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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITY EXCHANGE ACT OF 1934 (MARK ONE)
[ X ] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (fee required) for the fiscal year ended May 31,
1997;
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (no fee required) for the transition period from
___________ to ___________.
Commission File Number 0-11791
GREENTREE SOFTWARE, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
NEW YORK 13-2897997
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(State or Other Jurisdiction of (IRS Employer ID No.)
Incorporation or Organization)
7901 Flying Cloud Drive
Suite 150 55344
Eden Prairie, Minnesota 55344 ----------
- ---------------------------------------- (Zip Code)
(Address of Principal Executive Offices)
Issuer's Telephone Number, Including Area Code: (612) 941-1500
Securities Registered Under Section 12(b) of the Exchange Act: None
Securities Registered Under Section 12(g) of the Exchange Act:
Title of Each Class
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Common Shares, par value $0.01 per share
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Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 or
Regulation S-B in this form, and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ X ]
Issuer's revenues for its most recent fiscal year: $599,373
The aggregate market value of the Common Shares, par value $0.01 per share
("Common Shares"), held by non-affiliates of the Registrant (totaling 1,321,736
shares) was $1,890,082 as of August 25, 1997 (based upon the closing bid of the
Registrant's Common Shares in the OTC Bulletin Board on August 25, 1997 of $1.43
per share). The term affiliates is deemed, for this purpose only, to refer only
to directors, officers, and principal stockholders of the Registrant.
State the number of shares outstanding in each of the issuer's classes of common
equity, as of August 25, 1997.
CLASS OUTSTANDING
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Common Shares, par value 2,564,803 shares
$0.01 per share
DOCUMENTS INCORPORATED BY REFERENCE
No documents are incorporated by reference into this Annual Report on Form
10-KSB.
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GREENTREE SOFTWARE, INC.
ANNUAL REPORT ON FORM 10-KSB
MAY 31, 1997
CROSS REFERENCE SHEET
PART I PAGE
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Item 1 Description of Business 1
Item 2 Description of Property 8
Item 3 Legal Proceedings 8
Item 4 Submission of Matters to a Vote of Security Holders 8
PART II
Item 5 Market For Common Equity and Related Stockholder Matters 8
Item 6 Management's Discussion and Analysis or Plan of Operations 10
Item 7 Financial Statements 12
Item 8 Changes in the Disagreement with Accountants on Accounting
and Financial Disclosure 12
PART III
Item 9 Directors, Executive Officers, Promoters, and Control Persons:
Compliance With Section 16(a) of the Exchange Act 13
Item 10 Executive Compensation 15
Item 11 Security Ownership of Certain Beneficial Owners and
Management 16
Item 12 Certain Relationships and Related Transactions 18
Item 13 Exhibits, Lists, and Reports on Form 8-K 18
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Except for the historical information contained herein, this Annual Report
on Form 10-KSB may contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including, but not limited to, (i) the potential for
future orders and the existence of expressions of interest in the GT Purchase
PRO product, and (ii) results of future performance. Investors are cautioned
that forward-looking statements are inherently uncertain. Actual performance
and results of operations may differ materially from those projected or
suggested in the forward-looking statements due to certain risks and
uncertainties, including, but not limited to, the following risks and
uncertainties: (i) the Company's history of losses and accumulated deficit,
limited revenues, and the uncertainty of future profitability; (ii) the
Company's capital requirements and the uncertainty of additional funding; (iii)
the uncertainty of market acceptance of GT Purchase PRO software; (iv) the
intense competition in the software field; and (v) the dependence on one product
and rapid technological change in the industry. The forward-looking statements
contained herein represent the Company's judgment as of the date of this Annual
Report on Form 10-KSB, and the Company cautions readers not to place undue
reliance on such statements.
Except as otherwise noted, all information in this Annual Report on Form 10-KSB
reflects a one-for-six reverse stock split of the Company's Common Shares
effected on July 22, 1997.
PART I:
ITEM 1: DESCRIPTION OF BUSINESS
THE COMPANY
Greentree Software, Inc. (the "Company" or "Greentree") began operations in
June 1977 as a management consulting firm specializing in the area of purchasing
and materials management. The Company was incorporated in New York in 1984. In
1985, the Company introduced its first software product for purchasing and
materials management, Computer Aided Purchasing-Registered Trademark- ("CAP1")
for use on IBM compatible personal computers. Since 1991, all of the Company's
revenues have been derived from the sale and maintenance of software products.
The Company first released its Microsoft Windows and client/server based
purchasing and materials management software system (GT Purchase PRO) in May
1994. However, due to problems encountered with the initial software
development toolset, general problems relating to the transition to the
client/server, Windows platform, and a change from internal to external
development, the Company's GT Purchase PRO product (formerly referred to as GT
4.0) required substantial product development to eliminate operation and
performance problems encountered when operating the software. In March 1996,
the Company released its GT Purchase PRO version 5.0 which substantially
eliminated the product's prior performance and operating problems. In May 1997,
GT Purchase PRO version 6.0 was released which provided additional major
enhancements to the product. As a result of the ongoing development work, the
Company has had to repeatedly seek, and will continue to seek, additional
funding in order to continue operations. There can be no assurance that such
funding will be available, or that if obtained, will be sufficient to support
the Company's operations until such time as the Company's operations may be
sustained from operating cash flow.
GT PURCHASE PRO
GT Purchase PRO is a full life-cycle suite of software for improving the
performance of Purchasing and Materials Management. As a companion to Financial
Accounting Software, GT Purchase PRO gives everyone, including requisitioners,
managers, buyers, and executives, a better and more efficient solution for
purchasing and materials management automation. GT Purchase PRO is compatible
with Structured Query Language ("SQL") databases, the
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client/server architecture, and e-mail. GT Purchase PRO is an enterprise-wide
application developed in Powerbuilder 5.0 that is shipped as a 16-bit
application for Windows 3.1 users or as a true 32-bit application for Windows 95
and NT users.
The complete software suite includes the following modules:
Purchasing Requisitioning
Receiving Quotations and RFQ's
Inventory Invoice Matching
Asset Management Blanket Orders
All of the modules can be integrated into one common logical system, and
interfaces are available for supporting external Accounts Payable and MRO
applications and systems. The software routes electronic purchase requisitions
as APPLICATION-LEVEL communication. Requisitions flow via corporate LANs, WANs,
Internet, or Intranet to back-office solution processing. Requisitions are
created using on-line, electronic product, and services catalogs. Before
reaching back-office processing, requisitions must be approved, and this is
achieved using an authorization cycle as established through user-defined
workflow routed on top of existing e-mail systems.
Requisitions can be converted to RFQ's to support the bidding and sourcing
process, or requisitions can be turned directly into purchase orders. All
information is processed at the line item level. Buyers can turn one
requisition into many P.O.'s or many requisitions into one P.O. A Blanket
Purchase Order feature handles routine and repetitive purchases. Purchase
orders can be sent to vendors via paper, fax, and e-mail or exported for EDI
exchange.
The system uses industry standard, leading technology. Internet/intranet
technologies are combined with client/server technologies, creating a versatile,
highly reliable software solution. Modules are available for creating and
sending purchase requisitions via the internet, and the system also allows for
remote receipt of goods via the internet. There are multiple security levels
for requisition authorization.
Requisitions move over existing e-mail systems using MAPI and VIM.
Contracts, product specifications, and other documents are managed as file
attachments using OLE automation. Also, the system supports robust industry
standard databases, including Oracle, Microsoft SQL, Sybase SQL, and Sybase SQL
AnyWhere.
For corporations embracing internet/intranet technologies, the Company
believes that the system is well planned. A thin client approach is available
for purchase requisitioners via their intranet, and remote users with no WAN
access can create and send requisitions via a web browser and the internet. In
addition, vendor web sites can be easily launched from within the system. The
vendor file maintains URL's for quick launch of a desktop web browser.
MARKETS
Materials Management automation is an emerging market within the category
of enterprise administrative applications. Movement to Client/Server Systems
began when corporations migrated from host-based systems to Client/Server Human
Resources and Financial Systems followed by the migration of Manufacturing
Management Systems. Over the next few years, the Company believes that MMS
(Materials Management Systems) or SCM (Supply Chain Management Systems) will
continue to emerge in the area of financial applications.
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With the advent of internet/intranet technologies, self-service
applications, such as material requisitions and approvals, can now be
efficiently deployed on every desktop of the enterprise. This streamlines the
expenditure cycle within an organization allowing for better purchase management
and enhanced supplier relationships. To capture this market, applications
vendors will need to offer sensible implementations of client/server,
intranet/internet, and workflow technologies. More importantly, the
applications must integrate best practices purchasing and supplier management.
According to PURCHASING MAGAZINE, an estimated $250 billion was spent last
year on maintenance, repairs, and operations (MRO) purchases by the top 100
"buying" companies. Most of these companies have either paper systems or
automated systems that are not integrated with an automated materials management
procurement system. The Gartner Group states that world class procurement
leaders will enjoy an 8% to 10% revenue advantage by year 2000. By targeting
customers within fast-moving industries, such as telecommunication, computer
hardware and software, and financial services, the Company's goal is to gain
momentum and capture an early market share of this emerging segment. By
offering executive management a practical implementation of client/server,
intranet, and workflow technologies, such as materials management automation,
the Company's strategy is to obtain larger contract values with shorter sales
cycles.
DISTRIBUTION STRATEGY
The enterprise client/server market, because it is the emerging market,
appears to afford the greatest immediate revenue opportunity. Because of this,
the Company's strategy is to develop partnerships targeted to the direct sales
force of accounting software vendors, database vendors, and large systems
integrators (Big Six). This will create a force multiplier, and the Company
will recruit a sales force to sell into these accounts, as well as staffing a
service organization to support these customers on sight. There can be no
assurance that the Company will be successful in developing its partner network
or in recruiting a sales and support staff to meet its needs.
COMPETITION
The market for purchasing and procurement software in which the Company
competes is highly competitive. Competition for purchasing systems software
comes from custom built on-line systems, suppliers' proprietary systems, and
financial accounting software. The Company believes it competes on the basis of
product features, performance, and price and compares favorably to the
competition on each of these factors. The Company also believes that its
history of financial and product performance problems has negatively affected
its image in the marketplace and that it has lost potential business from
potential clients who expressed concerns about the Company's current financial
status and ability to remain solvent. It is impossible to predict what effect
these issues may have on the Company's future market image, overall
competitiveness, and ability to market its products. There can be no assurance
that the Company will be able to grow sufficiently to enable it to compete
effectively.
DEVELOPMENT
As with any new software product, GT Purchase PRO has, and may continue to
contain, "bugs." The Company has a formal quality assurance program, as well as
beta testing by select customers and/or prospects to identify those bugs which
are considered significant and need to be corrected prior to general release of
the product/module to prospects and customers. Management believes that all
significant bugs with respect to the modules released to date have been
identified and corrected or are being corrected and that all significant bugs
with respect to future modules will be identified and corrected.
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Since its inception, the Company has made substantial investments in
research and development. The Company spent approximately $261,000 and $619,000
in fiscal 1997 and fiscal 1996, respectively, on research and development
activities, including amounts capitalized as part of deferred software
development costs of approximately $228,000 and $419,000, respectively.
MAINTENANCE SERVICE
Maintenance revenues for fiscal 1997 and fiscal 1996, primarily for the
Company's discontinued DOS-based product, were $175,871 and $165,781,
respectively. See Item 6 to this report for additional comments related to the
trend of billings for these revenues. Maintenance contracts are generally sold
to customers for 15% of the software product cost. These entitle the customer
to telephone support and upgrades as they become available.
WARRANTIES
The Company's standard maintenance agreement for its CAPS System and GT
Purchase PRO modules provide that the Company will furnish such services as are
necessary to correct any malfunction in such software. Under the terms of such
agreement, if the Company is unable to correct a malfunction by means of
telephone or telecommunication assistance, repairs may, at the customer's
option, be performed on the premises where the software is located. For such
services rendered, the customer is obligated to pay the Company fees at certain
prescribed rates as set forth in the agreement and to provide reimbursement for
travel and other expenses.
DEPENDENCE ON CUSTOMERS, RESELLERS, OR SUPPLIERS
The Company has been dependent on the outsourcing relationship it has had
with LDSi, its software developer and support resource. In July 1997, the
Company brought the software development in house and is now doing all product
development and support internally.
COPYRIGHTS, TRADEMARKS, AND PATENTS
The trade names "Computer Aided Purchasing" or "CAP" and CAPlink" have been
registered by the Company with the United States Patent and Trademark Office and
will expire in March 1999 and December 2000, respectively, unless renewed.
Under the Trademark Revision Act of 1988, trademark registrations in the United
States have a ten-year term and can be renewed repeatedly for ten-year terms
provided certain criteria are met.
The Company has sought, and will continue to seek, to protect all software
programs developed by it under United States copyright laws. The Company is in
the process of applying for the copyright of its GT Purchase PRO product.
Management intends to protect aggressively the Company's copyright and
proprietary rights against any attempt by a competitor to infringe or interfere
with such rights. However, litigation in this area is expensive, and in view of
the Company's cash flow problems (see the section "Liquidity and Capital
Resources" in Item 7 to this report), the Company may not have, or, assuming no
such problems, may not wish to commit, funds to commence or pursue such
litigation, especially because the high costs thereof could adversely affect the
Company's results of operation. Even if the Company commences such litigation,
there is no assurance that the Company would prevail.
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EMPLOYEES
As of August 25, 1997, the Company had thirteen employees, of which ten
were full-time employees. See "Executive Compensation - Executive Employment
Agreements."
PRIVATE PLACEMENTS
In October 1996, the Company began a private offering of its common shares
and convertible debt which raised a total of $2,090,000 in gross proceeds for
the Company. On October 25, 1996, the Company issued a convertible note in the
original amount of $750,000 to an accredited investor [as such term is defined
in Rule 501(a) under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to Regulation D under the Securities Act] on the terms set forth
in the private placement (the "October 25, 1996 Convertible Note"), and on
December 11, 1996, the company issued 26,666 shares of common shares to two
accredited investors, at a price per share of $1.50, resulting in gross proceeds
to the Company of $40,000. As additional consideration for the October 25, 1996
convertible note and the December 11, 1996 private offering, the Company issued
common shares purchase warrants exercisable for one common share for every two
common shares or conversion shares purchased, at an exercise price of $2.40 per
share.
The October 25, 1996 convertible note was issued at face value, had a two
year term, accrued interest beginning six months after issuance, and converted
to Common Shares at a conversion price of one share for each $1.50 of
outstanding principal and accrued interest upon the filing of an amendment to
the Company's Certificate of Incorporation effecting a reverse stock split of
the Company's issued and outstanding common shares and changing the per share
par value.
In February 1997, the Company started a second offering and issued
additional convertible notes in the amount of $1,300,000 to several other
accredited investors. The February 1997 convertible notes were issued at face
value, had a two year term, accrued interest beginning six months after
issuance, and would convert to common shares at a conversion price of one share
for each $3.00 of outstanding principal and accrued interest upon the filing of
an amendment to the Company's Certificate of Incorporation effecting a reverse
stock split of the Company's issued and outstanding Common Shares and changing
the per share par value.
The convertible notes described above converted into an aggregate of
954,193 shares of Common Shares in July 1997.
ENVIRONMENTAL REGULATIONS
The Company does not believe that compliance with federal, state, and local
laws and regulations which have been enacted or adopted regulating the discharge
of materials into the environment currently have, or in the foreseeable future,
will have any material effect upon the capital expenditures, earnings, or
competitive position of the Company.
RISK FACTORS
Stockholders and prospective purchasers of the Company's Common Stock
should carefully consider the following risk factors in addition to the other
information appearing in this Annual Report on Form 10-KSB.
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HISTORY OF LOSSES AND ACCUMULATED DEFICIT; UNCERTAINTY OF FUTURE PROFITABILITY.
The Company had a net loss of approximately $1.8 million for the fiscal
year ended on May 31, 1997 and had an accumulated deficit at May 31, 1997 of
approximately $14.6 million. The Company has experienced ongoing losses from
operations and expects that such losses will continue for at least some period
until product sales may be generated in sufficient volume to offset expenses.
For the fiscal year ended May 31, 1996, the Company had revenues of $305,132.
For the fiscal year ended May 31, 1997, the Company had revenues of $599,373.
There can be no assurance the Company's revenues will continue at all or will
grow sufficiently to achieve profitability. The Company does not expect to be
profitable unless and until such time as sales of its software products generate
sufficient revenue to fund its operations.
CAPITAL REQUIREMENTS; UNCERTAINTY OF ADDITIONAL FUNDING.
At August 25, 1997, the Company had expended a substantial portion of its
cash balances. Predicting the costs of ongoing development of the Company's
software product and of the expansion of its sales force and other required
personnel, as well as its working capital and other capital needs, is difficult.
There can be no assurance that revenues, if any, generated by the Company from
the sale of its software product will be adequate to successfully market its
software product and to expand its sales force. The Company anticipates that it
will have to raise additional capital to fund continuing operations. There can
be no assurance that any such required capital would be available on acceptable
terms, if at all. If the Company is unable to raise such additional capital on
acceptable terms, it could have to discontinue operations and liquidate.
GT PURCHASE PRO SOFTWARE.
The Company has invested heavily in research for, and development of, its
core purchasing and materials management software system - GT Purchase PRO. The
orders received to date for the GT Purchase PRO product have been significantly
lower than expected by management. Management believes that this was due
primarily to a variety of problems which were partly created by one of the
development tools used to develop the initial product. The Company believes
that its history of financial and product performance problems has negatively
affected its image in the marketplace and that it has lost potential business
from potential clients who expressed concerns about the Company's current
financial status and ability to remain solvent. The Company believes the
software development toolset used to produce GT Purchase PRO 6.0 has corrected
the performance problems associated with the prior version of the product;
however, there can be no assurance that (i) such performance problems have been
completely eliminated; (ii) any further required development work will be
completed on a timely basis; (iii) there will be satisfactory acceptance of the
new product into the marketplace; or (iv) revenues from this new product will be
realized in any material amounts, if at all, and if realized, when.
NEW MANAGEMENT, ABILITY TO RECRUIT SALES, SERVICE, AND IMPLEMENTATION PERSONNEL.
The Company's new management share a very limited history in operating the
Company even though they are experienced in managing companies with the problems
similar to those being faced by the Company. There can be no assurance that the
Company's management will be successful in meeting their planned objectives for
the Company. The ability to achieve anticipated revenues is substantially
dependent on the ability of the Company to attract on a timely basis and retain
skilled personnel, especially key management, sales, service, and implementation
personnel. The Company believes that its future success will depend in large
part on its ability to attract and retain highly skilled technical, managerial,
marketing, and professional services personnel to ensure the quality of products
and services provided to its
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customers. Competition for such personnel, in particular for product
development and implementation personnel, is intense, and the Company competes
in the market for such personnel against numerous companies, including larger,
more established companies with significantly greater financial resources than
the Company. There can be no assurance that the Company will be successful in
attracting and retaining skilled personnel. The Company's inability to attract
and retain qualified employees would have a material adverse effect on the
Company's business.
SUBSTANTIAL COMPETITION.
The software field is a growing one and, in addition to the computer
manufacturers which also offer software products performing functions similar to
the Company's products, a large number of providers of industry-specific
applications and software developers are introducing new purchasing modules and
software programs into the market. Existing competitive products offered by
companies with greater financial or marketing resources impact and limit the
Company's revenues. There can be no assurance that competitors do not have or
will not offer or develop products that are superior to the Company's products
or that achieve greater market acceptance. In addition, suppliers of relational
database management systems and companies that develop management information
software applications for large multinational manufacturers have begun to target
the firms targeted by the Company and offer applications that compete in the
Company's markets. As a result, competition (including pricing competition) may
increase, which could result in price reductions and loss of market share. The
Company may also face market resistance from potential customers from the large
installed base of legacy systems, who may be reluctant to commit the time and
resources necessary to convert to an open systems-based client/server software
product. As the client/server computing market expands, a large number of
companies, many with significantly greater resources than the Company, may enter
the market or increase their market share by acquiring or entering into the
alliances with competitors of the company. There can be no assurance that the
Company will be able to compete successfully against its competitors or that the
competitive pressures faced by the Company will not adversely affect its
financial performance.
DEPENDENCE ON ONE PRODUCT.
Substantially all of the Company's revenues are expected to be derived from
the sale of its GT Purchase PRO 6.0 and related support services. Accordingly,
any event that adversely affects fees from such product or fees derived from the
sale of such product, such as competition from other products, significant flaws
in the product, or incompatibility with third party hardware or software
products, negative publicity or evaluation, or obsolescence of the hardware
platforms or software environments in which the product runs, could have a
material effect on the Company's results of operations. The Company's future
financial performance will depend on the continued development and introduction
of new and enhanced versions of GT Purchase PRO 6.0 and other products and on
customer acceptance of such new enhanced products.
RAPID TECHNOLOGICAL CHANGE AND NEW PRODUCTS.
The market for the Company's software products is characterized by rapid
technological advances, evolving industry standards, change in end-user
requirements, and frequent new product introductions and enhancements. The
introduction of products embodying new technologies and the emergence of new
industry standards could render the Company's existing products and products
currently under development as obsolete and unmarketable. Accordingly, the
Company's future success will depend upon its ability to enhance its current
products and develop and introduce new products that keep pace with
technological developments, satisfy varying end-user requirements, and achieve
market acceptance. Any failure by the Company to anticipate or respond
adequately to technological developments or
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end-user requirements, or any significant delays in product development or
introduction, could severely damage the Company's competitive position and have
an adverse effect on revenues. There can be no assurance that the Company will
be successful in developing and marketing new products or product enhancements
on a timely basis or that the Company will not experience significant delays in
the future which could have a material adverse effect on the Company's results
of operations. In addition, there can be no assurance that new products or
product enhancements developed by the Company will achieve market acceptance.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS.
The Company intends to rely on a combination of copyright, trademark and
trade secret laws, employee and third party nondisclosure agreements, and other
industry standard methods for protecting ownership of its proprietary software.
There can be no assurance, however, that in spite of these precautions, an
unauthorized third party will not copy or reverse-engineer certain portions of
the Company's products or obtain and use information that the Company regards as
proprietary. In addition, the laws of some foreign countries do not protect the
Company's proprietary rights to the same extent as do the laws of the United
States. There can be no assurance that the mechanisms used by the Company to
protect its software will be adequate or that the Company's competition will not
independently develop software products that are substantially equivalent or
superior to the Company's software products.
The Company expects that, as the number of software products in the
industry increases and the functionality of these products further overlaps,
software products will increasingly be subject to claims of infringement on
third party proprietary rights. Any such claim, whether with or without merit,
could result in costly litigation and require the Company to enter into royalty
or licensing arrangements. Such royalty or license arrangements, if required,
may not be available on terms acceptable to the Company or at all.
ITEM 2: DESCRIPTION OF PROPERTY
Effective in October 1996, the Company relocated its corporate offices to
7901 Flying Cloud Drive in Eden Prairie, Minnesota, where it occupies 1,197 sq.
ft. and a lease expiring October 31, 1999. The Company also has a lease for
office space in Sarasota, Florida which it subleases at a rate approximating
that being paid by the Company.
ITEM 3: LEGAL PROCEEDINGS
The Company is not currently a party to any material litigation
proceedings.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the last
quarter of the fiscal year ended May 31, 1997.
PART II:
ITEM 5: MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Common Shares are traded in the National Association of Securities
Dealers OTC Bulletin Board (Symbol: GTSW). The following table sets forth the
range of high and low bid quotations of the Common Shares for each quarterly
period during the two fiscal years ended May 31, 1997 and May 31, 1996 as
reported by NASD Bulletin Board. The quotations in the
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table and the succeeding paragraph represent prices in the over-the-counter
market between dealers in securities, do not include retail markup, markdown, or
commissions, and may not necessarily represent actual transactions.
BID
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PERIOD HIGH LOW
FISCAL YEAR ENDING:
May 31, 1997
First Quarter $6.0000 $2.6220
Second Quarter $4.8750 $2.2500
Third Quarter $6.3750 $2.2500
Fourth Quarter $4.3125 $2.7000
FISCAL YEAR ENDING:
May 31, 1996
First Quarter $ 7.5000 $3.3750
Second Quarter $ 6.9375 $3.3750
Third Quarter $10.1250 $2.0625
Fourth Quarter $ 9.7500 $3.7500
The closing bid sales price of the Common Shares on August 25, 1997 in the
NASD OTC Bulletin Board (as reported by the NASD) was $1.43 per share.
HOLDERS
The number of holders of record of the Common Shares at August 25, 1997 was
approximately 400. Management of the Company is of the opinion that, based on
copies of proxy statements and Annual Reports requested by brokers, banks, and
other record holders for beneficial owners in connection with the last two
meetings of shareholder, that a significant number of registered shares are held
for beneficial owners.
DIVIDENDS
The Company has never paid cash dividends on the Common Shares nor does the
Board of Directors anticipate the Company paying cash dividends in the
foreseeable future because of the financial requirements necessary to develop
operations.
