the covenants of Sections 4 and 5 as of the date thereof.
(c) In the event, and only in the event, the Company shall have
executed and delivered contracts for the sale of the System to
non-affiliates of the Company having an aggregate sale price of at least
$300,000 and one (1) such System shall have been completely installed and
accepted by the purchaser thereof any time before the Evaluation Date, the
Company by delivery of a Purchase Demand to Purchaser may require the
Purchaser to purchase from the Company the number of Shares and the
principal amount of the Note
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specified in paragraph 1.4(a) at the purchase prices specified in
paragraph 1.4(a); provided said Purchase Demand shall be accompanied by a
certificate signed by the President and the principal financial officer of
the Company certifying that the representations and warranties set forth
in Sections 2 and 3 remain true and correct in all material respects on
and as of the date thereof and that the Company has conformed and complied
in all material respects with the covenants of Sections 4 and 5 as of the
date thereof.
(d) The closing of the purchase and sale of the Shares and Note
pursuant to this Section 1.4 (herein the "Second Closing") shall occur at
such time and place as shall be mutually agreed upon by the Company and
the Purchaser, provided that such Second Closing shall be no later than
twenty (20) days following receipt by the Purchaser of said Purchase
Demand. At the Second Closing the Company shall deliver to the Purchaser
share certificates evidencing the 22,000 Shares to be purchased by the
Purchaser hereunder registered in the name of the Purchaser and the Note
in the principal amount of $160,000 to be purchased by the Purchaser
hereunder made payable to the order of the Purchaser, against payment of
the purchase prices therefor.
1.5 Revolving Credit.
1.5.1 Revolving Credit. Subject to the terms and conditions of this
Agreement and so long as there exists no Event of Default (hereinafter defined),
at anytime after the Closing Date and prior to April 20, 1991, the Company may
borrow and reborrow, and the Purchaser shall make loans or extensions of credit
to the Company pursuant to this paragraph ("Revolving Credit Advances"), as from
time to time requested by the Company; provided Shattow, Gary Tyer (herein
"Tyer"), and Bruce Taylor (herein "Taylor") shall have executed and delivered a
Guaranty in favor of the Purchaser in an amount up to $50,000, which Guaranty
shall be substantially in the form of Exhibit C, (herein "Guaranty") to secure
repayment and performance of all the Company's obligations under the Revolving
Credit Advances. The aggregate amount of all Revolving Credit Advances
outstanding at any one time shall not exceed $100,000 or such higher amount of
indebtedness as approved by the Purchaser. At the time of the initial request
for a Revolving Credit Advance, the Company shall execute and deliver to the
Purchaser the Revolving Credit Note evidencing the Revolving Credit Advances.
Anything set forth herein to the contrary notwithstanding, the Purchaser
shall have the absolute right to refuse to make any Revolving Credit Advance (i)
if Shattow, Tyer, and Taylor
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have not executed the Guaranty, or (ii) for so long as there exists any Event of
Default, or any other condition which, with the passage of time or giving of
notice or both, would constitute an Event of Default upon the making of such
Revolving Credit Advance. The Company shall have the right to make prepayments
reducing the outstanding balance of Revolving Credit Advances without penalty.
The Revolving Credit Note shall be prepaid immediately in the amount by which at
any time the aggregate amount of all Revolving Credit Advances outstanding
exceeds $100,000 or such higher amount of indebtedness as approved by the
Purchaser.
1.5.2 Request for Revolving Credit Advances and Responses. Each request
for a Revolving Credit Advance shall be made to the Purchaser in writing by a
duly authorized representative of the Company. At the time of the initial
request for a Revolving Credit Advance, the Company shall provide the Purchaser
with a certificate signed by the President and principal financial officer of
the Company certifying that the representations and warranties set forth in
Sections 2 and 3 remain true and correct in all material respects on and as of
the date thereof and that the Company has conformed and complied in all material
respects with the covenants of Sections 4 and 5 as of the date hereof. Each
subsequent request for a Revolving Credit Advance shall constitute a
reconfirmation of the representations contained in such Certificate. Objection
to a request for a Revolving Credit Advance, if any, shall be made within three
(3) business days from the date such request is received by the Purchaser, and
in the absence of such objection, the Revolving Credit Advance shall be made
within five (5) business days from the date such request is received by the
Purchaser. The Purchaser shall not unreasonably withhold or delay any requested
Revolving Credit Advance made properly pursuant to and in accordance with this
paragraph 1.5.
1.5.4 Interest on Revolving Credit Advances. When Revolving Credit
Advances are made in the form of a cash advance, the Company shall pay interest
on the unpaid balance of each such Revolving Credit Advance from time to time
outstanding at a rate per annum equal to the Prime Rate established from time to
time by the Wainwright Bank and Trust Company plus three and one-half percent
(3.5%). The amount of cash advances will be added to the unpaid balance of the
Revolving Credit Note when made. Where Revolving Credit Advances are made via
extensions of credit (e.g., guarantees of letters of credit), the Company shall
pay all reasonable costs of such extensions of credit incurred by the Purchaser.
Interest shall be payable in arrears on the fifteenth day of each month
commencing with the first such month following the date of the initial Revolving
Credit Advance and continuing until all of the indebtedness of the Company to
the Purchaser
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under this paragraph 1.5 shall have been fully paid. On the stated or
accelerated maturity of the Revolving Credit Note, all accrued and unpaid
interest thereon together with the unpaid principal thereof shall be due and
payable immediately.
SECTION 2. SECURITY INTEREST
In order to secure due payment of the principal of and interest on the
Notes and the Revolving Credit Note and compliance by the Company with its
obligations and responsibilities contained herein:
2.1 Grant of Security Interest. The Company does hereby grant to the
Purchaser a security interest in and does also hereby assign, transfer and set
over to the Purchaser all the right, title and interest of the Company in, to
and under all personal property and fixtures, including, without limitation, all
inventory, equipment and other goods, accounts, documents, instruments, general
intangibles and chattel paper, in which the Company now has or hereafter
acquires any right and all the products and proceeds thereof (the "Collateral").
2.2 Company's Place of Business. The Company warrants that:
(a) The Company's principal place of business is located at 250 Pond
Street, Jamaica Plain, MA 02130.
(b) Debtor has no other place of business except 1050 Massachusetts
Avenue, Cambridge, MA 02138.
(c) The records concerning the Company's accounts and contract
rights are located at 1050 Massachusetts Avenue, Cambridge, MA 02138.
The Company covenants to notify the Purchaser of the addition or
discontinuance of any place of business or any change in the information
contained in this paragraph.
2.3 Location of Collateral. The Company warrants and covenants that all of
the Collateral shall be located at the Company's place of business specified in
this Agreement.
None of the Collateral shall be removed from the locations specified in
this paragraph other than in the ordinary course of business.
2.4 Fixtures. It is the intention of the Company and the Purchaser that
none of the Collateral shall become fixtures.
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2.5 Failure to Make Payments. If the Company shall fail to make any
payment under the Notes or the Revolving Credit Note when due thereunder, and
fails to make such payment within ten (10) days after written notice thereof to
the Company, the Purchaser shall have the right to possess and dispose of the
Collateral without further consent of the Company. The Purchaser may exercise
all the rights and remedies accorded a secured party under the Uniform
Commercial Code, and shall in addition have all the rights provided in this
Agreement. The net amount of receipts, proceeds and income received by the
Purchaser under or on account of the Collateral, after payment of all proper
costs and expenses incurred by the Purchaser in exercising its rights under this
Section 2, shall be applied to the reduction and payment of the debt evidenced
by the Notes and the Revolving Credit Note, including all interest due thereon.
2.6 Filing and Perfection. To evidence and perfect the security interest
granted under this Section, prior to or at the Closing, the Company shall
promptly execute and deliver to the Purchaser such certificates and financing
statements as the Purchaser may reasonably request. In addition, the Company
shall take or cause to be taken all other actions required by law or reasonably
requested by the Purchaser in order to preserve and protect said security
interest and the rights of the Purchaser hereunder.
2.7 Defeasance of Security Interest; Termination. When all the principal
and interest due on each of the Notes and the Revolving Credit Note has been
duly paid in accordance with the terms thereof and the Notes and Revolving
Credit Note have been retired, then the assignment of the Collateral shall
terminate and the Company's obligations with respect to the security interest
granted under this Section shall terminate. Thereafter, upon the Company's
reasonable request, the Purchaser shall promptly execute and deliver to the
Company instruments in the form furnished by the Company effective to evidence
the termination of the security interest granted under this Section and the
reassignment to the Company of the right, interest and title in, to and under
the Collateral.
