<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 2, 1999
REGISTRATION NO. 333-______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
___________
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
___________
PURCHASESOFT, INC. (FORMERLY GREENTREE SOFTWARE, INC.)
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 13-2897997
(State or Other (I.R.S. Employer
Jurisdiction of Identification No.)
Incorporation or
Organization)
7301 OHMS LANE, SUITE 220
EDINA, MINNESOTA 55439
(612) 941-1500
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
___________
MICHAEL G. KERRISON
CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD OF DIRECTORS
PURCHASESOFT, INC.
7301 Ohms Lane, Suite 220
Edina, Minnesota 55439
(612) 941-1500
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
___________
WITH COPIES TO:
JULIO E. VEGA, ESQ.
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
(617) 951-8000
___________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. / /
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
PROPOSED PROPOSED
TITLE OF SECURITIES AMOUNT TO MAXIMUM MAXIMUM AMOUNT OF
TO BE REGISTERED BE REGISTERED OFFERING AGGREGATE REGISTRATION
(1) PRICE OFFERING FEE
PER SHARE (2) PRICE (2)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rights to Purchase
Shares of Common 6,151,382 $ -- $ -- $ --
Stock, Par Value
$.01 Per Share
- -----------------------------------------------------------------------------------
Common Stock
Par Value $.01 Per 6,151,382 $0.90 $5,536,243.80 $1,539.08
Share
- -----------------------------------------------------------------------------------
</TABLE>
(1) Maximum number of shares of PurchaseSoft, Inc.'s common stock to be
sold to current holders of common stock of PurchaseSoft, Inc. in this
rights offering.
(2) Estimated solely for the purpose of calculating the registration fee
in accordance with Rule 457(g) of the Securities Act.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the Registration Statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell, and it is not soliciting an offer to buy, these securities in any state
where the offer or sale is not permitted.
PURCHASESOFT, INC.
6,151,382 Shares of Common Stock
$0.90 per Share
PurchaseSoft, Inc. is distributing subscription rights in this
rights offering to persons who owned shares of our common stock on
_____________. During this rights offering, we will issue up to 6,151,382
shares of common stock.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
PROCEEDS
SUBSCRIPTION RIGHTS PRICE TO PURCHASESOFT, INC. (1)
- ---------------------------------------------------------------------
<S> <C> <C>
PER SHARE $0.90 $0.90
- ---------------------------------------------------------------------
TOTAL $5,536,243.80 $5,536,243.80
- ---------------------------------------------------------------------
</TABLE>
(1) Before deducting expenses payable by us, estimated to be $_________.
- ------------------------------------------------------------------------------
THE EXERCISE OF THE SUBSCRIPTION RIGHTS INVOLVES SUBSTANTIAL RISK. YOU SHOULD
REFER TO THE DISCUSSION OF MATERIAL RISK FACTORS, BEGINNING ON PAGE 7 OF THIS
PROSPECTUS.
- ------------------------------------------------------------------------------
You will receive 0.75 subscription rights for each share of common
stock that you owned on _____________. You will not receive any fractional
rights. Each subscription right entitles you to purchase one share of common
stock at the purchase price of $0.90 per share. If you exercise all of your
subscription rights, you may also have the opportunity to purchase additional
shares at the same purchase price.
The subscription rights are exercisable beginning on the date of
this prospectus and continuing until 5:00 p.m., Eastern Standard Time on
_____________, 1999.
The subscription rights may not be sold or transferred. The
subscription rights will not be listed for trading on any stock exchange.
L-R Global Partners, L.P., a major stockholder of PurchaseSoft,
of which two of our directors are principals, has committed to exercise at
least $2,727,000 of subscription rights in the rights offering. Also, Michael
G. Kerrison, our Chief Executive Officer and Chairman of the Board, has
committed to exercise up to $100,000 of subscription rights in the rights
offering. In addition, if the proceeds to PurchaseSoft in the rights
offering are less than $5,000,000, L-R Global has committed to purchase, at
$0.90 per share, additional shares of common stock to make up the shortfall,
but only up to $773,000. L-R Global's commitment is subject to the limitation
that in no event shall L-R Global's total investment exceed $3,500,000.
Shares of the our common stock are currently traded on the OTC
Bulletin Board-Registered Trademark- under the symbol "PURC." Neither the
Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
THE DATE OF THIS PROSPECTUS IS ______________
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Questions and Answers About PurchaseSoft. . . . . . . . . . .
Questions and Answers About the Rights Offering . . . . . . .
A WARNING ABOUT FORWARD-LOOKING STATEMENTS. . . . . . . . . . . . . . . .
RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PURCHASESOFT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Our History . . . . . . . . . . . . . . . . . . . . . . . . .
Our Products. . . . . . . . . . . . . . . . . . . . . . . . .
Future Products . . . . . . . . . . . . . . . . . . . . . . .
Our Marketplace . . . . . . . . . . . . . . . . . . . . . . .
Distribution Strategy . . . . . . . . . . . . . . . . . . . .
Competition . . . . . . . . . . . . . . . . . . . . . . . . .
Research and Product Development. . . . . . . . . . . . . . .
Software Maintenance. . . . . . . . . . . . . . . . . . . . .
Intellectual Property . . . . . . . . . . . . . . . . . . . .
Employees . . . . . . . . . . . . . . . . . . . . . . . . . .
RECENT DEVELOPMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . .
Resignation of CEO and Chairman of the Board of Directors . .
Funding by L-R Global . . . . . . . . . . . . . . . . . . . .
Reorganization and Refocus. . . . . . . . . . . . . . . . . .
Cash Balance, Liquidity, Finance. . . . . . . . . . . . . . .
Marketing Efforts . . . . . . . . . . . . . . . . . . . . . .
Board of Directors; Management Compensation . . . . . . . . .
THE RIGHTS OFFERING . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Subscription Rights . . . . . . . . . . . . . . . . . . .
Basic Subscription Privilege. . . . . . . . . . . . . . . . .
Over-Subscription Privilege . . . . . . . . . . . . . . . . .
Purchase Commitments. . . . . . . . . . . . . . . . . . . . .
No Recommendations. . . . . . . . . . . . . . . . . . . . . .
Expiration Date . . . . . . . . . . . . . . . . . . . . . . .
Withdrawal Right. . . . . . . . . . . . . . . . . . . . . . .
Determination of Subscription Price . . . . . . . . . . . . .
Transferability of Subscription Rights. . . . . . . . . . . .
Exercise of Subscription Rights . . . . . . . . . . . . . . .
Method of Payment . . . . . . . . . . . . . . . . . . . . . .
Guaranteed Delivery Procedures. . . . . . . . . . . . . . . .
Signature Guarantees. . . . . . . . . . . . . . . . . . . . .
Shares Held for Others. . . . . . . . . . . . . . . . . . . .
Ambiguities in Exercise of Subscription Rights. . . . . . . .
Regulatory Limitation . . . . . . . . . . . . . . . . . . . .
Our Decision Binding. . . . . . . . . . . . . . . . . . . . .
No Revocation . . . . . . . . . . . . . . . . . . . . . . . .
Shares of Common Stock Outstanding after the
Rights Offering. . . . . . . . . . . . . . . . . . . . . .
Fees and Expenses . . . . . . . . . . . . . . . . . . . . . .
Subscription Agent. . . . . . . . . . . . . . . . . . . . . .
IF YOU HAVE QUESTIONS . . . . . . . . . . . . . . . . . . . . . . . . . .
DESCRIPTION OF COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . .
PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND
BY-LAWS THAT MAY HAVE ANTI-TAKEOVER EFFECTS . . . . . . . . .
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PRICE RANGE OF COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . .
DETERMINATION OF OFFERING PRICE . . . . . . . . . . . . . . . . . . . . .
PLAN OF DISTRIBUTION. . . . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . .
Taxation Of Stockholders. . . . . . . . . . . . . . . . . . .
Taxation Of PurchaseSoft. . . . . . . . . . . . . . . . . . .
Information Reporting and Backup Withholding. . . . . . . . .
STATE AND FOREIGN SECURITIES LAWS . . . . . . . . . . . . . . . . . . . .
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IF YOU WOULD LIKE ADDITIONAL INFORMATION. . . . . . . . . . . . . . . . .
<PAGE>
PROSPECTUS SUMMARY
This section answers in summary form some questions you may have
about PurchaseSoft and this rights offering. The information in this section
is not complete and does not contain all of the information that you should
consider before exercising your subscription rights. You should read the
entire prospectus carefully, including the "Risk Factors" section and the
documents listed under "If You Would Like More Information."
QUESTIONS AND ANSWERS ABOUT PURCHASESOFT
WHAT IS PURCHASESOFT, INC.?
We design, develop, market and service purchasing and materials
management application specific software systems. We serve customers in a
broad range of industries, from small and mid-sized businesses to Fortune
2000 companies. Our core product, PurchaseSoft-TM-, encompasses electronic
catalogs, requisitioning, e-mail enabled authorization, request for
quotations, quotations and analyses, purchasing, receiving, inventory
management, fixed asset management, invoice management, and advanced decision
support. For more information, see "PurchaseSoft."
WHERE ARE WE LOCATED?
Our principal executive offices are located at:
PurchaseSoft, Inc.
7301 Ohms Lane, Suite 220,
Edina, Minnesota 55439
QUESTIONS AND ANSWERS ABOUT THE RIGHTS OFFERING
WHAT IS A SUBSCRIPTION RIGHT?
We are distributing to you, at no charge, 0.75 subscription
rights for every share of common stock that you owned on _____________. We
will not distribute any fractional subscription rights, but will round the
number of subscription rights you receive up or down to the nearest whole
number. Each subscription right entitles you to purchase one share of common
stock for $0.90. When you "exercise" a subscription right, that means that
you choose to purchase the common stock that the subscription right entitles
you to purchase. You may exercise any number of your subscription rights, or
you may choose not to exercise any subscription rights. You cannot give or
sell your subscription rights to anybody else - only you can exercise them.
See "The Rights Offering - The Subscription Rights."
<PAGE>
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WHAT IS A RIGHTS OFFERING?
A rights offering is an opportunity for you to purchase
additional shares of common stock at a fixed price and in an amount
proportional to your existing interest, which enables you to maintain your
current percentage ownership.
WHAT IS THE BASIC SUBSCRIPTION PRIVILEGE?
The basic subscription privilege of each subscription right
entitles you to purchase one share of our common stock at a subscription
price of $0.90. See "The Rights Offering - Basic Subscription Privilege."
WHAT IS THE OVER-SUBSCRIPTION PRIVILEGE?
The over-subscription privilege of each subscription right
entitles you, if you fully exercise your basic subscription privilege, to
subscribe for additional shares of common stock at the same subscription
price of $0.90 per share. See "The Rights Offering - Over-Subscription
Privilege."
WHAT ARE THE LIMITATIONS ON THE OVER-SUBSCRIPTION PRIVILEGE?
If sufficient shares are available, we will honor the
over-subscription requests in full. If over-subscription requests exceed the
number of shares available, we will allocate all or a portion of the
available shares among stockholders who oversubscribed in proportion to the
number of shares purchased through the basic subscription privilege. See "The
Rights Offering - Over-Subscription Privilege."
WHY ARE WE ENGAGING IN A RIGHTS OFFERING?
We are offering the subscription rights to obtain additional
working capital, to invest in research and development and to expand our
sales and marketing capabilities. We believe that, if all of the
subscription rights are exercised, the proceeds from the rights offering,
together with funds on hand and anticipated operating revenues, will be
sufficient to finance our operations as projected by our business plan for at
least the next two years. Instead of selling additional shares of common
stock to outside parties, our Board of Directors has chosen to give you the
opportunity to buy more shares and provide us with additional capital. Of
course, we cannot assure you that we will not need to seek additional
financing in the future. See "Risk Factors - Capital Requirements;
Uncertainty of Additional Funding."
HOW MANY SHARES MAY I PURCHASE?
You will receive 0.75 subscription rights for each share of
common stock that you owned on _____________. We will not distribute
fractional subscription rights, but will round the number of subscription
rights you are to receive up or down to the nearest whole number. Each
subscription right entitles you to purchase one share of common stock for
$0.90. See "The Rights Offering - Basic Subscription Privilege." If you
exercise
<PAGE>
-3-
all of the subscription rights that you receive, you may have the opportunity
to purchase additional shares of common stock. On the attached subscription
certificate, you may request to purchase as many additional shares as you
wish for $0.90 per share. We may honor all of the over-subscription
requests, but if not, you may not be able to purchase as many shares as you
requested on your subscription certificate. In addition, we have the
discretion to issue less than the total number of shares that may be
available for over-subscription requests. See "The Rights Offering -
Over-Subscription Privilege."
HOW DID WE ARRIVE AT THE $0.90 PER SHARE PRICE?
In determining the price per share during the rights offering, a
special committee of our Board of Directors, which did not include Michael
Kerrison or our directors affiliated with L-R Global, considered several
factors including the historic and current market price of the common stock,
our business prospects, our history of losses, general conditions in the
securities market, our need for capital, alternatives available to us for
raising capital, the amount of proceeds desired, pricing of similar
transactions, the liquidity of our common stock, the level of risk to our
investors, and the need to offer shares at a price that would be attractive
to our investors relative to the current trading price of our common stock.
See "The Rights Offering - Determination of Subscription Price."
HOW DO I EXERCISE MY SUBSCRIPTION RIGHTS?
You must properly complete the attached subscription certificate
and deliver it to the Subscription Agent before 5 p.m., Eastern Standard Time
on __________. The address for the Subscription Agent is on page 26. See
"The Rights Offering - Exercise of Subscription Rights." Your subscription
certificate must be accompanied by proper payment for each share that you
wish to purchase. See "The Rights Offering - Method of Payment."
HOW LONG WILL THE RIGHTS OFFERING LAST?
You will be able to exercise your subscription rights only during
a limited period. IF YOU DO NOT EXERCISE YOUR SUBSCRIPTION RIGHTS BEFORE 5
P.M., EASTERN STANDARD TIME, ON __________, THE SUBSCRIPTION RIGHTS WILL
EXPIRE. See "The Rights Offering - Expiration Date."
AFTER I EXERCISE MY SUBSCRIPTION RIGHTS, CAN I CHANGE MY MIND?
No. Once you send in your subscription certificate and payment,
you cannot revoke the exercise of your subscription rights, even if you later
learn information about us that you consider to be unfavorable. You should
not exercise your subscription rights unless you are certain that you wish to
purchase additional shares of common stock at a price of $0.90 per share.
See "The Rights Offering - No Revocation."
<PAGE>
-4-
IS EXERCISING MY SUBSCRIPTION RIGHTS RISKY?
The exercise of your subscription rights involves certain risks.
Exercising your subscription rights means buying additional shares of our
common stock, and should be carefully considered as you would view other
equity investments. Among other things, you should carefully consider the
risks described under the heading "Risk Factors," beginning on page 7.