NASD REQUIREMENTS
The Company's Common Shares are traded in the over-the-counter market and
reported in the NASD's OTC Bulletin Board or in the "pink sheets" as reported by
the National Quotation Bureau, Inc. However, because the bid price of the
Common Shares was below $5.00 per share when the Common Shares were delisted
from the NASDAQ System, the Common Shares, when recommended by a broker-dealer,
are subject to the limitations of Rule 15g-9 under the Exchange Act, which Rule
imposes additional sales practices requirements on broker-dealers which sell the
Common Shares (1) to persons other than (a) existing customers with a previous
history of trading through such broker-dealer, (b) institutional accredited
investors (for example, a bank or savings and loan association), and (c) a
director and/or officer of the Company and/or the beneficial owner of 5% or more
of the Common Shares, or (2) in transactions not exempt by the Rule. For
transactions under Rule 15g-9, the broker-dealer must obtain written information
from the prospective purchaser as to his or her financial situation, investment
experience, and investment objectives, and based on such information, reasonably
determine that transactions in the security are suitable for that person and
that the
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prospective investor (or his or her independent advisor) has sufficient
knowledge and experience in financial matters so as to be reasonably expected to
be capable of evaluating the risks of transactions in such security. The
broker-dealer must also receive the purchaser's written agreement to the
transaction prior to the sale. Certain broker-dealers, particularly if they are
market makers in the Common Shares, will have to comply with the disclosure
requirements of Rules 15g-2, 15g-3, 15g-4, 15g-5, and 15g-6 under the Exchange
Act. Consequently, Rule 15g-9 and these other Rules may adversely affect the
ability of broker-dealers to sell the Common Shares as a result of the
delisting.
ITEM 6: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Company's
Financial Statements and Notes thereto and the other financial information
included elsewhere in the Form 10-KSB Report. This Discussion and Analysis of
Financial Condition and Results of Operations contains descriptions of the
Company's expectations regarding future trends affecting its business. These
forward-looking statements and other forward-looking statements made elsewhere
in this document are made in reliance upon the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. The following discussion sets
forth certain factors the Company believes could cause actual results to differ
materially from those contemplated by the forward looking statements. The
Company undertakes no obligation to update the information contained in this
Item 6.
Fiscal 1997 showed improvements in certain areas, including the addition of
seasoned management and sales staff and also product improvements with GT
Purchase Pro. However, sales continue to lag expectations. Nevertheless, the
Company has moved forward with an increase in installed customer base and
referenceable sites. In May 1997, GT Purchase Pro Version 6.0 was released
which provided additional major enhancements to the product, including
additional modules and web capabilities.
FISCAL YEAR ENDED MAY 31, 1997 VS. 1996.
Total sales, which include product and services revenues for fiscal 1997
were $599,373 compared to $305,132 for fiscal 1996, reflecting an increase of
96.4%. Product revenues for fiscal 1997 were $368,915 compared to $125,785 for
fiscal 1996, an increase of $243,130 or 193.3%. Services revenue for fiscal
1997 were $230,458 compared to $179,347 for fiscal 1996, an increase of $51,111
or 28.5%. Included in services revenue for fiscal 1997 were training and dealer
fees of $54,587 compared to $13,566 for fiscal 1996, an increase of $41,021 or
302.4%. Also included in service revenues for fiscal 1997 were maintenance
revenues of $175,871, compared to $165,781 for fiscal 1996, an increase of
$10,090 or 6.1%.
The primary reasons for the increase in sales in fiscal 1997 over fiscal
1996 were the increase in demand for the GT Purchase Pro product following the
rewrite of significant portions of the GT Purchase Pro source code in late
fiscal 1996 and the ability of the company to obtain additional financing in
fiscal 1997 to expand the sales and marketing effort and the products technical
support. These increases are largely attributable to an increase in market
acceptance of the client/server product.
Due to the Company's continued losses from operations, difficulties in
successfully releasing GT Purchase PRO and securing significant product sales,
the Company has previously experienced difficulties in securing the funds
necessary to support the negative cash
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<PAGE>
flow from operations during fiscal 1997 and 1996 (see the section "Liquidity and
Capital Resources" in this section for further comments). In addition, the
Company believes that certain prospective customers may have deferred orders, or
not placed orders, due to concerns with respect to the financial viability of
the Company.
Additional funding will be required during the second quarter of fiscal
1998 to continue to expand the marketing and customer support efforts. There
can be no assurance that funding will be available, or that, if obtained, will
be sufficient to support the Company's operations until such time that as the
Company's operations may be sustained from operating cash flows.
Cost of revenues for fiscal 1997 decreased to $508,705 from $523,853 in
fiscal 1996, a decrease of $15,148 or 2.9%. The main reasons for this decrease
were lower compensation expense and lower consulting fees for outside
programmers, consultants, and contract labor. Offsetting these reductions was
an increase in the amount of the amortization of capitalized software
development costs.
As of May 31, 1997, the Company had recorded $526,372 in net capitalized
software costs. Capitalized costs are being amortized on a straight-line basis
over twelve (12) to thirty-six (36) months from the date of product release.
Management continues to believe that these capitalized amounts are recoverable
given the expected revenue increase from GT Purchase PRO; however, should
revenues not increase to the levels expected by Management, these amounts would
have to be written down to their realizable values, which could result in a
material charge against earnings.
Selling expenses for fiscal 1997 were $584,984 compared to $562,272 in
fiscal 1996, an increase of $22,712 or 4.0%. This increase was primarily due to
an increase in advertising and promotion costs as the Company made a significant
effort to expand its marketing activities in connection with the improved GT
Purchase PRO product and attempts to reach new customers.
General and administrative expenses for fiscal 1997 were $1,321,842
compared to $797,175 for the prior year, an increase of $524,667 or 65.8%. This
increase was due to a number of factors, including an increase in salaries and
related payroll expenses for administrative management and an increase in
professional, legal, and accounting fees. These amounts were incurred with the
addition of new management and as the Company worked to resolve and clean up
financial and legal issues.
Interest expense for fiscal 1997 was $8,282 compared with $744 for the
prior year, an increase of $7,538. Interest income for fiscal 1997 was $1,240
compared to $2,432 in fiscal 1996, a decrease of $1,192. The increase in the
interest expense was related to the interest accruing on some of the convertible
notes payable which were issued in October 1996.
For fiscal 1997, the Company reported a net loss of $1,823,200 (or $1.14
per share) as compared with a net loss of $1,576,480 ($1.42 per share) for
fiscal 1996. This loss was caused by the lower than anticipated revenue levels
which were not sufficient to offset the other costs and expenses.
LIQUIDITY AND CAPITAL RESOURCES.
During fiscal 1997, the Company raised $33,377, net of cash placement agent
fees and other issue costs, from the issuance of Common Shares in Private
Placements in December 1996 and $2,049,566 net proceeds from the issuance of
convertible Notes Payable in October 1996 and February 1997. All such proceeds
were used to fund product development, sales, and the Company's general
operating expenses. The Company currently anticipates that it will
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require additional and ongoing outside funding to continue operating until such
time that the Company is able to generate product sales sufficient to offset its
working capital deficit and ongoing operating expenses. There can be no
assurance that the Company will be successful in securing outside funding or, if
available, upon what terms.
The Company had a working capital deficit of $2,181,387 as of May 31, 1997
as compared with a working capital deficit of $645,258 as of May 31, 1996, an
increase of $1,536,129. The primary reason for this increase in working capital
deficit was the use of the cash proceeds from the issuance of the convertible
notes payable which were used to fund operations for fiscal 1997. These notes
were subsequently converted to equity in July 1997 which would have reduced the
working capital deficit as of May 31, 1997 to $131,821.
The Company incurred approximately $24,567 in capital expenditures during
fiscal 1997 as compared with $31,723 in fiscal 1996.
(See the Report of Independent Accountants and Note 1 to Notes to Financial
Statements in Item 7 to this Report regarding the continued existence of the
Company as a "going concern.")
ITEM 7: FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Report of Price Waterhouse LLP F-2
Report of KPMG Peat Marwick LLP F-3
Balance Sheets at May 31, 1997 and 1996 F-4
Statements of Operations For The Years Ended May 31, 1997 and 1996 F-5
Statements of Stockholders' Equity (Deficit)for the Years Ended
May 31, 1997 and 1996 F-6
Statements of Cash Flows for the Years Ended May 31, 1997 and 1996 F-7
Notes to Financial Statements F-8
ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
CHANGE IN INDEPENDENT ACCOUNTANTS
On May 15, 1997, the Board of Directors of the Registrant authorized the
Company to engage Price Waterhouse LLP ("PW") rather than KPMG Peat Marwick LLP
("KPMG") as the Registrant's independent public accountants for the fiscal year
ending May 31, 1997, subject to the Chief Financial Officer of the Registrant
confirming acceptance by PW of such appointment and notifying KPMG. On May 15,
1997, the Registrant advised KPMG and PW of its decision. On May 15, 1997, PW
advised the Registrant that it accepted the appointment, and the Company
officially engaged PW as its independent public accountants for the fiscal year
ending May 31, 1997.
KPMG served as the Registrant's independent public accountants and auditors
since November 21, 1994. KPMG was dismissed by the Board of Directors as of May
15, 1997. The Registrant's decision to employ PW rather than KPMG was the
result of the Registrant's decision to move its executive offices to Eden
Prairie, Minnesota, upon the hiring of Mr. Mooney
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<PAGE>
as Chief Executive Officer, and the fact that the Registrant wanted to utilize
the services locally of a large independent public accounting firm which had
particular expertise in the software industry.
In each of the past two fiscal years, KPMG in its report noted that,
although the financial statements had been prepared assuming that the Registrant
will continue as a going concern, the Registrant has suffered recurring losses
from operations that raise substantial doubt about its ability to continue as a
going concern. Such firm also stated that the financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
There were no disagreements with KPMG, whether or not resolved, on any
matter of accounting principles or practices, financial statement disclosure,
or auditing scope or procedure, which, if not resolved to that firm's
satisfaction, would have caused it to make reference to the subject matter of
the disagreements in connection with its report. The Company notes that, in
connection with the fiscal year 1996 audit, certain matters concerning the
Company's internal controls were brought to the Company's attention in a
letter to the Board of Directors dated September 11, 1996. These concerns
were discussed with the former accountant and addressed by the Board of
Directors of the Company. All required adjustments were made in the
Company's annual financial statements in connection with the audit. KPMG's
audit opinion was not qualified as to these matters, and no disagreement
existed between the Company and KPMG with respect to these issues. The
Company has authorized KPMG to respond fully to the inquiries of PW
concerning the internal control issues raised in the Management Letter.
Neither the Registrant, nor any person acting on its behalf, prior to the
engagement of PW, consulted PW regarding the application of accounting
principles to a specific completed or contemplated transaction, or the type of
audit opinion that might be rendered on the Registrant's financial statements.
PART III:
ITEM 9: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
EXECUTIVE OFFICERS AND DIRECTORS
As of August 25, 1997, the executive officers and directors of the Company were
as follows:
YEAR
BECAME
OFFICER OR
NAME AGE POSITION WITH COMPANY DIRECTOR
- ------------------- --- ----------------------------- --------
Joseph D. Mooney 59 Chairman of the Board, 1996
Chief Executive Officer, & Director
Jeffrey B. Pinkerton 49 President & Director 1994
Brad I. Markowitz 39 Director 1994
Jerome B. Misukanis 55 Chief Financial Officer 1997
Treasurer & Secretary
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<PAGE>
JOSEPH D. MOONEY has served as Chairman of the Board since June 1997 and as
Chief Executive Officer and a director of the Company since December 1996. From
August 1996 to December 1996, Mr. Mooney served as a consultant to the Company
to assist the Company in product development and marketing strategy. Since
1973, Mr. Mooney has served in various management and marketing positions with
Benchmark Computer Systems, Inc., a software management company. He is also
currently a member of the Board of Directors of Benchmark Computer Systems, Inc.
and Spanlink Communications, Inc.
JEFFREY B. PINKERTON has served as President of the Company since August
1996 and as a member of the Board of Directors since October 1995. Since 1994
and from 1987 to 1991, Mr. Pinkerton has served in various positions for the
Company, including President, Executive Vice President, Vice President-Product
Development, and as a member of the Board of Directors. From 1991 to 1994, Mr.
Pinkerton served as the owner of Viewpoint Consulting, a reseller of the
Company's software products.
BRAD I. MARKOWITZ served as Chairman of the Board of Directors of the
Company from February 1994 to June 1997. Since 1990, Mr. Markowitz has served
as President and a member of the Board of Directors of Focus Capital Corp., an
investment banking firm. Since 1995, Mr. Markowitz has served as President and
a member of the Board of Directors of Park Avenue Health Care Management, Inc.,
a physician practice management company. Since 1995, Mr. Markowitz has served
as President and a member of the Board of Directors of Buckeye Communications,
Inc. From 1987 to 1995, Mr. Markowitz served as Vice President of the ADCO
Group, a real estate, banking, and venture capital company.
JEROME B. MISUKANIS has served as Chief Financial Officer, Treasurer, and
Secretary of the Company since June 1997. From February 1997 to June 1997, Mr.
Misukanis served as a consultant to the Company to assist in financial and
accounting matters. Mr. Misukanis is a Certified Public Accountant and has
served in various capacities, both with his own public accounting firm, as well
as in management positions for public and private companies for 30 years. From
1991 through 1996, Mr. Misukanis was a principal in the public accounting firm
of Misukanis & Dodge, P.A.
No director serves as a director of a company which has a security
registered under Section 12(b) or (g) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or is an investment company registered under the
Investment Company Act of 1940, as amended.
FAMILY RELATIONSHIPS
There are no family relationships among any directors or executive officers
of the Company.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Based solely upon a review of Forms 3 and 4 furnished to the Company under
Rule 16a-3(3) promulgated under the Exchange Act with respect to fiscal 1997,
the Company is not aware of any director or officer of the Company or beneficial
owner of 10% or more of the outstanding shares of the Common Shares who failed
to file reports required by Section 16(a) of the Exchange Act during such fiscal
year or prior years. Based upon the Company's review of such forms, the Company
is not aware of any director or officer of the Company or beneficial owner of
10% or more of the outstanding shares of the Common Shares who failed to file
such reports on a timely basis, as disclosed in such forms, during such fiscal
years or prior years.
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<PAGE>
ITEM 10: EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE:
The table below sets forth certain compensation information for the fiscal
years ended May 31, 1997, 1996, and 1995 with respect to the Company's Chief
Executive Officers and each executive officer of the Company who were the most
highly paid for fiscal 1997.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
NAME & ------------------- ------------- ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION ($)
- ------------------------- -------- ---------- --------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
John J. Medico
President & Chief 1997 (1) $ 28,000 -- 33,333 --
Executive Officer 1996 $ 87,500 -- -- --
Joseph D. Mooney
Chairman & Chief
Executive Officer 1997 (2) $ 75,000 -- -- $211,357
Jeffrey B. Pinkerton
President, Vice-President 1997 (3) $116,667 -- -- --
of Product Development 1996 $108,750 -- -- --
1995 $120,000 -- -- --
</TABLE>
(1) Mr. Medico was appointed President and Chief Executive Officer by the Board
of Directors on October 4, 1995 and resigned on August 9, 1996.
(2) See "Executive Officers and Directors" for information as to the offices
held by Mr. Mooney in fiscal 1997.
(3) See "Executive Officers and Directors" for information as to the offices
held by Mr. Pinkerton in fiscal 1995 and thereafter.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL
GRANT
# OF ---------------
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE
OPTIONS TO EMPLOYEE IN PRICE EXPIRATION
NAME GRANTED FISCAL YEAR ($/SHARE) DATE
- -------------------- ------- ----------- ------- ----
John J. Medico (1) 33,333 100 $2.16 Sept. 2001
Joseph D. Mooney 0 0 -- --
Jeffrey B. Pinkerton 0 0 -- --
(1) Mr. Medico's option was vested with respect to 16,666 shares on the date of
grant, and the remainder vests in three annual installments commencing
October 1, 1996 and ending October 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
No options were exercised during the year by any person who held options
which were eligible to be exercised. The following table sets forth information
as to options exercised
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during the fiscal year ended May 31, 1997 and unexercised options held at the
end of such fiscal year by the individuals listed in the Summary Compensation
Table.
<TABLE>
<CAPTION>
NUMBERS OF VALUE OF UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED OPTIONS AT 5/31/97 AT 5/31/97 ($)
ON VALUE (#) EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE (1)
- ------------------- ------------ ------------ ------------- -----------------
<S> <C> <C> <C> <C>
John J. Medico 0 $0 22,222/11,111 $0/$0
Joseph D. Mooney 0 $0 0/ 0 $0/$0
Jeffrey B. Pinkerton 0 $0 12,500/ 8,333 $0/$0
</TABLE>
(1) Value is based on the mean between the high ask and the low bid prices
supplied by the National Quotations Bureau in the Nasdaq System and
reported by the NASD as of May 31, 1997 (the last trading date during
fiscal 1997) ($0.475) minus the exercise price.
DIRECTOR COMPENSATION
At the current time, directors of the Corporation receive no compensation
for their service to the Company as directors.
EXECUTIVE EMPLOYMENT AGREEMENT
The Company entered into an employment agreement with Jeffrey B. Pinkerton,
the President of the Company, as of February 17, 1994 (the "Pinkerton Employment
Agreement"), which terminated on February 16, 1997. Mr. Pinkerton continues to
be employed under the same terms and conditions as the Pinkerton Employment
Agreement. Mr. Pinkerton's current annual base salary under the Employment
Agreement is $120,000, subject to annual review and increase by the Board of
Directors of the Company. The Pinkerton Employment Agreement provides that Mr.
Pinkerton's employment with the Company may be terminated by either Mr.
Pinkerton or the Company, at any time and for any reason whatsoever. If the
Company terminates Mr. Pinkerton's employment for a reason other than death, the
Company will continue to pay Mr. Pinkerton's base salary for a period of three
(3) months following such termination.
The Company intends to enter into an employment agreement with Joseph D.
Mooney, the Chief Executive Officer and Chairman of the Board of the Company
(the "Mooney Employment Agreement") with terms substantially similar to that
certain letter agreement dated August 2, 1996 between the Company and Mr.
Mooney. Mr. Mooney's annual base salary under the agreement will be $200,000,
subject to annual review and increase by the Board of Directors of the Company.
In addition, Mr. Mooney was entitled to deferred compensation of $175,000 during
the first year of service to the Company. Additionally, he is entitled to
receive options to purchase 166,666 shares of the Company's Common Stock at an
exercised price of $1.50 per share subject to certain performance conditions
which have not as yet been met. The Mooney Employment Agreement will provide
that it may be terminated by either Mr. Mooney or the Company upon 30 days'
notice.
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning the shares of the
Common Shares owned beneficially as of August 25, 1997 by (1) each person known
to the Company to own
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<PAGE>
beneficially 5% or more of the Common Shares; (2) each director of the Company;
(3) the chief executive officers of the Company; (4) each executive officer of
the Company as of May 31, 1997, whose compensation exceeded $100,000 in fiscal
1997; and (5) all directors and executive officers as a group. Each beneficial
owner has advised the Company that he has sole voting and investing power as to
the shares of the Common Shares, except as indicated in the notes below and
except as to the options and warrants described in the notes below which do not
have any voting power until exercised and the options which generally may not be
transferred except in certain limited circumstances.
AMOUNT & NATURE
NAME & ADDRESS OF BENEFICIAL % OF CLASS
OF BENEFICIAL OWNER OWNERSHIP OWNERSHIP (1)
- -------------------------------- ----------- -------------
Joseph D. Mooney (2) 186,666 (3) 4.62%
Jeffrey B. Pinkerton (4) 145,766 (5) 3.61%
Brad I. Markowitz (6) 175,415 (7) 4.35%
Larry I. Jeddeloh 217,777 (8) 5.40%
TIS Group, Inc.
200 S. Sixth Street, Suite 450
Minneapolis, MN
Mark Cahill 201,498 (9) 5.00%
66 Greenwich Street
New York, NY 10014
Primerica Life Insurance 952,553 (10) 23.61%
Company (Travelers Indemnity)
3120 Breckenridge Blvd.
Duluth, GA 30199
All Current Directors & Executive
Officers as a Group (3 Persons) 507,847 12.58%
( 1) The percentages computed in the table are based on 4,035,167 shares of
the Common Shares being outstanding on August 25, 1997 and effect being
given, where appropriate, pursuant to Rule 13d-3(d)(1)(i) under the
Exchange Act, to any option or warrant then exercisable or exercisable
within 60 days thereafter.
( 2) Mr. Mooney is the Chief Executive Officer, Chairman of the Board, and a
Director.
( 3) Includes 166,666 shares issuable upon the exercise of stock options.
( 4) Mr. Pinkerton is President and a Director of the Company.
( 5) Includes 104,166 shares issuable upon the exercise of options granted
pursuant to the Company's 1997 Stock Option Plan. Includes 8,916 shares
issuable upon the exercise of two February 1996 Warrants, 8,333 shares
issuable upon the exercise of options granted pursuant to the 1994 Option
Plan, and 8,333 shares issuable upon the exercise of options granted
pursuant to the 1987 Option Plan.
( 6) Mr. Markowitz is a Director of the Company.
( 7) Includes 95,833 shares issuable upon the exercise of options granted
pursuant to the Company's 1997 Stock Option Plan. The shares reported in
the table reflect 10,544 shares owned by Focus Capital Corp., 18,067 shares
issuable upon the exercise of two February 1996 Warrants, and 19,063 shares
issuable upon the exercise of a Placement Agent's Warrant which Warrants
are also held by Focus Capital Corp. and 2,777 and of
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<PAGE>
record by Mr. Markowitz. Mr. Markowitz is the President and a Director of
Focus Capital Corp., and his wife is the sole shareholder. He disclaims
beneficial ownership of 47,674 of such shares.
( 8) Includes 207,777 shares held by TIS of which Mr. Jeddeloh has shared voting
and investment power. Includes 10,000 shares that TIS Group has the right
to acquire upon exercise of a warrant.
( 9) Of such 191,555 shares, 6,111 are owned of record by Raymond James as
Custodian of the IRA Account of Mark Cahill.
(10) Includes 250,000 shares that Primerica has the right to acquire upon the
exercise of a warrant.
The Company is not aware of any arrangements, the operation of which may at a
subsequent date result in a change in control of the Company.
ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In October 1996, the Company entered into a Subscription Agreement and
Letter of Intent with The Travelers Indemnity Company ("Travelers") as part of a
private placement of Convertible Promissory Notes and Common Shares. Travelers
purchased a $750,000 Convertible Promissory Note which was converted into
500,000 shares of Common Shares upon the filing of a Certificate of Amendment to
the Corporation's Certificate of Incorporation providing for a sufficient number
of authorized shares of Common Shares to permit the conversion.
ITEM 13: EXHIBITS, LISTS, AND REPORTS ON FORM 8-K
EXHIBITS
The following exhibits (1) which are designated with a footnote reference
are incorporated by reference to a prior registration statement declared
effective under the Securities Act or a periodic report file pursuant to Section
13 of the Exchange Act and (2) which are designated with an asterisk are filed
with this Report. As to the Exhibits 10(k) and 10(k) (1) designated with a
double asterisk, confidential treatment has been granted as to certain aspects
of two of the exhibits to each of the Agreement and the Addendum.
NUMBER EXHIBIT
- ------ -------
3.1 Certificate of Incorporation of the Company. (1)
3.2 Amendment to Certificate of Incorporation of the Company as filed
in the State of New York on August 18, 1983. (1)
3.3 Amendment to Certificate of Incorporation of the Company as filed
in the State of New York on January 26, 1988. (2)
3.4 Amendment to Certificate of Incorporation of the Company as filed
in the State of New York on December 23, 1993. (11)
3.5 Amendment to Certificate of Incorporation of the Company as filed
in the State of New York on April 28, 1994. (11)
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NUMBER EXHIBIT
- ------ -------
3.6 Amendment to Certificate of Incorporation of the Company as filed
in the State of New York on June 22, 1997*.
3.7 By-laws of the Company. (3)
4.1 Specimen Certificate for Shares of Common Stock
4.2 Form of Warrant expiring February 15, 1988 issued by the Company in
the February and June 1994 private placements. (4)
4.3 Form of Warrant expiring February 15, 1998 issued by the Company to
Raymond James & Associates, Inc., acting through its division Awad
& Associates, is the same Warrant as Exhibit 4 (a).
4.4 Warrant expiring April 30, 1998 issued by the Company to Princeton
Securities Corp. (11)
4.5 Warrant expiring January 31, 1999 issued by the Company to Wm.
Smith & Co.
4.6 Form of Warrant issued to Wm. Smith Securities & Gilmore & Co. (10)
10.1 The Company's Non-Qualified Stock Option Plan. (8)
10.2 The Company's Stock Option Plan of 1994. (11)
10.3 The Company's 1997 Stock Option Plan*.
10.4 Placement Agent Agreement dated June 4, 1992 between the Company
and PMG. (2)
10.5 Form of Purchase Agreement dated as of February 16, 1994 by and
between the Company and the purchasers in the February 1994 private
placement. (4)
10.6 Agreement dated January 19, 1994 between the Company and Awad &
Associates. (4)
10.7 Amendments dated February 16 and 18, 1994 substituting Raymond
James & Associates, Inc., acting through its division Awad &
Associates, in the agreement filed as Exhibit 10 (g). (4)
10.8 Form of standard maintenance agreement of the Company. (8)
10.9 Form of standard customer license agreement of the Company. (8)
10.10 Employment Agreement dated February 17, 1994 between the Company
and Jeffrey B. Pinkerton. (11)
10.11 Agreement dated September 23, 1993 between Focus Capital Corp.
and the Company. (11)
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<PAGE>
NUMBER EXHIBIT
- ------ -------
10.12 Registration Rights Agreement dated as of December 25, 1995 among
the Company and certain of its Shareholders. (10)
10.13 Registration Rights Agreement dated as of April 23, 199_ among
the Company and certain of its Shareholders. (10)
10.14 Lease between the Company and Fruitville-Tuttle, Ltd. (12)
10 (aa) Form of Warrant issued to TIS Acquisitions and Management Group,
Inc., The Travelers Indemnity Company, and Mark Cahill, dated
October 25, 1996*.