2.8 Assignment of Security Interest. The Company agrees that the Purchaser
and a Secured Party may assign and transfer all or a part of the security
interest granted to the Purchaser under this Section to one or more subsequent
holders of the Notes or the Revolving Credit Note (a "Secured Party") without
the consent of the Company. To evidence the assignment and transfer of said
security interest to a Secured Party, the Company shall promptly execute and
deliver to the Secured
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Party, such certificates and financing statements as the Secured Party may
reasonably request to preserve and protect said security interest.
2.9 Subordination of Security Interest. The security interest granted to
the Purchaser pursuant to paragraph 2.1 shall be subordinate to the security
interest granted to Multisystems, Inc. in the System (as defined in paragraph
1.4(a)), as described in a Multitrak Purchase Agreement, dated April 20, 1988 by
and between the Company and Multisystems, Inc.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company and Shattow hereby represent and warrant to the Purchaser
that:
3.1 Organization and Corporate Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is qualified to do business as a foreign corporation in each
jurisdiction where such qualification is required. The Company has all required
corporate power and authority to own its property, to carry on its business as
presently conducted and as contemplated by the Business Plan referred to in
paragraph 3.15 and to carry out the transactions contemplated hereby and
thereby. The copies of the Certificate of Incorporation and By-laws of the
Company, as amended to date, which have been furnished to counsel for the
Purchaser by the Company, are correct and complete.
3.2 Authorization. This Agreement, the Shareholders' Agreement
(hereinafter defined), the Consulting Agreement (hereinafter defined), the
Employment Agreements (hereinafter defined), the Abraham Consulting Agreement
(as defined herein), the Notes, and the Revolving Credit Note when delivered
will be valid and binding obligations of the Company, enforceable in accordance
with their terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and subject to equitable principles
limiting rights to specific performance or other equitable remedies. The
execution, delivery and performance of this Agreement, the Shareholders'
Agreement, the Consulting Agreement, and the Employment Agreements, the Abraham
Consulting Agreement and the issuance of the Shares, the Notes and the Revolving
Credit Note have been duly authorized by all necessary corporate or other action
of the Company.
3.3 Capitalization. The authorized and issued capital stock of the Company
and the consideration received and to be received therefor are as set forth in
Schedule 3.3 of the Schedule Volume to this Agreement (the "Schedule Volume").
All
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of the presently outstanding shares of capital stock of the Company have been
duly and validly authorized and issued and are fully paid and non-assessable,
are owned of record and beneficially as set forth in said Schedule 3.3, and were
issued for the respective considerations set forth in said Schedule 3.3. The
Company has authorized for issuance to the Purchaser pursuant to this Agreement
55,000 shares of its Common Stock, and the shares so issued will, upon such
issuance pursuant to and in accordance herewith, be validly authorized, issued
and outstanding, fully paid and non-assessable. Except as provided above or in
said Schedule 3.3, the Company has issued no other shares of its Common Stock
and there are no outstanding warrants, options or other rights to purchase or
acquire any of such shares. There are no preemptive rights with respect to the
issuance or sale of the Company's Common Stock. There are no restrictions on the
transfer of the Company's Common Stock except as provided in this Agreement, the
Shareholders' Agreement, or described in said Schedule 3.3. The Company has no
subsidiaries and no investments in any other corporation or business
organization. The Company has no outstanding agreements providing for the
registration of any of its capital stock or other securities under the
Securities Act of 1933, as amended (the "Securities Act") except as provided in
this Agreement.
3.4 Financial Statements. Set forth in Schedule 3.4 of the Schedule Volume
are the following financial statements of the Company, all of which statements
(including footnotes thereto) are complete and correct in all material respects,
and fairly present the financial position of the Company on the dates of such
statements and the results of its operations for the period covered thereby.
Pro Forma Balance Sheet as of March 31, 1988, 1989 and 1990
Pro Forma Income Statements for the years ended December 31, 1988,
1989, 1990, 1991 and 1992
Pro Forma Statement of Monthly Cash Flow for the year ended
December 31, 1988
Pro Forma Statement of Quarterly Cash Flow for the years ended
December 31, 1989 and 1990
3.5 Absence of Undisclosed Liabilities. Except as and to the extent
reflected or reserved against in the pro-forma balance sheet included in
Schedule 3.4 of the Schedule Volume, except for liabilities arising in the
ordinary course of its business since the date of said balance sheet, and except
as disclosed in Schedule 3.9 of the Schedule Volume, the Company has no material
accrued or contingent liability arising out of
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any transaction or state of facts existing prior to or at the date hereof.
3.6 Absence of Certain Developments. Since the date of the pro forma
balance sheet included in Schedule 3.4 of the Schedule Volume, there has been
(i) no material adverse change in the condition, financial or otherwise, of the
Company or in its assets, liabilities, properties or business, (ii) no
declaration, setting aside or payment of any dividend or other distribution with
respect to the capital stock of the Company, (iii) no material loss, destruction
or damage to any property of the Company, whether or not insured, (iv) no labor
trouble involving the Company and no material change in its personnel or the
terms and conditions of employment, (v) no condition, act or event which
constitutes an Event of Default or which, with notice or lapse of time or both,
would constitute such an Event of Default, and (vi) no acquisition or
disposition of any material assets (or any contract or arrangement therefor) or
any other material transaction by the Company, otherwise than for fair value in
the ordinary course of business.
3.7 Title to Properties. Except for security interest of Multisystems,
Inc. in the System described in paragraph 2.9, the Company has good and
marketable title to all of its properties and assets free and clear of all
liens, restrictions or encumbrances except such as would be permitted by
paragraph 5.9 hereof. All machinery and equipment included in such properties
which is necessary to the business of the Company is in good condition and
repair, and all leases of real or personal property to which the Company is a
party are fully effective and afford the Company peaceful and undisturbed
possession of the subject matter of the lease. The Company is not in violation
of any zoning, building or safety ordinance, regulation or requirement or other
law or regulation applicable to the operation of its owned or leased properties,
nor has it received any notice of a violation thereof with which it has not
complied.
3.8 Tax Matters. All federal, state, county and local taxes due and
payable by the Company have been paid. The Company has duly filed all federal,
state, county and local tax returns required to have been filed by it and there
are in effect no waivers of applicable statutes of limitations with respect to
taxes for any year.
3.9 Contracts and Commitments. The Company has no contract, obligation or
commitment which is material or which involves a potential commitment in excess
of $10,000 and no employment contracts, consulting agreements, stock redemption
or purchase agreements, financing agreements, licenses, leases, or pension,
profit-sharing, retirement or stock option plans or agreements, except as
described in this Agreement or in Schedule 3.9 of the Schedule Volume and of
which copies have
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been delivered to counsel for the Purchaser. The Company is not in default under
any such contract, obligation or commitment. The Company is not a party to any
contract or arrangement which is unduly burdensome or could have a material
adverse effect on its business or prospects. The Company has no material
liability for renegotiation of government contracts or subcontracts.
3.10 Patents; Trade Secrets. The Company has exclusive ownership of, or
license to, all patent, copyright or trademark rights reasonably necessary to
the conduct of its business, and to the best of its knowledge, after due
investigation, does not infringe any such rights of others. The Company has the
right to use, free and clear of claims or rights of others, all trade secrets,
data, designs, customer lists and manufacturing processes required for or
incident to its products, and is not using any confidential information or trade
secrets of any former employer of any of its past or present employees.
3.11 Effect of Transactions. The execution, delivery and performance of
this Agreement, the Shareholders' Agreement, the Consulting Agreement, the
Employment Agreements, the Abraham Consulting Agreement and the agreements and
transactions contemplated hereby and the issuance of the Notes, the Revolving
Credit Note, and the Shares, will not conflict with or result in any default
under any contract, obligation, commitment, charter provision, by-law or
corporate restriction of the Company or the creation of any lien, charge or
encumbrance of any nature upon any of the properties or assets of the Company,
except pursuant to this Agreement. The transactions contemplated hereby do not
violate any statute or regulation of any federal, state or local government or
agency.
3.12 Litigation. There is no litigation, suit, claim, arbitration
proceeding, or governmental investigation pending or, to its knowledge,
threatened against the Company or to which the Company is a party, or any basis
therefor known to the Company.
3.13 Offerees. Except as set forth in Schedule 3.13 of the Schedule
Volume, neither the Company nor anyone acting on its behalf has within the past
thirteen (13) months offered the Notes or any similar security of the Company or
any Common Stock of the Company for sale to, or solicited any offers to buy the
same from any person or organization other than the Purchaser. Neither the
Company, nor anyone acting on its behalf, has in the past or will hereafter
sell, offer for sale or solicit offers to buy any of said securities so as to
bring the offer, issuance or sale of the Shares or the Notes, as contemplated by
this Agreement, within the provisions of Section 5 of the Securities Act. The
Company has complied and will comply with all applicable state "blue-sky" or
securities
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laws in connection with the issuance and sale of the Shares, the Notes and other
securities.