WHAT HAPPENS IF I CHOOSE NOT TO EXERCISE MY SUBSCRIPTION RIGHTS?
You will retain your current number of shares of common stock
even if you do not exercise your subscription rights. However, if other
stockholders exercise their subscription rights and you do not, the
percentage of PurchaseSoft that you own will diminish, and your voting and
other rights will be diluted. See "Risk Factors - Dilution of Your
Percentage Ownership of PurchaseSoft."
CAN I SELL OR GIVE AWAY MY SUBSCRIPTION RIGHTS?
No.
MUST I EXERCISE ANY SUBSCRIPTION RIGHTS?
No.
WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF EXERCISING MY SUBSCRIPTION
RIGHTS?
The receipt and exercise of your subscription rights are intended
to be nontaxable. You should seek specific tax advice from your personal tax
advisor. See "Federal Income Tax Considerations - Taxation of Stockholders."
WHEN WILL I RECEIVE MY NEW SHARES?
If you purchase shares of common stock through the rights
offering, you will receive certificates representing those shares as soon as
practicable after __________, 1999.
CAN WE CANCEL THE RIGHTS OFFERING?
Yes. A committee of our disinterested directors may cancel the
rights offering at any time on or before __________, for any reason. If we
cancel the rights offering, any money received from stockholders will be
refunded promptly. See "The Rights Offering - Withdrawal Right."
<PAGE>
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HOW MUCH MONEY WILL PURCHASESOFT RECEIVE FROM THE RIGHTS OFFERING?
Our gross proceeds from the rights offering depend on the number
of shares that are purchased. If we sell all 6,151,382 shares offered by this
prospectus, then we will receive proceeds of $5,536,243.80.
To guarantee us a minimum of $3.6 million in proceeds after the
rights offering:
- Our largest stockholder, L-R Global Partners, L.P. ("L-R
Global"), two principals of which serve on our Board of
Directors, has committed to exercise its basic subscription
privilege in the rights offering to the extent of at least
$2,727,000.
- Michael G. Kerrison, our Chief Executive Officer and Chairman
of the Board, has committed to exercise his subscription
privileges in the rights offering for up to $100,000, subject
to availability of sufficient shares on an over-subscription
basis.
- L-R Global has also made a stand-by commitment that if the
rights offering is undersubscribed and, as a result, our
proceeds from the rights offering are less than $5,000,000,
L-R Global will purchase, at $0.90 per share, additional
shares of common stock to make up the shortfall, but only up to
$773,000. L-R Global's commitment is subject to the limitation
that in no event shall L-R Global's total investment exceed
$3,500,000.
As a result, we expect to receive minimum proceeds of $3.6 million from the
rights offering, even if no other stockholders exercise their subscription
rights. See "The Rights Offering - Purchase Commitments."
HOW WILL WE USE THE PROCEEDS FROM THE RIGHTS OFFERING?
We will use the proceeds from the rights offering for additional
working capital, to invest in research and development and to expand our
sales and marketing capabilities. See "Use of Proceeds."
HOW MANY SHARES WILL BE OUTSTANDING AFTER THE RIGHTS OFFERING?
The number of shares of common stock that will be outstanding
after the rights offering depends on the number of shares that are purchased.
If we sell all of the shares offered by this prospectus, then we will issue
6,151,382 new shares of common stock during the rights offering. In that
case, we will have approximately 14,354,000 shares of common stock
outstanding after the rights offering. Even if no other stockholders
exercise their subscription rights, L-R Global and Michael G. Kerrison have
committed to purchase a total of 4,000,000 shares of common stock from us in
the rights offering, in which case we will have approximately 12,202,000
shares of common stock outstanding after the rights offering.
<PAGE>
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WHAT IF I HAVE MORE QUESTIONS?
If you have more questions about the rights offering, please
contact our Chief Financial Officer, Philip D. Wolf, at PurchaseSoft, Inc.,
7301 Ohms Lane, Suite 220, Edina, Minnesota 55439, Telephone: 612-941-1500.
See "If You Have Questions."
A WARNING ABOUT FORWARD-LOOKING STATEMENTS
This prospectus contains and may incorporate by reference
"forward-looking" statements, including statements regarding our
expectations, beliefs, intentions or strategies regarding the future. Such
statements can be identified by the use of forward-looking terminology such
as "may," "will," "believe," "intend," "expect," "anticipate," "estimate,"
"continue," or other similar words. Variations on those or similar words, or
the negatives of such words, also may indicate forward-looking statements.
Although we believe that the expectations reflected in this prospectus are
reasonable, we cannot assure you that our expectations will be correct. We
have included a discussion entitled "Risk Factors" in this prospectus,
highlighting important factors that could cause our actual results to differ
materially from our expectations. If in the future you hear or read any
forward-looking statements concerning us, you should refer back to the
discussion of Risk Factors. The forward-looking statements in this
prospectus are accurate only as of its date. If our expectations change, or
if new events, conditions or circumstances arise, we are not required to, and
may not, update or revise any forward-looking statement in this prospectus.
These forward-looking statements include, but are not limited to,
expressions of interest in our PurchaseSoft-TM- software product, as well as
the potential for future orders of our software product or new products we
may later introduce. Forward-looking statements are inherently uncertain.
Our 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:
- our history of losses and accumulated deficit, inconsistent
revenues and the uncertainty of future profitability;
- the uncertainty of market acceptance of our PurchaseSoft-TM-
software product or any products introduced in the future;
- new management and the need to recruit sales, service and
implementation personnel;
- the intensity of competition in the software field;
- the rapid progress of technology in the industry in which we
participate;
<PAGE>
-7-
- our dependence on a single product; and
- the level of protection over our intellectual property and
proprietary rights.
In addition to the risks and uncertainties discussed below, you
can find additional information concerning risks and uncertainties that would
cause actual results to differ materially from those projected or suggested
in the forward-looking statements in our filings with the Securities and
Exchange Commission (the "SEC") and in our Annual Report on Form 10-KSB for
the year ended May 31, 1998. The forward-looking statements contained in this
prospectus represent our judgment as of the date of this prospectus, and you
should not unduly rely on such statements.
RISK FACTORS
INVESTING IN PURCHASESOFT'S COMMON STOCK IS VERY RISKY. YOU
SHOULD BE ABLE TO BEAR A COMPLETE LOSS OF YOUR INVESTMENT. YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING FACTORS AND OTHER INFORMATION IN THIS
PROSPECTUS BEFORE DECIDING TO INVEST IN, OR MAKE FURTHER INVESTMENTS IN, OUR
COMMON STOCK.
HISTORY OF LOSSES AND EXPECTATION OF FUTURE LOSSES; UNCERTAINTY
OF FUTURE PROFITABILITY. We had a net loss of approximately $2.3 million for
the fiscal year ended on May 31, 1998 and had an accumulated deficit of
approximately $16.9 million through May 31, 1998. We have experienced ongoing
losses from operations and expect such losses to continue until we generate
product sales in sufficient volume to offset expenses. We had revenues of
$616,639 for the fiscal year ended May 31, 1998 and $599,373 for the fiscal
year ended May 31, 1997. We do not expect to operate profitably unless and
until our sales of software products generate sufficient revenue to fund our
operations. We cannot assure you that our revenues will grow enough so that
PurchaseSoft will operate profitably.
CAPITAL REQUIREMENTS; UNCERTAINTY OF ADDITIONAL FUNDING. At
February 23, 1999, we had a cash balance of approximately $2,131,000. It is
difficult to predict the costs of the ongoing development of our software
products and of the rebuilding and expansion of our sales force and other
required personnel, as well as our working capital and other capital needs.
We cannot assure you that the revenues we generate, if any, from the sale of
our software products will be adequate to successfully market our software
products and to expand our sales force. We anticipate that we may have to
raise additional capital to fund continued operations. We cannot assure you
that any additional required capital will be available on acceptable terms,
if at all. If we are unable to raise additional capital on acceptable terms,
we may have to discontinue operations and liquidate. It is highly likely
that you will lose all of your investment in the event of any liquidation of
our assets.
PROVISION OF FUNDING BY L-R GLOBAL. Since April of 1997, we have
had limited sources of financing and L-R Global has been providing financial
support and funding our operations. On February 9, 1999, L-R Global lent us
$2 million in order to allow us
<PAGE>
-8-
to maintain liquidity and adequate levels of working capital. L-R Global has
committed to exercise its basic subscription privilege in an amount of at
least $2,727,000 in the rights offering and intends to pay for its purchase
of shares in part through the cancellation of debt to L-R Global under the $2
million note. L-R Global has also made a stand-by commitment that if the
rights offering is undersubscribed and, as a result, our proceeds from the
rights offering are less than $5,000,000, L-R Global will purchase, at $0.90
per share, additional shares of common stock to make up the shortfall, but
only up to $773,000. L-R Global's commitment is subject to the limitation
that in no event shall L-R Global's total investment exceed $3,500,000. See
"The Rights Offering - Purchase Commitments" and "Use of Proceeds." We cannot
assure you that L-R Global will continue to render financial support should
we need additional financing for continued operations. If L-R Global were to
discontinue its financial support, we cannot assure you that alternative
sources of financing will be available or that the terms of alternative
resources will be as favorable to us.
UNCERTAINTY OF MARKET ACCEPTANCE OF PURCHASESOFT SOFTWARE. We
have invested heavily in research for, and development of, our core
purchasing and materials management software system - PurchaseSoft-TM-.
Although we feel our GT Purchase PRO product has been received favorably in
the market place, we cannot assure you that our PurchaseSoft-TM- product will
achieve market acceptance. We believe that our history of financial
performance has negatively affected our image in the marketplace and that we
may have forfeited business from potential customers who expressed concerns
about our financial status and ability to remain solvent. We believe that
the equity proceeds from the rights offering, in which we expect to raise a
minimum of $3.6 million based upon commitments we have already received, will
position us to overcome existing and potential future customers' concerns
regarding our viability. We believe our largest challenge is to gain
widespread market acceptance of our PurchaseSoft-TM- software product as well
as any future products we may introduce. Failure to obtain market acceptance
would have a material adverse effect on our business.
NEW MANAGEMENT, ABILITY TO RECRUIT SALES, SERVICE, AND
IMPLEMENTATION PERSONNEL. Although three members of our management team have
been with us for more than one year, and two of those for more than four
years, our new management has a very limited history in operating
PurchaseSoft; although our managers are experienced in managing companies
facing challenges similar to those being faced by PurchaseSoft. We cannot
assure you that our management will be successful in meeting planned
objectives for PurchaseSoft. Our ability to achieve anticipated revenues
depends substantially upon our ability to attract on a timely basis, and
retain, skilled personnel, especially key management, sales, support, and
implementation personnel. We believe that our future success will depend in
large part on our ability to attract and retain highly skilled technical,
managerial, marketing, and professional services personnel to ensure the high
quality of products and services we seek to provide to our customers.
Competition for such personnel, in particular for product development and
implementation personnel, is intense, and we compete in the market for such
personnel against numerous companies, including larger, more established
companies with significantly greater financial resources than we have. We
cannot assure you that we will
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be successful in attracting and retaining skilled personnel. Our inability
to attract and retain qualified personnel would have a material adverse
effect on our business.
INTENSE COMPETITION. The software products industry is intensely
competitive. We have numerous competitors in the United States and abroad.
Our competitors range from large ERP vendors (such as SAP, BAAN, Oracle and
PeopleSoft) to medium-sized vendors (such as QAD and Symix) to industry
specific and best of breed vendors (such as Ariba). Many of these
competitors have greater financial and other resources, larger research and
development staffs and more effective marketing organizations than we do.
These competitors all offer software products performing functions similar to
our products. The market in which we compete is undergoing tremendous growth
and we believe that this will invite new competitors. We cannot assure you
that our competitors do not have or will not offer or develop products that
are superior to our 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 our potential customers and
offer applications that compete in our markets. As a result, competition
(including pricing competition) may increase, which could result in price
reductions and loss of market share. We may also face market resistance from
potential customers within the large installed base of legacy systems, which
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 we have, may enter the market or
increase their market share by acquiring or entering into alliances with
PurchaseSoft's competitors. We cannot assure you that we will be able to
compete successfully against our competitors; competitive pressures we face
may adversely affect our financial performance.
RAPID TECHNOLOGICAL CHANGE. The market for our 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 our
existing products and products currently under development obsolete and
unmarketable. Accordingly, our future success will depend in part upon our
ability to enhance our 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 us to
anticipate or respond adequately to technological developments or end-user
requirements, or any significant delays in product development or
introduction, could severely damage our competitive position and have a
material adverse effect on revenues. We cannot assure you that we will be
successful in developing and marketing new products or product enhancements
on a timely basis or that we will not experience significant delays in the
future which could have a material adverse effect on our results of
operations. In addition, there can be no assurance that new products or
product enhancements we develop will achieve market acceptance.
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DEPENDENCE ON A SINGLE PRODUCT. We expect to derive substantially
all of our revenues in the near term from the sale of our PurchaseSoft-TM-
software product and related support services. Accordingly, any event that
adversely affects revenue generated from the sale of software or from the
professional fees derived from the installation of our PurchaseSoft-TM-
software 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 adverse effect on our results of operations. Our future financial
performance will depend on the continued development and introduction of new
and enhanced versions of PurchaseSoft-TM- and other products and on customer
acceptance of these new enhanced products.
NEW PRODUCT DEVELOPMENT. We are in the process of designing a
new architecture for our flagship product, PurchaseSoft-TM- 5.0, which will
move the product from a two-tiered to three-tiered design. The advantage of
a three-tiered design is that it will allow our product to support more users
by concentrating network traffic, distributing network processing loads, and
also facilitate more efficient and timely maintenance and upgrading of
software applications. In addition we are developing a web-based version of
our product written in JAVA. See the discussion under "PurchaseSoft - Our
Products." Most of our working capital allocated to research and product
development is being channeled towards the design of this next generation of
products. We cannot guarantee you that our design and development of these
products will achieve the desired results, nor can we assure you that we will
be able to successfully develop the products on a timely basis. Even if
development is completed as planned, we cannot assure you that we will be
able to market new products or new versions of products successfully. The
failure of new products to gain market acceptance, or our inability to
introduce products compatible with ever-changing technology on a timely
basis, would damage our ability to compete in the marketplace and would have
an adverse effect on our business and operations.
FLUCTUATION IN QUARTERLY OPERATING RESULTS. Our revenues and
operating results can vary substantially from quarter to quarter. Sales
revenues in any quarter are largely dependent on aggregate contracting
activity and our ability to recognize revenue in that quarter in accordance
with our revenue recognition policies. Revenues may vary from quarter to
quarter due to variances in prior quarter contracting activity which impacts
revenue on a lag and may not reflect positively or adversely our future
financial performance. Our sales cycle is relatively long and variable. Our
ability to increase revenue is dependent on our ability to grow sales
activity which provides opportunities for consulting, training and subsequent
maintenance revenues. Additionally, we cannot assure you that we will be
able to recruit, hire, and train sufficient numbers of qualified consultants
to perform such services. These fluctuations make it likely that in one or
more future quarters our operating results will be below the expectations of
public securities market analysts. Performance below market analysts
expectations would likely have an adverse material effect on the price of our
common stock.