10 (bb) Form of Warrant issued to Wm. Smith Securities, Inc., dated
October 25, 1996*.
10 (cc) Form of Warrant issued to Wm. Smith Securities, Inc., dated
October 25, 1996*.
10 (dd) Registration Rights Agreement dated October 25, 1996 between the
Company and certain of its Shareholders.
11.1 Computation of Income Per Share.
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Price Waterhouse LLP
(1) Incorporated herein by reference to the Company's Registration Statement on
Form S-18, File No. 2-86249-NY.
(2) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the fiscal year ended May 31, 1992.
(3) Incorporated herein by reference to the Company's Annual Report on Form
10-KSB for the fiscal year ended May 31, 1993.
(4) Incorporated herein by reference to the Company's Current Report on Form
8-K filed on March 2, 1993.
(5) Incorporated herein by reference to the Company's Current Report on Form
8-K filed on June 26, 1992.
(6) Incorporated herein by reference to the Company's Current Report on Form
8-K filed on July 15, 1992.
(7) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the fiscal year ended May 31, 1987.
(8) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the fiscal year ended May 31, 1991.
(9) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the fiscal year ended May 31, 1990.
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<PAGE>
(10) Incorporated herein by reference to the Company's Registration Statement on
Form S-1, File No. 333-45475.
(11) Incorporated herein by reference to the Company's Annual Report on Form
10-KSB for the fiscal year ended May 31, 1994.
(b)
Reports on Form 8-K
On October 15, 1996, the Company files a report on Form 8-K announcing the
Company's private placement of Common Shares and convertible debt to raise $1.25
million.
On February 27, 1997, the Company files a report on Form 8-K announcing the
Company's private placement of Common Shares and convertible debt to raise
$800,000.
On May 22, 1997, the Company filed a report on Form 8-K announcing its
change in its certifying accountant. On June 2, 1997, the Company files an
amendment to that report to include the former accountant's letter.
(12) Incorporated herein by reference to the Company's Annual Report on Form
10-KSB for the fiscal year ended May 31, 1996.
-21-
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto to
be duly authorized.
Greentree Software, Inc.
(Registrant)
Date: September 12, 1997
/s/ Joseph D. Mooney
--------------------------------------------
Joseph D. Mooney
Chairman, Chief Executive Officer, & Director
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
September 12, 1997.
SIGNATURE TITLE
- -------------------------------------- -----------------------------------
/s/ Joseph D. Mooney Chairman, Chief Executive Officer
Director
- ------------------------------
Joseph D. Mooney
/s/ Jerome B. Misukanis Chief Financial Officer
- ------------------------------
Jerome B. Misukanis
/s/ Jeffrey B. Pinkerton Director
- ------------------------------
Jeffrey B. Pinkerton
/s/ Brad I. Markowitz Director
- ------------------------------
Brad I. Markowitz
-22-
<PAGE>
Greentree Software, Inc.
Index to Financial Statements
Description Page
- --------------------------------------------------------------------------------
Report of Price Waterhouse LLP...............................................F-2
Report of KPMG Peat Marwick LLP..............................................F-3
Balance Sheets as of May 31, 1997 and 1996...................................F-4
Statements of Operations for the years ended May 31, 1997 and 1996...........F-5
Statements of Stockholders' Equity (Deficit) for the years
ended May 31, 1997 and 1996.................................................F-6
Statements of Cash Flows for the years ended May 31, 1997 and 1996...........F-7
Notes to Financial Statements................................................F-8
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Greentree Software, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of stockholders' equity (deficit) and of cash flows present
fairly, in all material respects, the financial position of Greentree
Software, Inc. at May 31, 1997, and the results of its operations and its
cash flows for the year ended in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Company's management, our responsibility is to express an opinion on
these financial statements based on our audit. We conducted our audit of
these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred substantial losses, has a working
capital deficit and has a stockholders' deficit at May 31, 1997. These factors
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans are described in Note 1 to the financial
statements. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Price Waterhouse LLP
Minneapolis, Minnesota
August 6, 1997
F-2
<PAGE>
Independent Auditor's Report
The Board of Directors and Stockholders
Greentree Software, Inc.
We have audited the accompanying balance sheet of Greentree Software, Inc. as of
May 31, 1996 and the related statements of operations, stockholders' equity, and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Greentree Software, Inc. as of
May 31, 1996 and the results of its operations and its cash flows for the year
then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Notes 1 and 5 to the
financial statements, the Company has incurred substantial losses from
operations, has a working capital deficit, an accumulated deficit, and a
liquidity deficiency, and is currently party to two lawsuits, one of which
involves its rights to continue to sell its primary product. These matters
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 1 to the financial statements. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ KPMG PEAT MARWICK LLP
St. Petersburg, Florida
September 11, 1996
F-3
<PAGE>
GREENTREE SOFTWARE, INC.
BALANCE SHEETS
MAY 31, 1997 AND 1996
<TABLE>
<CAPTION>
ASSETS 1997 1996
-------------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 245,649 $ 249,525
Accounts receivable, net 164,556 112,749
Inventories -- 4,854
Prepaid expenses and other current assets 30,204 17,153
------------ ------------
Total current assets 440,409 384,281
------------ ------------
Property and equipment 54,554 120,000
------------ ------------
Other assets:
Customer list 29,345 45,341
Capitalized software development costs 526,372 768,516
Security deposits 9,124 5,111
Other 76,261 10,382
------------ ------------
Total Other Assets 641,102 829,350
------------ ------------
Total Assets $ 1,136,065 $ 1,333,631
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 348,148 $ 447,791
Convertible notes payable 2,049,566 --
Accrued expenses 146,214 430,296
Deferred revenue 77,868 151,452
------------ ------------
Total current liabilities 2,621,796 1,029,539
------------ ------------
Commitments and contingencies
Stockholders' equity(deficit):
Common stock, $0.01 par value, authorized
15,000,000 shares issued and outstanding
1,610,610 and 1,583,944 shares, respectively 16,106 15,839
Additional paid-in capital 13,231,268 13,198,158
Accumulated deficit (14,644,073) (12,820,873)
------------ ------------
(1,396,699) 393,124
Less treasury stock (4,780 shares) at cost (89,032) (89,032)
------------ ------------
Total stockholders' equity (deficit) (1,485,731) 304,092
------------ ------------
Total liabilities and stockholders' equity (deficit) $ 1,136,065 $ 1,333,631
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE>
GREENTREE SOFTWARE, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED MAY 31, 1997 AND 1996
1997 1996
-------------- --------------
Net revenues:
Product $ 368,915 $ 125,785
Services 230,458 179,347
------------ ------------
Total net revenues 599,373 305,132
------------ ------------
Costs and expenses:
Cost of revenues 508,705 523,853
Selling expenses 584,984 562,272
General and administrative 1,321,842 797,175
------------ ------------
Total costs and expenses 2,415,531 1,883,300
------------ ------------
Operating loss (1,816,158) (1,578,168)
Interest expense, net (7,042) 1,688
------------ ------------
Net loss $ (1,823,200) $ (1,576,480)
------------ ------------
------------ ------------
Net loss per common share $ (1.14) $ (1.42)
------------ ------------
------------ ------------
Weighted average number of common shares
outstanding 1,596,510 1,108,167
------------ ------------
------------ ------------
Supplemental net loss per common
and common equivalent share $ (0.92)
------------
------------
Supplmental weighted average common
and common equivalent shares 1,991,450
------------
------------
See accompanying notes to financial statements
F-5
<PAGE>
GREENTREE SOFTWARE, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED MAY 31, 1997 AND 1996
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid-in Accumulated Treasury Stockholders'
Shares Amount Capital Deficit Stock Equity
------------------------------------- ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance, May 31, 1995 791,746 $ 7,917 $11,629,339 $(11,244,393) $(89,032) $ 303,831
Net proceeds from October Private
Placement 235,000 2,350 453,088 -- -- 455,438
Net proceeds from December Private
Placement 411,944 4,119 609,282 -- -- 613,401
Net proceeds from April Private Placement 145,254 1,453 506,449 -- -- 507,902
Net loss -- -- -- (1,576,480) -- (1,576,480)
---------- -------- ----------- ------------ -------- -----------
Balance, May 31, 1996 1,583,944 15,839 13,198,158 (12,820,873) (89,032) 304,092
Net proceeds from December Private
Placement 26,666 267 33,110 -- -- 33,377
Net loss -- -- -- (1,823,200) -- (1,823,200)
---------- -------- ----------- ------------ -------- -----------
Balance, May 31, 1997 1,610,610 $ 16,106 $13,231,268 $(14,644,073) $(89,032) $(1,485,731)
---------- -------- ----------- ------------ -------- -----------
---------- -------- ----------- ------------ -------- -----------
</TABLE>
See accompanying notes to financial statements
F-6
<PAGE>
GREENTREE SOFTWARE, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED MAY 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,823,200) $(1,576,480)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 139,228 152,492
Amortization of capitalized
software costs 470,513 163,797
Increase in allowance for uncollectible
accounts receivable 30,414 15,000
Deferred revenue (73,584) (22,889)
Changes in operating assets and liabilities:
Accounts receivable (82,221) (56,295)
Certificates of deposit -- 775,000
Inventories 4,854 12,260
Prepaid expenses and other current assets (13,051) (8,873)
Other assets (103,111) 58,348
Accounts payable and accrued expenses (383,725) 228,457
---------- ----------
Net cash used in operating activities (1,833,883) (259,183)
---------- ----------
Cash flows from investing activities:
Additions to property and equipment (24,567) (31,723)
Additions to capitalized software development costs (228,369) (418,931)
---------- ----------
Net cash used in investing activities (252,936) (450,654)
---------- ----------
Cash flows from financing activities:
Net proceeds from placements of
common stock 33,377 1,576,741
Net proceeds from issuance of convertible notes payable 2,049,566 --
Repayment of notes payable -- (775,000)
---------- ----------
Net cash provided by financing activities 2,082,943 801,741
---------- ----------
Net increase (decrease) in cash and
cash equivalents (3,876) 91,904
Cash and cash equivalents, beginning of year 249,525 157,621
---------- ----------
Cash and cash equivalents, end of year $ 245,649 $ 249,525
---------- ----------
---------- ----------
Supplemental disclosures of cash
flow information:
Cash paid for interest $ 8,282 $ 744
Cash paid for income taxes $ -- $ --
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to financial statements
F-7
<PAGE>
Greentree Software, Inc.
Notes to Financial Statements
May 31, 1997 and 1996
NOTE 1-BASIS OF PRESENTATION
The accompanying financial statements of Greentree Software, Inc. (the
Company) have been presented on the basis that the Company is a going concern,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. The Company reported a net loss of $1,823,200
for the year ended May 31, 1997 and $1,576,480 for the year ended May 31, 1996.
Additionally, at May 31, 1997, the Company has a working capital deficit of
$2,181,387 and a stockholders' deficit of $1,485,731. The Company's continued
existence is dependent upon its ability to raise additional capital and
successfully market its Windows-based purchasing application, GT Purchase PRO.
Historically, the Company has been successful in raising funds from outside
sources, through private placement or other means. While the Company believes
that its most recent version of GT Purchase Pro has demand in the marketplace,
the Company provides no assurances that significant revenues will be generated.
The above matters raise substantial doubt about the Company's ability to
continue as a going concern. The accompanying financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Accounting Estimates
Management is required to make estimates and assumptions during the
preparation of financial statements in conformity with generally accepted
accounting principles. These estimates and assumptions affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements. They also affect reported
amounts of net income (loss) during the period. Actual results could differ
materially from these estimates and assumptions.
(b) Revenue Recognition
The Company generally recognizes product revenue at the time products are
shipped provided that no significant Company obligations remain outstanding and
collection of the resulting receivable is deemed probable by management.
Insignificant obligations remaining at the time of shipment are accrued. For
those shipments where a license agreement does not exist and the probability of
collection and existence of remaining obligations could not be determined, the
sale has not been recorded and revenue has not been recognized.
F-8
<PAGE>
Service revenues are comprised primarily of revenues derived from
maintenance agreements. Maintenance fees are recorded as deferred revenue and
recognized over the maintenance period that is usually twelve months. Also
included in deferred revenue are deferred product revenues which, based on
terms, will be recognized as revenue when the various terms are met.
(c) Accounts Receivable
Accounts receivable are presented net of an allowance for uncollectible
accounts of $57,100 and $26,700 at May 31, 1997 and 1996, respectively.
(d) Software Development Costs
The Company is engaged in research and development activities in the area
of computer software. In accordance with generally accepted accounting
principles, costs incurred prior to determination of technological feasibility
are considered research and development and treated as period costs and,
accordingly, charged to operations. Once technological feasibility has been
established, development costs are capitalized and amortized over the shorter of
an economic life of one to three years or the proportion of current period
product revenues to total expected product revenues. Amortization charged to
cost of revenues amounted to approximately $471,000 and $164,000 during the
fiscal years ended May 31, 1997 and 1996, respectively. Accumulated
amortization was approximately $635,000 at May 31, 1997.
(e) Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is charged to operations over the estimated useful lives of the
related assets, generally 5 to 7 years, using the straight-line method.
Maintenance and repairs are charged to expense as incurred. Improvements and
betterments that extend the useful life of the assets are capitalized.
Depreciation, was approximately $90,000 and $123,000 for the years ended May 31,
1997 and 1996, respectively.
(f) Customer List
During the year ended May 31, 1994, the Company acquired the customer list
of one of its resellers for $80,000. This reseller subsequently became employed
as the president of the Company. These costs are being amortized using the
straight-line method over five years. Amortization expense related to this
intangible asset was approximately $16,000 for both the fiscal years ended May
31, 1997 and 1996.
F-9
<PAGE>
(g) Inventories
Inventories are carried at the lower of cost or market with cost determined
under the first-in, first-out method. Inventories are comprised of purchased
software for resale and product documentation.
(h) Cash and Cash Equivalents
The Company considers all highly liquid instruments with original
maturities of 90 days or less to be cash equivalents for financial statement
purposes. Included in cash equivalents at May 31, 1996 was a certificate of
deposit totaling approximately $100,000.
(i) Income Taxes
The Company accounts for income taxes in accordance with the provisions of
the Financial Accounting Standards Board Statement of Financial Accounting
Standard No. 109 (SFAS 109), Accounting for Income Taxes. SFAS 109 requires
that deferred income taxes reflect the tax consequences on future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts.
(j) Loss Per Common Share
Net loss per common share is computed by dividing net loss by the weighted
average number of shares outstanding during the year. For the years ended May
31, 1997 and 1996, common stock options and warrants were anti-dilutive and were
not included in the weighted average number of common shares used in determining
per share amounts.
Supplemental net loss per common share reflects the adjustment for the
conversion of the Convertible Notes payable issued during 1997 into 957,322
(394,940 on a weighted average basis) shares of common stock that occurred
subsequent to year end.
(k) Recently Issued Accounting Standards
In March 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share" (SFAS No. 128). SFAS No. 128 applies to entities
with publicly held common stock or potential common stock and is effective for
financial statements issued for periods ending after December 15, 1997. Under
SFAS No. 128 the presentation of primary earnings per share is replaced with a
presentation of basic earnings per share. SFAS No. 128 requires dual
presentation of basic and diluted earnings per share for entities with complex
capital structures. Basic earnings per share includes no dilution and is
computed by dividing net income (loss) available to common stockholders by the
weighted average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution of securities that could
share in the earnings of an entity, similar to fully diluted earnings per share.
Management believes the adoption of SFAS No. 128 will not have a material effect
on the financial statements.
F-10
<PAGE>
(l) Reclassification and Stock Split
Certain prior year balances have been reclassified to conform with current
year presentation. There was no impact on the prior year's net loss or total
stockholders' equity from the reclassification.
As discussed in Note 10, the Company effected a one-for-six reverse stock
split subsequent to May 31, 1997. All shares and per share amounts contained in
the financial statements and notes thereto reflect the retroactive application
of such reverse stock split for all periods presented.
NOTE 3-PROPERTY AND EQUIPMENT
At May 31, 1997 property and equipment balances consisted of the following:
Equipment and fixtures cost $505,784
Less accumulated depreciation (451,230)
---------
Net property and equipment $ 54,554
---------
---------
At May 31, 1996, property and equipment balances consisted of the following:
Net book value of furniture and equipment to be used in operations $50,000
Net book value of furniture and equipment subject to litigation (note 5) 65,000
Furniture and equipment held for sale, which approximates net
realizable value 5,000
-------
$120,000
-------
-------
NOTE 4 INCOME TAXES
The Company has net operating loss carry forwards (NOLs) for Federal income
tax purposes of approximately $13,400,000 at May 31, 1997. Such NOLs are
available to offset future taxable income, if any. The NOLs expire at various
times from 1998 through 2012. The Company's potential utilization of NOLs may
be further subject to limitation under the provisions of Internal Revenue Code
Section 382.
There was no income tax expense for the years ended May 31, 1997 and 1996.
Such amounts differ from amounts computed by applying the United States Federal
income tax rate of 34% to loss before income taxes as a result of the following:
1997 1996
---- ----
Expected federal tax at 34% $ (619,888) $ (536,003)
Other, primarily state net operating
loss benefit, net of federal tax effect (115,112) (143,009)
Increase in valuation allowance 735,000 679,012
---------- ----------
Total $ 0 $ 0
---------- ----------
---------- ----------
F-11
<PAGE>
No future tax benefit for the Company's cumulative temporary differences has
been recognized since utilization of the benefit is not presently likely. The
tax effects of temporary differences that give rise to significant portions of
the deferred tax asset are presented below.
1997 1996
---- ----
Deferred tax asset:
Net operating loss carryforwards $ 5,065,000 $ 4,350,000
Other, net 135,000 115,000
---------- ----------
Total gross deferred tax assets 5,200,000 4,465,000
Less valuation allowance (5,200,000) (4,465,000)
---------- ----------
Net deferred tax asset $ 0 $ 0
---------- ----------
---------- ----------
NOTE 5-COMMITMENTS AND CONTINGENCIES
Employment agreements for certain key executives call for minimum salary
levels, stock option awards and incentive bonuses which are payable if specific
management and Company goals are attained. The Company has entered into an
agreement with the chief executive officer of the Company with terms as follows:
(a) The individual will receive a base compensation of $200,000 per year.
(b) The individual will be entitled to deferred compensation, in addition to
his compensation, during the first year of service. Such deferred
compensation will total $175,000.
(c) The individual is to receive options to purchase 116,667 shares of the
Company's common stock at an exercise price of $1.50 per share. Such
options are to vest in equal installments upon 120 days, 240 days and 365
days of service, respectively. Additionally, the individual is to receive
options for the purchase of 50,000 additional shares of the Company's
common stock. Such options shall have an exercise price of $1.50 per share
and shall vest in the event the Company is sold for a price equivalent to
at least $12.00 per share or the Company's common stock trades at or above
$12.00 per share.
All of the options discussed above shall expire in not less than five years
from the date of grant.
In February of 1996, the Company was sued by Parera Information Services,
Inc. (Parera) in the United States District Court for the District of
Massachusetts. Parera and the Company were parties to a software development
agreement. The complaint sought damages for breach of contract, alleged
copyright infringement, misrepresentation and violation of the Massachusetts
Consumer Protection Act. Additionally, Parera sought injunctive relief
prohibiting the Company from marketing its GT Purchase PRO Version 5.0 software,
declaring Parera as the owner of the software and freezing the assets of the
Company.
F-12
<PAGE>
This lawsuit was settled in November 1996 with full release from all claims
by Parera along with a second lawsuit that was filed by a former employee, who
was joined in the matter, in exchange for the payment of $105,000.
NOTE 6-OPERATING LEASES
During the year ended May 31, 1997, the Company relocated its headquarters
from Sarasota, Florida to the Minneapolis, Minnesota area (Eden Prairie). The
Company has entered into a three-year lease for office space in Eden Prairie.
The Company also leases office space under a three-year lease in the Boston
area.
During the year ended May 31, 1996, the Company moved from the Boston,
Massachusetts area to Sarasota, Florida. In connection with such relocation,
lease termination costs of approximately $50,000 were paid. The Company entered
into a five-year lease for office space in Sarasota. The Company is currently
under negotiations to continue to sublet the suite under a sublease agreement at
a rate approximating that being paid by the Company. The Company believes that
the Sarasota office facility will be sublet, and as such, no provision has been
made in the financial statements related to this lease abandonment, other than a
reserve of approximately $25,000 made in the fourth quarter of fiscal 1996
related to potential future cash outflows with respect to the commitment.
Future minimum lease payments under the noncancelable operating leases as
of May 31, 1997 are as follows:
Years
Ending Committed
May 31 Commitment Sublease Net
------ ---------- -------- ---
1998 $89,500 $(18,300) $71,200
1999 90,700 0 90,700
2000 63,800 0 63,800
2001 14,100 0 14,100
------- --------- -------
Total $258,100 $(18,300) $239,800
------- --------- -------
------- --------- -------
Rent expense (excluding lease termination costs) amounted to approximately
$58,000 and $56,000 for the fiscal years ended May 31, 1997 and 1996,
respectively.
NOTE 7-STOCKHOLDERS' EQUITY
DELISTING OF COMMON SHARES. Under the National Association of Securities
Dealers, Inc. ("NASD") maintenance criteria for continued listing of common
shares in the National Association of Securities Dealers Automated Quotation
System, a Company must, among other
F-13
<PAGE>
criteria, have minimum capital and surplus of $1,000,000, total assets of
$2,000,000 and a per share bid price of $1.00. During the years ended May 31,
1997 and 1996, the Company did not meet these requirements and was delisted in
December 1995.
PRIVATE PLACEMENTS. During the fiscal year ended May 31, 1997 and 1996, the
following equity placements occurred:
(a) Fiscal Year Ended May 31, 1997
1. During October and December 1996 (October Private Placement) the
Company sold an aggregate of 26,666 shares of its common stock at a
price of $1.50 per share in a private placement offering. Net
proceeds realized by the Company were $33,377.
2. During October 1996, the Company issued a Convertible Term Promissory
Note in the original principal amount of $750,000. The note
automatically converted to 500,000 shares of the Company's common
stock upon the amendment to the Company's Articles of Incorporation
effecting a one-for-six reverse stock split of the issued and
outstanding common shares. The Amendment became effective and the
conversion took place in July, 1997. See Note 10.
3. During March and April, 1997, (February 1997 Private Placement), the
Company issued Convertible Term Promissory Notes in the aggregate
principal amounts of $1,299,566. The notes automatically converted to
457,322 shares of the Company's common stock upon the Amendment to the
Company's Articles of Incorporation effecting a one-for-six reverse
stock split. The amendment became effective and the conversion took
place in July, 1997. See Note 10.
(b) Fiscal Year Ended May 31, 1996
1. During October and December 1995 (October Private Placement), the
Company sold an aggregate of 235,000 shares of its common stock at a
price of $2.40 per share in a private placement offering. Net
proceeds realized by the Company were $455,438.
2. During December 1995 and January 1996 (December private Placement),
the Company sold an aggregate of 411,944 shares of its common stock at
a price of $1.80 per share in a private placement offering. Net
proceeds realized by the Company were $613,401.
3. During April and May 1996 (April Private Placement), the Company sold
an aggregate of 145,254 shares of its common stock at a price of $4.20
per share in a private placement offering. Net proceeds realized by
the Company were
F-14
<PAGE>
$507,902. As of May 31, 1996, the Company's stock transfer agent had
yet to formally issue such shares. Share amounts have been included in
outstanding totals as of May 31, 1996.
In connection with certain of the fiscal 1997 and 1996 debt and equity
placements, common stock warrants were issued. These warrants are included in
the summary of outstanding warrants discussed below in this Note 7.
Stock Options
The Company maintains two Non-Qualified Stock Option Plans, the 1994 Stock
Option Plan and the 1987 Stock Option Plan, under which stock options can be
granted to consultants, key employees and directors or officers of the Company.
The options under each plan are generally exercisable over a five-year period.
The Stock Option Plans reserved a total of 229,167 shares for future issuance.
The following summary of outstanding options and shares reserved under the plan
is as follows:
Weighted
Average
1987 Plan 1994 Plan Total Exercise Price
--------- --------- ----- --------------
Outstanding at May 31, 1995 20,667 86,250 106,917 $ 16.32
Grants 0 0 0 0
Exercise 0 0 0 0
Cancelled (2,500) 0 (2,500) (18.00)
------ -------- -------- --------------
Outstanding at May 31, 1996 18,167 86,250 104,417 16.32
Grants 0 33,333 33,333 2.16
Exercise 0 0 0 0
Cancelled ( 625) (41,667) (42,292) (17.04)
------ -------- -------- --------------
Outstanding at May 31, 1997 17,542 77,916 95,458 $ 11.02
------ -------- -------- --------------
------ -------- -------- --------------
F-15
<PAGE>
As of May 31, 1997 all of the above options outstanding covering 62,125
shares were exercisable at prices ranging from $3.60 to $44.16 per share.