3.14 Business. The Company has all necessary franchises, permits, licenses
and other rights and privileges necessary to permit it to own its property and
to carry on its business as presently conducted and as contemplated by the
Business Plan (as defined in paragraph 3.15). To the best knowledge of the
Company, the Company is not in violation of any law, regulation, authorization
or order of any public authority or in violation of the terms of any agreement
granting to the Company a franchise, license, or permit that is relevant to the
ownership of its properties or the carrying on of its present business.
3.15 Business Plan. The Business Plan, dated May, 1987 and the Business
Plan Supplement, dated April 1, 1988 (herein together referred to as the
"Business Plan"), set forth in Schedule 3.15 of the Schedule Volume, prepared by
the Company and furnished to the Purchaser prior to the date hereof has been
prepared by responsible officers of the Company, approved by the Company's Board
of Directors, and reflects good faith estimates of sales and expenses reasonably
achievable and known to exist based upon facts and conditions known to exist.
The Business Plan contains no untrue or misleading statement of a material fact
or any omission to state a fact material to the business of the Company or
necessary to make the statements contained therein not misleading.
3.16 Brokerage. There are no valid claims for brokerage commissions,
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of the Company, and the Company will indemnify and hold the Purchaser
harmless against any liability or expense arising out of such a claim.
SECTION 4. AFFIRMATIVE COVENANTS OF THE COMPANY
So long as the Notes or the Revolving Credit Note are outstanding unless
the holders of at least a majority in interest of the principal amount of each
of the outstanding Notes and Revolving Credit Note shall otherwise consent in
writing:
4.1 Fulfillment of Obligations. The Company will pay the principal of and
interest on the Notes and the Revolving Credit Note in accordance with the terms
thereof, and will observe and comply with all of the terms, conditions and
covenants to be performed by it under this Agreement, the Notes, the Revolving
Credit Note and the other agreements and instruments entered into by the Company
pursuant to this Agreement.
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4.2 Accounts and Reports. The Company will maintain a standard system of
accounts in accordance with generally accepted accounting principles
consistently applied, will keep full and complete financial records and will
furnish to the Purchaser the following reports: (a) within ninety (90) days
after the end of each fiscal year a copy of the balance sheet of the Company as
of the end of such year, together with statements of income, retained earnings
and changes in financial position of the Company for such year, all in
reasonable detail, prepared and certified by independent public accountants of
national standing selected by the Company; (b) within forty-five (45) days after
the end of the first six months of each fiscal year a copy of the balance sheet
of the Company as of the end of such six months together with a statement of
income and changes in financial position of the Company for such six months, all
in reasonable detail, prepared by independent public accountants of national
standing selected by the Company and certified by the principal financial
officer of the Company; (c) within thirty (30) days after the end of each of the
first three quarters of each fiscal year a copy of the balance sheet of the
Company as of the end of such quarter and statements of income and changes in
financial position of the Company for the fiscal quarter and for the portion of
the fiscal year ending on the last day of such quarter, each of the foregoing
balance sheets and statements of income and changes in financial position to set
forth in comparative form the corresponding figures for the prior fiscal period,
to be in reasonable detail and to be certified, subject to year-end audit
adjustments, by the principal financial officer of the Company; (d) within ten
(10) days after the end of each month of each fiscal year a copy of the balance
sheet of the Company as of the end of such month, each of the foregoing balance
sheets to be in reasonable detail and to be certified, subject to year-end audit
adjustments. by the principal financial officer of the Company; (e) copies of
all financial statements and reports which the Company shall send to its
shareholders or file with the Securities and Exchange Commission or any stock
exchange on which any securities of the Company may be listed; and (f) such
other financial information as the Purchaser may reasonably request, including
without limitation, certificates of the principal financial officer of the
Company concerning compliance with the affirmative and negative-covenants of the
Company under this Agreement. The Company will also permit the Purchaser or its
authorized representative, at all reasonable times and as often as reasonably
requested, to visit and inspect, at the expense of the Purchaser, any of the
properties of the Company, including its books and records and, subject to
reasonable arrangements with transfer agents of the Company, lists of security
holders, and to make extracts therefrom and to discuss the affairs, finances,
and accounts of the Company with its officers. The reports required to be
furnished by the Company pursuant to clauses (a), (b) and (c) above shall be
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accompanied by a certificate executed by the President and principal financial
officer of the Company, and by its independent public accountants in the case of
annual financial statements under clause (a), to the effect that no Event of
Default exists or has existed during the period covered by such reports, or if
such an Event of Default exists or has existed, setting forth a description
thereof in reasonable detail and an explanation of action taken by the Company
to remedy the same.
4.3 Shareholders', Consulting, Employment and Abraham's Consulting
Agreements. On or before the Closing, the Company, the Purchaser, Shattow and
certain other shareholders of the Company will enter into an agreement providing
for the election of representatives of the Purchaser to the Board of Directors
of the Company, and containing such other provisions as the parties thereto may
agree to, which agreement shall be substantially in the form attached hereto as
Exhibit D (the "Shareholders' Agreement"). The Company will reimburse
representatives of the Purchaser who serve as Directors of the Company under the
Shareholders' Agreement for all expenses incurred by them in attending meetings
of the Board of Directors. On or before the Closing, the Company will enter into
an agreement with Purchaser providing for the provision by Purchaser of
consulting services to the Company, which agreement shall be substantially in
the form attached hereto as Exhibit E (the "Consulting Agreement"). On or before
the Closing, the Company will enter into with each of Shattow, Tyer, Taylor and
David Cooper ("Cooper") an Employment Agreement substantially in the form
attached hereto as Exhibit F (the "Employment Agreements"). On or before the
Closing the Company will enter into an agreement with John Abraham for the
provision of consulting services to the Company, which agreement shall be
substantially in the form attached hereto as Exhibit G ("Abraham's Consulting
Agreement"). Each of the Company and Shattow agrees that it will diligently
enforce all of its rights under each of the foregoing agreements and that it
will not waive or release any such rights or consent to any amendment of any of
said agreements without in each instance obtaining the prior written consent of
the holders of at least a majority in interest of the principal amount of each
of the outstanding Notes and Revolving Credit Note, which consent shall not be
unreasonably withheld.
4.4 Adverse Change; Litigation. The Company will promptly advise the
Purchaser of any event which represents a material adverse change in the
condition or business, financial or otherwise, of the Company, and of each suit
or proceeding commenced or threatened against the Company which, if adversely
determined, would result in such a material adverse change. The Company will
also promptly advise the Purchaser of any facts which cast any doubt upon the
accuracy or completeness of
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the representations and warranties contained herein and of any conditions or
events which constitute an Event of Default or which, after notice or lapse of
time or both, would constitute such an Event of Default.
4.5 Payment of Expenses. The Company agrees to pay the reasonable
out-of-pocket expenses of the Purchaser incurred in connection with the
negotiation, preparation, execution and delivery of this Agreement, the
Shareholders' Agreement, the Consulting Agreement, the Notes, the Revolving
Credit Note, Guaranty and the other instruments and agreements entered into
pursuant to this Agreement and any amendments or supplements to the same,
including without limitation, reasonable fees and disbursements of counsel for
the Purchaser.
4.6 Dealings with Related Parties. All transactions by and between the
Company, and Shattow or shareholders of the Company or corporations or other
business organizations controlled by such shareholders shall be conducted on an
arms-length basis and shall be on terms and conditions no less favorable to the
Company than could be obtained from non-related persons.
4.7 Use of Proceeds. The Company will apply the proceeds of the issuance
and sale of the Shares, the Notes and the Revolving Credit Note only as stated
in the Use of Proceeds Memorandum of even date herewith prepared by the Company
and delivered to the Purchaser, a copy of which is attached hereto as Exhibit H.
4.8 Life Insurance. The Company will at its expense purchase and maintain
ordinary or term life insurance from reputable insurers on the lives of each of
Shattow and Tyer, in the face amounts of $1,000,000 and $500,000 for Shattow and
Tyer respectively, each payable to the Company. The Company will not borrow
against said policies and will not cause or permit any assignment of the
proceeds of said policies to be made except to the Purchaser. It is agreed that
on and thereafter a date sixty (60) days following the death of any of the
insureds and in the event that the Company is not achieving its projections,
financial or otherwise, as previously mutually determined by the Company and the
Purchaser, the Purchaser shall have the right to require the Company to prepay
the unpaid principal amount of the outstanding Notes and Revolving Credit Note,
with interest accrued to the prepayment date, to the full extent of the proceeds
of said policies.
