<PAGE> 1
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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
</TABLE>
BARRISTER INFORMATION SYSTEMS CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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<PAGE> 2
BARRISTER INFORMATION SYSTEMS CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 16, 1999
The Annual Meeting of Stockholders of Barrister Information Systems Corporation
(the "Company") will be held at the Buffalo and Erie County Public Library
Auditorium, Clinton and Ellicott Streets, Buffalo, New York, on September 16,
1999 at 10:00 a.m., local time, for the following purposes:
1. To elect four (4) Class II directors to hold office until the
Year 2001 annual meeting and until their successors have been
elected and qualified.
2. To approve the issuance of 2,500,000 shares of Common Stock,
$.24 par value per share, on conversion of the outstanding
shares of Series E Preferred Stock of the Company which was
issued as consideration for the purchase of the assets of Icon
Technology LLC pursuant to an Asset Purchase Agreement dated
January 15, 1999.
3. To approve the Company's 1999 Stock Incentive Plan.
4. To ratify the appointment of KPMG LLP as the Company's
independent auditors for the current fiscal year.
5. To transact such other business as may properly come before
the meeting.
The close of business on July 19, 1999 has been fixed as the record date for
determining the stockholders entitled to notice of, and to vote at, the Annual
Meeting.
By order of the Board of Directors,
Mark C. Donadio
Secretary
July 19, 1999
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE IN
ORDER TO ASSURE REPRESENTATION OF YOUR SHARES.
<PAGE> 3
BARRISTER INFORMATION SYSTEMS CORPORATION
465 MAIN STREET
BUFFALO, NEW YORK 14203
(716) 845-5010
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
SEPTEMBER 16, 1999
GENERAL
This Proxy Statement and accompanying form of proxy have been mailed on or about
August ___, 1999, to all holders of record on July 19, 1999 of Common Stock, par
value $.24 per share ("Common Stock") and Series E Preferred Stock, par value
$1.00 per share ("Series E Preferred Stock") of Barrister Information Systems
Corporation, a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
Annual Meeting of Stockholders to be held on September 16, 1999 and at any
adjournment or postponements thereof.
Shares represented by an effective proxy in the accompanying form, unless
contrary instructions are specified in the proxy, will be voted FOR each of the
proposals set forth in the accompanying Notice of Annual Meeting of
Stockholders. Any proxy may be revoked at any time before it is voted. A
shareholder may revoke his/her proxy by executing another proxy at a later date,
by notifying the Secretary of the Company in writing of his/her revocation, or
by attending and voting at the Annual Meeting. Revocation is effective only upon
receipt of notice by the Secretary.
The Company will bear the cost of soliciting proxies by the Board of Directors.
The Board of Directors may use the services of the Company's executive officers
and certain directors to solicit proxies from stockholders in person and by
mail, telegram and telephone, and the Company may reimburse them for reasonable
out-of-pocket expenses incurred by them in so doing. In addition, the Company
will request brokers, nominees and others to forward proxy materials to their
principals and to obtain authority to execute proxies. The Company will
reimburse such brokers, nominees and others for their reasonable out-of-pocket
and clerical expenses incurred by them in so doing.
The presence, in person or by properly executed proxy, of holders of a majority
of outstanding shares of Common Stock entitled to vote at the Annual Meeting
will constitute a quorum. A stockholder who abstains from a vote on a particular
matter by registering an abstention will be deemed present at the Annual Meeting
for quorum purposes, but will not be deemed to have voted on such matter.
Proxies relating to `street name" shares voted by brokers on a discretionary
basis on certain proposals will be treated as present for quorum purposes on all
proposals, but will not be entitled to vote on any proposal as to which the
broker does not have discretionary voting power and has not received
instructions from the beneficial owner ("broker non-votes").
The securities entitled to vote at the Annual Meeting are shares of Common Stock
and Series E Preferred Stock, which vote together as a class on all matters
presented to the stockholders. Each share of Common Stock is entitled to one
vote. Each share of Preferred Stock is entitled to 1,000 votes. The close of
business on July 19, 1999 has been fixed as the record date for the
determination of stockholders entitled to notice of and to vote at the Annual
Meeting and any adjournment or postponement thereof. At that date 9,132,886
shares of Common Stock and 2,500 shares of Series E Preferred Stock were
outstanding.