Range of Number Average Weighted
Exercise Outstanding Remaining Average
Prices May 31,1997 Life Exercise Price
------ ----------- ------------ --------------
$2.16 - 3.60 33,334 4.25 $2.16
$7.20 - 13.62 15,208 1.98 11.28
$16.8 44,583 2.40 16.80
$21.0 - 44.16 2,333 1.14 30.06
- ------------- ------------ ---------- -------------
$2,16 - 44.16 95,458 2.95 $11.02
- ------------- ------ ---- ------
- ------------- ------ ---- ------
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard No. 123 (SFAS 123) "Accounting for
Stock Based Compensation" effective for transactions entered into during fiscal
years beginning after December 14, 1995. SFAS 123 provides alternatives for the
methods used by entities to record compensation expense associated with its
stock based compensation plans. Additionally, SFAS 123 provides further
guidance on the disclosure requirements relating to stock based compensation
plans. Management has adopted the disclosure provisions of SFAS 123 and as
such, the adoption has not had a material impact on the financial condition or
results of operations of the company. As there were no significant option
grants in 1997 and none in 1996, no proforma disclosures under SFAS 123 are
required as the additional proforma expense is immaterial.
Warrants to Purchase Common Stock
At May 31, 1997, the Company has a total of approximately 1,041,600
outstanding warrants for the purchase of the Company's common stock. Exercise
prices range from $1.80 to $7.26 per share, with the price of certain warrants
subject to adjustment for anti-dilution provisions. Warrants expire at various
times from June 1997 through October 2001. Warrants were issued to placement
agents in various years from fiscal 1993 through fiscal 1996. Proceeds to the
Company should all warrants be exercised is approximately $4,600,000. At May
31, 1997, warrants with potential proceeds of approximately $3,600,000 are "out
of the money".
NOTE 8-RELATED PARTED TRANSACTIONS
During the fiscal year ended May 31, 1997 and 1996, compensation and
relocation costs were paid to certain officers of the Company. Such individuals
also own shares of the Company's common stock.
Options to certain officers and directors are currently pending shareholder
approval. These options are discussed in Notes 5 and 10.
F-16
<PAGE>
NOTE 9-SIGNIFICANT CUSTOMERS
During the fiscal year ended May 31, 1996, one customer accounted for
approximately $37,000 (12%) of net revenues. No single customer accounted for
10% or more of net revenues for the fiscal year ended May 31, 1997.
NOTE 10-SUBSEQUENT EVENTS
On June 23, 1997, a special meeting in lieu of the 1997 annual meeting of
Shareholders was held and the following action was taken: (a) authorized an
amendment to the corporation's Certificate of Incorporation to effect a
one-for-six reverse stock and reclassified the par value of the common shares
from $0.04 to $0.01 per share (all references to common stock amounts,
shares, per share data and stock conversion rights included in the financial
statements and these notes have been adjusted to give retroactive effect to
the stock split); (b) ratified, confirmed, and adopted the corporation's 1997
Stock Option Plan; and (c) elected three Director's of the Corporation. The
effective date for the reverse stock split was July 22, 1997 and this allowed
for the automatic conversion of the Convertible Notes Payable of $2,049,566
from debt to equity. This in turn increased the shares outstanding following
the reverse split from 1,610,610 shares to 2,564,803 shares. The
Corporation's 1997 Stock Option Plan has reserved a total of 1,500,000 shares
for future issuance and provides for the purchase of common stock as
Incentive Stock Options to employees and directors and Nonstatutory Stock
Options to suppliers, service providers, and consultants of the corporation.
Subsequent to year end, the Board of Directors granted 437,992 stock
options under the 1997 Stock Option Plan.
F-17
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
Exhibit 3(a)(5)
CERTIFICATE OF INCORPORATION
OF
GREENTREE SOFTWARE, INC.
(under section 805 of the Business Corporation Law)
Each of the undersigned, being the Chief Executive Officer and Chairman of
the Board of Directors, and the President and Secretary of GREENTREE SOFTWARE,
INC. (the "Corporation"), pursuant to Section 805 of the Business Corporation
Law of the State of New York, do hereby certify and set forth:
(1) The name of the Corporation is GREENTREE SOFTWARE, INC. The name
under which the Corporation was formed is Schacher Greentree & Co., Inc.
(2) The Certificate of Incorporation of the Corporation was filed by the
Department of State on the 13th day of June, 1977, and subsequently amended on
the 18th day of August, 1983, the 26th day of January, 1988, the 23rd day of
December, 1993, the 28th day of April, 1994, and the 1st day of March, 1995.
(3) The amendment of the Certificate of Incorporation of the Corporation
effected by this Certificate of Amendment is to reduce the aggregate number of
Common Shares issued and outstanding or held in treasury by means of a one-for-
six reverse stock split of the Common Shares and to reclassify the Common Shares
by changing its par value. As of the date hereof (the "Effective Date"), a one-
for-six reverse stock split of the Common Shares, as well as a change in the par
value per share of the Common Shares (such reverse stock split and change in par
value per share being referred to herein as the "Reverse Stock Split"), shall
become effective such that each share of Common Shares, $0.04 par value per
share ("Old Par Value Common Shares"), that is issued and outstanding or held in
treasury immediately prior to the Effective Time shall be automatically
combined, reclassified and changed (without any further act) into one-sixth
(1/6) of one share of fully paid and nonassessable Common Shares, $0.01 par
value per share, of the Corporation ("New Par Value Common Shares"). No
fractional share of New Par Value Common Shares shall be issued to any holder of
record of shares of Old Par Value Common Share as a result of the Reverse Stock
Split, but in lieu of any fraction of a share which would otherwise be
<PAGE>
issuable to any such holder of record, there shall be paid by the Corporation an
amount of cash equal to the pro rata value of such fractional share. Each stock
certificate of the Corporation that represents shares of Old Par Value Common
Shares and that is outstanding immediately prior to the Effective Time shall
immediately after the Effective Time represent such number of shares of New Par
Value Common Shares as shall be equal to one-sixth (1/6) of the number of shares
of Old Par Value Common Shares shown on the face of such stock certificate,
excluding fractional shares which are subject to cash settlement as provided
above. Within a reasonable time after the Effective Time, notice shall be given
to the shareholders of record of the New Par Value Common Shares instructing
them to surrender those of their stock certificates that represent, on their
face, shares of Old Par Value Common Shares to the Corporation for cancellation
and reissuance of new certificates representing the number of shares of New Par
Value Common Shares to which such shareholders are entitled after adjustment for
the Reverse Stock Split. The aggregate amount of capital represented by the
aggregate number of shares of Old Par Value Common Shares issued and outstanding
immediately prior to the Effective Time shall be appropriately adjusted to
reflect the change in the aggregate number of shares of New Par Value Common
Shares issued and outstanding immediately after the Effective Time and the
change in the par value as a result of the Reverse Stock Split. From and after
the Effective Time, any reference to, or use of, the term "Common Shares", or
any reference to the par value per share thereof, in the Certificate of
Incorporation shall, notwithstanding anything in the Certificate of
Incorporation to the contrary, be deemed a reference to the New Par Value Common
Shares or the par value per share thereof, respectively.
As a result of the foregoing amendment, the Reverse Stock Split, the Nine
Million Six Hundred Sixty-Three Thousand Six Hundred Sixty-Two (9,663,662)
shares of the Old Par Value Common Shares, par value $0.04 per share, issued and
outstanding immediately prior to the Effective Date, will be reduced, at a rate
of one for six, to a maximum of One Million Six Hundred Ten Thousand Six Hundred
Ten (1,610,610) New Par Value Common Shares par value $0.01 per share, issued
and outstanding to the shareholders of the Corporation as of and on the
Effective Date.
As a result of the foregoing amendment, the Reverse Stock Split, the Five
Million Three Hundred Thirty-Six Thousand Three Hundred Thirty-Eight (5,336,338)
shares of the Old Par Value Common Shares, par value $0.04 per share, authorized
but unissued as of immediately prior to the Effective Date, will, by virtue of
the Reverse Stock Split, be increased to a maximum of Thirteen Million, Three
Hundred Eighty-Nine Thousand Three Hundred Ninety (13,389,390) shares of the New
Par Value Common Shares, par value $0.01 per share, authorized but unissued
shares of the Common Shares as of and on the Effective Date.
<PAGE>
(4) To accomplish the foregoing amendment, paragraph (4) of the
Certificate of Incorporation of the Corporation, which sets forth the aggregate
number of shares which the Corporation shall be authorized to issue and the par
value of each of such shares, is hereby amended to read as follows:
"(4) The aggregate number of shares which the
Corporation shall have authority to issue is Fifteen Million
(15,000,000) common shares, having a par value of $0.01 per
share."
(5) As a result of the amendment set forth in paragraph (3)(ii) above, the
Reverse Stock Split, the Corporation's stated capital shall be reduced by one-
twenty-fourth (1/24) from $386,546 to $16,106.
(6) The foregoing amendments of the Certificate of Incorporation were
authorized by the vote of the Board of Directors of the Corporation followed by
the affirmative vote of the holders of a majority of the outstanding shares of
Common Shares of the Corporation entitled to vote thereon at a meeting of
shareholders of the Corporation duly called and held on June 23, 1997, a quorum
being present.
IN WITNESS WHEREOF, the undersigned has subscribed this Certificate of
Amendment on the date set forth below and does hereby affirm, under penalties of
perjury, that the statements contained herein have been examined by the
undersigned and are true and correct.
/s/ Joseph D. Mooney
----------------------------------------
Joseph D. Mooney, CEO and
Chairman of the Board of Directors
/s/ Jeffrey B. Pinkerton
----------------------------------------
Jeffrey B. Pinkerton, President and
Secretary
Dated: July 21, 1997
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
GREENTREE SOFTWARE, INC.
Under Section 805 of the Business Corporation Law
__________________________________________
Bingham, Dana & Gould LLP
150 Federal Street
Boston, Massachusetts 02110
Attn.: Julio E. Vega, Esq.
(617) 951-8901
<PAGE>
Exhibit 10(a)(3)
GREENTREE SOFTWARE, INC.
1997 STOCK OPTION PLAN
(adopted by the Board of Directors on March 17, 1997 but not to become
effective until (i) the ratification and approval by the shareholders of the
Company of this 1997 Stock Option Plan and (ii) the ratification and approval
by the shareholders of the Company of an amendment to the Certificate of
Incorporation of the Company to effect a one for six reverse stock split and to
reclassify the common shares with a par value of $0.01 per share)
1. DEFINITIONS. As used in this 1997 Stock Option Plan of Greentree
Software, Inc., the following terms shall have the following meanings:
1.1. BOARD means the Company's Board of Directors.
1.2 CHANGE IN CORPORATE CONTROL means (1) the time of approval by the
shareholders of the Company of (A) any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or pursuant to
which Shares would be converted into cash, securities or other property, other
than a merger in which the holders of Stock immediately prior to the merger will
have the same proportionate ownership of common stock of the surviving
corporation immediately after the merger as before the merger, (B) any sale,
lease, exchange, or other transfer (in one transaction or a series of related
transactions) of all or substantially all the assets of the Company, or
(C) adoption of any plan or proposal for the liquidation or dissolution of the
Company, or (2) the date on which any "person" (as defined in Section 13(d) of
the Exchange Act), other than the Company or a Subsidiary or employee benefit
plan or trust maintained by the Company or any of its Subsidiaries shall become
(together with its "affiliates" and "associates," as defined in Rule 12b-2 under
the Exchange Act) the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of more than 25% of the Stock outstanding
at the time, without the prior approval of the Board of Directors of the
Company.
1.3. CODE means the federal Internal Revenue Code of 1986, as amended.
1.4. COMMITTEE means a committee comprised of two or more Outside
Directors, appointed by the Board of Directors, responsible for the
administration of the Plan, as provided in Section 5; PROVIDED, that the Board
of Directors itself may at any time, in its sole discretion, exercise any or all
functions and authority of the Committee.
<PAGE>
-2-
1.5. COMPANY means Greentree Software, Inc., a New York corporation.
1.6. EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.
1.7. FAIR MARKET VALUE means on any date (i) if the Stock is traded on a
stock exchange or on the Nasdaq National Market, the closing price on the date
in question or, if no trades were reported on such date, the closing price on
the most recent trading day preceding such date on which a trade occurred, and
(ii) if the Stock is not traded on a stock exchange or on the Nasdaq National
Market, the value of a Share on such date as determined by the Committee.
1.8. GRANT DATE means the date as of which an Option is granted, as
determined under Section 7.1.
1.9. HOLDER means, with respect to any Option, (i) the Optionee to whom
such Option shall have been granted under the Plan, or (ii) any transferee of
such Option to whom such Option shall have been transferred in accordance with
the provisions of Section 14.
1.10. INCENTIVE OPTION means an Option which by its terms is to be
treated as an "incentive stock option" within the meaning of Section 422 of the
Code.
1.11. NONSTATUTORY OPTION means any Option that is not an Incentive
Option.
1.12. OPTION means an option granted under the Plan to purchase Shares.
1.13. OPTION AGREEMENT means an agreement between the Company and an
Optionee, setting forth the terms and conditions of an Option.
1.14. OPTION PRICE means the price paid by an Optionee for a Share upon
exercise of an Option.
1.15. OPTIONEE means a person eligible to receive an Option, as
provided in Section 6, to whom an Option shall have been granted under the Plan.
1.16. PLAN means this Amended and Restated 1993 Stock Option Plan of
the Company, as amended from time to time.
1.17. RETIREMENT means, with respect to any Optionee that is an
employee or director of the Company, the voluntary retirement of such Optionee
<PAGE>
-3-
as an employee and/or director, as the case may be, of the Company at any time
after age 65 or such earlier age as the Committee shall determine.
1.18. SECURITIES ACT means the Securities Act of 1933, as amended.
1.19. SHARES means shares of Stock.
1.20. STOCK means common shares, $.01 par value per share, of the
Company.
1.21. SUBSIDIARY means any corporation which qualifies as a subsidiary
of the Company under the definition of "subsidiary corporation" in Section
424(f) of the Code.
1.22. TEN PERCENT OWNER means a person who owns, or is deemed within
the meaning of Section 422(b)(6) of the Code to own, stock possessing more than
10% of the total combined voting power of all classes of stock of the Company
(or its parent or Subsidiaries). Whether a person is a Ten Percent Owner shall
be determined with respect to each Incentive Option based on the facts existing
immediately prior to the applicable grant date thereof.
1.23. VESTING YEAR for any portion of any Incentive Option means the
calendar year in which that portion of the Incentive Option first becomes
exercisable.
2. PURPOSE. This Plan is intended to encourage ownership of Stock by
officers, employees and directors of and consultants to the Company and its
Subsidiaries and to provide additional incentives for them to promote the
success of the Company's business. The Plan is intended to be an incentive
stock option plan within the meaning of Section 422 of the Code but not all
Options granted hereunder are required to be Incentive Options.
3. TERM OF THE PLAN. Options may be granted hereunder at any time in the
period commencing upon the effectiveness of the Plan pursuant to Section 20 and
ending on March 17, 2007.
4. STOCK SUBJECT TO tHE PLAN. Subject to the provisions of Section 14 of
the Plan, at no time shall the number of Shares then outstanding which are
attributable to the exercise of Options granted under the Plan, PLUS the number
of Shares then issuable upon exercise of outstanding Options granted under the
Plan exceed 1,500,000 Shares. Shares to be issued upon the exercise of Options
granted under the Plan may be either authorized but unissued Shares or Shares
held by the Company in its treasury. If any Option expires or terminates for
any reason without having been exercised in full, the Shares not purchased
thereunder shall again be available for Options thereafter to be granted.
<PAGE>
-4-
5. ADMINISTRATION. The Plan shall be administered by the Committee.
Subject to the provisions of the Plan, the Committee shall have complete
authority, in its discretion, to make or to select the manner of making the
following determinations with respect to each Option to be granted by the
Company: (a) the officer, employee, consultant or director to receive such
Option; (b) whether the Option (if granted to an employee) will be an Incentive
Option or Nonstatutory Option; (c) the time of granting the Option; (d) the
number of Shares subject to the Option; (e) the Option Price; (f) the option
period; (g) the exercise date or dates or, if the Option is immediately
exercisable in full on its grant date, the vesting schedule, if any, applicable
to the Shares issuable upon the exercise of the Option; (h) the effect of
termination of employment, consulting or association with the Company on the
subsequent exercisability of the Option; and (i) if the Option is a Nonstatutory
Option, whether such Nonstatutory Option may be transferred by the Holder to a
third party. In making such determinations, the Committee may take into account
the nature of the services rendered by the respective officers, employees and
consultants, their present and potential contributions to the success of the
Company and its Subsidiaries, and such other factors as the Committee in its
discretion shall deem relevant. Subject to the provisions of the Plan, the
Committee shall also have complete authority to interpret the Plan, to
prescribe, amend and rescind rules and regulations relating to it, to determine
the terms and provisions of the respective Option Agreements (which need not be
identical), and to make all other determinations necessary or advisable for the
administration of the Plan. The Committee's determinations on the matters
referred to in this Section 5 shall be conclusive.
6. ELIGIBILITY. An Option may be granted only to an employee, officer or
director of or consultant to one or more of the Company and its Subsidiaries,
PROVIDED that Incentive Options may be granted only to an employee (including an
officer that is an employee) of the Company or one or more of its Subsidiaries.
Subject to adjustment pursuant to Section 15 hereof, no person in any year may
be granted Options with respect to more than 250,000 Shares.
7. GRANT OF OPTIONS.
7.1. TIME OF GRANTING OPTIONS. The granting of an Option shall take place
at the time specified by the Committee. Only if expressly so provided by the
Committee, shall the Grant Date be the date on which an Option Agreement shall
have been duly executed and delivered by the Company and the Optionee.
7.2. OPTION PRICE. The Option Price under each Option shall be determined
by the Committee but, in the case of any Incentive Option, shall be not less
than 100% of the Fair Market Value of Stock on the Grant Date, or not less than
110% of the Fair Market Value of Stock on the Grant Date if the
<PAGE>
-5-
Optionee is a Ten Percent Owner. The Option Price under each Nonstatutory
Option shall not be so limited solely by reason of this Section 7.2.
7.3. OPTION PERIOD. No Incentive Option may be exercised later than the
tenth (10th) anniversary of the Grant Date but in any case not later than the
fifth (5th) anniversary of the Grant Date if the Optionee is a Ten Percent
Owner. The option period under each Nonstatutory Option shall not be so limited
solely by reason of this Section 7.3.
7.4. VESTING. An Option may become exercisable in such installments,
cumulative or non-cumulative, as the Committee may determine. In the case of an
Option not otherwise immediately exercisable in full, the Committee may
accelerate the exercisability of such Option in whole or in part at any time,
PROVIDED the acceleration of the exercisability of any Incentive Option would
not cause the Option to fail to comply with the provisions of Section 422 of the
Code.
7.5. LIMIT ON INCENTIVE OPTION CHARACTERIZATION. No Incentive Option shall
be considered an Incentive Option to the extent pursuant to its terms it would
permit the Optionee to purchase for the first time in any Vesting Year under
that Incentive Option more than the number of Shares calculated by dividing the
current limit by the Option Price. The current limit for any Optionee for any
Vesting Year shall be $100,000 minus the aggregate Fair Market Value (determined
as of the respective Grant Dates) of the number of Shares available for purchase
for the first time in the Vesting Year under each other Incentive Option granted
to the Optionee under the Plan and each other incentive stock option granted to
the Optionee after December 31, 1986 under any other incentive stock option plan
of the Company (and any parent corporation and Subsidiaries). Any Shares
subject to an Incentive Option in excess of the foregoing limitation shall be
treated as if granted under a Nonstatutory Option with otherwise identical
terms.
8. EXERCISE OF OPTION.
(a) An Option may be exercised only by giving written notice, in the
manner provided in Section 19 hereof, specifying the number of Shares as to
which the Option is being exercised, accompanied (except as otherwise provided
in paragraph (b) of this Section 8) by full payment for such Shares in the form
of a check or bank draft payable to the order of the Company or other Shares
with a current Fair Market Value equal to the Option Price of the Shares to be
purchased. Receipt by the Company of such notice and payment shall constitute
the exercise of the Option or a part thereof. Subject to the provisions of the
Plan (including, without limitation, Sections 9, 10 and 11) or any applicable
Option Agreement, within 30 days after receipt of such notice and payment, the
Company shall deliver or cause to be delivered to the Holder a certificate or
certificates for the number of Shares then being purchased by the Holder. Such
<PAGE>
-6-
Shares shall be fully paid and nonassessable. If such Shares are not at that
time effectively registered under the Securities Act, the Holder shall include
with such notice a letter, in form and substance satisfactory to the Company,
confirming that such Shares are being purchased for the Holder's own account for
investment and not with a view to distribution.
(b) In lieu of payment by check, bank draft or other Shares
accompanying the written notice of exercise as described in paragraph (a) of
this Section 8, a Holder may, unless prohibited by applicable law, elect to
effect payment by including with the written notice referred to in paragraph (a)
of this Section 8 irrevocable instructions to deliver for sale to a registered
securities broker acceptable to the Company that number of Shares subject to the
Option being exercised sufficient, after brokerage commissions, to cover the
aggregate exercise price of such Option and, if the Holder further elects, the
withholding obligations of the Optionee and/or such Holder pursuant to Section
11 with respect to such exercise, together with irrevocable instructions to such
broker to sell such Shares and to remit directly to the Company such aggregate
exercise price and, if the Holder has so elected, the amount of such withholding
obligation. The Company shall not be required to deliver to such securities
broker any stock certificate for such Shares until it has received from the
broker such exercise price and, if the Holder has so elected, the amount of such
withholding obligation.
(c) The right of the Holder to exercise an Option pursuant to any
provision of this Section 8, and the obligation of the Company to issue Shares
upon any exercise of an Option pursuant to this Section 8, is subject to
compliance with all of the other provisions of the Plan (including, without
limitation, Sections 9, 10 and 11) or any applicable Option Agreement.
9. RESTRICTIONS ON ISSUE OF SHARES.
(a) Notwithstanding any other provision of the Plan, if, at any time,
in the reasonable opinion of the Company the issuance of Shares covered by the
exercise of any Option may constitute a violation of law, then the Company may
delay such issuance and the delivery of a certificate for such Shares until (i)
approval shall have been obtained from such governmental agencies, other than
the Securities and Exchange Commission, as may be required under any applicable
law, rule, or regulation; and (ii) in the case where such issuance would
constitute a violation of a law administered by or a regulation of the
Securities and Exchange Commission, one of the following conditions shall have
been satisfied:
(1) the Shares with respect to which such Option has been exercised are at
the time of the issue of such Shares effectively registered under the Securities
Act; or
<PAGE>
-7-
(2) a no-action letter in form and substance reasonably satisfactory to
the Company with respect to the issuance of such Shares shall have been obtained
by the Company from the Securities and Exchange Commission.
The Company shall make all reasonable efforts to bring about the occurrence of
said events.
(b) Each certificate representing Shares issued upon the exercise of
an Option will bear restrictive legends which may refer to this Plan.
10. PURCHASE FOR INVESTMENT; SUBSEQUENT REGISTRATION.
(a) Without limiting the generality of Section 9 hereof, if the
Shares to be issued upon exercise of an Option granted under the Plan have not
been effectively registered under the Securities Act, the Company shall be under
no obligation to issue any Shares covered by any Option unless the person who
exercises such Option, in whole or in part, shall give a written representation
to the Company which is satisfactory in form and substance to its counsel and
upon which the Company may reasonably rely, that he or she is acquiring the
Shares issued pursuant to such exercise of the Option as an investment and not
with a view to, or for sale in connection with, the distribution of any such
Shares.
(b) Each Share issued pursuant to the exercise of an Option granted
pursuant to this Plan may bear a reference to the investment representation made
in accordance with this Section 10 and to the fact that no registration
statement has been filed with the Securities and Exchange Commission in respect
to said Stock.
(c) If the Company shall deem it necessary or desirable to register
under the Securities Act or other applicable statutes any Shares with respect to
which an Option shall have been granted, or to qualify any such Shares for
exemption from the Securities Act or other applicable statutes, then the Company
shall take such action at its own expense. The Company may require from each
Option holder, or each holder of Shares acquired pursuant to the Plan, such
information in writing for use in any registration statement, prospectus,
preliminary prospectus or offering circular as is reasonably necessary for such
purpose and may require reasonable indemnity to the Company and its officers and
directors from such holder against all losses, claims, damage and liabilities
arising from such use of the information so furnished and caused by any untrue
statement of any material fact therein or caused by the omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made.
<PAGE>
-8-
11. WITHHOLDING; NOTICE OF DISPOSITION OF STOCK PRIOR to EXPIRATION OF
SPECIFIED HOLDING PERIOD.
(a) Whenever Shares are to be issued in satisfaction of an Option
granted hereunder, the Company shall have the right to require the Optionee
and/or any subsequent Holder to remit to the Company an amount sufficient to
satisfy federal, state, local, employment or other tax withholding requirements
if and to the extent required by law (whether so required to secure for the
Company an otherwise available tax deduction or otherwise) prior to the delivery
of any certificate or certificates for such Shares.
(b) The Company may require as a condition to the issuance of Shares
covered by any Incentive Option that the party exercising such Option give a
written representation to the Company which is satisfactory in form and
substance to its counsel and upon which the Company may reasonably rely, that he
or she will report to the Company any disposition of such Shares prior to the
expiration of the holding periods specified by Section 422(a)(1) of the Code.
If and to the extent that the realization of income in such a disposition
imposes upon the Company federal, state, local or other withholding tax
requirements, or any such withholding is required to secure for the Company an
otherwise available tax deduction, the Company shall have the right to require
that the recipient remit to the Company an amount sufficient to satisfy those
requirements; and the Company may require as a condition to the issuance of
Shares covered by an Incentive Option that the party exercising such Incentive
Option give a satisfactory written representation promising to make such a
remittance.