4.9 Property Insurance. The Company will keep its insurable properties
insured by financially sound and reputable insurers satisfactory to the
Purchaser against the perils of liability, casualty, fire and extended coverage
in amounts of coverage at least equal to those customarily maintained by
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companies in the same or similar businesses. The Company will also maintain with
such insurers insurance against other hazards and risks and liability to persons
and property to the extent and in the manner customary for corporations engaged
in the same or a similar business.
4.10 Maintenance of Properties. The Company will maintain all properties
used or useful in the conduct of its business in good repair, working order and
condition as necessary to permit such business to be properly and advantageously
conducted.
4.11 Payment of Taxes, etc. The Company will pay and discharge all lawful
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or property before the same shall become in default, as well as all
lawful claims for labor, materials and supplies which, if not paid when due,
might become a lien or charge upon its property or any part thereof; provided,
however, that the Company shall not be required to pay and discharge any such
tax, assessment, charge, levy, or claim so long as the validity thereof is being
contested by the Company in good faith by appropriate proceedings and an
adequate reserve therefore has been established on its books.
4.12 Conduct of Business; Compliance with Laws, The Company will keep in
full force and effect its corporate existence and all material rights, licenses,
patents, copyrights, trademarks, trade names and franchises now held by it and
useful in its business and comply with all applicable laws and regulations in
the conduct of its business.
4.13 Investment by Shattow. Shattow shall lend to the Company the sum of
$50,000 on or before the date ninety (90) days after the Closing Date. The
indebtedness of the Company to Shattow shall be subordinated in right of payment
of interest and liquidation to the Notes and the Revolving Credit Note. The
terms and conditions of the indebtedness of the Company to Shattow shall be no
more favorable to Shattow than the terms and conditions set forth herein with
respect to the indebtedness of the Company to the Purchaser.
SECTION 5. NEGATIVE COVENANTS OF THE COMPANY
So long as the Notes or the Revolving Credit Note are outstanding, unless
the holders of at least a majority in interest of the principal amount of each
of the outstanding Notes and Revolving Credit Note shall otherwise consent in
writing:
5.1 No Amendments to Certificate of Incorporation or By-Laws. The Company
will not make any amendment to its
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Certificate of Incorporation or its By-Laws which shall adversely affect the
rights of the Purchaser.
5.2 Limitation on Liability for Obligations of Others. The Company will
not assume, guarantee, endorse or otherwise become liable for the obligations of
any person or organization, except (a) the endorsement of negotiable instruments
for deposit or collection and similar transactions in the ordinary course of
business of the Company or (b) obligations assumed by the Company in connection
with an acquisition or merger permitted by paragraph 5.8.
5.3 Limitations on Compensation of Employees. The Company will not pay
aggregate compensation to any employee of the Company for services rendered in
any fiscal year of the Company in excess of such limits as the Board of
Directors shall have previously approved consistent with the Business Plan and
the Employment Agreements.
5.4 Loans and Investments. The Company will not purchase or otherwise
acquire, or hold, any stock or obligations of, or make or permit to exist any
loans or advances to, or investments in, any person or organization, except that
the Company may (a) invest in direct obligations of the United States of
America, (b) extend normal credit in the ordinary course of business in
connection with the sale of its products or services, or (c) subject to
paragraph 5.8 (in case of a business acquisition) purchase or hold not less than
80% of the voting stock and outstanding stock of any corporation organized and
existing under the laws of any state of the United States, substantially all of
whose assets and business are located or conducted in the United States and
which shall be operated as a subsidiary of the Company; provided that if such
subsidiary shall have total assets having a fair value of 5% or more of the book
value of assets of the Company at any time or if the Company shall invest in
such subsidiary a total amount equivalent to 5% or more of said assets, said
subsidiary shall guarantee in writing payment of the Notes and the Revolving
Credit Note (the form of guarantee to be satisfactory to the Purchaser); and
provided further that no minority interest in such subsidiary may be owned
directly or indirectly by any person or organization who was or is a shareholder
of the Company.
5.5 Restrictions on Acquisition of Capital Assets. The Company will not,
without the approval of the Board of Directors of the Company including the
approval of the representatives of the Purchaser on said Board, make any
expenditures for fixed or capital assets, or any commitments for such
expenditures, exceeding an aggregate amount for all such expenditures made or
committed in such year of $15,000, other than expenditures provided for in the
Business Plan and
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subsequent business plans developed and approved by the Board of Directors, and
excluding expenditures made in any fiscal year pursuant to commitments therefor
made in any prior fiscal year if such commitments when made were permitted under
this paragraph 5.5.
5.6 Restrictions on Leases. The Company will not, without the approval of
the Board of Directors of the Company including the approval of the
representatives of the Purchaser on said Board, lease or enter into arrangements
with any person or organization for the use of any fixed or capital assets, or
real property, if the aggregate of the amounts which will be payable under all
such leases or other such arrangements for any period of twelve (12) consecutive
months shall exceed $10,000.
5.7 Limitation of Indebtedness. The Company will not become indebted or
create, incur, assume, or be liable in any manner in respect of, or suffer to
exist, any indebtedness (whether for money borrowed or for the purchase price of
any asset or otherwise) except (a) indebtedness in respect of the Notes or the
Revolving Credit Note; (b) current liabilities and accounts payable (other than
for money borrowed) incurred in the ordinary course of business; (c)
indebtedness secured by, or incurred in connection with purchases or leases of
equipment or other personal property acquired or leased in accordance with the
limitations contained in paragraphs 5.5 and 5.6, including, without limitation,
the indebtedness cited in Schedule 3.9 of the Schedule Volume; or (d)
indebtedness for money borrowed from banks and other recognized governmental or
commercial lending institutions; provided that the principal amount of such
indebtedness at any one time outstanding shall not in the aggregate exceed 150%
of the net worth of the Company. For purposes of this paragraph "net worth"
shall mean the excess of assets (exclusive of good will, capitalized research
and development and the value of patents, trademarks, franchises and similar
rights) over liabilities (exclusive of shareholders' equity, the Note and
Revolving Credit Note) determined in accordance with generally accepted
accounting principles consistently applied on the same basis as employed by the
Company's independent public accountants in preparing its audited financial
statements pursuant to paragraph 4.2.
5.8 Limitations on Consolidations, Mergers and Sale of Assets. The Company
will not consolidate with, or merge into or have merged into it, or acquire the
stock, business or assets of, any other corporation or association, or sell,
lease or otherwise dispose of any of its assets except (a) sales of assets or
products for fair value in the ordinary course of business, or (b) the
acquisition by the Company of substantially all of the assets or stock of
another corporation or the merger of another corporation into the Company
provided
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that such acquisition or merger is approved by the affirmative vote of at least
80% of the Board of Directors of the Company then in office and provided further
that immediately after such acquisition or merger there shall exist no Event of
Default hereunder or event or circumstance which after the passage of time or
giving of notice or both would become such an Event of Default.
5.9 Limitation on Liens. The Company will not create, incur, assume or
suffer to be created, incurred or assumed, or to exist, any pledge, mortgage,
lien, charge, security interest or encumbrance of any kind upon any of its
properties or assets, or own or acquire or agree to acquire any property of any
character subject to or upon any mortgage, conditional sale agreement or other
title retention agreement, or sell, assign, pledge or otherwise dispose of any
accounts or notes receivable or contract rights except (a) liens for taxes,
assessments, governmental charges, levies or claims suffered by the Company and
described in paragraph 4.11 hereof to the extent that payment thereof is not
required by such paragraph, or (b) other liens, charges, pledges, deposits and
encumbrances incidental to the conduct of the business of the Company which are
not incurred in connection with the borrowing of money or the obtaining of
advances or credits and which do not in the aggregate materially detract from or
impair the use of the assets or business of the Company.
5.10 Change in Management. The Company will not permit any substantial
change in the present management of the Company except as a result of death or
disability.
5.11 Issuance of Stock. The Company will not issue any Common Stock of the
Company or warrants, options, or other rights to purchase Common Stock of the
Company or any securities convertible into Common Stock of the Company, except
the Shares, except in the following circumstances:
(a) As a dividend or distribution payable pro rata to all
shareholders;
(b) Not in excess of a total of 48,000 shares of Common Stock of the
Company to employees, consultants, officers or directors of the Company
directly or through options or other rights; or
(c) In connection with a merger by the Company with, or the
acquisition by the Company of, another corporation as permitted by
paragraph 5.8.
5.12 Dividends; Distributions; Redemption of Capital Stock. Except as
otherwise expressly provided herein, the Company will not declare or pay any
dividends or make any
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distributions of cash, property or securities of the Company with respect to any
shares of its Common Stock or any other class of its stock while the Notes or
Revolving Credit Note are issued and outstanding.