<PAGE> 4
PRINCIPAL STOCKHOLDERS
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of June 4, 1999 with
respect to the beneficial ownership of the Company's Common Stock by all persons
or groups (as such terms are used in Section 13(d)(3) of the Securities Exchange
Act of 1934) known by the Company to be beneficial owners of more than 5% of its
outstanding Common Stock.
<TABLE>
<CAPTION>
=====================================================================================================================
NAME AND ADDRESS COMMON PERCENT
OF STOCK OF
BENEFICIAL OWNER(1) COMMON STOCK(2)
=====================================================================================================================
<S> <C> <C>
Henry P. Semmelhack 1,942,674 (3) 20.83
761 Willardshire Blvd.
Orchard Park, NY 14127
- ----------------------------------------------------------------------------------------------------------------------
First Carolina Investors, Inc. 1,757,910 19.43
1130 East 3rd Street, Suite 410
Charlotte, NC 28204
- ----------------------------------------------------------------------------------------------------------------------
Jay S. Moeller 1,168,121 (4) 11.46
55 Brompton Court
Orchard Park, NY 14127
- ----------------------------------------------------------------------------------------------------------------------
James D. Morgan 977,959 (5) 10.69
34 Ironwood Court
East Amherst, NY 14051
- ----------------------------------------------------------------------------------------------------------------------
Richard E. McPherson 953,888 (6) 10.44
304 Burroughs Drive
Amherst, NY 14226
- ----------------------------------------------------------------------------------------------------------------------
Thomas W. Jones 918,539 (7) 9.23
520 Fairhills Drive
San Rafael, CA 94901
======================================================================================================================
</TABLE>
(1) The beneficial ownership information presented is based upon
information furnished by each person or contained in filings with the
Securities and Exchange Commission. Pursuant to Rule 13d-3 of the
Regulations under the Securities Exchange Act of 1934, as amended,
beneficial ownership of a security consists of sole or shared voting
power (including the power to vote or direct the vote) and/or sole or
shared investment power (including the power to dispose or to direct
the disposition) with respect to a security whether through any
contract, arrangement, understanding, relationship or otherwise. Except
as otherwise indicated, the named person has sole voting and investment
power with respect to the Common Stock set forth opposite his name.
Percentages have been calculated on the basis of 9,047,500 shares of
Common Stock outstanding, plus, as appropriate, shares deemed
outstanding pursuant to Rule 13d-3(d)(1), including conversion of 2,500
shares of Series E Preferred Stock to 2,500,000 shares of Common Stock.
(2) The percent beneficially owned is equivalent to each person's or
group's percentage of the aggregate number of votes attributable to
outstanding Common Stock and outstanding Series E Preferred Stock.
<PAGE> 5
(3) Includes 196,900 shares of Common Stock and Warrants to purchase 22,500
shares of Common Stock owned by Mr. Semmelhack's wife. Mr. Semmelhack
disclaims beneficial ownership of such shares. Includes options to
purchase 87,000 shares of Common Stock and Warrants to purchase 168,750
shares of Common Stock.
(4) Includes 1,142,000 shares of Common Stock issuable upon conversion
of 1,142.5 shares of Series E Preferred Stock issued as consideration
for the acquisition of the assets of Icon Technology LLC by the Company
on January 15, 1999. This represents 45.7% of the outstanding class of
Series E Preferred Stock.
(5) Includes 207 shares held in trust by Mr. Morgan for the benefit of his
children. Mr. Morgan disclaims any beneficial ownership of such shares.
Includes non-qualified options to purchase 10,000 shares of Common
Stock and Warrants to purchase 90,000 shares of Common Stock.
(6) Includes Warrants to purchase 90,000 shares of Common Stock.