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INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS. We 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 our proprietary software. We cannot assure you,
however, that in spite of these precautions, an unauthorized third party will
not copy or reverse-engineer certain portions of our products or obtain and
use information that we regard as proprietary. In addition, the laws of some
foreign countries do not protect our proprietary rights to the same extent as
do the laws of the United States. There can be no assurance that the
mechanisms we use to protect our software will be adequate or that our
competition will not independently develop software products that are
substantially equivalent or superior to our software products. We expect
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 us to enter into royalty or licensing
arrangements. These royalty or license arrangements, if required, may not be
available on terms acceptable to us, or at all.
SHARES ELIGIBLE FOR FUTURE SALE. Assuming that the holders of our
outstanding options and warrants exercise their respective securities, we
would have to issue a total of up to approximately 2,815,000 additional
shares of common stock. Our management is of the opinion that, if a
substantial number of such shares were offered at one time, such an offering
would likely have an adverse effect on the market price for the common stock.
In addition, if the market price were to decline because of such an offering
of shares, management is of the opinion that such a development may adversely
affect our ability to raise additional capital in the equity markets, when
and if necessary, at a price and at a time favorable to us.
ABSENCE OF DIVIDENDS. We have never declared or paid cash
dividends. We do not intend to declare or pay any cash dividends in the
foreseeable future.
YEAR 2000 COMPLIANCE. We believe that our PurchaseSoft-TM-
product is year 2000 compliant, however our customers' hardware systems on
which our product is installed may contain other software applications, some
of which are integral to the function of the system or inter-operate with our
product, that may not be year 2000 compliant. Any failure of such equipment
or its installed base of software is likely to adversely affect the operation
of our product. Our business, financial condition or results of operations
could be materially adversely affected by the failure of our saleable
software products, or those provided by other parties, to properly manage
dates beyond 1999.
We are conducting a comprehensive review of the year 2000
compliance of our significant internal information systems. To date, we
believe that the significant business, accounting and operations software we
use internally are either compliant or can be remediated without material
impact on our business operations. However, we cannot assure you that we
will not experience difficulties with any necessary conversion of these
systems. Our business, financial condition or results of operations could be
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materially adversely affected by the failure of our internal systems and
internal software applications to properly manage dates beyond 1999.
DILUTION OF YOUR PERCENTAGE OWNERSHIP OF PURCHASESOFT. If you do
not exercise all of your subscription rights, you may suffer significant
dilution of your percentage ownership of PurchaseSoft relative to
stockholders who exercise their subscription rights. For example, if you own
100,000 shares of common stock before the rights offering, or 1.22% of the
equity of PurchaseSoft, and you exercise none of your subscription rights
while all other subscription rights are exercised through the basic
subscription privilege or over-subscription privilege, then your percentage
ownership will be reduced to 0.70%.
RISKS ASSOCIATED WITH EXERCISING SUBSCRIPTION RIGHTS. We cannot
assure you that the public trading market price of our common stock will not
decline before the subscription rights expire. If you exercise your
subscription rights and then the public trading market price of the common
stock decreases below $0.90, then you will have committed to buy shares of
common stock at a price above the prevailing market price. Moreover, we
cannot assure you that following the exercise of subscription rights you will
be able to sell your shares of common stock at a price equal to or greater
than the subscription price. Until certificates are delivered upon
expiration of the rights offering, you may not be able to sell the shares of
our common stock you purchase in the rights offering. Certificates
representing shares of PurchaseSoft common stock purchased will be delivered
as soon as practicable after expiration of the rights offering. We will not
pay you interest on funds delivered to the Subscription Agent pursuant to the
exercise of rights.
NO REVOCATION OF EXERCISE OF SUBSCRIPTION RIGHTS; CANCELLATION OF
RIGHTS OFFERING. Once you exercise your subscription rights, you may not
revoke the exercise. If we elect to withdraw or terminate the rights
offering, neither we nor the Subscription Agent will have any obligation with
respect to the subscription rights except to return, without interest, any
subscription payments.
DETERMINATION OF THE SUBSCRIPTION PRICE. The subscription price
was set by a special committee of our Board of Directors, which did not
include Michael Kerrison or any directors affiliated with L-R Global. The
subscription price does not necessarily bear any relationship to the book
value of our assets, past operations, cash flows, losses, financial condition
or any other established criteria for value. You should not consider the
subscription price as an indication of the value of PurchaseSoft. See "The
Rights Offering - Determination of Subscription Price."
VOLATILITY OF STOCK PRICE. Based on the trading history of our
common stock, we believe that certain factors cause the market price of the
our stock to fluctuate significantly. These factors include, without
limitation:
- quarterly fluctuations in our financial results;
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- announcements of technological innovations or new products by
us or our competitors;
- market conditions in the software industry, and in the
industries that purchase our products;
- changes in relationships with our customers; and
- the size of the public float of the our common stock (which
will depend, in part, on the number of shares of common stock
purchased or acquired by you and other stockholders in the
rights offering).
LIMITED MARKET FOR COMMON STOCK. Trading in our common stock is
presently conducted in the over-the-counter market. As a result, an investor
may find it difficult to dispose of, or to obtain accurate quotations as to
the price of, the common stock. Although our common stock is quoted on the
OTC Bulletin Board-Registered Trademark-, we cannot assure you that a
developed regular trading market will be sustained. The OTC Bulletin
Board-Registered Trademark-is an inter-dealer, over-the-counter market which
provides significantly less liquidity than a national stock exchange or
NASDAQ and quotes for stocks included on the OTC Bulletin Board-Registered
Trademark- are not listed in the financial sections of newspapers as are
those for a national securities exchange or NASDAQ. Therefore, the prices
for shares of common stock traded solely on the OTC Bulletin Board-Registered
Trademark- may be difficult to obtain, and purchasers of our common stock may
be unable to resell their common stock at or near its original offering
price, or at any price.
CONTROL BY MAJOR STOCKHOLDER. As of February 23, 1999, L-R Global
and two principals of L-R Global who serve on our Board of Directors in the
aggregate owned approximately 51.3% of our voting stock. L-R Global also
holds warrants presently exercisable for an aggregate of approximately
204,000 shares of common stock that if exercised prior to the rights offering
would increase its ownership of our voting stock by approximately 1.2%. The
rights offering could, and in fact is likely to, result in L-R Global owning
an even greater percentage of our common stock. L-R Global has enough votes
to approve or disapprove any matters that are determined by a majority vote
of our stockholders, and accordingly your ability to influence PurchaseSoft
through voting your shares is limited.
PURCHASESOFT
OUR HISTORY
In 1977 we began operations as a management consulting firm
specializing in purchasing and materials management. We were initially
incorporated under the laws of the State of New York with the name Schacher,
Greentree & Co., Inc. and we later changed our name to Greentree Software,
Inc. In 1985, we introduced our first software product for purchasing and
materials management, Computer Aided Purchasing-Registered Trademark-
("CAP") for use on IBM compatible personal computers. Since 1991, all of our
revenues have been derived from
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the sales and maintenance of software products and services. In November,
1998, we reincorporated in the State of Delaware by means of a migratory
merger and in the process changed our name to PurchaseSoft, Inc. to better
reflect our focus.
In May of 1994, we released our first Microsoft Windows and
client/server based purchasing and materials management software system, GT
Purchase PRO. We released GT Purchase PRO version 5.0 in March, 1996, which
was followed by the release of our significantly enhanced version 6.0 in May,
1997. In the fall of 1997, we changed the product name from GT Purchase PRO
to PurchaseSoft 2.0 consistent with the wider "enterprise" scope of our
software solution. The latest release, PurchaseSoft-TM- 5.0, was released in
November, 1998.
OUR PRODUCTS
PURCHASESOFT-TM- 5.0. PurchaseSoft-TM- 5.0 is a suite of
software modules that provides end-to-end operational support for strategic
procurement. The suite provides a complementary solution to a company's
existing financial, enterprise requirements planning ("ERP") and supply chain
management ("SCM") packages and can also be integrated with legacy systems.
The PurchaseSoft 5.0 suite includes the following modules:
- - Requisitioning - Inventory Management
- - Purchase Order Management - Invoice Matching
- - Receiving - Asset Tracking
- - Request for Quotations ("RFQ"s) - Advanced Analysis and Reporting
- - Quotations and Bid Analysis - Accounts Payable Interface
- - Data Integration and Migration - Blanket Orders
All of the modules are integrated, but some can also be purchased
separately to complement existing applications. The software suite routes
electronic purchase requisitions through the Internet, an intranet, corporate
local area networks (LANs), or to back-office solution processing.
Requisitions are created by making selections from online product and
services catalogs. For users requiring approval of requisitions before their
conversion into orders, the software suite has the capability of implementing
an authorization cycle established through user-defined workflow coordinated
through existing e-mail systems.
Requisitions can be converted to RFQs 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 a single requisition into multiple purchase orders, or multiple
requisitions into a single purchase order. A blanket purchase order feature
handles routine and repetitive purchases. Purchase orders can be sent to
suppliers through various media, including paper, fax, e-mail, or exported
for electronic data interface (EDI) exchange. Contracts, product
specifications, and other documents are managed as file attachments. The
system supports robust industry standard databases
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including Microsoft SQL Server and Oracle.
We designed our system to operate through the Internet as well as
intranet networks using a TCP/IP protocol. A thin client approach is
available for purchase requisitioners through their intranet, and remote
users with no wide area network (WAN) access can create and send requisitions
through an Internet web browser. In addition, supplier web sites can be
easily launched from within the system. The supplier file maintains URLs for
quick launch of a desktop web browser.
FUTURE PRODUCTS
We hope to introduce two new versions of our product within the
next year. Our current product, PurchaseSoft-TM- 5.0, is a two-tier product.
We are in the process of converting PurchaseSoft 5.0 to a three-tier product
and plan to begin delivery, in phases, in late summer of 1999.
Concurrently, we are developing a web-based version of
PurchaseSoft-TM- 5.0 written in JAVA. This JAVA product will have similar
functionality to PurchaseSoft 5.0, but will have a flexible architecture
designed to take advantage of technological advancements in the Internet and
intranets. We hope to begin a phased delivery of this JAVA product beginning
in the summer of 1999. We believe that delivering products compatible with a
range of technologies will optimize our ability to serve our customers on the
leading-edge of technology and provide companies with the ability to remain
state-of-the-art.
OUR MARKETPLACE
Electronic procurement and strategic sourcing automation are
emerging markets within the supply chain segment of software applications.
With the advent of and widespread usage of Internet/intranet technologies, an
enterprise can now efficiently deploy self-service applications, such as
material requisitions and approvals, on every desktop. This streamlines an
organization's expenditure cycle by enhancing supplier relationships and
streamlining purchasing control and management. To capture this market,
software vendors need to offer implementations of client/server,
Internet/intranet, and workflow technologies which have the flexibility to
operate with existing systems and may be tailored to a company's industry and
size of operations. Optimally, the applications should integrate best
practices purchasing with supplier management.
By targeting customers within fast-growing industries, our goal
is to gain momentum and capture an early market share of this emerging
market. To reach our goal, we have retained the services of a marketing
consulting firm to assist us in defining target market industries and
developing strategic sales and marketing messages. We currently have a
significant market research project in process to help focus our efforts in
these areas.
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DISTRIBUTION STRATEGY
We believe that the enterprise-wide, client/server and browser
markets, because they are emerging markets, afford the greatest immediate
revenue opportunity. Our strategy is:
- to build a direct sales force to sell directly to mid-range and
low-end Fortune 2000 accounts, and
- to seek partnerships and alliances with system integrators,
strategic partners and other software vendors
We cannot assure you that we will be successful in developing our alliance
and partner network or in recruiting a sales staff to meet our needs.
COMPETITION
We sell our products in the highly competitive market for
purchasing and procurement software. We face competition from several
sources ranging from large ERP vendors (such as SAP, Baan, Oracle and
PeopleSoft) to medium-sized vendors (such as QAD and Symix), as well as
industry specific vendors and best of breed vendors (such as Ariba). We
believe our products compete and compare favorably to those of our
competitors on the basis of product features, performance, and price.
However, we believe that our history of financial performance has negatively
affected our image in the marketplace and that we may have forfeited business
from potential customers who have expressed concerns about our financial
status and ability to remain solvent. We believe that the equity proceeds
raised in the rights offering, which we expect to raise a minimum of $3.6
million based upon commitments we have already received, will position us to
overcome existing and potential future customers' concerns regarding our
viability. However, it is difficult to predict what effect these issues may
have on our future market image, overall competitiveness, and ability to
market our products. We cannot assure you that we will be able to grow
sufficiently to enable us to compete effectively.
RESEARCH AND PRODUCT DEVELOPMENT
Since inception, we have made substantial investments in research
and development. In fiscal 1998, we spent approximately $227,000 on research
and development activities. We believe that timely development of new
software product enhancements to existing software products is essential to
build our position in the marketplace. We are also seeking to expand our
line of products in the marketplace, leveraging relationships with existing
customers and aggressively increasing market share.
As with any new software product, certain software "bugs" have
been identified in PurchaseSoft-TM- 5.0. We believe all of these have been
addressed and corrected; however, bugs may continue to be discovered in the
future. We have a formal quality
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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 the market.
We believe that all significant bugs with respect to the modules released to
date have been identified and corrected or are being corrected; however, it
is impossible for us to test every permutation our products may be subject
to, and future bugs may be identified.
SOFTWARE MAINTENANCE
We have generally sold software maintenance packages to our
customers in connection with sales of our products. These contracts
generally entitle participating customers to telephone support and upgrades,
as they become available. The proportion of our revenues arising from
maintenance arrangements has been increasing, and we intend to continue to
rely on the provision of support services as a means of generating revenue
and cash flow.
INTELLECTUAL PROPERTY
We have applied to register with the United States Patent and
Trademark Office the trademark "PurchaseSoft" for our purchasing and
materials management software product. We have sought, and will continue to
seek, the protection of all of our software and documentation through a
combination of contract, copyright, trademark and trade secret laws, as
appropriate. Existing copyright laws afford only limited protection. We
cannot assure you that these protections will be adequate or that our
competitors will not independently develop technologies that are superior to
our technology. We cannot assure you that third parties will not assert
infringement claims against us in the future. We intend to aggressively
protect our trademark, 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 we may not wish to commit funds to
commence or pursue such litigation, especially because the high costs could
adversely affect our operational results. Even if we commence litigation,
there is no assurance that we would prevail, or have adequate resources to
fully pursue any claims we may have or vigorously defend our position.
EMPLOYEES
As of February 23, 1999, we had twenty full-time employees
consisting of three executive officers, seven sales and marketing personnel,
seven development and support employees, and three administrative personnel.