5.13 Restrictions on Other Agreements. The Company will not enter into any
agreement with any party which would restrict the payments due the holders of
the Notes or the Revolving Credit Note.
SECTION 6. SUBORDINATION
6.1 Senior Debt. The Company, for itself and its successors and assigns,
covenants and agrees, and the Purchaser and each successive holder of the Notes
or the Revolving Credit Note, by his acceptance of the Notes and the Revolving
Credit Note, likewise covenants and agrees, that the payment of the principal of
and interest on the Notes and the Revolving Credit Note and the security
interest granted herein is hereby expressly subordinated, to the extent and in
the manner hereinafter set forth in this Section 6, in right of payment, to the
prior payment in full of all (i) indebtedness of the Company for money borrowed
from banks or other recognized commercial or government lending institutions and
(ii) other indebtedness to which the obligations of the Notes and the Revolving
Credit Note shall be expressly subordinated by the holders of the Notes in
writing, citing this Section (hereinafter "Senior Debt").
6.2 Subordination in Bankruptcy, etc. Upon any payment or distribution of
assets of the Company in connection with its winding up, dissolution, total or
partial liquidation and reorganization, whether in bankruptcy, insolvency,
reorganization or receivership proceedings, or upon any assignment for the
benefit of creditors or any other marshalling of the assets and liabilities of
the Company or otherwise:
(a) all principal, premium, if any, and interest due upon all Senior
Debt shall first be paid in full, or payment thereof provided for in money
or money's worth, before the holders of the Notes or Revolving Credit Note
shall be entitled to receive any payment upon the principal of, or
interest on, the Notes or Revolving Credit Note;
(b) any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities (other than shares
of stock of the Company as reorganized or readjusted, or securities of the
Company or any other corporation provided for by a plan of reorganization
or readjustment, the payment of which is subordinated to the payment of
all Senior Debt which may at
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the time be outstanding on terms not less favorable to the holders thereof
than the terms of this Section 6) to which the holders of the Notes or the
Revolving Credit Note would be entitled except for the provisions of this
Section 6, shall be paid by the liquidating trustee or agent or other
person making such payment or distribution, whether a trustee in
bankruptcy, a receiver or otherwise, directly to the holders of Senior
Debt (pro rata to each holder on the basis of the respective amounts of
Senior Debt owed to such holder), to the extent necessary to pay in full
all Senior Debt remaining unpaid after giving effect to any prior or
concurrent payment or distribution, or provision therefor, to the holders
of Senior Debt on the Senior Debt; and
(c) in the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in
cash, property or securities (other than shares of stock of the Company or
securities expressly exempted from the provisions of clause (b) above)
shall be received by the holder of the Notes or the Revolving Credit Note
before all Senior Debt is paid in full, or provision made for its payment,
such payment or distribution shall be paid over to holders of Senior Debt
(pro rata to each such holder on the basis of the respective amounts of
Senior Debt owed to such holder), for application to the payment of all
Senior Debt remaining unpaid until all such Senior Debt shall have been
paid in full, or provision made for its payment, after giving effect to
any prior or concurrent payment or distribution, or provision therefor, to
the holders of Senior Debt on the Senior Debt.
6.3 Subordination When Senior Debt Due, etc. In the event of and during
the continuance of any default by the Company with respect to the payment of any
Senior Debt when due (whether at a stated maturity date, upon acceleration or
otherwise), no payment of principal of or interest on the Notes and Revolving
Credit Note shall be made by the Company until payment of the full amount of
Senior Debt then due has been made or provided for.
6.4 Subrogation. Subject to the payment in full of all Senior Debt, the
holders of the Notes and the Revolving Credit Note shall be subrogated to the
rights of the holders of the Senior Debt to receive payments or distributions of
assets of the Company applicable to the Senior Debt until the principal of and
interest on the Notes and the Revolving Credit Note shall be paid in full. No
such payments or distributions applicable to the Senior Debt shall, as between
the Company, its creditors other than the holders of the Senior Debt, and the
holders of the Notes and the Revolving Credit Note, be
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deemed to be a payment by the Company to or on account of the Notes and the
Revolving Credit Note.
6.5 Rights of Note Holders. The provisions of this Section 6 are solely
for the purpose of defining the rights of the holders of the Notes and the
Revolving Credit Note, on the one hand, relative to the rights of the holders of
the Senior Debt, on the other hand, and nothing contained in this Section 6 or
elsewhere in the Agreement or the Notes or the Revolving Credit Note is intended
to or shall (i) impair, as between the Company, its creditors other than the
holders of the Senior Debt, and the holders of the Notes and the Revolving
Credit Note, the obligation of the Company, which is unconditional and absolute,
to pay promptly to the holders of the Notes and the Revolving Credit Note the
principal of and interest on the Notes and the Revolving Credit Note, as and
when the same shall become due and payable in accordance with the terms of this
Agreement and the Note and the Revolving Credit Note, (ii) affect the rights of
the holders of the Notes and the Revolving Credit Note relative to creditors of
the Company other than the holders of the Senior Debt, or (iii) prevent the
holders of the Notes and the Revolving Credit Note from exercising all remedies
otherwise permitted by applicable law upon default under this Agreement or the
Notes or the Revolving Credit Note, subject to the rights, if any, under this
Section 6 of the holders of the Senior Debt in respect of assets of the Company
received upon the exercise of any such remedy.
6.6 Reliance by Note Holders. Upon any payment or distribution of assets
of the Company referred to in this Section 6, the holders of the Notes and the
Revolving Credit Note shall be entitled to rely upon any order or decree made by
any court of competent jurisdiction in which such dissolution, winding up,
liquidation or reorganization proceedings are pending or upon a certificate of
the liquidating trustee or agent or other person making any distribution to the
holders of the Notes and the Revolving Credit Note for the purpose of
ascertaining the amount of the Senior Debt, the holders thereof, the amounts
paid or distributed thereon and all other facts pertinent thereto or to this
Section 6.
SECTION 7. PREPAYMENT
7.1 Prepayments. The Notes shall be subject to prepayment, at the option
of the Company, in whole or from time to time in part, in multiples of $10,000
at par value plus interest on the principal amount prepaid accrued to the
prepayment date; provided that there is not outstanding Senior Debt.
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7.2 Notice of Prepayments. Not less than ten (10) days prior to the
prepayment date of any prepayment pursuant to this Section, the Company shall
give written notice thereof to the registered holders of the outstanding Note,
specifying the intended prepayment date, the principal amount of the Note to be
prepaid on such date and the interest applicable to such prepayment. Notice of
prepayment having been given as aforesaid, the principal amount of the Note to
be prepaid as specified in such notice together with interest, if any, as herein
provided shall mature and become due and payable on such prepayment date.
7.3 Evidence of Payment. Except as expressly provided otherwise in
paragraphs 13.3 or 13.4 hereof, upon any partial prepayment of any Note, such
Note shall, at the option of the holder thereof, be either (i) surrendered to
the Company in exchange for a new Note in the principal amount remaining unpaid
on the Note surrendered and otherwise having the same terms and provisions as
the Note surrendered, or (ii) made available to the Company at the place of
prepayment or any other place specified by the Company for notation thereon of
the portion of the principal amount so prepaid.
7.4 Reissue of Notes. No Note shall be reissued with respect to the
principal amount of the Note which is paid or prepaid pursuant to this Agreement
and the Company shall cancel and terminate the Note when it has been fully paid
or presented to it for exchange pursuant to any of the provisions of this
Agreement.
SECTION 8. RIGHT TO REPURCHASE SHARES
In the event all of the principal and interest due on each of the Notes
and the Revolving Credit Note has been duly paid in accordance with the terms
thereof and the Notes and the Revolving Credit Note are retired, then for a
period of one (1) year commencing on April 20, 1991, Shattow, Tyer, Cooper, and
Taylor (collectively the "Employees", and individually an "Employee") and the
Company may elect if they are then employees of the Company to purchase from the
then holders of outstanding Shares and such holders shall thereupon become
obligated to sell to Employees and the Company on demand that number of Shares
such that immediately following such sale the aggregate number of Shares owned
by such holders shall constitute 30% of the issued and outstanding shares of
Common Stock (including shares of Common Stock issuable upon the exercise or
conversion of the then issued and outstanding warrants, options, or other
subscription or purchase rights or convertible securities) of the Company. (The
number of Shares available for purchase under this Section 8 shall herinafter be
referred to as the "Repurchase Shares.") The Employees shall have the first
right
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to purchase all or any part of the Repurchase Shares. The Company, subject to
the prior right of the Employees, shall have the right to purchase that number
of Repurchase Shares as shall be equal to the Repurchase shares not purchased by
the Employees. The aggregate purchase price for such Repurchase Shares shall be
equal to the greater of $100,000 or the aggregate book value of such Repurchase
Shares on said date. Each Employee and the Company may elect to so purchase the
Repurchase Shares by delivering to such holders a written demand to sell the
Repurchase Shares to him/it. Payment of the purchase price by said Employee(s)
and the Company for the Repurchase Shares shall be paid within fifteen (15) days
after the date of said demand, against surrender by holders thereof of share
certificates evidencing the Repurchase Shares duly endorsed for transfer to said
Employee(s) and/or the Company. The right of said Employees under this Section 8
may be exercised by the Employees jointly or by any of them acting individually.