(7) Includes 905,000 shares of Common Stock issuable upon conversion of
905 shares of Series E Preferred Stock issued as consideration for the
acquisition of the assets of Icon Technology LLC by the Company on
January 15, 1999. This represents 36.2% of the outstanding class of
Series E Preferred Stock.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock of the
Company as of June 4, 1999 by each director and executive officer and by all
directors and officers as a group.
<TABLE>
<CAPTION>
NAME OF COMMON PERCENT OF
BENEFICIAL OWNER(1) STOCK COMMON STOCK
- ------------------- ----- ------------
<S> <C> <C>
Henry P. Semmelhack 1,942,674 (2) 20.83
Jay S. Moeller 1,168,121 (3) 11.46
James D. Morgan 977,959 (4) 10.69
Richard E. McPherson 953,888 (5) 10.44
Richard P. Beyer 281,236 (6) 3.08
Brent D. Baird 2,500 0.03
Warren E. Emblidge, Jr. 0 0.0
Franklyn S. Barry, Jr. 0 0.0
All officers and directors
as a group (13 persons) 6,466,318 (7) 54.79
</TABLE>
(1) The beneficial ownership information presented is based upon
information furnished by each person or contained in filings with the
Securities and Exchange Commission. Pursuant to Rule 13d-3 of the
Regulations under the Securities Exchange Act of 1934, as amended,
beneficial ownership of a security consists of sole or shared voting
power (including the power to vote or direct the vote) and/or sole or
shared investment power (including the power to dispose or to direct
the disposition) with respect to a security whether through any
contract, arrangement, understanding, relationship or otherwise.
Except as otherwise indicated, the named person has sole voting and
investment power with respect to the Common Stock set forth opposite
his name. Percentages have been calculated on the basis of 9,047,500
shares of Common Stock shares outstanding, plus, as appropriate,
shares deemed outstanding pursuant to Rule 13d-3(d)(1), including
conversion of 2,500 shares of Series E Preferred Stock to 2,500,000
shares of Common Stock.
(2) Includes 196,000 shares of Common Stock and Warrants to purchase
22,500 shares of Common Stock owned by Mr. Semmelhack's wife. Mr.
Semmelhack disclaims beneficial ownership of such shares. Includes
options to purchase 87,000 shares of Common Stock and Warrants to
purchase 168,750 shares of Common Stock.
(3) Includes 1,142,500 shares of Common Stock issuable upon conversion of
1,142.5 shares of Series E Preferred Stock. This represents 45.7% of
the outstanding class of Series E Preferred Stock.
<PAGE> 6
(4) Includes 207 shares held in trust by Mr. Morgan for the benefit of his
children. Mr. Morgan disclaims any beneficial ownership of such shares
held in trust. Includes non-qualified options to purchase 10,000
shares of Common Stock and Warrants to purchase 90,000 shares of
Common Stock.
(5) Includes Warrants to purchase 90,000 shares of Common Stock.
(6) Includes options to purchase 85,666 shares of Common Stock and
Warrants to purchase 11,250 shares of Common Stock.
(7) Includes options to purchase 325,497 shares of Common Stock, Warrants
to purchase 382,500 shares of Common Stock and 2,047,500 shares of
Common Stock issuable upon conversion of 2,047.5 shares of Series E
Preferred Stock.
INFORMATION ABOUT MANAGEMENT
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of 7 meetings during the
fiscal year ended March 31, 1999. The Board of Directors has two committees: the
Audit Committee and the Compensation Committee.
The Audit Committee consisted of directors Morgan, Barry, Baird and Emblidge and
met one time during the fiscal year ended March 31, 1999. The Audit Committee's
functions include recommending to the Board of Directors the engagement of the
Company's independent certified public accountants, reviewing with such
accountants the plan for and results of their auditing engagement and the
independence of such accountants.
The Compensation Committee consisted of directors Barry, Morgan, Baird and
Emblidge and met one time during the fiscal year ended March 31, 1999. The
Compensation Committee reviews and makes recommendations with respect to
compensation of officers and key employees, administers the Company's 1989 Stock
Incentive Plan and will administer the Company's 1999 Stock Incentive Plan, if
approved by the stockholders.