(c) The Committee may, at or after grant, permit an Optionee and/or
subsequent Holder to satisfy any tax withholding requirements pertaining to the
exercise of an Option by delivery to the Company of Shares (including, without
limitation, Shares retained from the Option exercise that is creating the tax
obligation) having a value equal to the amount to be withheld. The value of
Shares to be so delivered shall be based on the Committee's determination of the
Fair Market Value of a Share on the date the amount of tax to be withheld is to
be determined.
12. TERMINATION OF ASSOCIATION WITH THE COMPANY. If an Optionee ceases to
be an employee, director or consultant of the Company and its Subsidiaries for
any reason other than Retirement or death of such Optionee, any Option held by
such Optionee and/or any subsequent Holder may be exercised by such Optionee
and/or such subsequent Holder at any time within 90 days after the termination
of such relationship, but only to the extent exercisable at termination and in
no event after the applicable option period. If an Optionee enters Retirement
or dies, any Option held by such Optionee and/or any subsequent Holder may be
exercised by such Optionee, such subsequent
<PAGE>
-9-
Holder and/or the executor or administrator of such Optionee or such subsequent
Holder at any time within the shorter of the applicable option period or 12
months after the date of the Optionee's Retirement or death, but only to the
extent exercisable at the time of such Optionee's Retirement or death. Options
which are not exercisable at the time of termination of such relationship
between the Company and the Optionee or which are so exercisable but are not
exercised within the time periods described above shall terminate.
Notwithstanding the foregoing, in the event that (i) the applicable Option
Agreement with respect to an Option shall contain specific provisions governing
the effect that any such termination shall have on the exercisability of such
Option or (ii) the Board, the Committee or any other committee of the Board
composed of Outside Directors that are disinterested on the matter, as
appropriate, shall at any time adopt specific provisions governing the effect
that any such termination shall have on the exercisability of such Option, then
such provisions shall, to the extent that they are inconsistent with the
provisions of this Section 12, control and be deemed to supersede the provisions
of this Section 12. For purposes of this Section 12, military or sick leave
shall not be deemed a termination of employment, PROVIDED that it does not
exceed the longer of 90 days or the period during which the absent Optionee's
reemployment rights, if any, are guaranteed by statute or by contract.
13. TRANSFERABILITY OF OPTIONS. Incentive Options shall not be
transferable, otherwise than by will or the laws of descent and distribution,
and may be exercised during the life of the Optionee only by the Optionee.
Nonstatutory Options shall not be transferable; PROVIDED, HOWEVER, that
Nonstatutory Options shall be transferable by will or the laws of descent and
distribution; and PROVIDED, FURTHER, that Nonstatutory Options may be
transferred to a third party if and to the extent authorized and permitted by
the Compensation Committee. In granting its authorization and permission to any
proposed transfer of a Nonstatutory Option to a third party, the Compensation
Committee may impose conditions or requirements that must be satisfied by the
transferor or the third party transferee prior to or in connection with such
transfer, including, without limitation, any conditions or requirements that may
be necessary or desirable, in the sole and absolute discretion of the Committee,
to ensure that such proposed transfer complies with applicable securities laws
or to prevent the Company, such transferor or such third party transferee from
violating or otherwise not be in compliance with applicable securities laws as a
result of such transfer. For purposes of this Section 13, the term Nonstatutory
Option shall include an Option that was an Incentive Option at the time of
grant, but that has been subsequently been disqualified or otherwise lost its
status as an Incentive Option. The restrictions on transferability set forth in
this Section 13 shall in no way preclude any Holder from effecting "cashless"
exercises of an Option pursuant to, and in accordance with, Section 8(b) hereof.
<PAGE>
-10-
14. ADJUSTMENT OF NUMBER OF OPTION SHARES. In the event of any stock
dividend payable in Stock or any split-up or contraction in the number of Shares
prior to the exercise in full of an Option, the number of Shares subject to the
Option and the price to be paid for each Share subject to the Option shall be
proportionately adjusted. In the event of any reclassification or change of
outstanding Stock or in case of any consolidation or merger of the Company with
or into another company or in case of any sale or conveyance to another company
or entity of the property of the Company as a whole or substantially as a whole,
shares of stock or other securities equivalent in kind and value to those shares
a Holder would have received if he or she had held the full number of Shares
subject to the Option immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance and had continued to hold those shares
(together with all other shares, stock and securities thereafter issued in
respect thereof) to the time of the exercise of the Option shall thereupon be
subject to the Option. Upon dissolution or liquidation of the Company, the
Option shall terminate, but the Holder (if at the time the Optionee is in the
employ or retained as a consultant or serving as a director of the Company or
any of its Subsidiaries) shall have the right, immediately prior to such
dissolution or liquidation, to exercise the Option to the extent not theretofore
exercised. No fraction of a share shall be purchasable or deliverable upon
exercise, but in the event that any adjustment hereunder of the number of Shares
covered by the Option shall cause such number to include a fraction of a Share,
such number of Shares shall be adjusted to the nearest smaller whole number of
shares. In the event of changes in the outstanding Stock by reason of any stock
dividend, split-up, contraction, reclassification, or change of outstanding
Shares of the nature contemplated by this Section 14, the number of Shares
available for the purpose of the Plan as stated in Section 4 hereof shall be
correspondingly adjusted.
15. CHANGE IN CORPORATE CONTROL. Upon a Change in Corporate Control, each
outstanding Option shall immediately become fully exercisable.
16. RESERVATION OF STOCK. The Company shall at all times during the term
of the Plan and, without duplication, of any outstanding Options reserve or
otherwise keep available such number of Shares as will be sufficient to satisfy
the requirements of the Plan (if not then terminated) and such outstanding
Options and shall pay all fees and expenses necessarily incurred by the Company
in connection therewith.
17. LIMITATION OF RIGHTS IN STOCK; NO SPECIAL EMPLOYMENT OR OTHER RIGHTS.
A Holder shall not be deemed for any purpose to be a stockholder of the Company
with respect to any of the Shares covered by an Option, except to the extent
that the Option shall have been exercised with respect thereto and, in addition,
a certificate shall have been issued therefor and delivered to the Holder or his
agent. Any Stock issued pursuant to the Option shall be subject to
<PAGE>
-11-
all restrictions upon the transfer thereof which may be now or hereafter imposed
by the Certificate of Incorporation, and the By-laws of the Company, if any.
Nothing contained in the Plan or in any Option shall confer upon any Optionee
any right with respect to the continuation of his or her employment with, or
retention as a consultant, director or advisor to, the Company (or any
Subsidiary), or interfere in any way with the right of the Company (or any
Subsidiary), subject to the terms of any separate employment or consulting
agreement or provision of law or corporate articles or by-laws to the contrary,
at any time to terminate such employment, consulting, directorship or advisory
relationship or to increase or decrease the compensation of the Optionee from
the rate in existence at the time of the grant of an Option.
18. TERMINATION AND AMENDMENT OF THE PLAN. The Board may at any time
terminate the Plan or make such modifications of the Plan as it shall deem
advisable. No termination or amendment of the Plan may, without the consent of
the Holder of any Option, adversely affect the rights of such Holder under such
Option.
19. NOTICES AND OTHER COMMUNICATIONS. All notices and other
communications required or permitted under the Plan shall be effective if in
writing and if delivered or sent by certified or registered mail, return receipt
requested (a) if to the Holder, at his or her residence address last filed with
the Company, and (b) if to the Company, at 7901 Flying Cloud, Suite 150, Eden
Prairie, Minnesota 555344 02139, Attention: Chief Executive Officer or to such
other persons or addresses as the Holder or the Company may specify by a written
notice to the other from time to time. Copies of all notices sent to any Holder
that is not the Optionee shall also be sent to the Optionee in the manner set
forth in this Section 19.
20. EFFECTIVENESS. This 1997 Stock Option Plan was approved by the Board
of Directors on March 17, 1997, but shall not become effective until and unless
(i) the ratification and approval by the shareholders of the Company of this
1997 Stock Option Plan and (ii) the ratification and approval by the
shareholders of the Company of an amendment to the Certificate of Incorporation
of the Company to effect a one for six reverse stock split and to reclassify the
common shares with a par value of $0.01 per share.
<PAGE>
Exhibit 10(aa)
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, MORTGAGED, PLEDGED HYPOTHECATED OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL ACCEPTABLE TO
GREENTREE SOFTWARE, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
October 25, 1996
GREENTREE SOFTWARE, INC.
COMMON SHARES PURCHASE WARRANT
Void after October 25, 2001
This Warrant (the "Warrant") entitles __________________________ (the
"Holder"), for value received, to purchase from GREENTREE SOFTWARE, INC., a New
York corporation (the "Company"), at any time during the period starting from
February 25, 1997 (the "Commencement Date"), to 5:00 p.m., New York time, on
October 25, 2001 (the "Expiration Date"), at which time this Warrant shall
expire and become void, 1,500,000 shares of the Company's common shares, $0.04
par value per share (the "Stock"), subject to adjustment as set forth herein
(the "Warrant Shares"). The 120 day period from the date hereof to the
Commencement Date is referred to herein as the Interim Period. This Warrant
shall be exercisable at the price per share as determined in Section 1 hereof,
subject to adjustment as set forth herein (the "Exercise Price"). This Warrant
also is subject to the following terms and conditions:
1. WARRANT EXERCISE PRICE.
1.1 EXERCISE PRICE DETERMINATION. The initial Exercise Price shall
be determined as follows:
(a) In the event that the Company's revenues during the Interim
Period are less than $400,000, the Exercise Price shall be $0.40 per
share;
(b) In the event that the Company's revenues during the Interim
Period are $400,000 or greater but less than $500,000, the Exercise
Price per share shall be equal to 100% of the Current Market Price (as
defined in Section 1.2 below);
<PAGE>
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(c) In the event that the Company's revenues during the Interim
Period are $500,000 or greater but less than $600,000, the Exercise
Price per share shall be equal to 115% of the Current Market Price;
and
(d) In the event that the Company's revenues during the Interim
Period are $600,000 or greater, the Exercise Price per share shall be
equal to 130% of the Current Market Price.
1.2 CURRENT MARKET PRICE. The term "Current Market Price" shall mean
the average of the closing bid prices for the Company's Stock for the
twenty (20) trading days immediately prior to and ending on the
Commencement Date.
2. EXERCISE OF WARRANT. Subject to the terms and conditions hereof, this
Warrant may be exercised in whole or in part at any time from and after the
Commencement Date and before the Expiration Date. Exercise shall be by
presentation and surrender to the Company at its principal office of this
Warrant and the subscription form annexed hereto, executed by the Holder,
together with payment to the Company in accordance with Section 3 or 4 hereof in
an amount equal to the product of the Exercise Price multiplied by the number of
Warrant Shares being purchased upon such exercise. It shall be a condition
precedent to the exercise of this Warrant, in whole or in part, that the Holder
shall deliver to the Company a certificate certifying that the representations
set forth in Section 10 hereof are true and correct as of the date of such
exercise. If this Warrant is exercised in part only, the Company shall, as soon
as practicable after presentation of this Warrant upon such exercise, execute
and deliver a new Warrant, dated the date hereof, evidencing the right of the
Holder to purchase the balance of the Warrant Shares purchasable hereunder upon
the same terms and conditions herein set forth. Upon and as of receipt by the
Company of such properly completed and duly executed purchase form accompanied
by payment as herein provided, the Holder shall be deemed to be the Holder of
record of the Warrant Shares issuable upon such exercise, notwithstanding that
the stock transfer books of the Company shall then be closed or that
certificates representing such Warrant Shares shall not then actually be
delivered to the Holder.
3. PAYMENT OF EXERCISE PRICE. The Exercise Price for the Warrant Shares
being purchased may be paid (i) in cash or by check, (ii) by the surrender by
the Holder to the Company of any promissory notes or other obligations issued by
the Company, with all such notes and obligations so surrendered being credited
against the Exercise Price for the Warrant Shares in an amount equal to the
principal amount thereof plus accrued interest to the date of surrender, or
(iii) by any combination of the foregoing.
4. NET ISSUE EXERCISE. Notwithstanding any provision herein to the
contrary, in lieu of exercising this Warrant for cash or cancellation of
indebtedness, the Holder may elect by the surrender of this Warrant, or a
portion of this Warrant, to the Company at the principal office of the Company,
with the net issue exercise notice annexed hereto duly executed, to receive,
without the payment by the Holder of any additional consideration, such number
of fully paid and nonassessable Warrant Shares as is computed using the
following formula:
<PAGE>
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X = Y(A-B)
A
where: X = the number of Warrant Shares to be issued to the Holder pursuant
to this Section 4.
Y = the number of shares of Stock covered by this Warrant or, if only
a portion of the Warrant is being exercised, the number of shares
of Stock for which the Warrant is then being exercised pursuant
to the net issue exercise election made pursuant to this
Section 4 (at the date of such calculation).
A = the fair market value of one share of Stock (at the date of such
calculation).
B = the Exercise Price in effect under this Warrant at the time the
net issue exercise election is made pursuant to this Section 4.
For the purposes of this Section 4, the fair market value of one share of Stock
as of a particular date (the "Determination Date") shall be determined by the
Company's Board of Directors in good faith; provided, however, that (i) if, as
of the Determination Date, there has been a public market for the Stock for at
least 11 trading days, the fair market value per share shall be the average of
the closing prices (or bid prices if there are no such closing prices) of the
Stock quoted in the over-the-counter market summary or the closing price quoted
on the Nasdaq National Market or on the primary national securities exchange on
which the Stock is then listed, whichever is applicable, as published in the New
York City Edition of the Wall Street Journal (or, if not so reported, as
otherwise reported by the Nasdaq National Market) for the 10 trading days prior
to the Determination Date; and (ii) if the Determination Date is the date on
which the Stock is first sold by the Company in a firm commitment public
offering under the Securities Act of 1933, as amended (the "Act"), or if there
has been a public market for the Stock for fewer than 11 trading days, the fair
market value shall be the initial public offering price (before deducting
commissions, discounts or expenses).
5. ADJUSTMENT OF EXERCISE PRICE. The Exercise Price shall be subject to
adjustment from time to time upon the happening of certain events as follows:
5.1. SUBDIVISION OR COMBINATION OF STOCK. If at any time or from time
to time after the Commencement Date, the Company shall subdivide its outstanding
shares of Stock, the Exercise Price in effect immediately prior to such
subdivision shall be reduced proportionately and the number of Warrant Shares
(calculated to the nearest whole share) shall be increased proportionately, and
conversely, in the event the outstanding shares of Stock shall be combined into
a smaller number of shares, the Exercise Price in effect immediately prior to
such combination shall be increased proportionately and the number of Warrant
Shares (calculated to the nearest whole share) shall be decreased
proportionately.
<PAGE>
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5.2 ADJUSTMENT FOR STOCK DIVIDENDS. If at any time after the
Commencement Date the Company shall declare a dividend or make any other
distribution upon any class or series of stock of the Company payable in shares
of Stock or securities convertible into shares of Stock, the Exercise Price and
the number of shares to be obtained upon exercise of this Warrant shall be
adjusted proportionately to reflect the issuance of any shares of Stock or
convertible securities, as the case may be, issuable in payment of such dividend
or distribution.
5.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
In the event of any reorganization of the capital stock of the Company, a
consolidation or merger of the Company with another corporation (other than a
merger in which the Company is the surviving corporation), the sale of all or
substantially all of the Company's assets or any transaction involving the
transfer of a majority of the voting power over the capital stock of the Company
effected in a manner such that holders of Stock shall be entitled to receive
stock, securities, or other assets or property, in each case, at any time after
the Commencement Date, then, as a condition of such reorganization,
reclassification, consolidation, merger, sale or transaction, lawful and
adequate provision shall be made whereby the Holder hereof shall have the right
to purchase and receive (in lieu of the shares of the Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby) such shares of stock, securities or other assets or
property as may be issued or payable with respect to or in exchange for a number
of outstanding shares of such Stock equal to the number of shares of such Stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby. In any such reorganization, consolidation, merger,
sale or transaction, including successive events of such nature, appropriate
provision shall be made with respect to the rights and interests of the Holder
such that the provisions hereof (including, without limitation, provisions for
adjustments of the Exercise Price and of the number of shares purchasable and
receivable upon the exercise of this Warrant) thereafter shall be applicable, as
nearly practicable, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof.
5.4 ISSUANCE OF ADDITIONAL SHARES. The Exercise Price shall be
subject to adjustment upon the issuance of Stock or Convertible Securities so
long as any Warrant is then issued and outstanding.
(A) SPECIAL DEFINITIONS. For purposes of this Section 5.4, the
following definitions shall apply:
(1) "Option" shall mean contractual rights, options or
warrants to subscribe for, purchase or otherwise acquire either Stock or
Convertible Securities.
(2) "Convertible Securities" shall mean any evidences of
indebtedness, shares (other than Stock and Options) or other securities directly
or indirectly convertible into or exchangeable for Stock.
<PAGE>
-5-
(3) "Additional Shares of Stock" shall mean all shares of
Stock issued (or, pursuant to Section 5.4(c), deemed to be issued) by the
Company after the Commencement Date, other than shares of Stock issued or
issuable:
(I) pursuant to Options or Convertible Securities
outstanding on the Commencement Date;
(II) to directors, officers or employees of, or
consultants to, the Corporation pursuant to a stock grant or option plan or
other employee stock incentive program (collectively, the "Plans") approved by
the Board of Directors, subject to adjustment for all subdivisions and
combinations;
(III) as a dividend or distribution on the Warrant or
any event for which adjustment is made pursuant to Section 5 hereof; or
(IV) by way of dividend or other distribution on
shares excluded from the definition of Additional Shares of Stock by the
foregoing clauses (i), (ii) or (iii) or this clause (iv) or on shares of Stock
so excluded.
(B) NO ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
Exercise Price shall be made in respect of the issuance of Additional Shares of
Stock unless the consideration per share for an Additional Share of Stock issued
or deemed to be issued by the Company is less than the Exercise Price in effect
on the date of, and immediately prior to, the issue of such Additional Shares of
Stock.
(C) ISSUANCE OF SECURITIES DEEMED TO BE AN ISSUANCE OF
ADDITIONAL SHARES OF STOCK.
(1) OPTIONS AND CONVERTIBLE SECURITIES. In the event the
Company at any time or from time to time after the Commencement Date shall issue
any Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Stock issuable
upon the exercise of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible Securities,
shall be deemed to be Additional Shares of Stock issued as of the time of such
issue or, in case such a record date shall have been fixed, as of the close of
business on such record date, provided that in any such case in which Additional
Shares of Stock are deemed to be issued:
(I) no further adjustment in the Exercise Price
shall be made upon the subsequent issue of Convertible Securities or shares of
Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities;
<PAGE>
-6-
(II) if such Options or Convertible
Securities by their terms provide, with the passage of time or otherwise, for
any increase or decrease in the consideration payable to the Company or in the
number of shares of Stock issuable upon the exercise, conversion or exchange
thereof, the applicable Exercise Price computed upon the original issue thereof
(or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase or decrease insofar
as it affects such Options or the rights of conversion or exchange under such
Convertible Securities.
(2) Upon the expiration of any such Options or any rights
of conversion or exchange under such Convertible Securities which shall not have
been exercised, the Exercise Price computed upon the original issue thereof (or
upon the occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration, be recomputed as if:
(I) in the case of Convertible Securities or Options
for Stock, the only Additional Shares of Stock issued were the shares of Stock,
if any, actually issued upon the exercise of such Options or conversion or
exchange of such Convertible Securities and the consideration received therefor
was the consideration actually received by the Company for the issue of all such
Options, whether or not exercised, plus the consideration actually received by
the Company upon such exercise, or for the issue of all such Convertible
Securities which were actually converted or exchanged, plus the additional
consideration, if any, actually received by the Company upon such conversion or
exchange, and
(II) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such Options, and the
consideration received by the Company for the Additional Shares of Stock
actually deemed to have been then issued was the consideration actually received
by the Company for the issue of all such Options, whether or not exercised, plus
the consideration actually received by the Company upon the issue of the
Convertible Securities with respect to which such Options were actually
exercised.
(3) No readjustment pursuant to clause (2) above shall have
the effect of increasing the Exercise Price to an amount which exceeds the lower
of (x) such Exercise Price on the original adjustment date, or (y) such Exercise
Price that would have resulted from any issuance of Additional Shares of Stock
between the original adjustment date and such readjustment date.
(4) In the case of any Options which expire by their terms
not more than 30 days after the date of issue thereof, no adjustment of the
Exercise Price shall be made until the expiration or exercise of all such
Options; provided, however, that this clause (4) shall not apply to Options that
are issued within 30 days of a transaction described under Section 5.4(c)(1) or
(2) hereof.
<PAGE>
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(D) ADJUSTMENT OF EXERCISE PRICE UPON ISSUANCE OF ADDITIONAL
SHARES OF STOCK. In the event the Company shall issue Additional Shares of
Stock (including Additional Shares of Stock deemed to be issued pursuant to
Section 5.4(c)) without consideration or for a consideration per share less than
the Exercise Price, then and in such event, such Exercise Price, shall be
reduced, concurrently with such issue, to a price (calculated to the nearest
cent) determined by multiplying the Exercise Price by a fraction:
(1) the numerator of which shall be (i) the number of
shares of Stock outstanding immediately prior to the issuance of such Additional
Shares of Stock (calculated on a fully diluted basis assuming the exercise or
conversion of all Options or Convertible Securities which are exercisable or
convertible at the time such calculation is being made), plus (ii) the number of
shares of Stock which the net aggregate consideration, if any, received by the
Company for the total number of such Additional Shares of Stock so issued would
purchase at the Exercise Price in effect immediately prior to such issuance, and
(2) the denominator of which shall be (i) the number of
shares of Stock outstanding immediately prior to the issuance of such Additional
Shares of Stock (calculated on a fully diluted basis assuming the exercise or
conversion of all Options or Convertible Securities which are exercisable or
convertible at the time such calculation is being made), plus (ii) the number of
such Additional Shares of Stock so issued.
(E) DETERMINATION OF CONSIDERATION. For purposes of this
Section 5.4, the consideration received by the Company for the issue of any
Additional Shares of Stock shall be computed as follows:
(1) CASH AND PROPERTY. Such consideration shall:
(I) insofar as it consists of cash, be computed at
the aggregate amount of cash received by the Company excluding amounts paid or
payable for accrued interest or accrued dividends;
(II) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
(III) in the event Additional Shares of Stock are
issued together with other shares or securities or other assets of the Company
for consideration which covers both, be the proportion of such consideration so
received, computed as provided in clauses (i) and (ii) above, as determined in
good faith by the Board of Directors.
(2) OPTIONS AND CONVERTIBLE SECURITIES. The consideration
per share received by the Company for Additional Shares of Stock deemed to have
been issued pursuant to Section 5.4(c)(1), relating to Options and Convertible
Securities, shall be determined by dividing:
<PAGE>
-8-
(I) the total amount, if any, received or receivable
by the Company as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Company upon the exercise of such Options or the conversion or exchange of
such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
(II) the maximum number of shares of Stock (as set
forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
5.5 MINIMAL ADJUSTMENTS. No adjustment in the Exercise Price subject
to this Warrant shall be made if such adjustment would result in a change in the
number of shares represented by this Warrant of less than one share (the
"Adjustment Threshold Amount"). Any adjustment not made because the Adjustment
Threshold Amount is not satisfied shall be carried forward and made, together
with any subsequent adjustments, at such time as (a) the aggregate amount of all
such adjustments is equal to at least the Adjustment Threshold Amount or (b) the
Warrant is exercised.
5.6 CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Exercise Price pursuant to this Section 5, the
Warrant shall, without any action on the part of the holder thereof, be adjusted
in accordance with this Section 5, and the Company promptly shall compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to the Holder a certificate setting forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based.
6. NOTICES OF RECORD DATE. Upon (a) any establishment by the Company of
a record date of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or right or option to acquire securities of the Company, or
any other right, or (b) any capital reorganization, reclassification,
recapitalization, merger or consolidation of the Company with or into any other
corporation, any transfer of all or substantially all the assets of the Company,
or any voluntary or involuntary dissolution, liquidation or winding up of the
Company, the Company shall mail to the Holder at least 10 days, or such longer
period as may be required by law, prior to the record date specified therein, a
notice specifying (i) the date established as the record date for the purpose of
such dividend, distribution, option or right and a description of such dividend,
distribution, option or right, (ii) the date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding up is expected to become effective and (iii) the date, if any, fixed as
to when the holders of record of Stock (or other securities at that time
receivable upon exercise of the Warrant) shall be entitled to exchange their
shares of Stock (or such other stock or securities) for securities or other
property deliverable upon such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up.
<PAGE>
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7. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or By-Laws or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all action as may be
necessary or appropriate in order to protect the rights of the Holder against
dilution, or other impairment.
8. FRACTIONAL SHARES. The Company shall not issue any fractional shares
nor scrip representing fractional shares upon exercise of any portion of this
Warrant.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS. This Warrant is issued and
delivered by the Company and accepted by each Holder on the basis of the
following representations, warranties and covenants made by the Company:
9.1 AUTHORITY. The Company has all necessary authority to issue,
execute and deliver this Warrant and to perform its obligations hereunder. This
Warrant has been duly authorized, issued, executed and delivered by the Company
and is the valid and binding obligation of the Company, enforceable in
accordance with its terms.