SECTION 9. REGISTRATION
9.1 Required Registration. At any two (2) occasions after the date hereof,
the holders of at least 25% of the Shares may make a written request to the
Company for registration of all or part of their Shares, but in no event less
than 10,000 Shares, under the Securities Act. Within ten (10) days after receipt
of such request, the Company will serve written notice (the "Notice") of such
registration request to all holders of the Shares and the Company will include
in such registration all Shares of such holders with respect to which the
Company has received written requests for inclusion therein within fifteen (15)
days after the receipt by the applicable holder of the Notice. All requests made
pursuant to this paragraph 9.1 will specify the number of Shares to be
registered and will also specify the intended method of disposition. The Company
will use its best efforts to cause such Shares of the holders to be registered
under the Securities Act and qualified under any applicable state securities or
"blue-sky" laws of jurisdictions specified in the request. The Company shall not
be deemed to have effected a registration pursuant to this paragraph 9.1 unless
and until such registration is declared effective for the Shares. All expenses
of such registration shall be borne by the Company, except that each holder
shall bear underwriting commissions and discounts, legal and accounting expenses
and other expenses attributable solely to the Shares being registered by that
particular holder.
9.2 Optional Registration. If at any time or times after the date hereof
the Company shall determine to register any of its securities under the
Securities Act and in connection therewith the Company may lawfully register the
Shares, the Company will promptly give written notice thereof to the then
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holders of all outstanding Shares and will use its best efforts to effect the
registration under the Securities Act of all Shares which such holders may
request in writing delivered to the Company within fifteen (15) days after the
notice given by the Company; provided, however, that in the case of the first
such registration of Common Stock by the Company, it shall not be required to
register Shares in excess of the amount of Common Stock which the principal
underwriter of an underwritten offering shall reasonably and in good faith
refuse in writing to include in such offering; and provided, further, that if
any Shares are not included for this reason, the Company will permit holders of
Shares who have requested participation in the offering to participate to the
extent of a pro rata portion of all shares of Common Stock of shareholders
desiring to participate in such offering. If the Company includes in such
registration any securities to be offered by it, all expenses of registration
and offering shall be borne by the Company, except that such holders shall bear
underwriting commissions and discounts, legal and accounting expenses and other
expenses attributable solely to the Shares being registered by that particular
holder. If the registration is exclusively a secondary offering, such holders
shall bear their proportionate share of the expenses of the registration and
offering, except expenses which the Company would have incurred whether or not
registration was attempted, including without limitation the expense of
preparing normal audited or unaudited financial statements or summaries
consistent with this Agreement or applicable reports of the Securities and
Exchange Commission.
9.3 Further Obligations of the Company. Whenever under the preceding
paragraph of this Section 9, the Company is required hereunder to register
Shares, it agrees that it shall also do the following:
(a) Prepare for filing with the Securities and Exchange Commission
such amendments and supplements to said registration statement and the
prospectus used in connection therewith as may be necessary to keep said
registration statement effective for a period of two (2) years thereafter
and to comply with the provisions of the Securities Act with respect to
the sale of securities covered by said registration statement for the
period necessary to complete the proposed public offering;
(b) Furnish to each selling holder such copies of each preliminary
and final prospectus and such other documents as such holder may
reasonably request to facilitate the public offering of his Shares;
(c) Enter into any underwriting agreement with provisions consistent
herewith and reasonably required by the proposed underwriter for the
selling holders, if any; and
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(d) Use its best efforts to register or qualify the Shares covered
by said registration statement under the securities or blue-sky laws of
such jurisdictions as any selling holder may reasonably request.
9.4 Indemnification. Incident to any registration statement referred to in
the preceding paragraphs of this Section, the Company will indemnify each
underwriter, each holder of Shares so registered, and each person controlling
any of them, against all claims, losses, damages and liabilities, including
legal and other expenses incurred in investigating or defending against the
same, arising out of any untrue statement of a material fact contained therein,
or any omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or arising out of
any violation by the Company of the Securities Act, any state securities or
"blue-sky" laws or any rule or regulation thereunder, in connection with such
registration, except insofar as the same may have been caused by an untrue
statement or omission based upon information furnished in writing to the Company
by such holder expressly for use therein, and with respect to such untrue
statement or omission in the information furnished in writing to the Company by
such holder, such holder will indemnify the underwriters, the Company, its
Directors and officers, the other holders and each person controlling any of
them, against any of said losses, claims, damages, expenses or liabilities to
which any of them may become subject.
SECTION 10. RESTRICTIONS ON TRANSFER
10.1 Investment Purpose. The Purchaser by acceptance of the Shares and/or
the Notes, represents that it has purchased the Shares and/or the Notes, not
with a view to, or for sale in connection with, any distribution thereof in
violation of the Securities Act or any rule or regulation promulgated
thereunder, as amended from time to time. Notwithstanding such representations,
the Company agrees to permit a sale or transfer of Shares or the Notes upon
obtaining reasonable assurance that the Securities Act and the rules and
regulations promulgated thereunder would not be violated thereby, including
without limitation, receipt of an opinion to such effect of Goodwin, Procter &
Hoar or other counsel for the Purchaser satisfactory to the Company.
10.2 Transfers to Competitors. Subject to this Section 10 and the terms of
the Shareholders' Agreement, the Purchaser may from time to time transfer,
assign or sell any or all of the Shares acquired hereunder to any individual or
entity.
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10.3 Restrictive Legends. The Note and each certificate evidencing Shares
issued to the Purchaser or to any subsequent transferee shall include a legend
substantially in the form of the legend set forth below:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED
EXCEPT (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
OR (ii) FOLLOWING RECEIPT BY THE ISSUER OF AN OPINION FROM ITS COUNSEL
THAT NO REGISTRATION STATEMENT IS NECESSARY IN CONNECTION WITH SUCH
TRANSACTION. THE TRANSFER OF THIS SECURITY IS SUBJECT TO THE CONDITIONS
SPECIFIED IN THE SECURITIES PURCHASE AGREEMENT, DATED APRIL 20, 1988, TO
WHICH THE ISSUER AND THE ORIGINAL HOLDER OF THIS SECURITY ARE PARTIES. A
COPY OF SUCH CONDITIONS WILL BE FURNISHED BY THE ISSUER TO THE HOLDER
HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE."
In addition, each certificate evidencing Shares issued to the Purchaser or
to any subsequent transferee shall include a legend substantially in the form of
the additional legend set forth below:
"THIS SECURITY IS SUBJECT TO CERTAIN COVENANTS AND AGREEMENTS SET
FORTH IN THE SHAREHOLDERS' AGREEMENT DATED APRIL 20, 1988, TO WHICH THE
ISSUER AND THE ORIGINAL HOLDER OF THIS SECURITY ARE PARTIES (A COPY OF
WHICH MAY BE OBTAINED WITHOUT CHARGE FROM THE ISSUER AT ITS PRINCIPAL
EXECUTIVE OFFICES), AND THE HOLDER OF THIS SECURITY, BY SUCH HOLDER'S
ACCEPTANCE HEREOF, SHALL BE DEEMED TO HAVE AGREED TO, AND SHALL BE BOUND
BY, THE TERMS OF SUCH SHAREHOLDERS' AGREEMENT."
SECTION 11. CONDITIONS OF PURCHASER'S OBLIGATION
11.1 Effect of Conditions. The Purchaser's obligation to purchase and pay
for Shares, the Notes, and the Revolving Credit Note of the Company at the
Closing and the Second Closing shall be subject at the Purchaser's election to
the satisfaction of each of the conditions stated in the following paragraphs of
this Section 11.
11.2 Opinion of Counsel for Company. The Purchaser shall have received
from Davis, Malm & D'Agostine, counsel for the Company, a favorable opinion, in
form and substance satisfactory to the Purchaser and its counsel as to the
matters covered in paragraphs 3.1, 3.2, 3.3, 3.7, 3.10, 3.11, 3.12 and 3.13
hereof (with such exceptions or qualifications as may be
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approved by counsel for the Purchaser), and as to the following additional
matters:
(a) This Agreement and the Shares and the Note acquired by the
Purchaser at the Closing have been duly authorized, executed and delivered
by the Company and, upon payment by the Purchaser for the Shares and the
Note, such Shares and Note will be duly and validly issued and fully paid
and non-assessable and entitled to the benefits of this Agreement.