During the fiscal year ended March 31, 1999, no director attended fewer than
100% of the aggregate of all meetings of the Board of Directors and the
committees, if any, on which the director served for the fiscal year, except
that Mr. Page missed three meetings and Mr. Emblidge and Mr. McPherson attended
all meetings except one.
COMPENSATION AND RELATED MATTERS
COMPENSATION OF DIRECTORS
Directors who are employees of the Company receive no additional compensation
for service on the Board of Directors or its Committees. Directors who are not
employees receive a $4,000 annual retainer, payable semiannually plus a fee of
$500 for each Board and Committee meeting attended with a $500 maximum per day.
EXECUTIVE COMPENSATION
The following table sets forth all cash compensation paid to the Chief Executive
Officer and any officer who received $100,000 compensation for services rendered
to the Company in all capacities during the fiscal years ended March 31, 1999,
1998, and 1997.
<PAGE> 7
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
Other Securities
Name and Annual Restricted Underlying LTIP All Other
Principal Salary Bonus Compen- Stock Options/ Payouts Compen-
Position Year ($) ($) sation ($) Award(s)($) SARs (#) ($) sation
- ------------ ---- --- --- ---------- ----------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Henry P. Semmelhack 1999 155,871 - - - - - -
Chief Executive 1998 138,659 - - - - - -
Officer 1997 105,019 - - - - - -
Mark J. Phillips 1999 93,860 13,000 - - - - -
Vice President
David L. Blankenship 1999 97,700 15,000 - - 50,000 - -
Vice President
</TABLE>
The amount reported in the compensation table above does not include
expenditures made by the Company for an automobile and insurance benefits. These
benefits did not exceed the lesser of $25,000 or 10% of the compensation
reported in the table above. No other officer of the Company earned more than
$100,000 during the fiscal years ended on March 31, 1999, March 31, 1998 and
1997.
STOCK OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>
Number of Shares % of Total Options
Underlying Options Granted to All Exercise Price
Executive Officer Granted Employees in 1998 (1) Per Share Expiration Date
----------------- ------- ----------------- ------------ ---------------
<S> <C> <C> <C> <C>
David L. Blankenship 50,000(1) 28.9% 1.25 2/26/09
</TABLE>
(1) Contingent upon closing business with specified companies at revenue levels
of $5,000,000 by 2/26/00. One-third of the shares may be exercised upon the date
of the removal of the contingency and the remaining two-thirds may be exercised
in equal increments over a two year period after such date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options/SARs at FY-End (#) at FY-End ($)
-------------------------- --------------------
Shares Acquired Value
Name on Exercise Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Henry P. Semmelhack 0 0 111,000 6,000 $104,888 $5,700
Mark J. Phillips 0 0 56,333 20,667 $47,125 $8,500
David L. Blankenship 0 0 23,332 76,668 $6,250 $5,000
</TABLE>
CERTAIN TRANSACTIONS
On January 15, 1999, the Company acquired the assets of Icon Technology LLC
("Icon"), for 2,500 shares of Series E Preferred Stock convertible into
2,500,000 shares of Common Stock. Mr. Moeller was an executive officer, director
and equity owner of Icon.
Prior to March 31, 1997, the Company had a term loan in the amount of $2,500,000
owing to BIS Partners, L.P. ("BIS Partners"), a limited partnership composed of
private investors. The loan is secured by Company assets and receivables.
Partners in BIS Partners include Messrs. Semmelhack, Beyer, McPherson and
Morgan. On March 31, 1997, the Company renegotiated the terms of its loan with
BIS Partners, L.P., extending the repayment schedule
<PAGE> 8
through the year 2004 and agreeing to an interest rate of prime plus 3.5%. In
March, 1998, BIS Partners provided the Company an additional demand loan of
$100,000 which bears interest at the prime rate plus 3.5% and expires March 31,
2002. In the fourth quarter of fiscal 1999, BIS Partners converted $233,000 of
the term loan and all of the demand loan into 383,000 shares of Common Stock at
$.87 per share, the fair market value at that time. On March 31, 1999 the
balance of the term loan was $1,068,863.