9.2 RESERVATION OF WARRANT SHARES. The Warrant Shares issuable upon
the exercise of this Warrant have been (and any securities issuable or
deliverable upon conversion of such Warrant Shares, upon issuance or delivery,
will be) duly authorized and reserved for issuance by the Company and, when
issued in accordance with the terms hereof, will be validly issued, fully paid
and nonassessable.
10. INVESTMENT REPRESENTATIONS.
10.1 PURCHASE FOR INVESTMENT. The Holder represents and warrants that
it is acquiring the Warrant, and upon exercise will hold the Warrant Shares,
solely for its account for investment and not with a view to or for sale or
distribution of said Warrant or Warrant Shares or any part thereof. The Holder
also represents that the entire legal and beneficial interests of the Warrant
and Warrant Shares the Holder is acquiring is being acquired for, and will be
held for, its account only.
10.2 SECURITIES NOT REGISTERED. The Holder understands that the
Warrant has not been registered under the Act on the basis that no distribution
or public offering of the stock of the Company is to be effected. The Holder
realizes that the basis for the exemption may not be present if, notwithstanding
its representations, it has in mind merely acquiring the securities for a fixed
or determinable period in the future, or for a market rise, or for sale if the
market does not rise. The Holder has no such intention.
10.3 SECURITIES TO BE HELD INDEFINITELY. The Holder recognizes that
the Warrant and Warrant Shares being acquired by it must be held indefinitely
unless they are
<PAGE>
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subsequently registered under the Act or an exemption from such registration is
available. The Holder recognizes that the Company has no obligation to register
the Warrant or to comply with any exemption from such registration.
10.4 RULE 144. The Holder is aware that neither the Warrant nor
Warrant Shares may be sold pursuant to Rule 144 adopted under the Act unless
certain conditions are met and until the Holder has held the Warrant Shares for
at least two years. Among the conditions for use of the Rule is the
availability of current information to the public about the Company.
10.5 ACCREDITED INVESTOR. The Holder represents and warrants that it
is a "accredited investor" (as such term is defined in Regulation D of the
Securities Act of 1933, as amended) and understands the risks associated with an
investment in the Company.
11. TRANSFER, EXCHANGE, ASSIGNMENT OR LOSS OF WARRANT.
11.1 RESTRICTIONS ON TRANSFER. This Warrant may be transferred, in
whole or in part, subject to the following restrictions. This Warrant and the
Warrant Shares or any other securities ("Other Securities") received upon
exercise of this Warrant shall be subject to restrictions on transferability
until registered under the Act, unless an exemption from registration is
available. Until this Warrant and the Warrant Shares or Other Securities are so
registered, this Warrant and any certificate for Warrant Shares or Other
Securities issued or issuable upon exercise of this Warrant shall contain a
legend on the face thereof, in form and substance satisfactory to counsel for
the Company, stating that this Warrant, the Warrant Shares or Other Securities
may not be sold, transferred or otherwise disposed of unless, in the opinion of
counsel (which counsel and which opinion shall be satisfactory to the Company),
the Warrant, the Warrant Shares or Other Securities may be transferred without
such registration.
11.2 PROCEDURE FOR TRANSFER. Any transfer permitted hereunder shall
be made by surrender of this Warrant to the Company at its principal office or
to the Transfer Agent at its offices with a duly executed request to transfer
the Warrant, which shall provide adequate information to effect such transfer
and shall be accompanied by funds sufficient to pay any transfer taxes
applicable. Upon satisfaction of all transfer conditions, the Company or
Transfer Agent shall, without charge, execute and deliver a new Warrant in the
name of the transferee named in such transfer request, and this Warrant promptly
shall be canceled.
11.3 LOST, STOLEN OR DESTROYED WARRANT. Upon receipt by the Company
of evidence satisfactory to it of loss, theft, destruction or mutilation of this
Warrant and, in the case of loss, theft or destruction, of reasonably
satisfactory indemnification, or, in the case of mutilation, upon surrender of
this Warrant, the Company will execute and deliver, or instruct the Transfer
Agent to execute and deliver, a new Warrant of like tenor and date, and any such
lost, stolen or destroyed Warrant thereupon shall become void.
11.4 WARRANT BINDING UPON ASSIGNEE OR SUCCESSOR. The terms and
conditions of this Warrant shall be binding upon any permitted assignee and
successor of the Holder. Any such successor or assignee shall be obligated to
and shall immediately execute an instrument
<PAGE>
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which provides that such party is bound under the terms of this Warrant. Any
transfer, assignment or other disposition without such execution by the proposed
transferee, assignee or successor shall be null and void.
12. ISSUE TAX. The issuance of certificates for shares of Stock upon the
exercise of this Warrant shall be made without charge to the Holder of the
Warrant for any issue tax (other than applicable income taxes) in respect
thereof; provided, however, that the Company shall not be required to pay any
tax that may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the then Holder of the
Warrant being exercised.
13. AMENDMENT. The terms of this Warrant may be amended, modified or
waived only with the written consent of the parties hereto.
14. GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York, as such laws are applied to
contracts entered into and wholly to be performed within the State of New York
and without giving effect to any principles of conflicts or choice of law that
would result in the application of the laws of any other jurisdiction.
IN WITNESS WHEREOF, the Company and Holder have executed this Warrant as of
October 25, 1996.
HOLDER GREENTREE SOFTWARE, INC.
By: By:
---------------------- ------------------------
Brad I. Markowitz
Chairman
<PAGE>
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SUBSCRIPTION
To: Date:
---------------------- -------------------------
The undersigned hereby subscribes for __________________ shares of Stock
covered by this Warrant. The certificate(s) for such shares shall be issued in
the name of the undersigned or as otherwise indicated below:
------------------------------
Signature
------------------------------
Name for Registration
------------------------------
Mailing Address
<PAGE>
-13-
NET ISSUE EXERCISE ELECTION NOTICE
To: Date:
---------------------- -------------------------
The undersigned hereby elects under Section 4 to surrender the right to
purchase _____________ shares of Stock pursuant to this Warrant. The
certificate(s) for the shares issuable upon such net issue exercise election
shall be issued in the name of the undersigned or as otherwise indicated below.
------------------------------
Signature
------------------------------
Name for Registration
------------------------------
Mailing Address
<PAGE>
-14-
ASSIGNMENT
For value received __________________________________________ hereby sells,
assigns and transfers unto ___
________
[Please print or typewrite name and address of Assignee]
________
the within Warrant, and does hereby irrevocably constitute and appoint
__________________________________________ its attorney to transfer the within
Warrant on the books of the within named Company with full power of substitution
on the premises.
Dated:
------------------------
------------------------------
In the Presence of:
- ------------------------------
<PAGE>
Exhibit 10(bb)
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, MORTGAGED, PLEDGED HYPOTHECATED OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL ACCEPTABLE TO
GREENTREE SOFTWARE, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
October 25, 1996
GREENTREE SOFTWARE, INC.
COMMON SHARES PURCHASE WARRANT
Void after October 25, 2001
This Warrant (the "Warrant") entitles Wm Smith Securities, Incorporated
(the "Holder"), for value received, to purchase from GREENTREE SOFTWARE, INC., a
New York corporation (the "Company"), at any time during the period starting
from February 25, 1997 (the "Commencement Date"), to 5:00 p.m., New York time,
on October 25, 2001 (the "Expiration Date"), at which time this Warrant shall
expire and become void, Three Hundred Sixty Thousand (360,000) shares of the
Company's common shares, $0.04 par value per share (the "Stock"), subject to
adjustment as set forth herein (the "Warrant Shares"), for a price per share of
$0.30, subject to adjustment as set forth herein (the "Exercise Price"). This
Warrant also is subject to the following terms and conditions:
1. EXERCISE OF WARRANT. Subject to the terms and conditions hereof, this
Warrant may be exercised in whole or in part at any time from and after the
Commencement Date and before the Expiration Date. Exercise shall be by
presentation and surrender to the Company at its principal office of this
Warrant and the subscription form annexed hereto, executed by the Holder,
together with payment to the Company in accordance with Section 2 or 3 hereof in
an amount equal to the product of the Exercise Price multiplied by the number of
Warrant Shares being purchased upon such exercise. It shall be a condition
precedent to the exercise of this Warrant, in whole or in part, that the Holder
shall deliver to the Company a certificate certifying that the representations
set forth in Section 9 hereof are true and correct as of the date of such
exercise. If this Warrant is exercised in part only, the Company shall, as soon
as practicable after presentation of this Warrant upon such exercise, execute
and deliver a new Warrant, dated the date hereof, evidencing the right of the
Holder to purchase the balance of the Warrant Shares purchasable hereunder upon
the same terms and conditions herein set forth. Upon and as of receipt by the
Company of such properly
<PAGE>
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completed and duly executed purchase form accompanied by payment as herein
provided, the Holder shall be deemed to be the Holder of record of the Warrant
Shares issuable upon such exercise, notwithstanding that the stock transfer
books of the Company shall then be closed or that certificates representing such
Warrant Shares shall not then actually be delivered to the Holder.
2. PAYMENT OF EXERCISE PRICE. The Exercise Price for the Warrant Shares
being purchased may be paid (i) in cash or by check, (ii) by the surrender by
the Holder to the Company of any promissory notes or other obligations issued by
the Company, with all such notes and obligations so surrendered being credited
against the Exercise Price for the Warrant Shares in an amount equal to the
principal amount thereof plus accrued interest to the date of surrender, or
(iii) by any combination of the foregoing.
3. NET ISSUE EXERCISE. Notwithstanding any provision herein to the
contrary, in lieu of exercising this Warrant for cash or cancellation of
indebtedness, the Holder may elect by the surrender of this Warrant, or a
portion of this Warrant, to the Company at the principal office of the Company,
with the net issue exercise notice annexed hereto duly executed, to receive,
without the payment by the Holder of any additional consideration, such number
of fully paid and nonassessable Warrant Shares as is computed using the
following formula:
X = Y(A-B)
------
A
where: X = the number of Warrant Shares to be issued to the Holder
pursuant to this Section 3.
Y = the number of shares of Stock covered by this Warrant
or, if only a portion of the Warrant is being exercised, the
number of shares of Stock for which the Warrant is then being
exercised pursuant to the net issue exercise election made
pursuant to this Section 3 (at the date of such calculation).
A = the fair market value of one share of Stock (at the date of such
calculation).
B = the Exercise Price in effect under this Warrant at the
time the net issue exercise election is made pursuant to this
Section 3.
For the purposes of this Section 3, the fair market value of one share of Stock
as of a particular date (the "Determination Date") shall be determined by the
Company's Board of Directors in good faith; provided, however, that (i) if, as
of the Determination Date, there has been a public market for the Stock for at
least 11 trading days, the fair market value per share shall be the average of
the closing prices (or bid prices if there are no such closing
<PAGE>
-3-
prices) of the Stock quoted in the over-the-counter market summary or the
closing price quoted on the Nasdaq National Market or on the primary national
securities exchange on which the Stock is then listed, whichever is
applicable, as published in the New York City Edition of the Wall Street
Journal (or, if not so reported, as otherwise reported by the Nasdaq National
Market) for the 10 trading days prior to the Determination Date; and (ii) if
the Determination Date is the date on which the Stock is first sold by the
Company in a firm commitment public offering under the Securities Act of
1933, as amended (the "Act"), or if there has been a public market for the
Stock for fewer than 11 trading days, the fair market value shall be the
initial public offering price (before deducting commissions, discounts or
expenses).
4. ADJUSTMENT OF EXERCISE PRICE. The Exercise Price shall be subject to
adjustment from time to time upon the happening of certain events as follows:
4.1. SUBDIVISION OR COMBINATION OF STOCK. If at any time or from time
to time after the Commencement Date, the Company shall subdivide its outstanding
shares of Stock, the Exercise Price in effect immediately prior to such
subdivision shall be reduced proportionately and the number of Warrant Shares
(calculated to the nearest whole share) shall be increased proportionately, and
conversely, in the event the outstanding shares of Stock shall be combined into
a smaller number of shares, the Exercise Price in effect immediately prior to
such combination shall be increased proportionately and the number of Warrant
Shares (calculated to the nearest whole share) shall be decreased
proportionately.
4.2 ADJUSTMENT FOR STOCK DIVIDENDS. If at any time after the
Commencement Date the Company shall declare a dividend or make any other
distribution upon any class or series of stock of the Company payable in shares
of Stock or securities convertible into shares of Stock, the Exercise Price and
the number of shares to be obtained upon exercise of this Warrant shall be
adjusted proportionately to reflect the issuance of any shares of Stock or
convertible securities, as the case may be, issuable in payment of such dividend
or distribution.
4.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
In the event of any reorganization of the capital stock of the Company, a
consolidation or merger of the Company with another corporation (other than a
merger in which the Company is the surviving corporation), the sale of all or
substantially all of the Company's assets or any transaction involving the
transfer of a majority of the voting power over the capital stock of the Company
effected in a manner such that holders of Stock shall be entitled to receive
stock, securities, or other assets or property, in each case, at any time after
the Commencement Date, then, as a condition of such reorganization,
reclassification, consolidation, merger, sale or transaction, lawful and
adequate provision shall be made whereby the Holder hereof shall have the right
to purchase and receive (in lieu of the shares of the Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby) such shares of stock, securities or other assets or
property as may be issued or payable with respect to or in exchange for a number
of outstanding shares of such Stock equal to the number of shares of such Stock
immediately
<PAGE>
-4-
theretofore purchasable and receivable upon the exercise of the rights
represented hereby. In any such reorganization, consolidation, merger, sale or
transaction, including successive events of such nature, appropriate provision
shall be made with respect to the rights and interests of the Holder such that
the provisions hereof (including, without limitation, provisions for adjustments
of the Exercise Price and of the number of shares purchasable and receivable
upon the exercise of this Warrant) thereafter shall be applicable, as nearly
practicable, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise hereof.
4.4 ISSUANCE OF ADDITIONAL SHARES. The Exercise Price shall be
subject to adjustment upon the issuance of Stock or Convertible Securities so
long as any Warrant is then issued and outstanding.
(a) SPECIAL DEFINITIONS. For purposes of this Section 4.4, the
following definitions shall apply:
(1) "Option" shall mean contractual rights, options or
warrants to subscribe for, purchase or otherwise acquire either Stock or
Convertible Securities.
(2) "Convertible Securities" shall mean any evidences of
indebtedness, shares (other than Stock and Options) or other securities directly
or indirectly convertible into or exchangeable for Stock.
(3) "Additional Shares of Stock" shall mean all shares of
Stock issued (or, pursuant to Section 4.4(c), deemed to be issued) by the
Company after the Commencement Date, other than shares of Stock issued or
issuable:
(i) pursuant to Options or Convertible Securities
outstanding on the Commencement Date;
(ii) to directors, officers or employees of, or
consultants to, the Corporation pursuant to a stock grant or option plan or
other employee stock incentive program (collectively, the "Plans") approved by
the Board of Directors, subject to adjustment for all subdivisions and
combinations;
(iii) as a dividend or distribution on the Warrant or
any event for which adjustment is made pursuant to Section 4 hereof; or
(iv) by way of dividend or other distribution on
shares excluded from the definition of Additional Shares of Stock by the
foregoing clauses (i), (ii) or (iii) or this clause (iv) or on shares of Stock
so excluded.
(b) NO ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
Exercise Price shall be made in respect of the issuance of Additional Shares of
Stock unless the
<PAGE>
-5-
consideration per share for an Additional Share of Stock issued or deemed to be
issued by the Company is less than the Exercise Price in effect on the date of,
and immediately prior to, the issue of such Additional Shares of Stock.
(c) ISSUANCE OF SECURITIES DEEMED TO BE AN ISSUANCE OF
ADDITIONAL SHARES OF STOCK.
(1) OPTIONS AND CONVERTIBLE SECURITIES. In the event the
Company at any time or from time to time after the Commencement Date shall issue
any Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Stock issuable
upon the exercise of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible Securities,
shall be deemed to be Additional Shares of Stock issued as of the time of such
issue or, in case such a record date shall have been fixed, as of the close of
business on such record date, provided that in any such case in which Additional
Shares of Stock are deemed to be issued:
(i) no further adjustment in the Exercise Price shall
be made upon the subsequent issue of Convertible Securities or shares of Stock
upon the exercise of such Options or conversion or exchange of such Convertible
Securities;
(ii) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Company or in the number of shares
of Stock issuable upon the exercise, conversion or exchange thereof, the
applicable Exercise Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange under such
Convertible Securities.
(2) Upon the expiration of any such Options or any rights
of conversion or exchange under such Convertible Securities which shall not have
been exercised, the Exercise Price computed upon the original issue thereof (or
upon the occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration, be recomputed as if:
(i) in the case of Convertible Securities or Options
for Stock, the only Additional Shares of Stock issued were the shares of Stock,
if any, actually issued upon the exercise of such Options or conversion or
exchange of such Convertible Securities and the consideration received therefor
was the consideration actually received by the Company for the issue of all such
Options, whether or not exercised, plus the consideration actually received by
the Company upon such exercise, or for the issue of all such Convertible
Securities which were actually converted or exchanged, plus the
<PAGE>
-6-
additional consideration, if any, actually received by the Company upon such
conversion or exchange, and
(ii) in the case of Options for Convertible Securities,
only the Convertible Securities, if any, actually issued upon the exercise
thereof were issued at the time of issue of such Options, and the consideration
received by the Company for the Additional Shares of Stock actually deemed to
have been then issued was the consideration actually received by the Company for
the issue of all such Options, whether or not exercised, plus the consideration
actually received by the Company upon the issue of the Convertible Securities
with respect to which such Options were actually exercised.
(3) No readjustment pursuant to clause (2) above shall have
the effect of increasing the Exercise Price to an amount which exceeds the lower
of (x) such Exercise Price on the original adjustment date, or (y) such Exercise
Price that would have resulted from any issuance of Additional Shares of Stock
between the original adjustment date and such readjustment date.
(4) In the case of any Options which expire by their terms
not more than 30 days after the date of issue thereof, no adjustment of the
Exercise Price shall be made until the expiration or exercise of all such
Options; provided, however, that this clause (4) shall not apply to Options that
are issued within 30 days of a transaction described under Section 4.4(c)(1) or
(2) hereof.
(d) ADJUSTMENT OF EXERCISE PRICE UPON ISSUANCE OF ADDITIONAL
SHARES OF STOCK. In the event the Company shall issue Additional Shares of
Stock (including Additional Shares of Stock deemed to be issued pursuant to
Section 4.4(c)) without consideration or for a consideration per share less than
the Exercise Price, then and in such event, such Exercise Price, shall be
reduced, concurrently with such issue, to a price (calculated to the nearest
cent) determined by multiplying the Exercise Price by a fraction:
(1) the numerator of which shall be (i) the number of
shares of Stock outstanding immediately prior to the issuance of such Additional
Shares of Stock (calculated on a fully diluted basis assuming the exercise or
conversion of all Options or Convertible Securities which are exercisable or
convertible at the time such calculation is being made), plus (ii) the number of
shares of Stock which the net aggregate consideration, if any, received by the
Company for the total number of such Additional Shares of Stock so issued would
purchase at the Exercise Price in effect immediately prior to such issuance, and
(2) the denominator of which shall be (i) the number of
shares of Stock outstanding immediately prior to the issuance of such Additional
Shares of Stock (calculated on a fully diluted basis assuming the exercise or
conversion of all Options or Convertible Securities which are exercisable or
convertible at the time such calculation is being made), plus (ii) the number of
such Additional Shares of Stock so issued.
<PAGE>
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(e) DETERMINATION OF CONSIDERATION. For purposes of this
Section 4.4, the consideration received by the Company for the issue of any
Additional Shares of Stock shall be computed as follows:
(1) CASH AND PROPERTY. Such consideration shall:
(i) insofar as it consists of cash, be computed at
the aggregate amount of cash received by the Company excluding amounts paid or
payable for accrued interest or accrued dividends;
(ii) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
(iii) in the event Additional Shares of Stock are
issued together with other shares or securities or other assets of the Company
for consideration which covers both, be the proportion of such consideration so
received, computed as provided in clauses (i) and (ii) above, as determined in
good faith by the Board of Directors.
(2) OPTIONS AND CONVERTIBLE SECURITIES. The consideration
per share received by the Company for Additional Shares of Stock deemed to have
been issued pursuant to Section 4.4(c)(1), relating to Options and Convertible
Securities, shall be determined by dividing:
(i) the total amount, if any, received or receivable
by the Company as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Company upon the exercise of such Options or the conversion or exchange of
such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
(ii) the maximum number of shares of Stock (as set
forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
4.5 MINIMAL ADJUSTMENTS. No adjustment in the Exercise Price subject
to this Warrant shall be made if such adjustment would result in a change in the
number of shares represented by this Warrant of less than one share (the
"Adjustment Threshold Amount"). Any adjustment not made because the Adjustment
Threshold Amount is not satisfied shall be carried forward and made, together
with any subsequent adjustments, at such time as (a) the aggregate amount of all
such adjustments is equal to at least the Adjustment Threshold Amount or (b) the
Warrant is exercised.
<PAGE>
-8-
4.6 CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Exercise Price pursuant to this Section 4, the
Warrant shall, without any action on the part of the holder thereof, be adjusted
in accordance with this Section 4, and the Company promptly shall compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to the Holder a certificate setting forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based.
5. NOTICES OF RECORD DATE. Upon (a) any establishment by the Company of
a record date of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or right or option to acquire securities of the Company, or
any other right, or (b) any capital reorganization, reclassification,
recapitalization, merger or consolidation of the Company with or into any other
corporation, any transfer of all or substantially all the assets of the Company,
or any voluntary or involuntary dissolution, liquidation or winding up of the
Company, the Company shall mail to the Holder at least 10 days, or such longer
period as may be required by law, prior to the record date specified therein, a
notice specifying (i) the date established as the record date for the purpose of
such dividend, distribution, option or right and a description of such dividend,
distribution, option or right, (ii) the date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding up is expected to become effective and (iii) the date, if any, fixed as
to when the holders of record of Stock (or other securities at that time
receivable upon exercise of the Warrant) shall be entitled to exchange their
shares of Stock (or such other stock or securities) for securities or other
property deliverable upon such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up.
6. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or By-Laws or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all action as may be
necessary or appropriate in order to protect the rights of the Holder against
dilution, or other impairment.
7. FRACTIONAL SHARES. The Company shall not issue any fractional shares
nor scrip representing fractional shares upon exercise of any portion of this
Warrant.
8. REPRESENTATIONS, WARRANTIES AND COVENANTS. This Warrant is issued and
delivered by the Company and accepted by each Holder on the basis of the
following representations, warranties and covenants made by the Company:
8.1 AUTHORITY. The Company has all necessary authority to issue,
execute and deliver this Warrant and to perform its obligations hereunder. This
Warrant has been
<PAGE>
-9-
duly authorized, issued, executed and delivered by the Company and is the valid
and binding obligation of the Company, enforceable in accordance with its terms.
8.2 RESERVATION OF WARRANT SHARES. The Warrant Shares issuable upon
the exercise of this Warrant have been (and any securities issuable or
deliverable upon conversion of such Warrant Shares, upon issuance or delivery,
will be) duly authorized and reserved for issuance by the Company and, when
issued in accordance with the terms hereof, will be validly issued, fully paid
and nonassessable.
9. INVESTMENT REPRESENTATIONS.
9.1 PURCHASE FOR INVESTMENT. The Holder represents and warrants that
it is acquiring the Warrant, and upon exercise will hold the Warrant Shares,
solely for its account for investment and not with a view to or for sale or
distribution of said Warrant or Warrant Shares or any part thereof. The Holder
also represents that the entire legal and beneficial interests of the Warrant
and Warrant Shares the Holder is acquiring is being acquired for, and will be
held for, its account only.
9.2 SECURITIES NOT REGISTERED. The Holder understands that the
Warrant has not been registered under the Act on the basis that no distribution
or public offering of the stock of the Company is to be effected. The Holder
realizes that the basis for the exemption may not be present if, notwithstanding
its representations, it has in mind merely acquiring the securities for a fixed
or determinable period in the future, or for a market rise, or for sale if the
market does not rise. The Holder has no such intention.
9.3 SECURITIES TO BE HELD INDEFINITELY. The Holder recognizes that
the Warrant and Warrant Shares being acquired by it must be held indefinitely
unless they are subsequently registered under the Act or an exemption from such
registration is available. The Holder recognizes that the Company has no
obligation to register the Warrant or to comply with any exemption from such
registration.
9.4 RULE 144. The Holder is aware that neither the Warrant nor
Warrant Shares may be sold pursuant to Rule 144 adopted under the Act unless
certain conditions are met and until the Holder has held the Warrant Shares for
at least two years. Among the conditions for use of the Rule is the
availability of current information to the public about the Company.
9.5 ACCREDITED INVESTOR. The Holder represents and warrants that it
is a "accredited investor" (as such term is defined in Regulation D of the
Securities Act of 1933, as amended) and understands the risks associated with an
investment in the Company.
10. TRANSFER, EXCHANGE, ASSIGNMENT OR LOSS OF WARRANT.
10.1 RESTRICTIONS ON TRANSFER. This Warrant may be transferred, in
whole or in part, subject to the following restrictions. This Warrant and the
Warrant Shares or any
<PAGE>
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other securities ("Other Securities") received upon exercise of this Warrant
shall be subject to restrictions on transferability until registered under the
Act, unless an exemption from registration is available. Until this Warrant and
the Warrant Shares or Other Securities are so registered, this Warrant and any
certificate for Warrant Shares or Other Securities issued or issuable upon
exercise of this Warrant shall contain a legend on the face thereof, in form and
substance satisfactory to counsel for the Company, stating that this Warrant,
the Warrant Shares or Other Securities may not be sold, transferred or otherwise
disposed of unless, in the opinion of counsel (which counsel and which opinion
shall be satisfactory to the Company), the Warrant, the Warrant Shares or Other
Securities may be transferred without such registration.