In addition, we engage three independent contractors. None of these employees
or contractors is subject to a collective bargaining agreement. We believe
relations with our employees are good.
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RECENT DEVELOPMENTS
RESIGNATION OF CEO AND CHAIRMAN OF THE BOARD OF DIRECTORS
On January 31, 1999, Joseph D. Mooney resigned as Chief Executive
Officer, Chairman of the Board of Directors and a director of PurchaseSoft.
Michael G. Kerrison, a director, was elected to replace Mr. Mooney as Chief
Executive Officer and Chairman of the Board of Directors.
Mr. Kerrison, who formerly served as a consultant to PurchaseSoft
assisting principally with sales and marketing strategy, has been a member of
the Board of Directors since October 1998. From 1995 to 1998, Mr. Kerrison
was the Chief Executive Officer and an owner of North Central Consulting,
Inc., a company he founded specializing in information technology services
for the midrange market. Between 1984 and 1996, Mr. Kerrison founded and
successfully ran two other companies, Computer Options, Inc. and Maintenance
Innovators, Inc.
FUNDING BY L-R GLOBAL
In order to obtain working capital to implement our
reorganization and restructuring plans (described below), on February 9,
1999, we borrowed $2 million from L-R Global, and signed a demand promissory
note in return. Under the terms of this note, we must repay the principal
and interest due at any time upon the demand of L-R Global. L-R Global has
agreed to exercise its basic subscription privilege in the rights offering
for at least $2,727,000 and cancel the debt represented by the note as part
of the purchase price for shares purchased in the rights offering. L-R Global
has also made a stand-by commitment that if the rights offering is
undersubscribed and, as a result, our proceeds from the rights offering are
less than $5,000,000, L-R Global will purchase, at $0.90 per share,
additional shares of common stock to make up the shortfall, but only up to
$773,000. L-R Global's commitment is subject to the limitation that in no
event shall L-R Global's total investment exceed $3,500,000.
REORGANIZATION AND REFOCUS
On February 3, 1999, we announced our plans to reorganize and
refocus on our core competencies, specifically our deep domain expertise in
end-to-end organizational procurement. We will be targeting what we perceive
to be the growing electronic procurement market in mid-range companies and
low-end Fortune 2000 companies. We seek to exploit market opportunities by
providing business-to-business strategic procurement software and service
solutions that deliver rapid results and are designed to provide significant
returns on investment for companies implementing them.
As a part of our restructuring and refocus, we terminated several
employees across various departments whose function or skill set was
inconsistent with the focus on our current business strategy. In connection
with this restructuring and reorganization,
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we expect to take a one-time charge of approximately $750,000 in the third
quarter ending February 28, 1999 for severance pay and other restructuring
costs.
CASH BALANCE, LIQUIDITY, FINANCING
We currently have a cash balance of approximately $2,131,000 as
of February 23, 1999. Since April of 1998, L-R Global has been principally
responsible for providing financial support and funding our operations in
order to allow us to maintain liquidity and adequate levels of working
capital. Prior to obtaining funding from L-R Global, we had an insufficient
level of liquidity to maintain operations at their current levels. As has
been the case during previous periods, our levels of liquidity and capital
resources have impeded our pursuit of new initiatives.
MARKETING EFFORTS
For the fiscal year ended May 31, 1998, we generated total
revenues of $616,639. For the six months ended November 30, 1998, we
generated total revenues of $240,299 compared with $188,752 for the same
period in 1997. We intend to continue to apply efforts toward improving our
sales force and sales methods as an integral component of our marketing
strategy.
Based upon numerous meetings with current and prospective
customers, we believe that our new product initiatives, if successfully
brought to the market on a timely basis, will meet or exceed our targeted
market's needs in a cost-effective manner. We currently estimate a
phased-introduction of our next generation products beginning in the summer
of 1999. For more information, see "PurchaseSoft - Future Products."
BOARD OF DIRECTORS; MANAGEMENT COMPENSATION
Our board of directors currently consists of Brad Markowitz,
Jeffrey Pinkerton, Michael G. Kerrison, J. Murray Logan and Donald S.
LaGuardia. Joseph D. Mooney resigned as a director of PurchaseSoft on
January 31, 1999, and at the same time resigned as Chief Executive Officer
and Chairman of the Board of Directors.
We have agreed to pay Michael G. Kerrison an annual base salary
of $200,000, including $150,000 payable in cash and $50,000 payable in the
form of shares of common stock. In addition, Mr. Kerrison has been granted an
incentive stock option exercisable for an aggregate of up to 625,000 shares
of common stock of which 250,000 shares vest immediately. The remaining
375,000 share balance of the option to Mr. Kerrison will vest on an
accelerated basis if certain business plan milestones are exceeded, but in
any event such balance will vest by the end of the 57th month following the
date of grant.
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THE RIGHTS OFFERING
BEFORE EXERCISING OR SELLING ANY SUBSCRIPTION RIGHTS, YOU SHOULD
READ CAREFULLY THE INFORMATION SET FORTH UNDER "RISK FACTORS" BEGINNING ON
PAGE 7.
THE SUBSCRIPTION RIGHTS.
We are distributing non-transferable subscription rights to
stockholders who owned shares of our common stock on _____________, at no
cost to the stockholders. We will give you 0.75 subscription rights for each
share of common stock that you owned on _____________. You will not receive
fractional subscription rights during the rights offering, but instead we
will round your number of subscription rights up or down to the nearest whole
number. Each subscription right will entitle you to purchase one share of
common stock for $0.90. If you wish to exercise your subscription rights, you
must do so before 5 p.m., Eastern Standard Time, on __________, 1999. After
that date, the subscription rights will expire and will no longer be
exercisable.
BASIC SUBSCRIPTION PRIVILEGE.
Each subscription right will entitle you to receive, upon payment
of $0.90, one share of common stock. You will receive certificates
representing the shares that you purchase pursuant to your basic subscription
privilege as soon as practicable after __________, 1999, whether you exercise
your subscription rights immediately prior to that date or earlier.
OVER-SUBSCRIPTION PRIVILEGE.
Subject to the allocation described below, each subscription
right also grants you an over-subscription privilege to purchase additional
shares of common stock that are not purchased by other stockholders. You are
entitled to exercise your over-subscription privilege only if you exercise
your basic subscription privilege in full. If you wish to exercise your
over-subscription privilege, you should indicate the number of additional
shares that you would like to purchase in the space provided on your
subscription certificate. When you send in your subscription certificate, you
must also send the full purchase price for the number of additional shares
that you have requested to purchase (in addition to the payment due for
shares purchased through your basic subscription privilege). If the number of
shares remaining after the exercise of all basic subscription privileges is
not sufficient to satisfy all over-subscription privileges, you will be
allocated shares pro rata (subject to elimination of fractional shares), in
proportion to the number of shares you purchased through your basic
subscription privilege. However, if your pro rata allocation exceeds the
number of shares you requested on your subscription certificate, then you
will receive only the number of shares that you requested, and the remaining
shares from your pro rata allocation will be divided among other stockholders
exercising their over-subscription privileges. In addition, we have the
discretion to issue less than the total number of shares that may be
available for over-subscription requests.
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As soon as practicable after _________, 1999, American Stock
Transfer & Trust Company, the "Subscription Agent," will determine the number
of shares of common stock that you may purchase pursuant to the
over-subscription privilege. You will receive certificates representing these
shares as soon as practicable after __________, 1999. If you request and pay
for more shares than are allocated to you, we will refund that overpayment,
without interest. In connection with the exercise of the over-subscription
privilege, banks, brokers and other nominee holders of subscription rights
who act on behalf of beneficial owners will be required to certify to the
Subscription Agent and PurchaseSoft as to the aggregate number of
subscription rights that have been exercised, and the number of shares of
common stock that are being requested through the over-subscription
privilege, by each beneficial owner on whose behalf such nominee holder is
acting.
PURCHASE COMMITMENTS.
In order to obtain working capital, on February 9, 1999, we
borrowed $2 million from L-R Global, and signed a demand promissory note in
return. Under the terms of this note, we must repay the principal and
interest due at any time upon the demand of L-R Global. L-R Global has
agreed to exercise its basic subscription privilege in the rights offering
for at least $2,727,000 and cancel the debt represented by the note as part
of the purchase price for shares purchased in the rights offering. See
"Recent Developments - Funding by L-R Global."
Michael G. Kerrison, our Chief Executive Officer and Chairman of
the Board, has committed to exercise his subscription privileges in the
rights offering for up to $100,000, subject to the availability of sufficient
shares on an over-subscription basis.
L-R Global has also made a stand-by commitment that if the
rights offering is undersubscribed and, as a result, our proceeds from the
rights offering are less than $5,000,000, L-R Global will purchase, at $0.90
per share, additional shares of common stock to make up the shortfall, but
only up to $773,000. L-R Global's commitment is subject to the limitation
that in no event shall L-R Global's total investment exceed $3,500,000.
Accordingly, we expect to receive at least $3.6 million as a result of the
rights offering. If all subscription rights are exercised in the rights
offering, our gross proceeds of the rights offering will be $5,536,243.80.
NO RECOMMENDATIONS.
We are not making any recommendation as to whether or not you
should exercise your subscription rights. You should make your decision
based on your own assessment of your best interests.
EXPIRATION DATE.
The rights will expire at 5 p.m., Eastern Standard Time, on
__________, 1999. If you do not exercise your basic subscription privilege
and over-subscription privilege
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prior to that time, YOUR SUBSCRIPTION RIGHTS WILL BE NULL AND VOID. We will
not be required to issue shares of common stock to you if the Subscription
Agent receives your subscription certificate or your payment after that time,
regardless of when you sent the subscription certificate and payment, unless
you send the documents in compliance with the guaranteed delivery procedures
described below.
WITHDRAWAL RIGHT.
A committee of our disinterested directors may withdraw the
rights offering in its sole discretion at any time prior to or on
____________, 1999, for any reason (including, without limitation, a change
in the market price of the common stock). If we withdraw the rights offering,
any funds you paid will be promptly refunded, without interest or penalty.
DETERMINATION OF SUBSCRIPTION PRICE.
A special committee of our Board of Directors, which did not
include Michael Kerrison or any directors affiliated with L-R Global, decided
to charge the $0.90 per share subscription price after considering a variety
of factors including the historic and current market price of the common
stock, our business prospects, our history of losses, general conditions in
the securities market, our need for capital, alternatives available to us for
raising capital, the amount of proceeds desired, pricing of similar
transactions, the liquidity of our common stock, the level of risk to our
investors, and the need to offer shares at a price that would be attractive
to our investors relative to the current trading price of our common stock.
The $0.90 per share subscription price should not be considered an indication
of the actual value of PurchaseSoft or our common stock. We cannot assure you
that the market price of the common stock will not decline during the rights
offering. We also cannot assure you that you will be able to sell shares of
common stock purchased during the rights offering at a price equal to or
greater than $0.90 per share. See "Determination of Offering Price."
TRANSFERABILITY OF SUBSCRIPTION RIGHTS.
Only you may exercise the basic subscription privilege and the
over-subscription privilege. You may not sell, give away or otherwise
transfer the basic subscription privilege or the over-subscription privilege.
EXERCISE OF SUBSCRIPTION RIGHTS.
You may exercise your subscription rights by delivering to the
Subscription Agent on or prior to __________, 1999:
- A properly completed and duly executed subscription certificate;
- Any required signature guarantees; and
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- Payment in full of $0.90 per share of common stock to be
purchased through the basic subscription privilege and the
over-subscription privilege.
You should deliver your subscription certificate and payment to the
Subscription Agent at the address shown under the heading "Subscription
Agent." We will not pay you interest on funds delivered to the Subscription
Agent pursuant to the exercise of rights.
METHOD OF PAYMENT.
Payment for the shares must be made by check or bank draft
(cashier's check) drawn upon a United States bank or a postal, telegraphic or
express money order payable to "AMERICAN STOCK TRANSFER & TRUST COMPANY, AS
SUBSCRIPTION AGENT". If you are purchasing an aggregate number of shares of
common stock totaling $500,000 or more, we may agree to an alternative
payment method. If you use an alternative payment method, the Subscription
Agent must receive the full amount of your payment in currently available
funds within one over-the-counter ("OTC") trading day prior to __________,
1999. Payment will be deemed to have been received by the Subscription Agent
only upon:
(A) clearance of any uncertified check;
(B) receipt by the Subscription Agent of any certified check or
bank draft drawn upon U.S. bank or of any postal, telegraphic or express
money order; or
(C) receipt of funds by the Subscription Agent through an
alternative payment method.
Please note that funds paid by uncertified personal check may
take at least five business days to clear. Accordingly, if you wish to pay
by means of an uncertified personal check, we urge you to make payment
sufficiently in advance of __________, 1999, to ensure that the payment is
received and clears before that date. We also urge you to consider payment
by means of a certified or cashier's check or money order.
GUARANTEED DELIVERY PROCEDURES.
If you want to exercise your subscription rights, but time will
not permit your subscription certificate to reach the Subscription Agent on
or prior __________, 1999, you may exercise your subscription rights if you
satisfy the following guaranteed delivery procedures:
(1) You send, and the Subscription Agent receives, payment in
full for each share of common stock being subscribed for through the basic
subscription privilege and the over-subscription privilege, on or prior to
__________, 1999;
(2) You send, and the Subscription Agent receives, on or prior to
__________, 1999, a notice of guaranteed delivery, substantially in the form
provided
<PAGE>
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with the attached instructions, from a member firm of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States. The notice of guaranteed delivery must
state your name, the number of subscription rights that you hold, the number
of shares of common stock that you wish to purchase pursuant to the basic
subscription privilege and the number of shares, if any, you wish to purchase
pursuant to the over-subscription privilege. The notice of guaranteed
delivery must guarantee the delivery of your subscription certificate to the
Subscription Agent within three OTC trading days following the date of the
notice of guaranteed delivery; and
(3) You send, and the Subscription Agent receives, your properly
completed and duly executed subscription certificate, including any required
signature guarantees, within three OTC trading days following the date of
your notice of guaranteed delivery. The notice of guaranteed delivery may be
delivered to the Subscription Agent in the same manner as your subscription
certificate at the addresses set forth under the heading "Subscription
Agent," or may be transmitted to the Subscription Agent by facsimile
transmission, to facsimile number (718) 236-2641. You can obtain additional
copies of the form of notice of guaranteed delivery by requesting them from
the Subscription Agent at the address set forth under the heading
"Subscription Agent."
SIGNATURE GUARANTEES.
Signatures on the subscription certificate must be guaranteed by
an Eligible Guarantor Institution, as defined in Rule 17Ad-15 of the
Securities Exchange Act of 1934, as amended, subject to the standards and
procedures adopted by the Subscription Agent. Eligible Guarantor Institutions
include banks, brokers, dealers, credit unions, national securities exchanges
and savings associations. Signatures on the subscription certificate do not
need to be guaranteed if either the subscription certificate provides that
the shares of common stock to be purchased are to be delivered directly to
the record owner of such subscription rights, or the subscription certificate
is submitted for the account of a member firm of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
SHARES HELD FOR OTHERS.