(b) The issuance and delivery of the Shares and the Note under the
circumstances contemplated by this Agreement constitute transactions
exempt from registration under Section 5 of the Securities Act of 1933 as
now in effect, and neither registration of the Shares or the Note
thereunder nor qualification of this Agreement under the Trust Indenture
Act of 1939 as now in effect is required.
(c) The Company has complied with all applicable state "blue-sky" or
securities laws in connection with the issuance and sale of the Shares and
the Note. Except for any registration effected pursuant to the preceding
sentence, no consent, approval or authorization of, or designation,
declaration or filing with, any governmental authority on the part of the
Company is required in connection with the execution and delivery of this
Agreement or the issuance and delivery of the Shares and the Note pursuant
to this Agreement, or the consummation of any other transaction
contemplated hereby.
(d) Section 2 hereof is sufficient to create a security interest in
the Purchaser's favor under the Uniform Commercial Code as enacted in the
Commonwealth of Massachusetts, in the Company's right, title and interest
in and to the property described as Collateral therein, to the extent such
collateral is of the type in which a security interest can be taken under
the Uniform Commercial Code. Upon the filing of financing statements with
respect to the security interest granted to the Purchaser pursuant to
Section 2 hereof, the Purchaser shall have a first priority security
interest in the Collateral, except for the security interest granted to
Multisystems, Inc. in the System (as defined in paragraph 1.4(a)).
(e) Any other matters incident to the transactions contemplated
hereby upon which the Purchaser may reasonably require that an opinion be
given.
11.3 Minimum Investment. Each shareholder set forth on Schedule 3.3 shall
have purchased on or before the Closing Date the number of shares of Company
Common Stock set forth opposite
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his/her name on Schedule 3.3 for the purchase price set forth on said Schedule.
11.4 Acquisition of Multitrak System. The Company and Multisystems, Inc.,
a Massachusetts corporation with its principal place of business at 1050
Massachusetts Avenue, Cambridge, Massachusetts 02138 shall have executed and
delivered an agreement for the purchase by the Company of all Multisystems'
right, title and interest in and to the System together with any technology
necessary to use, manufacture and sell the System, upon terms and conditions
acceptable to Purchaser.
11.5 Acquisition of Project Management Graphics Package. The Company and
Taylor shall have executed and delivered an agreement for purchase by the
Company of right, title and interest to a certain software project management
graphics package together with any technology necessary to use, manufacture and
sell said software, upon terms and conditions acceptable to Purchaser.
11.6 Licensing of Accolade and Imagine Software. The Company and Computer
Corporation of America, Inc., a Massachusetts corporation with its principal
place of business at Four Cambridge Center, Cambridge, Massachusetts 02142 shall
have executed and delivered an agreement for the license by the Company of
certain software known as "Accolade" and "Imagine," upon terms and conditions
acceptable to Purchaser.
11.7 Representations and Warranties. The representations and warranties of
the Company and Shattow contained herein, in the Schedule Volume or in the
exhibits annexed hereto or otherwise made in writing by or on behalf of the
Company and Shattow in connection with the transactions contemplated hereby
shall be true and correct on the Closing Date with the same effect as though
made on and as of that date.
11.8 Performance; No Event of Default. Each of the Company and Shattow
shall have conformed and complied with all of the agreements and conditions
contained herein required to be performed or complied with by the Company at or
prior to the Closing; and the Company, Shattow and its shareholders shall have
entered into each of the additional agreements required to be entered into by
each of them pursuant to this Agreement or the exhibits attached hereto,
including without limitation, the Shareholders' Agreement, the Consulting
Agreement, the Employment Agreements, and the Guaranty. There shall exist on the
Closing Date no condition, event or act which constitutes an Event of Default or
which with notice or lapse of time or both would constitute such an Event of
Default.
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11.9 Authorization. The Board of Directors of the Company shall have duly
adopted resolutions in form satisfactory to the Purchaser authorizing the
Company to consummate the transactions contemplated herein in accordance with
the terms hereof, and the Purchaser shall have received at the Closing a duly
executed certificate of the Clerk of the Company setting forth a copy of such
resolutions and such other matters as may be requested by the Purchaser.
11.10 Amendment of Certificate of Incorporation and By-Laws. The
Certificate of Incorporation shall have been amended by the Shareholders of the
Company to authorize the issuance of additional shares of Common Stock. The
By-Laws of the Com pany shall have been amended by the shareholders of the
Company to increase the size of the Board of Directors from one (1) to four (4)
Directors.
11.11 Compliance Certificate. The Purchaser shall have received at the
Closing a certificate signed by the President and principal financial officer of
the Company certifying that the conditions specified in this Section 11 have
been fulfilled.
11.12 Proceedings. All corporate and other proceedings to be taken prior
to or at the Closing in connection with the transactions contemplated hereby and
all documents incident thereto shall be satisfactory in substance and form to
the Purchaser and its counsel, and the Purchaser and its counsel shall have
received all original copies or certified or other copies of documents which it
may reasonably request.
SECTION 12. DEFAULT
12.1 Events of Default. If and whenever any of the following events or
actions (herein "Events of Default") shall occur, namely:
(a) If the Company shall default in the payment of any installment
of principal of the Notes or the Revolving Credit Note after the same
shall become due and payable; or
(b) If the Company shall default in the payment of any installment
of interest on the Notes or the Revolving Credit Note for more than seven
(7) days after the same shall have become due and payable; or
(c) If the Company shall default in the payment of principal of, or
any premium or interest on, any indebtedness for borrowed money (including
Senior Debt) or with respect to any of the provisions of any evidence of
indebtedness for borrowed money or any agreement relating thereto, and
such default shall continue and remain
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unwaived by the lender for more than the period of grace therein
specified; or
(d) If the Company shall default in the performance of or compliance
with any of its obligations under paragraphs 4.2, 4.4, 4.5, 4.7, 4.8 and
4.9 of this Agreement; or
(e) If the Company shall default in the performance of or compliance
with any other provisions of this Agreement or of any certificate,
agreement or document attached hereto as an exhibit or delivered to the
Purchaser in connection with the transactions contemplated by this
Agreement, and such default shall not have been remedied within thirty
(30) days after the occurrence thereof; or
(f) If the net worth of the Company shall:
(i) at any time during the fiscal year ended December 31, 1988
be less than $100,000;
(ii) be less than $350,000 on or before December 31, 1989; and
(iii) upon reaching $350,000, at any time thereafter be less
than $350,000.
For purposes of this paragraph 12.1(f), "net worth" shall mean the excess assets
(exclusive of goodwill, capitalized research and development and the value of
patents, trademarks, franchises and similar rights) over liabilities (exclusive
of the shareholder's equity, the Note and Revolving Credit Note) determined in
accordance with generally accepted accounting principles consistently applied on
the same basis as employed by the Company's independent public accountants in
preparing its audited financial statement pursuant to paragraph 4.2.
(g) If any representation, warranty or opinion made or given by the
Company in this Agreement or in any certificate, agreement, document or
instrument furnished to the Purchaser in connection with the transactions
contemplated by this Agreement shall prove to have been false or incorrect in
any material respect as of the date made; or
(h) If the Company shall default in any material respect under any
material agreement to which it is a party or by which it is bound, including
agreements attached or described in the exhibits to this Agreement (other than
agreements referred to in subparagraph (e) above) and such
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default shall not have been remedied within thirty (30) days after the
occurrence thereof; or
(i) If any material portion of the property of the Company shall be
condemned, seized or otherwise appropriated by any governmental authority or any
officer or instrumentality thereof; or
(j) If the Company shall make an assignment for the benefit of creditors,
or shall admit in writing its inability to pay its debts as they become due, or
shall file a voluntary petition in bankruptcy, or shall be adjudicated a
bankrupt or insolvent, or shall file any petition or answer seeking for itself
any reorganization, arrangement, composition, readjustment, dissolution or
similar relief under any present or future statute, law or regulation, or shall
file any answer admitting the material allegations of a petition filed against
the Company in any such proceeding, or shall seek or consent to or acquiesce in
the appointment of any trustee, receiver or liquidator of the Company or of all
or any substantial part of the properties of the Company, or the Company or its
directors or majority shareholders shall take any action looking to the
dissolution or liquidation or suspension of the business of the Company; or
(k) If, within sixty (60) days after the commencement of any proceeding
against the Company seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, such proceeding shall not have been
dismissed, or if, within sixty (60) days after the appointment without the
consent or acquiescence of the Company of any trustee, receiver or liquidator of
the Company or of all or any substantial part of the properties of the Company,
such appointment shall not have been vacated; or
(l) If any restraining order or injunction which prevents or hinders the
Company from transacting all or any substantial part of its business, or a final
judgment, order or decree for the payments of money shall be rendered against
the Company in an amount which if paid would reduce the Company's net worth to
less than the amount specified in subparagraph 12.1(f) then outstanding, and
within sixty (60) days after entry thereof shall not have been satisfied or
discharged, or execution thereof stayed pending appeal, or if within sixty (60)
days after the expiration of any such stay such judgment shall not have been
satisfied or discharged;
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then and in any such event holders of the Note or the Revolving Credit Note
whose aggregate principal amount is 50% or more of the total principal amount
of, respectively, the Note or the Revolving Credit Note then outstanding, may at
any time (unless all defaults theretofore have been remedied) at their option by
written notice to the Company declare the principal of and the accrued interest
on the Note or the Revolving Credit Note, respectively, to be immediately due
and payable, without presentment, demand, protest or notice, all of which are
hereby waived by the Company.