In fiscal year 1999, the Company engaged Antenna Software, Inc., a New York City
based software and Web site developer to perform services related to the
Company's Web site and the Company's Web-based customer service management
system. Total services were approximately $70,000. Peter Semmelhack, an officer,
director and shareholder in Antenna Software, Inc, is a son of Company President
Henry Semmelhack.
<PAGE> 9
PROPOSAL NO. 1
ELECTION OF DIRECTORS
TO ELECT FOUR (4) CLASS II DIRECTORS TO HOLD OFFICE UNTIL THE YEAR 2001 ANNUAL
MEETING AND UNTIL THEIR SUCCESSORS HAVE BEEN ELECTED AND QUALIFIED.
TERM OF OFFICE
The Company's Certificate of Incorporation and By-Laws provide that the Company
shall have not less than 6 and not more than 15 directors, and that the Board of
Directors shall be divided into two classes, as nearly equal in number as
possible (but with not less than three directors in each class or such lesser
number as may be permitted by law), as determined by the Board of Directors;
each year the directors in one class will be elected to serve terms of two
years.
At the annual meeting of stockholders, in accordance with the Company's
Certificate of Incorporation and By-laws, at least three persons are to be
elected to the Board of Directors of the Company as Class II directors to hold
office until the 2001 annual meeting of stockholders and until their successors
are elected and qualified.
Four directors are proposed for election at the annual meeting, and it is
intended that shares represented by properly executed proxies will be voted, in
the absence of contrary instructions, in favor of the election of the following
named nominees for Class II directors: Henry P. Semmelhack, James D. Morgan,
Richard P. Beyer and Warren E. Emblidge, Jr. The nominations were approved by
resolution of the Board of Directors dated June 29, 1999.
The persons named in the enclosed proxy intend to vote the shares represented by
proxies for the Board of Directors nominees unless authority to vote for such
persons is withheld. If any of those nominated should not continue to be
available for election, it is intended that the shares represented by the
proxies will be voted for such other person or persons as the Board shall
designate. No circumstances are presently known which would render any nominee
named herein unavailable for election.
NOMINEES FOR DIRECTOR TO HOLD OFFICE UNTIL 2001 (CLASS II)
Henry P. Semmelhack - Age 62 Director since 1982
Mr. Semmelhack has served as the Company's Chairman of the Board of Directors,
Chief Executive Officer and President since its incorporation in 1982. He was
one of the founders of Comptek Research, Inc. ("Comptek"), a manufacturer and
marketer of computer systems for the defense industry traded on the American
Stock Exchange, and currently serves as a Director of Comptek. Previously he
served as Comptek's Chairman of the Board, Chief Executive Officer and
President. Mr. Semmelhack is also a Director of Merchants Group, Inc., a
property and casualty insurance company traded on the American Stock Exchange
("Merchants Group").
James D. Morgan - Age 62 Director since 1982
Mr. Morgan is currently Vice President and Chief Scientist of Comptek. He served
as Vice President of Product Engineering of the Company from 1982 to 1990. He
was one of the founders of Comptek and currently serves as a Director of that
company.
Richard P. Beyer - Age 52 Director since 1982
Mr. Beyer became Vice President Finance and Treasurer of the Company in 1982
following its incorporation. He previously was Vice President Finance and
Treasurer of Comptek.
Warren E. Emblidge, Jr. - Age 55 Director since 1993
Mr. Emblidge has been President of S.J. McCullagh, Inc., an importer, roaster
and distributor of coffee and related products, from 1986 to present. From 1987
to 1988 he was Chairman of Joseph Malecki Corporation, a meat processor for the
retail trade. Between 1989 - 1992, he was President and founder of Juiceables,
Inc., a bag-in-box distributor and President and co-founder of GR8 Nutrition,
Inc., a producer of specialty powdered foods for the geriatric and dental
markets. Previously Mr. Emblidge served in various executive positions at
Goldome
<PAGE> 10
FSB/Buffalo Savings Bank, including Executive Vice President of Goldome
Realty Credit Corporation, President of Goldome Corporation and Group Vice
President of Buffalo Savings Bank.