If you are a broker, a trustee or a depository for securities, or
you otherwise hold shares of common stock for the account of a beneficial
owner of common stock, you should notify the beneficial owner of such shares
as soon as possible to obtain instructions with respect to their subscription
rights. If you are a beneficial owner of common stock held by a holder of
record, such as a broker, trustee or a depository for securities, you should
contact the holder and ask him or her to effect transactions in accordance
with your instructions.
<PAGE>
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AMBIGUITIES IN EXERCISE OF SUBSCRIPTION RIGHTS.
If you do not specify the number of subscription rights being
exercised on your subscription certificate, or if your payment is not
sufficient to pay the total purchase price for all of the shares that you
indicated you wished to purchase, you will be deemed to have exercised the
maximum number of subscription rights that could be exercised for the amount
of the payment that the Subscription Agent receives from you. If your payment
exceeds the total purchase price for all of the subscription rights shown on
your subscription certificate, your payment will be applied, until depleted,
to subscribe for shares of common stock in the following order:
(1) to subscribe for the number of shares, if any, that you
indicated on the subscription certificate that you wished to purchase through
your basic subscription privilege;
(2) to subscribe for shares of common stock until your basic
subscription privilege has been fully exercised;
(3) to subscribe for additional shares of common stock pursuant
to the over-subscription privilege (subject to any applicable proration). Any
excess payment remaining after the foregoing allocation will be returned to
you as soon as practicable by mail, without interest or deduction.
REGULATORY LIMITATION
We will not be required to issue you shares of common stock
pursuant to the rights offering if, in our opinion, you would be required to
obtain prior clearance or approval from any state or federal regulatory
authorities to own or control such shares if, at the time the subscription
rights expire, you have not obtained such clearance or approval.
OUR DECISION BINDING.
All questions concerning the timeliness, validity, form and
eligibility of any exercise of subscription rights will be determined by us,
and our determinations will be final and binding. In our sole discretion, we
may waive any defect or irregularity, or permit a defect or irregularity to
be corrected within such time as we may determine, or reject the purported
exercise of any subscription right by reason of any defect or irregularity in
such exercise. Subscriptions will not be deemed to have been received or
accepted until all irregularities have been waived or cured within such time
as we determine in our sole discretion. Neither PurchaseSoft nor the
Subscription Agent will be under any duty to notify you of any defect or
irregularity in connection with the submission of a subscription certificate
or incur any liability for failure to give such notification.
<PAGE>
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NO REVOCATION.
After you have exercised your basic subscription privilege or
over-subscription privilege, YOU MAY NOT REVOKE THAT EXERCISE. You should not
exercise your subscription rights unless you are certain that you wish to
purchase additional shares of common stock.
SHARES OF COMMON STOCK OUTSTANDING AFTER THE RIGHTS OFFERING.
Assuming we issue all of the shares of common stock offered in the
rights offering, approximately 14,354,000 shares of common stock will be
issued and outstanding. This would represent a 75% increase in the number of
outstanding shares of common stock. IF YOU DO NOT EXERCISE YOUR BASIC
SUBSCRIPTION PRIVILEGE, THE PERCENTAGE OF COMMON STOCK THAT YOU HOLD WILL
DECREASE.
FEES AND EXPENSES.
We will pay all fees charged by the Subscription Agent. You are
responsible for paying any other commissions, fees, taxes or other expenses
incurred in connection with the exercise of the subscription rights. Neither
PurchaseSoft nor the Subscription Agent will pay such expenses.
SUBSCRIPTION AGENT.
We have appointed American Stock Transfer & Trust Company as
Subscription Agent for the rights offering. The Subscription Agent's address
for packages sent by mail or overnight delivery is:
American Stock Transfer & Trust Company
Attention: Rights Agent
6201 Fifteenth Avenue, 3rd Floor
Brooklyn, NY 11219
The Subscription Agent's telephone number is 800-937-5449 (or
718-921-8200) and its facsimile number is 718-236-2641. You should deliver
your subscription certificate, payment of the subscription price and notice
of guaranteed delivery (if any) to the Subscription Agent. We will pay the
fees and certain expenses of the Subscription Agent, which we estimate will
total __________. We have also agreed to indemnify the Subscription Agent
from any liability which it may incur in connection with the rights offering.
IMPORTANT
PLEASE CAREFULLY READ THE INSTRUCTIONS ACCOMPANYING THE SUBSCRIPTION
CERTIFICATE AND FOLLOW THOSE INSTRUCTIONS IN DETAIL. DO NOT SEND SUBSCRIPTION
CERTIFICATES DIRECTLY TO US. YOU ARE RESPONSIBLE FOR CHOOSING THE PAYMENT AND
DELIVERY METHOD FOR YOUR
<PAGE>
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SUBSCRIPTION CERTIFICATE, AND YOU BEAR THE RISKS ASSOCIATED WITH SUCH
DELIVERY. IF YOU CHOOSE TO DELIVER YOUR SUBSCRIPTION CERTIFICATE AND PAYMENT
BY MAIL, WE RECOMMEND THAT YOU USE REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED. WE ALSO RECOMMEND THAT YOU ALLOW A SUFFICIENT
NUMBER OF DAYS TO ENSURE DELIVERY TO THE SUBSCRIPTION AGENT AND CLEARANCE OF
PAYMENT PRIOR TO __________, 1999. BECAUSE UNCERTIFIED PERSONAL CHECKS MAY
TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR, WE STRONGLY URGE YOU TO PAY, OR
ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIER'S CHECK OR MONEY ORDER.
IF YOU HAVE QUESTIONS
If you have questions or need assistance concerning the procedure for
exercising subscription rights, or if you would like additional copies of
this prospectus, the Instructions, or the Notice of Guaranteed Delivery, you
should contact us at:
PurchaseSoft, Inc.
7301 Ohms Lane, Suite 220
Edina, Minnesota 55439
Attention: Philip D. Wolf, Chief Financial Officer
Telephone: 612-941-1500
DESCRIPTION OF COMMON STOCK
As a holder of common stock, you are entitled to one vote for each share
held of record on all matters submitted to a vote of our stockholders. You
are entitled to receive dividends, if any, declared by our Board of
Directors. If we liquidate PurchaseSoft, you will be entitled to share
ratably with the other stockholders in the distribution of all assets that we
have left after we pay all of our liabilities. You have no preemptive rights
to subscribe for additional shares of common stock and no right to convert
your common stock into any other securities. In addition, you do not have
the benefit of a sinking fund for your shares of common stock. Your common
stock is not redeemable by PurchaseSoft.
PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS
THAT MAY HAVE ANTI-TAKEOVER EFFECTS
Certain provisions of our Certificate of Incorporation and by-laws may
have an anti-takeover effect. These provisions may delay, defer or impede a
takeover attempt of PurchaseSoft even if it would be in your best interest.
However, because L-R Global can currently (and after the rights offering will
continue to be able to) elect all members of our Board of Directors and
control the outcome of most matters submitted to a vote of stockholders, such
provisions currently have limited significance to you. See "Risk Factors -
Control by Major Stockholder."
<PAGE>
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The Certificate of Incorporation provides that you and the other
stockholders may not take action by written consent but only by conducting an
annual or special meeting of stockholders. Our by-laws provide that special
meetings of stockholders may be called only upon the request of holders of
more than one third of the outstanding PurchaseSoft common stock, by the
Chairman of the Board or by a majority of the Board of Directors (calculated
as if there were no vacancies on the Board of Directors).
As of November 20, 1998, we became a Delaware corporation. Section 203
of the Delaware General Corporation Law prohibits certain transactions
between a Delaware corporation and an "interested stockholder." An
interested stockholder is defined as a person who, together with any
affiliates or associates of such person, beneficially owns, directly or
indirectly, 15% or more of the outstanding voting shares of a Delaware
corporation. This provision prohibits certain business combinations between
an interested stockholder and a corporation for a period of three years after
the date the interested stockholder becomes and interested stockholder. The
term "business combination" is broadly defined to include mergers,
consolidations, sales or other dispositions of assets having a total value in
excess of 10% of the consolidated assets of the corporation, and certain
transactions that would increase the interested stockholder's proportionate
share ownership in the corporation.
This prohibition is effective unless:
- The business combination is approved by the corporation's board of
directors prior to the time the interested stockholder becomes an
interested stockholder;
- The interested stockholder acquired at least 85% of the voting
stock of the corporation (other than stock held by directors who
are also officers or by certain employee stock plans) in the
transaction in which it becomes an interested stockholder; or
- The business combination is approved by a majority of the board of
directors and by the affirmative vote of 66 2/3% of the outstanding
voting stock that is not owned by the interested stockholder.
In general, the prohibitions do not apply to business combinations with
persons who were stockholders prior to the corporation becoming subject to
Section 203. L-R Global is not subject to the restrictions on "business
combinations" under Section 203.
USE OF PROCEEDS
We will apply the net proceeds from the rights offering to finance our
working capital, to invest in research and development, to expand our
sales and marketing capabilities and for other capital requirements. On
February 9, 1999, we borrowed $2 million from L-R Global, and signed a demand
promissory note in return. Under the terms of this note, we must repay the
principal and interest due at any time upon the demand of L-R Global. L-R
Global has agreed to exercise its basic subscription privilege in the
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rights offering to the extent of at least $2,727,000 and cancel the debt
represented by the note as part of the purchase price for shares purchased in
the rights offering.
Assuming that stockholders exercise all of the subscription rights
offered, we will receive gross proceeds from the rights offering of
$5,536,243.80. We expect to receive minimum proceeds of approximately $3.6
million, in light of the stand-by commitment of L-R Global, as well as the
commitment by Michael G. Kerrison to exercise up to $100,000 of subscription
rights, in each case to the extent that available shares are not fully
subscribed for by other stockholders.
If we receive only the minimum proceeds of $3.6 million as committed by
L-R Global and Michael G. Kerrison, or if we fail to attain sufficient
revenue levels, we may require additional capital. We cannot assure you that
such capital will be available on satisfactory terms.
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PRICE RANGE OF COMMON STOCK
Our common stock is listed for quotation under the symbol "PURC" on the
National Association of Securities Dealers OTC Bulletin Board-Registered
Trademark-. The following table sets forth the range of high and low bid
quotations of the common stock for each quarterly period during the current
fiscal year ending May 31, 1999 and the two fiscal years ended May 31, 1998
and May 31, 1997 as reported by OTC Bulletin Board-Registered Trademark-.
<TABLE>
<CAPTION>
BID
--------------------
PERIOD HIGH LOW
------ ------- -------
<S> <C> <C>
FISCAL YEAR ENDING MAY 31, 1999
First Quarter $2.6250 $1.0310
Second Quarter $1.7500 $0.6870
Third Quarter N/A N/A
Fourth Quarter N/A N/A
FISCAL YEAR ENDED MAY 31, 1998
First Quarter $3.3000 $1.0000
Second Quarter $1.9370 $1.1250
Third Quarter $1.6250 $0.9370
Fourth Quarter $3.7500 $0.9060
FISCAL YEAR ENDED 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
</TABLE>
Note: All information in the table above reflects the one-for-six reverse
stock split of our common stock which took place on July 22, 1997.
As of January 31, 1999, there were approximately 400 holders of record
of our common stock. We believe, based on the number of proxy materials
distributed in connection with our 1999 Annual Meeting of Shareholders, that
the number of beneficial owners as of September, 1998 was approximately
2,000.
DETERMINATION OF OFFERING PRICE
A special committee of our Board of Directors, which did not include
Michael Kerrison or directors affiliated with L-R Global, decided to charge a
$0.90 per share subscription price after considering a variety of factors,
including the historic and current market price of the common stock, our
business prospects, our history of losses, general conditions in the
securities market, our need for capital, alternatives available to us for
raising capital, the amount of proceeds desired, pricing of similar
transactions, the liquidity of our common stock, the level of risk to our
investors, and the need to offer
<PAGE>
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shares at a price that would be attractive to our investors relative to the
current trading price of our common stock. The $0.90 per share price should
not be considered an indication of the actual value of PurchaseSoft or our
common stock. We cannot assure you that the market price of the common stock
will not decline during the rights offering. We also cannot assure you that
you will be able to sell shares of common stock purchased during the rights
offering at a price equal to or greater than $0.90 per share.
PLAN OF DISTRIBUTION
On or about _______, 1999, we will distribute the subscription rights
and copies of this prospectus to individuals who owned shares of common stock
on _____________. If you wish to exercise your subscription rights and
purchase shares of common stock, you should complete the subscription
certificate and return it, with payment for the shares, to the Subscription
Agent, American Stock Transfer & Trust Company, at the address on page 26.
See "The Rights Offering - Exercise of Subscription Rights." If you have any
questions, you should contact our Chief Financial Officer, Philip D. Wolf, at
the telephone number and address on page 27.
L-R Global has made a stand-by commitment that if the rights offering
is undersubscribed and, as a result, our proceeds from the rights offering
are less than $5,000,000, L-R Global will purchase, at $0.90 per share,
additional shares of common stock to make up the shortfall, but only up to
$773,000. L-R Global's commitment is subject to the limitation that in no
event shall L-R Global's total investment exceed $3,500,000.
We have agreed to pay the Subscription Agent a fee of $__________ plus
certain expenses. We estimate that our total expenses in connection with the
rights offering will be $_______.
FEDERAL INCOME TAX CONSIDERATIONS
The following summarizes the material federal income tax considerations
of the rights offering to you and PurchaseSoft. This summary is based on
current law, which is subject to change at any time, possibly with
retroactive effect. This summary is not a complete discussion of all federal
income tax consequences of the rights offering, and, in particular may not
address federal income tax consequences applicable to stockholders subject to
special treatment under federal income tax law. In addition, this summary
does not address the tax consequences of the rights offering under applicable
state, local or foreign tax laws. This discussion assumes that your shares of
common stock and the subscription rights and shares issued to you during the
rights offering constitute capital assets.
Receipt and exercise of the subscription rights distributed pursuant to
the rights offering is intended to be nontaxable to stockholders, and the
following summary assumes you will qualify for such nontaxable treatment. If,
however, the rights offering does not qualify as nontaxable, you would be
treated as receiving a taxable distribution
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equal to the fair market value of the subscription rights on their
distribution date. The distribution would be taxed as a dividend to the
extent made out of PurchaseSoft's current or accumulated earnings and
profits; any excess would be treated first as a return of your basis
(investment) in your PurchaseSoft stock and then as a capital gain.
Expiration of the subscription rights would result in a capital loss.
THIS DISCUSSION IS INCLUDED FOR YOUR GENERAL INFORMATION ONLY. YOU
SHOULD CONSULT YOUR TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES TO YOU OF
THE RIGHTS OFFERING IN LIGHT OF YOUR PARTICULAR CIRCUMSTANCES, INCLUDING ANY
STATE, LOCAL AND FOREIGN TAX CONSEQUENCES.