12.2 Remedies upon Default. If any Event of Default shall occur, the
holders of the Notes and the Revolving Credit Note may proceed to protect and
enforce their rights under this Agreement, the Notes and the Revolving Credit
Note by a suit in equity, action at law or other appropriate proceeding whether
for damages or the specific performance of any agreement contained herein or in
the Notes or for an injunction against a violation of any of the terms or
provisions hereof or thereof, or in aid of the exercise of any power granted
hereby or thereby or at law; and the Company will reimburse said holder for its
reasonable costs and expenses incurred in connection with the enforcement of its
rights under this Agreement and the Notes or the Revolving Credit Note,
including without limitation reasonable fees and disbursements of its attorneys.
No course of dealing or delay on the part of any such holder in exercising any
right shall operate as a waiver thereof or otherwise prejudice the rights of
such holder and no consent or waiver shall extend beyond the particular case and
purpose involved. No remedy conferred hereby or by the Note or the Revolving
Credit Note shall be exclusive of any other remedy referred to herein or therein
or now or hereafter available at law, in equity, by statute or otherwise.
SECTION 13. MISCELLANEOUS
13.1 Survival of Representations. The representations, warranties,
covenants and agreements made herein or in any certificates, agreements or
documents executed in connection herewith shall survive the execution and
delivery thereof and of the Shares and the Notes and the Revolving Credit Note
and all statements contained in any certificate, agreements or other document
delivered by the Company hereunder or in connection herewith shall be deemed to
constitute representations and warranties made by the Company herein.
13.2 Exchange or Replacement of Notes. The Company will at any time at its
expense upon the request of a holder of a Note and upon surrender of such Note
for the purpose, issue a new Note in exchange therefor payable to the order of
such holder or such person or persons as may be designated by such holder
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(provided that there is compliance with Section 10 hereof), dated on the date to
which interest has been paid on the surrendered Note, in denominations of $1,000
or any integral multiple thereof, in the aggregate principal amount of the
unpaid principal amount of the Note surrendered and substantially in the form of
the Note surrendered with appropriate variations. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of a
Note, and in case of loss, theft or destruction upon delivery of a bond of
indemnity satisfactory to the Company, or in case of mutilation upon surrender
and cancellation of such Note, the Company will issue a new Note of like tenor
in lieu of such lost, stolen, destroyed or mutilated Note.
13.3 Exchange or Replacement of Share Certificates. The Company will at
any time at its expense upon the request of a holder of any Shares and upon
surrender of a share certificate evidencing such Shares for the purpose, issue
new share certificates in exchange therefor registered in the name of such
shareholder or such person or persons as may be designated by such shareholder
(provided that there is compliance with Section 10 hereof), substantially in the
form of the share certificates surrendered with appropriate variations. Upon
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of any share certificate, and in case of loss, theft or
destruction upon delivery of a bond of indemnity satisfactory to the Company, or
in case of mutilation upon surrender and cancellation of such share certificate,
the Company will issue a new share certificate of like tenor in lieu of such
lost, stolen, destroyed or mutilated share certificate.
13.4 Place of Payment. The Company will pay the interest on and any
prepayments of principal of the Notes and the Revolving Credit Note without any
presentment thereof and without notation of such payment being made thereon,
notwithstanding any contrary provisions of this Agreement, the Notes or the
Revolving Credit Note, by check duly mailed to the Purchaser at its address
first written above or in accordance with any unrevoked written direction from
the Purchaser to the Company. The Purchaser agrees that, prior to the sale or
transfer of the Notes by the Purchaser, it shall either (i) surrender said Note
to the Company in exchange for new Notes in the principal amount equal to the
unpaid balance of principal of the Notes surrendered and otherwise having the
same terms and provisions of the Notes surrendered or (ii) make a notation on
said Notes of the extent to which payment has been made on account of the
principal and interest thereof and furnish the Company with a certificate
stating that such notation has been made. The Purchaser further agrees that it
will promptly
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notify the Company of the name and address of any transferee of the Notes issued
to it, if such transferee is known to it.
13.5 Incorporation by Reference. All Schedules and exhibits appended to
this Agreement and all documents delivered pursuant to or referred to in this
Agreement are herein incorporated by reference and made a part thereof.
13.6 Parties in Interest. All covenants, agreements, representations,
warranties, rights and undertakings contained in this Agreement to be performed
or observed by and on behalf of any of the parties hereto shall bind and inure
to the benefit of the respective successors and assigns of the parties hereto
and each successive holder of the Notes or any Share, whether so expressed or
not.
13.7 Amendments and Waivers. Changes in or additions to this Agreement or
the Notes or the Revolving Credit Note may be made or compliance with any term,
covenant, agreement, condition or provision set forth herein or therein may be
omitted or waived (either generally or in a particular instance and either
retroactively or prospectively) upon written consent of the Company and the
holders of at least a majority of the principal amount of, respectively, each of
the Notes or the Revolving Credit Note then outstanding; provided, however, that
no change, addition, omission or waiver which causes any change in or extension
of the time of payment of the principal amount, or the reduction of the rate or
extension of the time of payment of the interest on, or in any way affects or
impairs the obligation of the Company in respect of the principal of or interest
on, the Notes or the Revolving Credit Note, or causes the change in the
subordination provisions applicable to the Notes or the Revolving Credit Note,
shall be made without the written consent of the holder of such Notes or
Revolving Credit Note.
13.8 Termination. This Agreement shall terminate without further liability
to any of the parties at such time as all of the obligations of the Company
under the Notes and the Revolving Credit Note have been fully satisfied and
discharged.
13.9 Governing Law. This Agreement, the Notes and the Revolving Credit
Note shall be deemed contracts made under the laws of the Commonwealth of
Massachusetts and, together with the rights and obligations of the parties
hereunder, shall be construed under and governed by the laws of such
Commonwealth.
13.10 Notices. All notices, requests, consents and demands provided for in
this Agreement or under the Notes or the Revolving Credit Note shall be in
writing and shall be delivered or mailed, postage prepaid, as follows or to such
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other address as the Company or the Purchaser or Shattow may furnish in writing
to the other parties hereto:
If to the Company or Shattow, at
Multitrak Software Development Corp.
250 Pond Street
Jamaica Plain, MA 02130
Attn: Michael B. Shattow
If to the Purchaser, at
LRF Investments, Inc.
189 Wells Avenue
Newton, MA 02159
Attn: Joseph J. Freeman
13.11 Subsidiaries. In the event that the Company hereafter acquires one
or more subsidiaries the financial statements of the Company described in
paragraph 4.2 will thereafter include such subsidiaries to the extent required
by generally accepted accounting principles and the other obligations of the
Company set forth in Sections 4 and 5 hereof will apply where relevant to such
subsidiaries as well as to the Company.
13.12 Counterparts. This Agreement may be executed in counterparts, all of
which together shall constitute one and the same instrument.
13.13 Effect of Headings. The section and paragraph headings herein are
for convenience only and shall not affect the construction hereof.
IN WITNESS WHEREOF this Agreement has been executed as a sealed instrument
as of the date first written above by the parties or their duly authorized
representatives.
MULTITRAK SOFTWARE DEVELOPMENT
CORP.
By: /s/ Michael B. Shattow
--------------------------
Michael B. Shattow
President
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LRF INVESTMENTS, INC.
By: /s/ Joseph J. Freeman
--------------------------
Joseph J. Freeman
Vice President
/s/ Michael B. Shattow
------------------------------
Michael B. Shattow
DP-1977/d
36