10.2 PROCEDURE FOR TRANSFER. Any transfer permitted hereunder shall
be made by surrender of this Warrant to the Company at its principal office or
to the Transfer Agent at its offices with a duly executed request to transfer
the Warrant, which shall provide adequate information to effect such transfer
and shall be accompanied by funds sufficient to pay any transfer taxes
applicable. Upon satisfaction of all transfer conditions, the Company or
Transfer Agent shall, without charge, execute and deliver a new Warrant in the
name of the transferee named in such transfer request, and this Warrant promptly
shall be canceled.
10.3 LOST, STOLEN OR DESTROYED WARRANT. Upon receipt by the Company
of evidence satisfactory to it of loss, theft, destruction or mutilation of this
Warrant and, in the case of loss, theft or destruction, of reasonably
satisfactory indemnification, or, in the case of mutilation, upon surrender of
this Warrant, the Company will execute and deliver, or instruct the Transfer
Agent to execute and deliver, a new Warrant of like tenor and date, and any such
lost, stolen or destroyed Warrant thereupon shall become void.
10.4 WARRANT BINDING UPON ASSIGNEE OR SUCCESSOR. The terms and
conditions of this Warrant shall be binding upon any permitted assignee and
successor of the Holder. Any such successor or assignee shall be obligated to
and shall immediately execute an instrument which provides that such party is
bound under the terms of this Warrant. Any transfer, assignment or other
disposition without such execution by the proposed transferee, assignee or
successor shall be null and void.
11. ISSUE TAX. The issuance of certificates for shares of Stock upon the
exercise of this Warrant shall be made without charge to the Holder of the
Warrant for any issue tax (other than applicable income taxes) in respect
thereof; provided, however, that the Company shall not be required to pay any
tax that may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the then Holder of the
Warrant being exercised.
12. AMENDMENT. The terms of this Warrant may be amended, modified or
waived only with the written consent of the parties hereto.
13. GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York, as such laws are applied to
contracts
<PAGE>
-11-
entered into and wholly to be performed within the State of New York and without
giving effect to any principles of conflicts or choice of law that would result
in the application of the laws of any other jurisdiction.
IN WITNESS WHEREOF, the Company and Holder have executed this Warrant as of
October 25, 1996.
HOLDER GREENTREE SOFTWARE, INC.
By: By:
---------------------- ---------------------------
Brad I. Markowitz
Chairman
<PAGE>
-12-
SUBSCRIPTION
To: Date:
------------------------- ----------------------
The undersigned hereby subscribes for __________________ shares of Stock
covered by this Warrant. The certificate(s) for such shares shall be issued in
the name of the undersigned or as otherwise indicated below:
---------------------------
Signature
---------------------------
Name for Registration
---------------------------
Mailing Address
<PAGE>
-13-
NET ISSUE EXERCISE ELECTION NOTICE
To: Date:
------------------------- ----------------------
The undersigned hereby elects under Section 3 to surrender the right to
purchase _____________ shares of Stock pursuant to this Warrant. The
certificate(s) for the shares issuable upon such net issue exercise election
shall be issued in the name of the undersigned or as otherwise indicated below.
---------------------------
Signature
---------------------------
Name for Registration
---------------------------
Mailing Address
<PAGE>
-14-
ASSIGNMENT
For value received __________________________________________ hereby sells,
assigns and transfers unto____________________________________________
________________________________________________________________________________
[Please print or typewrite name and address of Assignee]
________________________________________________________________________________
the within Warrant, and does hereby irrevocably constitute and appoint
__________________________________________ its attorney to transfer the within
Warrant on the books of the within named Company with full power of substitution
on the premises.
Dated:
------------------------
-----------------------------------
In the Presence of:
- -------------------------------
<PAGE>
Exhibit 10 (cc)
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, MORTGAGED, PLEDGED HYPOTHECATED OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL ACCEPTABLE TO
GREENTREE SOFTWARE, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
October 25, 1996
GREENTREE SOFTWARE, INC.
COMMON SHARES PURCHASE WARRANT
Void after October 25, 2001
This Warrant (the "Warrant") entitles Wm Smith Securities, Incorporated
(the "Holder"), for value received, to purchase from GREENTREE SOFTWARE, INC., a
New York corporation (the "Company"), at any time during the period starting
from February 25, 1997 (the "Commencement Date"), to 5:00 p.m., New York time,
on October 25, 2001 (the "Expiration Date"), at which time this Warrant shall
expire and become void, One Hundred Eighty Thousand (180,000) shares of the
Company's common shares, $0.04 par value per share (the "Stock"), subject to
adjustment as set forth herein (the "Warrant Shares"). The 120 day period from
the date hereof to the Commencement Date is referred to herein as the Interim
Period. This Warrant shall be exercisable at 120% of the price per share as
determined in Section 1 hereof, subject to adjustment as set forth herein (the
"Exercise Price"). This Warrant also is subject to the following terms and
conditions:
1. WARRANT EXERCISE PRICE.
1.1 EXERCISE PRICE DETERMINATION. The initial Exercise Price shall
be determined as follows:
(a) In the event that the Company's revenues during the Interim
Period are less than $400,000, the Exercise Price shall be $0.40 per
share;
(b) In the event that the Company's revenues during the Interim
Period are $400,000 or greater but less than $500,000, the Exercise
Price per
<PAGE>
-2-
share shall be equal to 100% of the Current Market Price (as defined
in Section 1.2 below);
(c) In the event that the Company's revenues during the Interim
Period are $500,000 or greater but less than $600,000, the Exercise
Price per share shall be equal to 115% of the Current Market Price;
and
(d) In the event that the Company's revenues during the Interim
Period are $600,000 or greater, the Exercise Price per share shall be
equal to 130% of the Current Market Price.
1.2 CURRENT MARKET PRICE. The term "Current Market Price" shall mean
the average of the closing bid prices for the Company's Stock for the
twenty (20) trading days immediately prior to and ending on the
Commencement Date.
2. EXERCISE OF WARRANT. Subject to the terms and conditions hereof, this
Warrant may be exercised in whole or in part at any time from and after the
Commencement Date and before the Expiration Date. Exercise shall be by
presentation and surrender to the Company at its principal office of this
Warrant and the subscription form annexed hereto, executed by the Holder,
together with payment to the Company in accordance with Section 3 or 4 hereof in
an amount equal to the product of the Exercise Price multiplied by the number of
Warrant Shares being purchased upon such exercise. It shall be a condition
precedent to the exercise of this Warrant, in whole or in part, that the Holder
shall deliver to the Company a certificate certifying that the representations
set forth in Section 10 hereof are true and correct as of the date of such
exercise. If this Warrant is exercised in part only, the Company shall, as soon
as practicable after presentation of this Warrant upon such exercise, execute
and deliver a new Warrant, dated the date hereof, evidencing the right of the
Holder to purchase the balance of the Warrant Shares purchasable hereunder upon
the same terms and conditions herein set forth. Upon and as of receipt by the
Company of such properly completed and duly executed purchase form accompanied
by payment as herein provided, the Holder shall be deemed to be the Holder of
record of the Warrant Shares issuable upon such exercise, notwithstanding that
the stock transfer books of the Company shall then be closed or that
certificates representing such Warrant Shares shall not then actually be
delivered to the Holder.
3. PAYMENT OF EXERCISE PRICE. The Exercise Price for the Warrant Shares
being purchased may be paid (i) in cash or by check, (ii) by the surrender by
the Holder to the Company of any promissory notes or other obligations issued by
the Company, with all such notes and obligations so surrendered being credited
against the Exercise Price for the Warrant Shares in an amount equal to the
principal amount thereof plus accrued interest to the date of surrender, or
(iii) by any combination of the foregoing.
4. NET ISSUE EXERCISE. Notwithstanding any provision herein to the
contrary, in lieu of exercising this Warrant for cash or cancellation of
indebtedness, the Holder may elect by the surrender of this Warrant, or a
portion of this Warrant, to the Company at the
<PAGE>
-3-
principal office of the Company, with the net issue exercise notice annexed
hereto duly executed, to receive, without the payment by the Holder of any
additional consideration, such number of fully paid and nonassessable Warrant
Shares as is computed using the following formula:
X = Y(A-B)
------
A
where: X = the number of Warrant Shares to be issued to the Holder
pursuant to this Section 4.
Y = the number of shares of Stock covered by this Warrant
or, if only a portion of the Warrant is being exercised, the
number of shares of Stock for which the Warrant is then being
exercised pursuant to the net issue exercise election made
pursuant to this Section 4 (at the date of such calculation).
A = the fair market value of one share of Stock (at the date of such
calculation).
B = the Exercise Price in effect under this Warrant at the
time the net issue exercise election is made pursuant to this
Section 4.
For the purposes of this Section 4, the fair market value of one share of Stock
as of a particular date (the "Determination Date") shall be determined by the
Company's Board of Directors in good faith; provided, however, that (i) if, as
of the Determination Date, there has been a public market for the Stock for at
least 11 trading days, the fair market value per share shall be the average of
the closing prices (or bid prices if there are no such closing prices) of the
Stock quoted in the over-the-counter market summary or the closing price quoted
on the Nasdaq National Market or on the primary national securities exchange on
which the Stock is then listed, whichever is applicable, as published in the New
York City Edition of the Wall Street Journal (or, if not so reported, as
otherwise reported by the Nasdaq National Market) for the 10 trading days prior
to the Determination Date; and (ii) if the Determination Date is the date on
which the Stock is first sold by the Company in a firm commitment public
offering under the Securities Act of 1933, as amended (the "Act"), or if there
has been a public market for the Stock for fewer than 11 trading days, the fair
market value shall be the initial public offering price (before deducting
commissions, discounts or expenses).
5. ADJUSTMENT OF EXERCISE PRICE. The Exercise Price shall be subject to
adjustment from time to time upon the happening of certain events as follows:
5.1. SUBDIVISION OR COMBINATION OF STOCK. If at any time or from time
to time after the Commencement Date, the Company shall subdivide its outstanding
shares of
<PAGE>
-4-
Stock, the Exercise Price in effect immediately prior to such subdivision shall
be reduced proportionately and the number of Warrant Shares (calculated to the
nearest whole share) shall be increased proportionately, and conversely, in the
event the outstanding shares of Stock shall be combined into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination shall
be increased proportionately and the number of Warrant Shares (calculated to the
nearest whole share) shall be decreased proportionately.
5.2 ADJUSTMENT FOR STOCK DIVIDENDS. If at any time after the
Commencement Date the Company shall declare a dividend or make any other
distribution upon any class or series of stock of the Company payable in shares
of Stock or securities convertible into shares of Stock, the Exercise Price and
the number of shares to be obtained upon exercise of this Warrant shall be
adjusted proportionately to reflect the issuance of any shares of Stock or
convertible securities, as the case may be, issuable in payment of such dividend
or distribution.
5.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
In the event of any reorganization of the capital stock of the Company, a
consolidation or merger of the Company with another corporation (other than a
merger in which the Company is the surviving corporation), the sale of all or
substantially all of the Company's assets or any transaction involving the
transfer of a majority of the voting power over the capital stock of the Company
effected in a manner such that holders of Stock shall be entitled to receive
stock, securities, or other assets or property, in each case, at any time after
the Commencement Date, then, as a condition of such reorganization,
reclassification, consolidation, merger, sale or transaction, lawful and
adequate provision shall be made whereby the Holder hereof shall have the right
to purchase and receive (in lieu of the shares of the Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby) such shares of stock, securities or other assets or
property as may be issued or payable with respect to or in exchange for a number
of outstanding shares of such Stock equal to the number of shares of such Stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby. In any such reorganization, consolidation, merger,
sale or transaction, including successive events of such nature, appropriate
provision shall be made with respect to the rights and interests of the Holder
such that the provisions hereof (including, without limitation, provisions for
adjustments of the Exercise Price and of the number of shares purchasable and
receivable upon the exercise of this Warrant) thereafter shall be applicable, as
nearly practicable, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof.
5.4 ISSUANCE OF ADDITIONAL SHARES. The Exercise Price shall be
subject to adjustment upon the issuance of Stock or Convertible Securities so
long as any Warrant is then issued and outstanding.
(a) SPECIAL DEFINITIONS. For purposes of this Section 5.4, the
following definitions shall apply:
<PAGE>
-5-
(1) "Option" shall mean contractual rights, options or
warrants to subscribe for, purchase or otherwise acquire either Stock or
Convertible Securities.
(2) "Convertible Securities" shall mean any evidences of
indebtedness, shares (other than Stock and Options) or other securities directly
or indirectly convertible into or exchangeable for Stock.
(3) "Additional Shares of Stock" shall mean all shares of
Stock issued (or, pursuant to Section 5.4(c), deemed to be issued) by the
Company after the Commencement Date, other than shares of Stock issued or
issuable:
(i) pursuant to Options or Convertible Securities
outstanding on the Commencement Date;
(ii) to directors, officers or employees of, or
consultants to, the Corporation pursuant to a stock grant or option plan or
other employee stock incentive program (collectively, the "Plans") approved by
the Board of Directors, subject to adjustment for all subdivisions and
combinations;
(iii) as a dividend or distribution on the Warrant or
any event for which adjustment is made pursuant to Section 5 hereof; or
(iv) by way of dividend or other distribution on
shares excluded from the definition of Additional Shares of Stock by the
foregoing clauses (i), (ii) or (iii) or this clause (iv) or on shares of Stock
so excluded.
(b) NO ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
Exercise Price shall be made in respect of the issuance of Additional Shares of
Stock unless the consideration per share for an Additional Share of Stock issued
or deemed to be issued by the Company is less than the Exercise Price in effect
on the date of, and immediately prior to, the issue of such Additional Shares of
Stock.
(c) ISSUANCE OF SECURITIES DEEMED TO BE AN ISSUANCE OF
ADDITIONAL SHARES OF STOCK.
(1) OPTIONS AND CONVERTIBLE SECURITIES. In the event the
Company at any time or from time to time after the Commencement Date shall issue
any Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Stock issuable
upon the exercise of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible Securities,
shall be deemed to be Additional Shares of Stock issued as of the time of such
issue or, in case such
<PAGE>
-6-
a record date shall have been fixed, as of the close of business on such record
date, provided that in any such case in which Additional Shares of Stock are
deemed to be issued:
(i) no further adjustment in the Exercise Price shall
be made upon the subsequent issue of Convertible Securities or shares of Stock
upon the exercise of such Options or conversion or exchange of such Convertible
Securities;
(ii) if such Options or Convertible Securities
by their terms provide, with the passage of time or otherwise, for any increase
or decrease in the consideration payable to the Company or in the number of
shares of Stock issuable upon the exercise, conversion or exchange thereof, the
applicable Exercise Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange under such
Convertible Securities.
(2) Upon the expiration of any such Options or any rights
of conversion or exchange under such Convertible Securities which shall not have
been exercised, the Exercise Price computed upon the original issue thereof (or
upon the occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration, be recomputed as if:
(i) in the case of Convertible Securities or Options
for Stock, the only Additional Shares of Stock issued were the shares of Stock,
if any, actually issued upon the exercise of such Options or conversion or
exchange of such Convertible Securities and the consideration received therefor
was the consideration actually received by the Company for the issue of all such
Options, whether or not exercised, plus the consideration actually received by
the Company upon such exercise, or for the issue of all such Convertible
Securities which were actually converted or exchanged, plus the additional
consideration, if any, actually received by the Company upon such conversion or
exchange, and
(ii) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such Options, and the
consideration received by the Company for the Additional Shares of Stock
actually deemed to have been then issued was the consideration actually received
by the Company for the issue of all such Options, whether or not exercised, plus
the consideration actually received by the Company upon the issue of the
Convertible Securities with respect to which such Options were actually
exercised.
(3) No readjustment pursuant to clause (2) above shall have
the effect of increasing the Exercise Price to an amount which exceeds the lower
of (x) such Exercise Price on the original adjustment date, or (y) such Exercise
Price that would have resulted from any issuance of Additional Shares of Stock
between the original adjustment date and such readjustment date.
<PAGE>
-7-
(4) In the case of any Options which expire by their terms
not more than 30 days after the date of issue thereof, no adjustment of the
Exercise Price shall be made until the expiration or exercise of all such
Options; provided, however, that this clause (4) shall not apply to Options that
are issued within 30 days of a transaction described under Section 5.4(c)(1) or
(2) hereof.
(d) ADJUSTMENT OF EXERCISE PRICE UPON ISSUANCE OF ADDITIONAL
SHARES OF STOCK. In the event the Company shall issue Additional Shares of
Stock (including Additional Shares of Stock deemed to be issued pursuant to
Section 5.4(c)) without consideration or for a consideration per share less than
the Exercise Price, then and in such event, such Exercise Price, shall be
reduced, concurrently with such issue, to a price (calculated to the nearest
cent) determined by multiplying the Exercise Price by a fraction:
(1) the numerator of which shall be (i) the number of
shares of Stock outstanding immediately prior to the issuance of such Additional
Shares of Stock (calculated on a fully diluted basis assuming the exercise or
conversion of all Options or Convertible Securities which are exercisable or
convertible at the time such calculation is being made), plus (ii) the number of
shares of Stock which the net aggregate consideration, if any, received by the
Company for the total number of such Additional Shares of Stock so issued would
purchase at the Exercise Price in effect immediately prior to such issuance, and
(2) the denominator of which shall be (i) the number of
shares of Stock outstanding immediately prior to the issuance of such Additional
Shares of Stock (calculated on a fully diluted basis assuming the exercise or
conversion of all Options or Convertible Securities which are exercisable or
convertible at the time such calculation is being made), plus (ii) the number of
such Additional Shares of Stock so issued.
(e) DETERMINATION OF CONSIDERATION. For purposes of this
Section 5.4, the consideration received by the Company for the issue of any
Additional Shares of Stock shall be computed as follows:
(1) CASH AND PROPERTY. Such consideration shall:
(i) insofar as it consists of cash, be computed at
the aggregate amount of cash received by the Company excluding amounts paid or
payable for accrued interest or accrued dividends;
(ii) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
(iii) in the event Additional Shares of Stock are
issued together with other shares or securities or other assets of the Company
for consideration
<PAGE>
-8-
which covers both, be the proportion of such consideration so received, computed
as provided in clauses (i) and (ii) above, as determined in good faith by the
Board of Directors.
(2) OPTIONS AND CONVERTIBLE SECURITIES. The consideration
per share received by the Company for Additional Shares of Stock deemed to have
been issued pursuant to Section 5.4(c)(1), relating to Options and Convertible
Securities, shall be determined by dividing:
(i) the total amount, if any, received or receivable
by the Company as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Company upon the exercise of such Options or the conversion or exchange of
such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
(ii) the maximum number of shares of Stock (as set
forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
5.5 MINIMAL ADJUSTMENTS. No adjustment in the Exercise Price subject
to this Warrant shall be made if such adjustment would result in a change in the
number of shares represented by this Warrant of less than one share (the
"Adjustment Threshold Amount"). Any adjustment not made because the Adjustment
Threshold Amount is not satisfied shall be carried forward and made, together
with any subsequent adjustments, at such time as (a) the aggregate amount of all
such adjustments is equal to at least the Adjustment Threshold Amount or (b) the
Warrant is exercised.
5.6 CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Exercise Price pursuant to this Section 5, the
Warrant shall, without any action on the part of the holder thereof, be adjusted
in accordance with this Section 5, and the Company promptly shall compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to the Holder a certificate setting forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based.
6. NOTICES OF RECORD DATE. Upon (a) any establishment by the Company of
a record date of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or right or option to acquire securities of the Company, or
any other right, or (b) any capital reorganization, reclassification,
recapitalization, merger or consolidation of the Company with or into any other
corporation, any transfer of all or substantially all the assets of the Company,
or any voluntary or involuntary dissolution, liquidation or winding up of the
<PAGE>
-9-
Company, the Company shall mail to the Holder at least 10 days, or such longer
period as may be required by law, prior to the record date specified therein, a
notice specifying (i) the date established as the record date for the purpose of
such dividend, distribution, option or right and a description of such dividend,
distribution, option or right, (ii) the date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding up is expected to become effective and (iii) the date, if any, fixed as
to when the holders of record of Stock (or other securities at that time
receivable upon exercise of the Warrant) shall be entitled to exchange their
shares of Stock (or such other stock or securities) for securities or other
property deliverable upon such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up.
7. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or By-Laws or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all action as may be
necessary or appropriate in order to protect the rights of the Holder against
dilution, or other impairment.
8. FRACTIONAL SHARES. The Company shall not issue any fractional shares
nor scrip representing fractional shares upon exercise of any portion of this
Warrant.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS. This Warrant is issued and
delivered by the Company and accepted by each Holder on the basis of the
following representations, warranties and covenants made by the Company:
9.1 AUTHORITY. The Company has all necessary authority to issue,
execute and deliver this Warrant and to perform its obligations hereunder. This
Warrant has been duly authorized, issued, executed and delivered by the Company
and is the valid and binding obligation of the Company, enforceable in
accordance with its terms.
9.2 RESERVATION OF WARRANT SHARES. The Warrant Shares issuable upon
the exercise of this Warrant have been (and any securities issuable or
deliverable upon conversion of such Warrant Shares, upon issuance or delivery,
will be) duly authorized and reserved for issuance by the Company and, when
issued in accordance with the terms hereof, will be validly issued, fully paid
and nonassessable.
10. INVESTMENT REPRESENTATIONS.
10.1 PURCHASE FOR INVESTMENT. The Holder represents and warrants that
it is acquiring the Warrant, and upon exercise will hold the Warrant Shares,
solely for its account for investment and not with a view to or for sale or
distribution of said Warrant or Warrant Shares or any part thereof. The Holder
also represents that the entire legal and beneficial interests of the Warrant
and Warrant Shares the Holder is acquiring is being acquired for, and will be
held for, its account only.
<PAGE>
-10-
10.2 SECURITIES NOT REGISTERED. The Holder understands that the
Warrant has not been registered under the Act on the basis that no distribution
or public offering of the stock of the Company is to be effected. The Holder
realizes that the basis for the exemption may not be present if, notwithstanding
its representations, it has in mind merely acquiring the securities for a fixed
or determinable period in the future, or for a market rise, or for sale if the
market does not rise. The Holder has no such intention.
10.3 SECURITIES TO BE HELD INDEFINITELY. The Holder recognizes that
the Warrant and Warrant Shares being acquired by it must be held indefinitely
unless they are subsequently registered under the Act or an exemption from such
registration is available. The Holder recognizes that the Company has no
obligation to register the Warrant or to comply with any exemption from such
registration.
10.4 RULE 144. The Holder is aware that neither the Warrant nor
Warrant Shares may be sold pursuant to Rule 144 adopted under the Act unless
certain conditions are met and until the Holder has held the Warrant Shares for
at least two years. Among the conditions for use of the Rule is the
availability of current information to the public about the Company.
10.5 ACCREDITED INVESTOR. The Holder represents and warrants that it
is a "accredited investor" (as such term is defined in Regulation D of the
Securities Act of 1933, as amended) and understands the risks associated with an
investment in the Company.
11. TRANSFER, EXCHANGE, ASSIGNMENT OR LOSS OF WARRANT.
11.1 RESTRICTIONS ON TRANSFER. This Warrant may be transferred, in
whole or in part, subject to the following restrictions. This Warrant and the
Warrant Shares or any other securities ("Other Securities") received upon
exercise of this Warrant shall be subject to restrictions on transferability
until registered under the Act, unless an exemption from registration is
available. Until this Warrant and the Warrant Shares or Other Securities are so
registered, this Warrant and any certificate for Warrant Shares or Other
Securities issued or issuable upon exercise of this Warrant shall contain a
legend on the face thereof, in form and substance satisfactory to counsel for
the Company, stating that this Warrant, the Warrant Shares or Other Securities
may not be sold, transferred or otherwise disposed of unless, in the opinion of
counsel (which counsel and which opinion shall be satisfactory to the Company),
the Warrant, the Warrant Shares or Other Securities may be transferred without
such registration.
11.2 PROCEDURE FOR TRANSFER. Any transfer permitted hereunder shall
be made by surrender of this Warrant to the Company at its principal office or
to the Transfer Agent at its offices with a duly executed request to transfer
the Warrant, which shall provide adequate information to effect such transfer
and shall be accompanied by funds sufficient to pay any transfer taxes
applicable. Upon satisfaction of all transfer conditions, the Company
<PAGE>
-11-
or Transfer Agent shall, without charge, execute and deliver a new Warrant in
the name of the transferee named in such transfer request, and this Warrant
promptly shall be canceled.
11.3 LOST, STOLEN OR DESTROYED WARRANT. Upon receipt by the Company
of evidence satisfactory to it of loss, theft, destruction or mutilation of this
Warrant and, in the case of loss, theft or destruction, of reasonably
satisfactory indemnification, or, in the case of mutilation, upon surrender of
this Warrant, the Company will execute and deliver, or instruct the Transfer
Agent to execute and deliver, a new Warrant of like tenor and date, and any such
lost, stolen or destroyed Warrant thereupon shall become void.