TAXATION OF STOCKHOLDERS
RECEIPT OF A SUBSCRIPTION RIGHT. You will not recognize any gain or
other income upon receipt of a subscription right.
TAX BASIS AND HOLDING PERIOD OF SUBSCRIPTION RIGHTS. Your tax basis in
each subscription right will effectively depend on whether you exercise the
subscription right or allow the subscription right to expire.
If you exercise a subscription right, your tax basis in the subscription
right will be determined by allocating the tax basis of your common stock on
which the subscription right is distributed between the common stock and the
subscription right, in proportion to their relative fair market values on the
date of distribution of the subscription right. However, if the fair market
value of your subscription rights is less than 15 percent of the fair market
value of your existing shares of common stock, then the tax basis of each
subscription right will be deemed to be zero, unless you elect, by attaching
an election statement to your federal income tax return for 1999, to allocate
tax basis to your subscription rights.
If you allow a subscription right to expire, it will be treated as
having no tax basis.
Your holding period for a subscription right will include your holding
period for the shares of common stock upon which the subscription right is
issued.
EXPIRATION OF SUBSCRIPTION RIGHTS. You will not recognize any loss upon
the expiration of a subscription right.
EXERCISE OF SUBSCRIPTION RIGHTS. You generally will not recognize a gain
or loss on the exercise of a subscription right. The tax basis of any share
of common stock that you purchase through the rights offering will be equal
to the sum of your tax basis (if any) in the subscription right exercised and
the price paid for the share. The holding period of the shares of common
stock purchased through the rights offering will begin on the date that you
exercise your subscription rights.
<PAGE>
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Taxation of PurchaseSoft
We will not recognize any gain, other income or loss upon the issuance
of the subscription rights, the lapse of the subscription rights, or the
receipt of payment for shares of common stock upon exercise of the
subscription rights.
Information Reporting and Backup Withholding
Under the backup withholding rules of the Internal Revenue Code, you may
be subject to 31% backup withholding with respect to any reportable payments
made to you pursuant to the rights offering. You will not be subject to
backup withholding if you:
- are a corporation or fall within certain other exempt categories
and, when required, demonstrate that fact; or
- provide a correct taxpayer identification number and certify under
penalty of perjury that your taxpayer identification number is
correct and that you are not subject to backup withholding because
you previously failed to report all dividends and interest income.
Any amount withheld under these rules will be credited against your
federal income tax liability. We may require you to establish your exemption
from backup withholding or make other arrangements with respect to the
payment of backup withholding.
STATE AND FOREIGN SECURITIES LAWS
The rights offering is not being made in any state or other jurisdiction
in which it is unlawful to do so, nor are we selling or accepting any offers
to purchase any shares of common stock to you if you are a resident of any
such state or other jurisdiction. We may delay the commencement of the rights
offering in certain states or other jurisdictions in order to comply with the
securities law requirements of such states or other jurisdictions. It is not
anticipated that there will be any changes in the terms of the rights
offering. In our sole discretion, we may decline to make modifications to the
terms of the rights offering requested by certain states or other
jurisdictions, in which case stockholders who live in those states or
jurisdictions will not be eligible to participate in the rights offering.
INDEMNIFICATION
Section 145 of the Delaware General Corporation Law empowers a Delaware
corporation to indemnify its officers and directors and certain other persons
in certain instances.
Our Certificate of Incorporation and by-laws provide for advancement of
expenses and indemnification of our officers and directors and certain other
persons
<PAGE>
-34-
against liabilities and expenses incurred by any of them in certain
proceedings and under certain conditions to the fullest extent allowed under
Delaware law.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"), may be permitted to
directors, officers and controlling persons of PurchaseSoft pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
LEGAL MATTERS
The validity of the shares of common stock offered by this prospectus
will be passed upon for us by Bingham Dana LLP, Boston, Massachusetts.
EXPERTS
The financial statements incorporated in this prospectus by reference to
the Annual Report on Form 10-KSB for the year ended May 31, 1998, have been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
IF YOU WOULD LIKE MORE INFORMATION
PurchaseSoft files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy this
information at the SEC's public reference rooms, which are located at:
450 Fifth Street, NW
Washington, DC 20549
7 World Trade Center, Suite 1300
New York, NY 10048
500 West Madison Street, Suite 1400
Chicago, IL 60661-2511
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. This information is also available online through the SEC's
Electronic Data Gathering, Analysis, and Retrieval System (EDGAR), located on
the SEC's web site (http://www.sec.gov).
<PAGE>
-35-
Also, we will provide you (free of charge) with any of our
documents filed with the SEC. To get your free copies, please call or write
to:
Philip D. Wolf,
Chief Financial Officer
PurchaseSoft, Inc.
7301 Ohms Lane, Suite 220
Edina, Minnesota 55439
Telephone: 612-941-1500
We have filed a registration statement with the SEC on Form S-3 with
respect to the rights offering. This prospectus is a part of the registration
statement, but the prospectus does not repeat important information that you
can find in the registration statement, reports and other documents that we
filed with the SEC. The SEC allows us to "incorporate by reference" those
documents, which means that we can disclose important information to you by
referring you to other documents. The documents that are incorporated by
reference are legally considered to be a part of this prospectus. The
documents incorporated by reference are:
(1) our Annual Report on Form 10-KSB for the year ended May 31, 1998;
(2) our Quarterly Report on Form 10-QSB for the period ended August 31,
1998 and our Quarterly Report on Form 10-QSB for the period ended November
30, 1998;
(3) our Current Report on Form 8-K filed June 10, 1998 and our Current
Report on Form 8-K filed November 25, 1998;
(4) the description of our common stock contained in our Registration
Statement on Form 8-A filed with the SEC pursuant to Section 12(g) of the
Exchange Act; and
(5) any filings with the SEC pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act of 1934 between the date of this prospectus and the
expiration of the rights offering.
As you read the above documents, you may find some inconsistencies in
information from one document to another. If you find inconsistencies between
the documents, or between a document and this prospectus, you should rely on
the statements made in the most recent document.
You should rely only on the information in this prospectus or
incorporated by reference. We have not authorized anyone to provide you with
any different information.
This prospectus is not an offer to sell nor is it seeking an offer to
buy these securities in any state where the offer or sale is not permitted.
This prospectus is not an
<PAGE>
-36-
offer to sell nor is it seeking an offer to buy securities other than the
shares of common stock to be issued pursuant to the rights offering. The
information contained in this prospectus is correct only as of the date of
this prospectus, regardless of the time of the delivery of this prospectus or
any sale of these securities.
------------
No action is being taken in any jurisdiction outside the United States
to permit a public offering of the common stock or possession or distribution
of this prospectus in any such jurisdiction. Persons who come into possession
of this prospectus in jurisdictions outside the United States are required to
inform themselves about and to observe any restrictions as to this offering
and the distribution of this prospectus applicable in the jurisdiction.
<PAGE>
PURCHASESOFT, INC. HAS NOT
AUTHORIZED ANY PERSON TO GIVE
YOU INFORMATION THAT DIFFERS
FROM THE INFORMATION IN THIS
PROSPECTUS. YOU SHOULD RELY
SOLELY ON THE INFORMATION
CONTAINED IN THIS PROSPECTUS.
THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE
SECURITIES, AND WE ARE NOT
SOLICITING OFFERS TO BUY 6,151,382 Shares
THESE SECURITIES IN ANY STATE of
WHERE THE OFFER OR SALE OF Common Stock
THESE SECURITIES IS NOT
PERMITTED. THE INFORMATION
IN THIS PROSPECTUS IS
ACCURATE ONLY AS OF THE DATE
OF THIS PROSPECTUS, EVEN IF
THE PROSPECTUS IS DELIVERED
TO YOU AFTER THE PROSPECTUS ------------
DATE, OR YOU BUY PURCHASESOFT PROSPECTUS
COMMON STOCK AFTER THE ------------
PROSPECTUS DATE.
"________", 1999
- ------------------------------
TABLE OF CONTENTS
- ------------------------------
Prospectus Summary ...........
A Warning About Forward-
Looking Statements .........
Risk Factors .................
PurchaseSoft .................
Recent Developments ..........
The Rights Offering ..........
If You Have Questions ........
Description of Common Stock ..
Provisions of the Certificate
of Incorporation and
By-Laws that May Have
Anti-Takeover Effects ......
Use of Proceeds ..............
Price Range of Common Stock ..
Determination of Offering
Price ......................
Plan of Distribution .........
Federal Income Tax
Considerations .............
State and Foreign Securities
Laws .......................
Indemnification ..............
Legal Matters ................
Experts ......................
If You Would Like
Additional Information .....
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the issuance and distribution of the
securities being registered are set forth in the following table (all amounts
except the registration fee and the listing fee are estimated):
<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fee ............................................... 1,540.00
Subscription Agent Fees and Expenses ............................... *
Legal Fees and Expenses ............................................ *
Blue Sky Fees and Expenses ......................................... *
Accounting Fees and Expenses ....................................... *
Printing and Engraving Expenses .................................... *
Miscellaneous Costs ................................................ *
Total ......................................................... *
</TABLE>
* To be filed by amendment.
All expenses in connection with the issuance and distribution of the
securities being offered shall be borne by the Registrant.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law empowers a Delaware
corporation to indemnify its officers and directors and certain other persons
to the extent and under the circumstances set forth therein.
The Certificate of Incorporation and the By-Laws of PurchaseSoft
provides for advancement of expenses and indemnification of officers and
directors of the Registrant and certain other persons against liabilities and
expenses incurred by any of them in certain stated proceedings and under
certain stated conditions to the fullest extent permissible under Delaware
law.
<PAGE>
-2-
<TABLE>
<CAPTION>
ITEM 16. EXHIBITS
<S> <C>
5.1 Opinion of Bingham Dana LLP.*
10.1 Demand Promissory Note, dated February 9, 1999, of PurchaseSoft,
Inc. to L-R Global Partners, L.P.
10.2 Agreement and General Release, dated as of January 31, 1999, by and
between Joseph D. Mooney and PurchaseSoft, Inc.
10.3 Compensation Agreement, dated as of February 1, 1999, by and
between PurchaseSoft, Inc. and Michael G. Kerrison.
23.1 Consent of Bingham Dana LLP (included in Exhibit 5.1).*
23.2 Consent of PricewaterhouseCoopers LLP.
24.1 Power of Attorney (included on signature page).
99.1 Form of Subscription Certificate.*
99.2 Instructions for Use of PurchaseSoft, Inc. Subscription
Certificates.*
99.3 Notice of Guaranteed Delivery.*
99.4 Form of Letter to Stockholders.*
99.5 Form of Letter to Brokers*
</TABLE>
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
(1) The undersigned Registrant hereby undertakes to file, during any period
in which it offers or sells securities, a post-effective amendment to this
registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) Include any additional or changed material information on the plan
of distribution;
Provided, however, paragraphs (i) and (ii) do not apply if the
information required in a post-effective amendment is incorporated by
reference from periodic reports filed by the Registrant under the Securities
Exchange Act of 1934, as amended.
<PAGE>
-3-
(2) The undersigned Registrant hereby undertakes that, for determining any
liability under the Securities Act, to treat post-effective amendment as a
new registration statement of the securities offered, and the offering of the
securities at that time to be the initial BONA FIDE offering.
(3) The undersigned Registrant hereby undertakes to file a post-effective
amendment to remove from registration any of the securities that remain
unsold at the end of the offering.
(4) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions described in Item 15 above,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
(5) The undersigned Registrant hereby undertakes that, for determining any
liability under the Securities Act, to treat the information omitted from the
form of prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the Registrant
under Rule 424(b)(1), or (4), or 497(h) under the Securities Act as part of
this registration statement as of the time the Commission declared it
effective.
(6) The undersigned Registrant hereby undertakes that, for determining any
liability under the Securities Act, to treat each post-effective amendment
that contains a form of prospectus as a new registration statement for the
securities offered in the registration statement, and that offering of the
securities at that time as the initial BONA FIDE offering of those
securities.
<PAGE>
-4-
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant, PurchaseSoft, Inc., certifies that it has reasonable grounds
to believe that it meets all of the requirements for filing on Form S-3 and
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Edina, State of
Minnesota, on this 2nd day of March, 1999.
PurchaseSoft, Inc.
By:
/s/ Michael G. Kerrison
----------------------------------
Michael G. Kerrison
CHAIRMAN OF THE BOARD OF DIRECTORS
AND CHIEF EXECUTIVE OFFICER
<PAGE>
-5-
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints Michael G.
Kerrison and/or Philip D. Wolf, his true and lawful attorney-in-fact with the
authority to execute in the name of each such person, and to file with the
Securities and Exchange Commission, together with any exhibits thereto and
other documents therewith, any and all amendments (including without
limitation post-effective amendments) to this registration statement
necessary or advisable to enable the Registrant to comply with the Securities
Act of 1933, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, which amendments may
make such other changes in the registration statement as the aforesaid
attorney-in-fact executing the same deems appropriate.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Michael G. Kerrison Chairman of the Board of Directors, March 2, 1999
- ----------------------- Chief Executive Officer and Director
Michael G. Kerrison (Principal Executive Officer)
/s/ Philip D. Wolf Chief Financial Officer and March 2, 1999
- ----------------------- Secretary (Principal Financial and
Philip D. Wolf Accounting Officer)
/s/ Jeffrey B. Pinkerton President and Director March 2, 1999
- -----------------------
Jeffrey B. Pinkerton
/s/ Brad I. Markowitz Director March 2, 1999
- -----------------------
Brad I. Markowitz
/s/ J. Murray Logan Director March 2, 1999
- -----------------------
J. Murray Logan
/s/ Donald S. LaGuardia Director March 2, 1999
- -----------------------
Donald S. LaGuardia
</TABLE>
<PAGE>
-6-
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
5.1 Opinion of Bingham Dana LLP.*
10.1 Demand Promissory Note, dated February 9, 1999, of PurchaseSoft,
Inc. to L-R Global Partners, L.P.
10.2 Agreement and General Release, dated as of January 31, 1999, by and
between Joseph D. Mooney and PurchaseSoft, Inc.
10.3 Compensation Agreement, dated as of February 1, 1999, by and
between Michael G. Kerrison and PurchaseSoft, Inc..
23.1 Consent of Bingham Dana LLP (included in Exhibit 5.1).*
23.2 Consent of PricewaterhouseCoopers LLP.
24.1 Power of Attorney (included on signature page).
99.1 Form of Subscription Certificate.*
99.2 Instructions for Use of PurchaseSoft, Inc. Subscription
Certificates.*
99.3 Notice of Guaranteed Delivery.*
99.4 Form of Letter to Stockholders.*
99.5 Form of Letter to Brokers*
</TABLE>
* To be filed by amendment.
<PAGE>
EXHIBIT 10.1
TIME DEMAND PROMISSORY NOTE
$2,000,000 February 9, 1999
FOR VALUE RECEIVED, PURCHASESOFT, INC., a Delaware corporation
("Borrower"), promises to pay to the order of L-R GLOBAL PARTNERS, L.P., a New
York limited partnership ("Lender"), at such place as the holder hereof may
designate, in lawful money of the United States of America, the principal sum of
Two Million Dollars ($2,000,000), plus interest as hereinafter PROVIDED, on
demand. This Note shall bear interest on the unpaid principal amount hereof at
the rate of 6% per annum; provided, that interest shall accrue at the rate of 8%
per annum on any principal or accrued interest that is not paid within five days
of written demand, from the date of such demand until the date of payment.
Borrower waives presentment, demand, protest, notice of protest, notice
of dishonor, notice of nonpayment, any and all other notices and demands in
connection with the delivery, acceptance, performance, default or enforcement of
this Note. No delay by the holder hereof in exercising any power or right in
respect of this Note shall operate as a waiver of such or any other power or
right.
Borrower may at any time prepay in whole or in part, from time to time,
the outstanding principal amount all of this Note, together with accrued
interest to date of payment on the principal amount so prepaid.
Borrower shall pay the holder hereof all costs and expenses of
collection of this Note, including without limitation reasonable attorneys'
fees.
This Note shall be deemed to be made under, and shall be construed in
accordance with and governed by, the laws of the State of New York.
PURCHASESOFT, INC.
/s/ Michael G. Kerrison
By: -----------------------------------
Michael G. Kerrison
Chairman & CEO
<PAGE>
EXHIBIT 10.2
AGREEMENT AND GENERAL RELEASE
This Agreement and General Release (the "Agreement") is made and entered
into, at Minneapolis, Minnesota, as of the 31st day of January, 1999, by and
between PurchaseSoft, Inc. ("the Company"), a corporation duly organized under
the laws of the State of Delaware, with offices at 7301 Ohms Lane, Suite 220,
Edina, Minnesota, 55439, and Joseph D. Mooney, Sr. ("Employee"), who is
domiciled at 4100 Lotus Drive, Minnetrista, Minnesota 55331.
WHEREAS:
A. Employee is employed by the Company as Chief Executive Officer
pursuant to an Executive Employment Agreement dated February 2, 1998 but
effective as of December 15, 1996, as amended by a First Amendment To The
Executive Employment Agreement Of Joseph D. Mooney dated April 14, 1998, and by
Amendment Number Two To The Executive Employment Agreement Of Joseph D. Mooney
dated April 15, 1998 (collectively, the "Employment Agreement"), and also serves
as a Director of the Company;
B. There are differences between Employee and the Company that include
but are not limited to the parties' rights and obligations under the Employment
Agreement; and
C. Employee and the Company desire to settle fully and finally any and
all differences between them, including but not limited to, any differences that
might arise out of Employee's employment with the Company, the conclusion
thereof, and the Employment Agreement;
<PAGE>
NOW, THEREFORE, IT IS HEREBY AGREED THAT:
1. (a) Employee irrevocably tenders, and the Company irrevocably accepts
Employee's resignation from employment with, and as an officer and director of
the Company, effective as of the close of business on January 31, 1999, (the
"Termination Date"). Attached as Exhibit A is Employee's resignation letter.
(b) Employee will not be reemployed by, and will not henceforth
accept, apply for, or otherwise seek employment with the Company or any of its
successors, subsidiaries, controlling shareholders, affiliates, or related
companies at any time.
2. Employee represents and warrants that Employee has returned to the
Company any and all documents, software, equipment (including, but not limited
to, computers, and computer-related items), and all other materials or other
things in Employee's possession, custody, or control which are the property of
the Company, including, but not limited to, the Company's identification, keys,
cellular telephones, office artwork, office furniture, and the like, wherever
such items may have been located; as well as all copies (in whatever form
thereof) of all materials relating to employment, or obtained or created in the
course of employment, with the Company, or that he will do so on or before the
Termination Date. Notwithstanding anything in this Agreement to the contrary,
nothing in this Agreement prevents the Employee from retaining duplicate copies
of documents that relate to him personally, such as agreements and contracts to
which he personally is a party and benefit plans in which he is a participant.
Further, Employee is entitled to retain all items that are Employee's personal
property, including but not limited to art work, furniture, appliances, and
other personal property of Employee.
-2-
<PAGE>
3. Employee represents that, other than those materials Employee has
returned or will return to the Company pursuant to Paragraph 2 of this
Agreement, Employee has not copied or caused to be copied, and has not
printed-out or caused to be printed-out, any software, computer disks, or
other documents other than those documents generally available to the public,
or retained any other materials originating with or belonging to the Company.
Except as set forth in paragraph 2 of this Agreement, Employee further
represents that Employee has not retained in Employee's possession any
software, documents or other materials in machine or other readable form,
which are the property of the Company, originated with the Company, and/or
were obtained or created in the course of or relate to Employee's employment
with the Company.
4. In consideration of this Agreement, and Employee's promises,
covenants, and representations set forth herein, and in full, final, and
complete settlement, the Company will commence to pay Employee specific
payments, as set forth below, which are special payments not otherwise owed
to Employee, in the total gross amount of Five Hundred Thousand Dollars and
No Cents ($500,000.00), and further to honor certain other commitments, as
set forth below:
(a) Not less than sixteen (16) and not more than twenty-one (21)
calendar days after the Company's attorneys, the law firm of Thelen Reid &
Priest LLP, receive a fully-executed original copy of this Agreement, the
Company will pay the Employee the gross amount of One Hundred Thousand Dollars
and No Cents ($100,000.00), payable in two lump sums, as follows: one lump sum
in the amount of Sixty Thousand Dollars and No Cents ($60,000.00), less
applicable federal, state, and local taxes and other appropriate payroll
-3-
<PAGE>
deductions, representing remaining balance of Employee's deferred employment
compensation; and one lump sum in the amount of Forty Thousand Dollars and No
Cents ($40,000.00), for which the Company will issue a 1099, and which is
consideration for Employee foregoing all other rights, benefits, and expenses
to which he may be entitled as a result of his Employment and/or his
association with the Company.
(b) The gross amount of Four Hundred Thousand Dollars and No Cents
($400,000.00), less applicable federal, state and local taxes and other
appropriate payroll deductions, payable in 48 equal installments on the 15th and
last day of every month starting with February 15, 1999 and ending January 31,
2001.
(c) Employee's rights as set forth in Article 4 of the Employment
Agreement, as previously modified, including but not limited to Employee's
option to purchase up to 366,666 shares of Company Stock of the Company shall
continue, in effect, except that such option shall expire and terminate on April
29, 2000.
(d) Employee's right to receive the Facilitator's Fee, as set forth
in Article 3.8 of the Employment Agreement, as previously modified, is hereby
extended through and including April 29, 2000.
(e) Employee has no duty to mitigate and Employee's right to receive
any payments and/or benefits under this Agreement is not subject to rescission
or offset based on Employee's earnings and/or benefits from any subsequent
employer and/or source.
5. (a) Employee will be entitled to any rights guaranteed by the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"). In the event
Employee elects to receive continued health insurance coverage in accordance
with COBRA, the Company will
-4-
<PAGE>
pay, on behalf of Employee and his dependents, or reimburse Employee for the
payment of, any required premiums for such coverage through and including
January 31, 2000, to the extent that Employee and/or his dependents remain
eligible for such COBRA benefits. To the extent not otherwise provided under
COBRA and/or in the preceding sentence, the Company will further pay, on
behalf of Employee and his dependents, or reimburse Employee for the payment
of, any required premiums for dental coverage through and including
January 1, 2000. The premiums that the Company agrees to pay in this
paragraph are over and above any other sums that the Company is required to
pay under this Agreement. In accordance with COBRA, premium and other
payments required for any continued health insurance coverage beyond January
31, 2000, will be the sole responsibility of Employee.
(b) The time during which Employee receives any payments pursuant to
this Agreement and any payments received by Employee pursuant to this Agreement
will not be counted, credited, or otherwise considered for any purpose under any
Company pension or retirement savings plan, including but not limited to
credited service, contributions, benefit accrual, or compensation for purposes
of such plan(s).
6. Employee represents, warrants, and acknowledges that the Company owes
Employee no wages, salary, commissions, bonuses, vacation pay, severance pay,
expenses, fees, or other compensation or payments of any kind or nature, other
than as expressly provided in this Agreement. Notwithstanding anything in this
Agreement to the contrary, the Company agrees to pay Employee his salary through
January 31, 1999, to reimburse Employee for any additional reasonable expenses,
which Employee may submit after the Effective Date of this Agreement, up to the
aggregate of Five Hundred Dollars and No Cents ($500.00), and
-5-
<PAGE>
to pay the credit card expenses set forth in Exhibit B to this Agreement, for
which Employee represents and warrants he has not yet received reimbursement
from the Company.
7. In consideration of this Agreement, the monies paid and benefits
provided pursuant to this Agreement, and for other good and valuable
consideration received from the Company, receipt whereof is hereby acknowledged,
and except as limited by the last sentence of this paragraph, Employee RELEASES
AND FOREVER DISCHARGES the Company and the Company's current, former, and future
controlling shareholders, subsidiaries, affiliates, related companies,
predecessor companies, divisions, directors, trustees, officers, employees,
agents, attorneys, successors, and assigns, including but not limited to L-R
Global Partners, L.P., Rockefeller & Co., Inc., and Greentree Software, Inc.
(and the current, former and future controlling shareholders, directors,
trustees, officers, employees, agents, and attorneys of such subsidiaries,
affiliates, related companies, predecessor companies, and divisions), and all
persons acting by, through, under, or in concert with any of them (the Company
and the foregoing other persons and entities are hereinafter defined separately
and collectively as the "Company Releasees"), from all actions, causes of
action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills,
specialties, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, judgments, extents, executions, claims, and
demands whatsoever, WHETHER KNOWN OR UNKNOWN, whether in law or equity, whether
statutory or common law, whether federal, state, local, or otherwise, including,
but not limited to, any claims related to, or arising out of any aspect of
Employee's employment with the Company, any agreement concerning such
employment, or the termination of such
-6-
<PAGE>
employment, including, without limitation, the Employment Agreement,
including, but not limited to:
(a) any and all claims of wrongful discharge or breach of contract,
any and all claims for equitable estoppel, any and all claims for employee
benefits, including, but not limited to, any and all claims under the Employee
Retirement Income Security Act of 1974, as amended, any and all claims under the
Family and Medical Leave Act of 1993, and any and all claims of employment
discrimination on any basis or of unlawful retaliation, including, but not
limited to, any and all claims under Title VII of the Civil Rights Act of 1964,
as amended, under the Age Discrimination in Employment Act of 1967, as amended,
under the Civil Rights Act of 1866, 42 U.S.C. Section 1981, under the Civil
Rights Act of 1991, as amended, under the Americans With Disabilities Act of
1990, as amended, under the Immigration Reform and Control Act of 1986, as
amended, under the Minnesota Human Rights Act, as amended, under the Minnesota
Parental Leave Act, as amended, and under the Minnesota Age Discrimination Law,
Sections 181.81 et seq., as amended;
(b) any and all claims under any other federal, state, or local labor
law, civil rights law, fair employment practices law, or human rights law;
(c) any and all claims of slander, libel, defamation, invasion of
privacy, intentional or negligent infliction of emotional distress, intentional
or negligent misrepresentation, fraud, and prima facie tort; and
(d) any and all claims for monetary recovery, including, but not
limited to, back pay, front pay, liquidated, compensatory, and punitive damages,
and attorneys' fees, experts' fees, disbursements, and costs,
-7-
<PAGE>
which may be asserted against the Company Releasees, or any of them, by
Employee or Employee's heirs, executors, administrators, successors, and
assigns, ever had, now have, or hereafter can, will, or may have, for, upon,
or by reason of any matter, cause, or thing whatsoever from the beginning of
the world to the date of Employee's execution of this Agreement.
Notwithstanding anything in this Agreement to the contrary, Employee does not
release, and nothing in this Agreement shall be construed to release of or
supersede, any right Employee may have to defense, indemnification, and/or
contribution from the Company as provided by statute, common law, insurance
contracts, officers and directors' policies, and/or the third paragraph of
Article 3.4 of the Employment Agreement.
8. Notwithstanding anything in this Agreement to the contrary, nothing
in this Agreement releases, diminishes, or otherwise affects any vested
monies or other benefits to which Employee might be entitled from or under
any pension or retirement savings plan.
9. In consideration of this Agreement, and for other good and valuable
consideration received from Employee, receipt whereof is hereby acknowledged,
the Company, on its behalf and on behalf of the other Company Releasees,
hereby RELEASES AND FOREVER DISCHARGES Employee from all actions, causes of
action, suits, debts, dues, sums of money, accounts, reckonings, bonds,
bills, specialties, covenants, contracts, controversies, agreements,
promises, variances, trespasses, damages, judgments, extents, executions,
claims, and demands whatsoever, WHETHER KNOWN OR UNKNOWN, whether in law or
equity, whether statutory or common law, whether federal, state, local, or
otherwise, including, but not limited to, any claims related to, or arising
out of any aspect of Employee's employment with the Company, any agreement
concerning such employment, or the termination of such
-8-
<PAGE>
employment, including, without limitation, the Employment Agreement, which
may be asserted against the Employee or Employee's heirs, executors,
administrators, successors, and assigns, by the Company and/or the Company
Releasees, ever had, now have, or hereafter can, will, or may have, for,
upon, or by reason of any matter, cause, or thing whatsoever from the
beginning of the world to the date of the Company's execution of this
Agreement.
10. The parties to this Agreement represent and warrant that they have not
assigned any rights or claims that they have against each other, except that the
Company acknowledges that it is subject to a court order relating to payments to
be made to Employee's former wife, and the Company shall continue to comply with
such court order with respect to amounts payable to Employee under paragraph
4(b) of this Agreement.
11. Employee represents that, to the best knowledge of his knowledge,
excluding the day-to-day expenses and obligations of operating the Company,
Employee is unaware of any claim against the Company or against Employee as it
relates to the Company. To the full extent permitted by law, Employee agrees to
cooperate with the Company in defense of any claim should such claim arise.
12. Employee's obligations as set forth in Article 7.1 of the
Employment Agreement, as previously modified, shall continue and Employee
will keep confidential, and will not hereafter disclose to any person, firm,
corporation, governmental agency, or other entity, any trade secret,
proprietary information, or confidential information of the Company,
including, but not limited to, information relating to processes, methods,
pricing strategies, customer lists, contracts, marketing plans, product
introductions, advertising or promotional programs, sales, financial results,
financial records and reports, regulatory matters and
-9-
<PAGE>
compliance, and other confidential business matters. Except as set forth in
the immediately preceding sentence of this Agreement, the Company
acknowledges and agrees that, except to the extent set forth in the
immediately preceding sentence, Employee has no contractual obligations to
the Company concerning competition and/or solicitation.