11.4 WARRANT BINDING UPON ASSIGNEE OR SUCCESSOR. The terms and
conditions of this Warrant shall be binding upon any permitted assignee and
successor of the Holder. Any such successor or assignee shall be obligated to
and shall immediately execute an instrument which provides that such party is
bound under the terms of this Warrant. Any transfer, assignment or other
disposition without such execution by the proposed transferee, assignee or
successor shall be null and void.
12. ISSUE TAX. The issuance of certificates for shares of Stock upon the
exercise of this Warrant shall be made without charge to the Holder of the
Warrant for any issue tax (other than applicable income taxes) in respect
thereof; provided, however, that the Company shall not be required to pay any
tax that may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the then Holder of the
Warrant being exercised.
13. AMENDMENT. The terms of this Warrant may be amended, modified or
waived only with the written consent of the parties hereto.
14. GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York, as such laws are applied to
contracts entered into and wholly to be performed within the State of New York
and without giving effect to any principles of conflicts or choice of law that
would result in the application of the laws of any other jurisdiction.
IN WITNESS WHEREOF, the Company and Holder have executed this Warrant as of
December 11, 1996.
HOLDER GREENTREE SOFTWARE, INC.
By: By:
--------------------------- ---------------------------
Brad I. Markowitz
Chairman
<PAGE>
-12-
SUBSCRIPTION
To: Date:
--------------------------- ---------------------------
The undersigned hereby subscribes for __________________ shares of Stock
covered by this Warrant. The certificate(s) for such shares shall be issued in
the name of the undersigned or as otherwise indicated below:
--------------------------------
Signature
--------------------------------
Name for Registration
--------------------------------
Mailing Address
<PAGE>
-13-
NET ISSUE EXERCISE ELECTION NOTICE
To: Date:
--------------------------- ---------------------------
The undersigned hereby elects under Section 4 to surrender the right to
purchase _____________ shares of Stock pursuant to this Warrant. The
certificate(s) for the shares issuable upon such net issue exercise election
shall be issued in the name of the undersigned or as otherwise indicated below.
--------------------------------
Signature
--------------------------------
Name for Registration
--------------------------------
Mailing Address
<PAGE>
-14-
ASSIGNMENT
For value received __________________________________________ hereby sells,
assigns and transfers unto __________________________________________________
________________________________________________________________________________
[Please print or typewrite name and address of Assignee]
________________________________________________________________________________
the within Warrant, and does hereby irrevocably constitute and appoint
__________________________________________ its attorney to transfer the within
Warrant on the books of the within named Company with full power of substitution
on the premises.
Dated:
------------------------
------------------------------
In the Presence of:
- ------------------------------
<PAGE>
Exhibit 10(dd)
GREENTREE SOFTWARE, INC.
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of October 25, 1996, among
Greentree Software, Inc., a New York corporation (the "Company"), and the other
Persons identified on the signature pages hereto.
W I T N E S S E T H:
WHEREAS, the Company is offering to sell to prospective investors, in a
private placement (the "Private Placement"), up to 1,000,000 shares (the
"Purchase Shares") of common shares, $.04 par value per share (the "Common
Shares"), and $1,000,000 in Convertible Term Promissory Notes (the "Notes")
convertible into 4,000,000 Common Shares (the "Conversion Shares"), all upon the
terms and conditions described in the Company's private placement memorandum
relating to the Private Placement (the "Private Placement Memorandum");
WHEREAS, the Company will issue to the purchasers of Purchase Shares or
Notes in this Private Placement a warrant (the "Investor Warrant") to purchase a
number of shares of Common Shares, which number will be based on the number of
Purchase Shares and amount of Notes purchased.
WHEREAS, the Company has engaged Wm Smith Securities, Inc., a Colorado
corporation (the "Placement Agent"), to offer and sell on behalf of the Company,
on a best efforts basis, the Purchase Shares and Notes proposed to be sold by
the Company pursuant to the Private Placement;
WHEREAS, as partial consideration for the Placement Agent's services, the
Company has agreed to issue to the Placement Agent a warrant (the "Placement
Agent Warrant") to purchase a number of shares of the Common Shares, which
number will be determined on a formula basis as based on the total amount of
Purchase Shares and Notes sold; and
WHEREAS, in order to induce the Holders to purchase shares of Common Shares
in the Private Placement and in order to induce the Placement Agent to accept
the Placement Agent Warrant as partial consideration for the Placement Agent's
services, the Company has agreed to provide certain registration rights to the
Holders and to the Placement Agent upon the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
<PAGE>
-2-
1. DEFINITIONS. As used in this Agreement, the following capitalized
terms shall have the following meanings:
"COMMISSION" shall mean the Securities and Exchange Commission.
"DEMAND REGISTRATION" shall have the meaning assigned to such term in
Section 3 hereof.
"HOLDER" shall mean a Person who is the owner of Registrable Securities.
"PERSON" shall mean an individual, partnership, corporation, business
trust, joint state company trust, unincorporated organization, joint venture, a
government authority or other entity of whatever nature.
"PROSPECTUS" shall mean the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by such Registration Statement, and all other amendments and supplements
to the Prospectus, including post-effective amendments to the Registration
Statement of which such Prospectus is a part, and all material incorporated by
reference in such Prospectus.
"REGISTRABLE SECURITIES" shall mean the Securities, but only so long as
they remain Restricted Securities.
"REGISTRATION EXPENSES" shall have the meaning ascribed thereto in
Section 7 hereof.
"REGISTRATION STATEMENT" means any registration statement of the Company
which covers any of the Registrable Securities pursuant to the provisions of
this Agreement, including the Prospectus, amendments and supplements to such
Registration Statement, including post-effective amendments, all exhibits, and
all material incorporated by reference in such Registration Statement.
"RESTRICTED SECURITIES" means the Registrable Securities unless and until,
in the case of any such Registrable Security, (i) it has been effectively
registered under the Securities Act and disposed of in accordance with the
Registration Statement covering it, or (ii) it is eligible for distribution to
the public pursuant to Rule 144 (or any similar provisions then in force) under
the Securities Act.
"SECURITIES" shall mean the Common Shares (i) issued to the parties to this
Agreement pursuant to the Private Placement or (ii) issuable to the parties to
this Agreement upon conversion of the Notes or upon exercise of the Placement
Agent Warrant or the Investor Warrants.
<PAGE>
-3-
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
2 SECURITIES SUBJECT TO THIS AGREEMENT. The Securities entitled to the
benefits of this Agreement are the Registrable Securities.
3. DEMAND REGISTRATION.
(a) REQUEST FOR REGISTRATION. Subject to the provisions of this Section,
one or more Holders owning in the aggregate in excess of 50% of the issued and
outstanding Registrable Securities may make a written request to the Company for
registration under and in accordance with the provisions of the Securities Act
of up to all of the Registrable Securities owned by such Holder or Holders (a
"Demand Registration"). Within five (5) days after receipt of such request, the
Company will serve written notice (the "Notice") of such request to all other
Holders and will include in such registration all Registrable Securities with
respect to which the Company receives written requests for inclusion therein
within five (5) business days after it gives the Notice to the applicable
Holder. Subject to the provisions of Section 3(d), the Company may include in
any registration statement to be filed pursuant to this Section 3 additional
shares of Common Shares for sale for its own account or for the account of any
other person.
(b) NUMBER OF REGISTRATIONS. The Holders are entitled to, in the
aggregate, two (2) Demand Registrations regardless of the Person or Persons
making demand. Each Holder agrees that if the Company determines that there are
material developments which the Company determines require the filing of a post-
effective amendment to the Registration Statement, then each Holder agrees to
refrain from selling any Registrable Securities until the post-effective
amendment is declared effective.
(c) SELECTION OF UNDERWRITERS. If a registration pursuant to this
Section 3 involves an underwritten offering, the underwriter or underwriters
thereof shall be selected by the Company after consultation with the Holders
making demand.
(d) LIMITATIONS, CONDITIONS AND QUALIFICATIONS. The obligations of the
Company to cause the Registrable Securities to be registered under the
Securities Act pursuant to this Section 3 are subject to each of the following
limitations, conditions and qualifications:
(1) The Company shall not be obligated to file or keep effective any
Registration Statement pursuant to Section 3(a) hereof at any time if the
Company would be required to include financial statements audited as of any date
other than the end of its fiscal year.
(2) The Company, by act of its Board of Directors, shall, one time
during any 180 day period, be entitled to postpone for up to 30 days from the
receipt of request for a Demand Registration the filing or effectiveness of any
Registration Statement otherwise
<PAGE>
-4-
required to be prepared and filed by it pursuant to Section 3(a) if the Board of
Directors of the Company determines, in its reasonable judgment, that the
Company is in possession of material information that has not been disclosed to
the public and the Board of Directors of the Company reasonably deems it to be
advisable not to disclose such information at such time in a registration
statement. If the Company shall so postpone the filing of a Registration
Statement, the Holders shall have the right to withdraw the request for
registration by giving written notice to the Company within 30 days after
receipt of the notice of postponement and, in the event of such withdrawal, such
request shall not be counted for purposes of the request for registration to
which the Holders are entitled pursuant to Section 3(a) hereof.
(3) If the Company at any time shall register Registrable Securities
under the Securities Act for sale to the public, the Holders of such Registrable
Securities shall, upon the written request of the Company, not publicly sell,
make any short sale of, grant any option for the purchase of, or otherwise
dispose of any Securities (other than any Registrable Securities being
registered under such Demand Registration) without the prior written consent of
the Company, to the extent and for the period (not exceeding 180 days) that all
of the directors and officers of the Corporation (other than directors and
officers holding not more than 25,000 shares of Common Shares (as adjusted for
stock dividends, stock splits, combinations of shares, or similar events) in the
aggregate) are subject to the same restriction.
(4) PRIORITY OF DEMAND REGISTRATION. If the Demand Registration
pursuant to this Section 3 involves an underwritten offering and the managing
underwriter shall advise the Company in writing that, in its opinion, the number
of shares of Common Shares requested to be included in such registration exceeds
the number which can be sold in such offering, then the Company will include in
such registration, to the extent of the number of shares of Common Shares which
the Company is so advised can be sold in such offering, (i) first, the number of
Registrable Securities requested to be included in such registration by the
Holders (on a pro rata basis to the number of Registrable Securities held by
such Holder), and (ii) second, the other shares of Common Shares of the Company
proposed to be included in such registration, in accordance with the priorities,
if any, then existing among the Company and the holders of such other
securities.
4. "PIGGYBACK" REGISTRATION. Whenever the Company proposes to register
any of its Common Shares under the Securities Act, other than pursuant to a
Demand Registration pursuant to Section 3(a) or a registration statement on
Form S-4 or Form S-8 or similar or successor forms, the Company shall, each such
time, give to the Holders written notice of its intent to do so. Upon the
written request of any Holder within twenty (20) days after the giving of any
such notice by the Company, the Company shall use its best efforts to cause to
be included in such registration up to fifty (50%) percent of the Registrable
Securities owned by such selling Holder, to the extent requested to be
registered; PROVIDED that (i) such selling Holder agrees to sell its shares of
Common Shares in the same manner and on the same terms and conditions as the
other shares of Common Shares which the Company
<PAGE>
-5-
proposes to register and (ii) if the registration is to include shares of Common
Shares to be sold for the account of the Company, the proposed managing
underwriter does not advise the Company that, in its opinion, the inclusion of
such selling Holders' shares of Registrable Securities (without any reduction in
the number of shares to be sold for the account of the Company) is likely to
affect adversely the success of the offering or the price the Company would
receive for any shares of Common Stock offered by it pursuant thereto, in which
case the shares proposed to be included by the selling Holders will be reduced
(on a pro rata basis), according to the total number of shares of Registrable
Securities owned by such selling Holders, or in such other proportions as shall
mutually be agreed to by such selling Holders, to such number which the Company
is advised can be sold in such offering without adversely affecting the success
of the offering or the price the Company would receive for any shares of Common
Shares.
5. INFORMATION. Upon making a request pursuant to Sections 3 or 4, the
Holders shall specify the number and shares of Common Shares to be registered.
The Company may require the Holders to furnish to the Company such information
regarding themselves and the distribution of Registrable Securities as the
Company may from time to time reasonably request in writing in order to comply
with the Securities Act. The Holders agree to notify the Company as promptly as
practicable of any inaccuracy or change in information they have previously
furnished to the Company.
6. REGISTRATION PROCEDURES. If and when the Company is required by the
provisions of Sections 3 or 4 to effect a registration under the Securities Act,
the Company will, at its expense, as expeditiously as practicable, subject to
the provisions of Section 3(d) hereof:
(a) In accordance with the Securities Act and the rules and
regulations of the Commission, prepare and file with the Commission a
Registration Statement in the form of registration statement appropriate with
respect to the Registrable Securities and use its best efforts to cause such
Registration Statement to become and remain continuously effective until all of
the Registrable Securities covered by such Registration Statement have been sold
in accordance with the intended methods of disposition of the seller or sellers
set forth in such Registration Statement, but in no event for longer than five
years from the date of the issuance of such Registrable Securities, and prepare
and file with the Commission such amendments to such Registration Statement and
supplements to the Prospectus contained therein as may be necessary to keep such
Registration Statement effective and such Registration Statement and Prospectus
accurate and complete during such period;
(b) Furnish to the Holders participating in such registration such
reasonable number of copies of the Registration Statement and Prospectus and
such other documents as such Holders may reasonably request in order to
facilitate the public offering of the Registrable Securities;
<PAGE>
-6-
(c) Use its best efforts to register or qualify the Common Shares
covered by such Registration Statement under such state securities or blue sky
laws of such jurisdictions as such Holders may reasonably request, PROVIDED,
however, that the Company shall not be obligated to file any general consent to
service of process or to qualify as a foreign corporation in any jurisdiction in
which it is not so qualified or to subject itself to taxation in connection with
any such registration or qualification of such Common Shares;
(d) Notify the Holders participating in such registration, promptly
after it shall receive notice thereof, of the date and time when such
Registration Statement and each post-effective amendment thereto has become
effective or a supplement to any Prospectus forming a part of such Registration
Statement has been filed;
(e) Notify the Holders participating in such registration promptly of
any request by the Commission for the amending or supplementing of such
Registration Statement or Prospectus or for additional information;
(f) Prepare and file with the Commission, promptly upon the request
of any Holder participating in such registration, the Registration Statement and
any amendments or supplements to such Registration Statement or Prospectus
which, in the reasonable opinion of counsel for such Holders is required under
the Securities Act or the rules and regulations thereunder in connection with
the distribution of the Common Shares by such Holders or to otherwise comply
with the requirements of the Securities Act and such rules and regulations;
(g) Prepare and promptly file with the Commission and promptly notify
the Holders participating in such registration of the filing of such amendments
or supplements to such Registration Statement or Prospectus as may be necessary
to correct any statements or omissions if, at the time when a Prospectus
relating to such Common Shares is required to be delivered under the Securities
Act, any event has occurred as the result of which any such Prospectus or any
other Prospectus then in effect may include an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading;
(h) Advise the Holders participating in such registration, promptly
after it shall receive notice or obtain knowledge thereof, of the issuance of
any stop order by the Commission suspending the effectiveness of such
Registration Statement or the initiation or threatening of any proceeding for
that purpose and promptly use its best efforts to prevent the issuance of any
stop order or to obtain its withdrawal if such stop order should be issued;
(i) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to the
Company's security holders earnings statements satisfying the provisions of
Section 11(a) of the Securities Act, no later than forty-five (45) days after
the end of any twelve (12) month period (or ninety
<PAGE>
-7-
(90) days, if such a period is a fiscal year) beginning with the first month of
the Company's first fiscal quarter commencing after the effective date of a
Registration Statement.
7. EXPENSES OF REGISTRATION. All expenses of the Company incident to the
Company's performance of or compliance with the provisions of Sections 3, 4, 5
and 6 of this Agreement shall be borne by the Company including without
limitation:
(a) All registration and filing fees;
(b) Fees and expenses of compliance with all securities or blue sky laws
(including fees and disbursements of counsel for the Company in connection with
blue sky qualifications of the Registrable Securities; PROVIDED, HOWEVER, that
the Company shall not be required to consent to general service of process or
qualify as a foreign corporation in any such state);
(c) Printing, messenger, telephone and delivery expenses; and
(d) Fees and disbursements of counsel for the Company and its independent
auditors.
Nothing in this Section 7 shall be deemed to require the Company to pay or
bear any expenses of any Holder's attorneys or accountants or any other personal
expenses or any underwriting discounts, selling commissions or similar fees if
such registration results in an underwritten public offering of all or any
portion of the Registrable Securities.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. Whenever, pursuant to Sections 3 or
4, a Registration Statement relating to the Registrable Securities is filed
under the Securities Act, the Company will (except as to matters covered by
Section 8(b) hereof) indemnify and hold harmless each Holder participating in
the registration, each of their officers, directors and employees, and each
person, if any, who controls any such Person (collectively, the "Holder
Indemnitees" and, individually, a "Holder Indemnitee"), against any losses,
claims, damages or liabilities, joint or several, to which such Holder
Indemnitees may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in such Registration Statement, or Prospectus
contained therein, or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse each Holder Indemnitee for all legal or other
expenses reasonably incurred by it in connection with investigating or defending
against such loss, claim, damage, liability or action.
<PAGE>
-8-
(b) INDEMNIFICATION BY HOLDERS. Each Holder participating in any
registration will indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the Registration Statement and
each other person, if any, who controls the Company, within the meaning of the
Securities Act (collectively, the "Company Indemnitees" and, individually, a
"Company Indemnitee") and each other Holder Indemnitee against all losses,
claims, damages or liabilities, joint or several, to which any of the Company
Indemnitees or the other Holder Indemnitees may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
such Registration Statement, or Prospectus contained therein, or any amendment
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only if, and to the
extent that, such statement or omission was in reliance upon and in conformity
with written information furnished to the Company by such Holder specifically
for use in the preparation thereof, and will reimburse each Company Indemnitee
and each other Holder Indemnitee for all legal or other expenses reasonably
incurred by it in connection with investigating or defending against such loss,
claim, damage, liability or action.
(c) INDEMNIFICATION PROCEDURES. Promptly after receipt by a Holder
Indemnitee or a Company Indemnitee (collectively, "Indemnitees" and,
individually, an "Indemnitee") under Section 8(a) or 8(b) hereof of notice of
the commencement of any action, such Indemnitee will, if a claim in respect
thereof is to be made against the indemnifying party under such clause, notify
the indemnifying party in writing of the commencement thereof; but the omission
so to notify the indemnifying party will not relieve the indemnifying party from
any liability which it may have to any Indemnitee otherwise than under such
clauses. In case any such action shall be brought against any Indemnitee, and
such Indemnitee shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in, and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel satisfactory to such Indemnitee, and
after notice from the indemnifying party to such Indemnitee of its election to
assume the defense thereof, the indemnifying party shall not be liable to such
Indemnitee under such clause for any legal or other expenses subsequently
incurred by such Indemnitee in connection with the defense thereof other than
reasonable costs of investigation; PROVIDED, HOWEVER, that the Indemnitee shall
have the right to employ one counsel to represent such Indemnitee if, in the
reasonable judgment of such Indemnitee, it is advisable for such party to be
represented by separate counsel because separate defenses are available, or
because a conflict of interest exists between such indemnified and indemnifying
party in respect of such claim, and in that event the fees and expenses of such
separate counsel shall be paid by the indemnifying party. Notwithstanding the
foregoing, if the Company is an Indemnitee, the Company shall designate the one
counsel, and in all other circumstances, the one counsel shall be designated by
a majority in interest based upon the Registrable Securities of the Indemnitees.
For purposes of this Section 8, the terms
<PAGE>
-9-
"control," and "controlling person" have the meanings which they have under the
Securities Act.
(d) CONTRIBUTION. If for any reason the foregoing indemnity is
unavailable, or is insufficient to hold harmless an Indemnitee, then the
indemnifying party shall contribute to the amount paid or payable by the
Indemnitee as a result of such losses, claims, damages, liabilities or expenses
(i) in such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party on the one hand and the Indemnitee on the
other from the registration or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, or provides a lesser sum to the
Indemnitee than the amount hereinafter calculated, in such proportion as is
appropriate to reflect not only the relative benefits received by the
indemnifying party on the one hand and the Indemnitee on the other but also the
relative fault of the indemnifying party and the Indemnitee as well as any other
relevant equitable considerations. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
9. AMENDMENT AND MODIFICATION. This Agreement may be amended, modified
or supplemented in any respect only by written agreement by the Company and the
Holders of a majority of the issued and outstanding Registrable Securities.
10. GOVERNING LAW. This Agreement and the rights and obligations of the
parties hereunder shall be governed by, and construed and interpreted in
accordance with, the laws of the Commonwealth of Massachusetts, without giving
effect to the choice of law principles thereof.
11. INVALIDITY OF PROVISION. The invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not affect the validity or
enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of this Agreement, including that provision, in any
other jurisdiction.
12. NOTICES. All notices and other communications hereunder shall be in
writing and, unless otherwise provided herein, shall be deemed duly given upon
receipt if delivered personally, sent by facsimile transmission, sent by express
courier, or mailed by registered or certified mail (return receipt requested) to
the parties at the following addresses or (at such other address for the party
as shall be specified by like notice):
(a) If to the Company:
Greentree Software, Inc.
2801 Fruitville Road
Sarasota, FL 34237
Attn: Jeffrey B. Pinkerton, President
<PAGE>
-10-
with a copy to:
Bingham, Dana & Gould LLP
150 Federal Street
Boston, MA 02110
Attn: Victor J. Paci, Esq.
(b) If to a Holder, as listed on Schedule A or as such Holder shall
designate to the Company in writing.
13. HEADINGS; EXECUTION IN COUNTERPARTS. The headings and captions
contained herein are for convenience of reference only and shall not control or
affect the meaning or construction of any provision hereof. This Agreement may
be executed in any number of counterparts, each of which shall be deemed to be
an original and all of which together shall constitute one and the same
instrument. In making proof of this Agreement, it shall not be necessary to
produce or account for more than one such counterpart.
14. ENTIRE AGREEMENT. This Agreement, including any exhibits hereto and
the documents and instruments referred to herein and therein, embodies the
entire agreement and understanding of the parties hereto in respect of the
subject matter contained herein. There are no restrictions, promises,
representations, warranties, covenants or undertakings, other than those
expressly set forth or referred to herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
15. ATTORNEYS' FEES. If any legal action or any arbitration or other
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default or misrepresentation in connection with any of
the provisions of this Agreement, the successful or prevailing party or parties
shall be entitled to recover such reasonable attorneys' fees and other costs
incurred in that action or proceeding, in addition to any other relief to which
it or they may be entitled, as may be ordered in connection with such
proceeding.
16. TRANSFERABILITY OF RIGHTS. Notwithstanding anything in this Agreement
to the contrary, none of the rights of any Holder under this Agreement shall be
transferred or assigned to any person unless (i) such person becomes the
registered holder, in the books of the Company, of such Holder's Securities,
Notes or Investor Warrant, and (ii) such person agrees to become a party to, and
bound by all of the terms and conditions of, this Agreement.
<PAGE>
-11-
IN WITNESS WHEREOF, this Agreement has been signed by each of the parties
hereto as of this 25th day of October, 1996.
GREENTREE SOFTWARE, INC.
By: /s/ Brad I. Markowitz
---------------------------
Brad I. Markowitz
Chairman
<PAGE>
-12-
SIGNATURE PAGE
TO
REGISTRATION RIGHTS AGREEMENT
Reference is hereby made to that certain Registration Rights Agreement,
dated as of October 25, 1996, among Greentree Software, Inc., a New York
corporation (the "Company"), and the Holders parties thereto, as amended and in
effect from time to time (the "Registration Rights Agreement").
The undersigned hereby agrees that, from and after the date that the
Company countersigned this Signature Page in the space provided therefor below,
the undersigned shall become a party to the Registration Rights Agreement. This
Signature Page shall take effect and shall become a part of the Registration
Rights Agreement immediately upon execution by the undersigned and the Company.
Executed under seal as of the date set forth below under the laws of the
Commonwealth of Massachusetts.
Signature:
------------------------------
Name:
------------------------------
Accepted:
GREENTREE SOFTWARE, INC.
By:
--------------------------------
Date:
-------------------------
<PAGE>
-13-
SCHEDULE A
HOLDER ADDRESS
- ------ -------
<PAGE>
Exhibit 23.1
CONSENT TO INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Greentree Software, Inc.
We consent to the incorporation by reference in the registration
statement (No. 333-05245) on Form SB-3 of Greentree Software, Inc. of our
report dated September 11, 1996, relating to the balance sheet of Greentree
Software, Inc. as of May 31, 1996 and the related statements of operations,
stockholders' equity, and cash flows for the year then ended, which report
appears in the May 31, 1996 annual report on Form 10-KSB of Greentree
Software, Inc.
Our report dated September 11, 1996 contains an explanatory paragraph that
states that "the accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Notes 1 and
5 to the financial statements, the Company has incurred substantial losses from
operations, has a working capital deficit, an accumulated deficit, and a
liquidity deficiency, and is currently party to two lawsuits, one of which
involves its rights to continue to sell its primary product. These matters
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans and assessments in regard to these matters are also
described in Note 1 to the financial statements. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty."
/s/ KPMG Peat Marwick LLP
St. Petersburg, Florida
September 12, 1997
<PAGE>
Exhibit 23.2
CONSENT TO INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 333-05245) of
Greentree Software, Inc. of our report dated August 6, 1997 appearing on page
F-2 of this Form 10-KSB.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Minneapolis, Minnesota
September 12, 1997
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