13. The parties to this Agreement agree that the Company will issue a
press release substantially in the form attached as Exhibit C to this
Agreement, promptly following the execution and delivery of this Agreement by
both parties.
14. This Agreement will be deemed to have been made at Minneapolis,
Minnesota, and will be interpreted, construed, and enforced pursuant to, and all
matters arising out of or relating to this Agreement will be determined pursuant
to, the substantive laws of the State of Minnesota. As used in this Agreement,
the singular or plural number will be deemed to include the other whenever the
context so indicates or requires.
15. This Agreement sets forth the entire agreement between the parties
hereto, fully terminates and supersedes any and all prior agreements or
understanding between them, including, without limitation, the Employment
Agreement EXCEPT as to Articles 1, 3.8, 4, the third paragraph of Article 3.4,
and Article 7.1 of the Employment Agreement, as previously modified and as
further modified by this Agreement. No amendment, modification, or waiver of
the Agreement, or any right under this Agreement, shall be effective unless
signed by the parties to this Agreement.
16. This Agreement will not in any way be construed as an admission by
either party to this Agreement of any liability, or of any wrongful or unlawful
acts whatsoever against the other party to this Agreement or any other person,
and each party to this
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<PAGE>
Agreement specifically disclaims any liability to or wrongful or unlawful
acts against the other party to this Agreement or any other person.
17. Each party to this Agreement expressly acknowledges, represents, and
warrants that the terms and provisions of this Agreement herein stated are the
only consideration for signing this Agreement; and that no other promise or
agreement of any kind has been made to or with any person or entity whatsoever
to cause the signing of this Agreement.
18. Notwithstanding any other provision of this Agreement to the contrary:
(a) Employee, in consideration of the monies paid by the Company, as
described in Paragraph 4 of this Agreement (which Employee agrees constitutes
consideration in addition to anything of value to which Employee is already
entitled), agrees that this Agreement constitutes a knowing and voluntary waiver
of all rights or claims Employee may have against the Company Releasees, or any
of them, including, but not limited to, all rights or claims arising under the
Age Discrimination in Employment Act of 1967, as amended ("ADEA"), including,
but not limited to, all claims of age discrimination in employment and all
claims of retaliation in violation of the ADEA.
(b) The Company and Employee agree that, by entering into this
Agreement, Employee does NOT waive rights or claims that may arise after the
date this Agreement is executed.
(c) The Company and Employee agree that this Agreement will not
affect the rights and responsibilities of the U.S. Equal Employment Opportunity
Commission (the "EEOC") to enforce the ADEA and other laws, and further agree
that this Agreement will not be used to justify interfering with Employee's
protected right to file a charge or participate in
-11-
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an investigation or proceeding conducted by the EEOC. The Company and
Employee further agree that Employee knowingly and voluntarily waives all
rights or claims (that arose prior to Employee's execution of this Agreement)
Employee may have against the Company Releasees, or any of them, to receive
any benefit or remedial relief (including, but not limited to, reinstatement,
back pay, front pay, damages, and attorneys' and experts' fees) as a
consequence of any charge filed with the EEOC, and of any litigation
concerning any facts alleged in any such charge.
(d) The Company and Employee agree that, for a period of fifteen
(15) calendar days following the execution of this Agreement, Employee has
the right to revoke this Agreement by written notice of revocation delivered
to Philip Wolff, Secretary, PurchaseSoft, Inc., 7301 Ohms Lane, Suite 220,
Edina, Minnesota, 55439. Such written notice of revocation must either (i)
be delivered by hand within such period, or (ii) if delivered by mail, must
be postmarked within such period, must be sent by certified mail, return
receipt requested, and must be properly addressed. Should Employee revoke
this Agreement, Employee also agrees to provide notice by telecopy
(612-941-0066) and telephone (612-941-1500) to Philip Wolff, Secretary,
PurchaseSoft, Inc. The Company and Employee further agree that this
Agreement will not become effective or enforceable until the sixteenth (16th)
calendar day after the execution of this Agreement; and that, if revoked by
Employee prior to such date, this Agreement, and all promises contained in
this Agreement, will automatically be deemed null and void.
(e) The Company hereby advises and urges Employee in writing to
consult with an attorney prior to executing this Agreement.
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<PAGE>
(f) Employee's acceptance of any of the monies paid by the
Company, as described in Paragraph 4 of this Agreement, at any time more than
fifteen (15) calendar days after the execution of this Agreement will
constitute an admission by Employee that Employee did not revoke this
Agreement and will further constitute an admission by Employee that this
Agreement has become effective and enforceable.
(g) Employee further represents and warrants that the Company gave
Employee a period of at least twenty-one (21) days in which to consider this
Agreement before executing this Agreement. If Employee executed this
Agreement at any time prior to the end of such twenty-one (21) day period
that, such early execution was a knowing and voluntary waiver of Employee's
right to consider this Agreement for at least twenty-one (21) days, and was
due to Employee's belief that Employee had ample time in which to consider
and understand this Agreement, and in which to review this Agreement with an
attorney.
19. (a) For purposes of this Agreement, "Successor" shall mean any
corporation, individual, group, association, partnership, limited liability
company, firm, venture, or other entity or person that, subsequent to the date
hereof, succeeds to the Company and/or the Company's business and/or assets,
directly or indirectly, by merger, consolidation, recapitalization, purchase,
liquidation, redemption, assignment, similar, corporate transaction, operation
of law, or otherwise.
(b) This Agreement, and all rights and obligations of the Company
hereunder, shall be binding upon and inure to the benefit of, and be enforceable
by and against the Company and any Successor of the Company.
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<PAGE>
(c) This Agreement and all rights of the Employee hereunder, shall
be binding upon and inure to the benefit of, and be enforceable by Employee
and Employee's personal or legal representative, executors, administrators,
successors, heirs, distributees, devisees, legatees, and any assignees
permitted hereunder. If Employee should die while any amounts would still be
payable to Employee hereunder if Employee had continued to live, all such
amounts shall be paid in accordance with the terms of this Agreement to
Employee's devisee, legatee, or other designee, or if there is no such
designee, to Employee's estate.
(d) Notwithstanding anything in this Agreement to the contrary,
Employee may assign his rights under this Agreement to his spouse, one or
more of his children, and/or any trust for the primary benefit of Employee,
his spouse, and/or one or more of his children. children. Except as provided
in the immediately preceding sentence of this Agreement, Employee may not
assign his this Agreement or any of his rights hereunder without the prior
written consent of the Company.
20. Each party to this Agreement represents and acknowledges that such
party has represents and acknowledges that such party has Employee had ample
opportunity to review and comment on this Agreement. This Agreement will be
read and interpreted according to its plain meaning and an ambiguity will not
be construed against either party.
21. The Company represents that Michael G. Kerrison, the individual who
signs this Agreement on behalf of the Company is fully authorized to enter
into this Agreement and to legally bind the Company.
22. EMPLOYEE EXPRESSLY ACKNOWLEDGES, REPRESENTS, AND WARRANTS THAT HE
HAS CAREFULLY READ THIS AGREEMENT AND GENERAL
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RELEASE; FULLY UNDERSTANDS ITS TERMS, CONDITIONS, AND SIGNIFICANCE; HAS HAD
AMPLE TIME TO CONSIDER AND NEGOTIATE THIS AGREEMENT AND GENERAL RELEASE; HAS
BEEN ADVISED AND URGED BY THE COMPANY TO CONSULT WITH AN ATTORNEY CONCERNING
THIS AGREEMENT AND GENERAL RELEASE; HAS HAD A FULL OPPORTUNITY TO REVIEW THIS
AGREEMENT AND GENERAL RELEASE WITH AN ATTORNEY AND HAS DONE SO; AND EMPLOYEE
HAS EXECUTED THIS AGREEMENT AND GENERAL RELEASE VOLUNTARILY, KNOWINGLY, AND
WITH THE ADVICE OF HIS ATTORNEYS, THE LAW FIRM OF FLYNN & GASKINS, L.L.P.
(SIGNATURE PAGE FOLLOWS)
-15-
<PAGE>
PLEASE READ CAREFULLY. THIS AGREEMENT AND GENERAL RELEASE HAS IMPORTANT
LEGAL CONSEQUENCES.
Dated: January 31, 1999 PURCHASESOFT, INC.
By: /s/ Michael G. Kerrison
---------------------------------
Its: Director
/s/ Joseph D. Mooney
-----------------------------------
Dated: January 31, 1999 Joseph D. Mooney
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EXHIBIT A
4100 Lotus Drive
Excelsior, Minnesota 55331
January 31, 1999
Mr. Michael G. Kerrison
PurchaseSoft, Inc.
7301 Ohms Lane
Edina, Minnesota 55439
Re: Resignation
Dear Mike:
Pursuant to the Agreement and General Release between me and
PurchaseSoft, Inc., I hereby resign as Chairman of the Board, a Member of the
Board of Directors, and CEO of PurchaseSoft, Inc., effective January 31, 1999.
Best of luck.
Regards,
/s/ Joseph D. Mooney
-------------------------
Joseph D. Mooney, Sr.
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<PAGE>
EXHIBIT B
Schedule of Unreimbursed Expenses:
<TABLE>
<CAPTION>
(a) American Express:
- ---------------------
<S> <C> <C>
1. ATT Airphones $ 7.39
2. ATT Airphones 10.05
3. Hertz 523.78
4. Sidneys 22.38
5. Kincaids 21.88
6. Perkins 18.54
7. TGIF's 18.65
8. AOL 21.95
--------
Total $ 644.62
(B) VISA:
- -------
1. Sun Country $ 228.00
</TABLE>
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EXHIBIT C
PRESS RELEASE:
PurchaseSoft, Inc., announced the January 31, 1999 resignation of Joseph D.
Mooney as CEO and Chairman of the Board, Monday, February 1, 1999.
Michael G. Kerrison, who joined the Company as a Director and Consultant in
September 1998, has been named as Mooney's successor. "I am very pleased
that Mike has agreed to become the Chairman and CEO," said Mooney. "The
strength of the product and Mike's leadership make the outlook for
PurchaseSoft very positive."
Statements contained herein that are not historical facts, including but not
limited to statement's about the Company's outlook, product, corporate
identity, and focus, may be forward-looking statements that are subject to a
variety of risks and uncertainties. There are a number of important factors
that could cause actual results to differ materially from those expressed in
any forward-looking statements made by the Company, including but not limited
to, the continuing development of the Company's sales, marketing, support,
research, and development efforts.
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<PAGE>
EXHIBIT 10.3
COMPENSATION AGREEMENT
MICHAEL G. KERRISON
EFFECTIVE DATE: February 1, 1999
POSITION: Chairman/CEO
RESPONSIBILITIES: Rebuild organization, launch new product, increase market
share, rebuild sales and return on investment to
shareholders.
COMPENSATION: For the period February 1, 1999 to December 31, 1999 base
salary will be $200,000 per annum paid as follows:
- $150,000 payable in cash as part of the Company's
customary payroll practices.
- $50,000 in common stock, payable on signing and
priced at the closing price of the Company's stock
on the trading day immediately preceding the
effective date of this agreement.
Thereafter, annual compensation will be adjusted based on
achievement of prior year objectives.
<TABLE>
<CAPTION>
<S> <C> <C>
Quarterly Bonuses: Ending 5/3/99 $ 5,000
Ending 8/31/99 10,000
Ending 11/30/99 10,000
Ending 2/28/00 10,000
-------
Total $35,000 *
</TABLE>
* Bonuses will be tied directly to quarterly objectives
approved by the Board of Directors. Thereafter, bonus
payments will be adjusted based on achievement of goals.
BENEFITS: Kerrison will be eligible to participate in all Company
benefits offered to its employees.
ATTORNEY FEES: The Company will pay for legal fees to review this
agreement.
ACCOUNTING FEES: The Company will pay for accounting fees, up to $1,000,
to review the tax liabilities associated with this
agreement.
STOCK OPTIONS: An incentive stock option to purchase 625,000 shares
(under the 1997 Stock Option Plan) will be granted upon
signing of this agreement. The shares granted under this
agreement will vest as follows:
- Two Hundred and Fifty Thousand (250,000) shares will
vest immediately upon signing.
- Up to Three Hundred Seventy Five Thousand (375,000)
performance shares will vest on May 31, 2000 based
on the following schedule for achieving the Fiscal
2000 Business Plan revenue objectives as approved at
the January 31, 1999 Special Meeting of the Board of
Directors and as may be amended from time to time.
<TABLE>
<CAPTION>
<S> <C> <C>
% Shares
Vested Vested
------ -------
- 65% of Business Plan revenues 50% 125,000
- 70% of Business Plan revenues 60% 150,000
- 75% of Business Plan revenues 70% 175,000
- 80% of Business Plan revenues 80% 200,000
- 85% of Business Plan revenues 85% 212,500
- 90% of Business Plan revenues 90% 225,000
- 95% of Business Plan revenues 95% 237,500
- 100% of Business Plan revenues 100% 250,000
- 105% of Business Plan revenues 110% 275,000
- 110% of Business Plan revenues 120% 300,000
- 115% of Business Plan revenues 130% 325,000
- 120% of Business Plan revenues 140% 350,000
- 125% of Business Plan revenues 150% 375,000
</TABLE>
<PAGE>
In the event that not all of the 375,000 performance
shares become vested in Fiscal Year 2000 and provided
that 65% or more of the Business Plan revenue was
achieved, the unearned option shares will be eligible to
be earned in future fiscal years based on performance
that will be determined by the Board of Directors.
Shares issued pursuant to this option will expire five
years from the date of grant and will have an exercise
price equal to the fair market value of the underlying
common stock on the grant date. In any event, these
shares will vest in their entirety fifty-seven (57)
months from the date of grant.
To protect the 625,000 option shares from dilution, an
equitable increase will be made to maintain Kerrison's
fully diluted percentage interest in the Company (only
pertaining to the 625,000 option shares or shares
received from the exercise of these options) in the event
that new shares of common stock are issued above $1.00
subsequent to May 31, 1999. These shares will have an
exercise price equal to the fair market value of the
underlying common stock on the date these new option
shares are granted.
ACCELERATED VESTING
DUE TO CHANGE IN
CORPORATE CONTROL: Each option share will become fully exercisable upon a
change in corporate control, which is defined in
paragraph 1.2 of the enclosed 1997 Option Plan.
VACATION: Six weeks paid vacation per annum.
TRAINING: The Company will pay for continuing executive education
up to $8,000 per annum.
SIGNED:
/s/ Michael G. Kerrison 2/1/99
- ------------------------------------------------ -----------------
Michael G. Kerrison Date
/s/ Philip D. Wolf 2/1/99
- ------------------------------------------------ -----------------
Philip D. Wolf, Corporate Secretary Date
For the Board of Directors of PurchaseSoft, Inc.
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
July 1, 1998 appearing on page F-2 of PurchaseSoft, Inc.'s (formerly Greentree
Software, Inc.) Annual Report on Form 10-KSB for the year ended May 31, 1998. We
also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 26, 1999