CONTINUING DIRECTORS
Jay S. Moeller - Age 35 Director since 1999
Since 1997, Mr. Moeller was President of Icon Technology LLC, a software and
consulting company which the Company purchased the assets of on January 15,
1999. Mr. Moeller was named President of the Company's Software Division on May
6, 1999. Previously, he was a Company Vice President since January 15, 1999. Mr.
Moeller was appointed to the Board on April 19, 1999. Previous to 1997, Mr.
Moeller was a Vice President of Metis/HTP, a software consulting company.
Franklyn S. Barry, Jr. - Age 59 Director since 1991
Mr. Barry is President and Chief Executive Officer of Hemex, Inc., a privately
owned developer and manufacturer of medical devices. He was President of Ingram
Software Inc., a distributor of microcomputer software and supplies from 1985 to
1987, and a founder and Chief Executive Officer of its predecessor, Software
Distribution Services, Inc. from 1983 to 1985. He has been a Director of
Merchants Mutual Insurance Company, a property and casualty underwriter since
1981, and was a Director of Merchants Group, Inc. from 1986 to 1994.
Richard E. McPherson - Age 66 Director since 1982
Mr. McPherson served as a Vice President of the Company since its incorporation
in 1982 until 1995 when he retired. He was one of the founders of Comptek and
served as Vice President of that company prior to April 1982.
Brent D. Baird - Age 60 Director since 1998
Mr. Baird is a private investor. He is Chairman of the Board of First Carolina
Investors, Inc., a closed-end, non-diversified management investment company,
which owns 19% of Barrister's Common Stock. Mr. Baird is also director of
Exolon-ESK, Inc., Merchants Group, M&T Bank Corporation, Todd Shipyards
Corporation and Oglebay Norton Company.
Mr. Baird resigned from the Board effective July 19, 1999 in order to devote
more time to other business interests.
THE NOMINEES FOR DIRECTOR RECEIVING THE HIGHEST NUMBER OF VOTES OF THE HOLDERS
OF COMMON STOCK AND SERIES E PREFERRED STOCK OF THE COMPANY VOTING AS A CLASS
PRESENT OR REPRESENTED AT THE MEETING SHALL BE ELECTED DIRECTORS. A VOTE IN
FAVOR OF THE COMPANY'S NOMINEES IS RECOMMENDED BY THE BOARD OF DIRECTORS.
<PAGE> 11
PROPOSAL NO. 2
TO APPROVE ISSUANCE OF 2,500,000 SHARES OF COMMON STOCK ON CONVERSION OF THE
COMPANY'S OUTSTANDING SHARES OF SERIES E PREFERRED STOCK WHICH WAS ISSUED AS
CONSIDERATION FOR THE PURCHASE OF THE ASSETS OF ICON TECHNOLOGY LLC PURSUANT TO
AN ASSET PURCHASE AGREEMENT DATED JANUARY 15, 1999.
SUMMARY
The following is a summary of certain summary information contained elsewhere in
this Proxy Statement. The information contained in this summary is qualified in
its entirety by and should be read in conjunction with more detailed information
contained in this Proxy Statement.
THE COMPANY
The Company is engaged in the business of developing, marketing and licensing
accounting and professional management software, primarily for the legal
profession and in maintaining, repairing and servicing computer equipment for
the general business market. During the fiscal year ended March 31, 1999 the
Company had revenues of $14,994,000, operating profit of $188,000 and net income
of $8,000. On June 30, 1999, the closing price of the common stock, par value
$.24 per share (the "Common Stock") of the Company on the AMEX was $3.00 per
share.
ICON TECHNOLOGY LLC
Icon was a private company engaged in the business of developing, marketing and
licensing high end budget and executive information software to the legal and
professional markets and in consulting on third party software products. During
the fiscal year ended December 31, 1998, Icon had revenues of $1,086,000
operating earnings of $56,000 and net pre-tax earnings of $58,000. Icon's main
product is LegalHouse, a sophisticated financial reporting and budgeting system
for the large professional services firm. Icon also provides high level
application development and software consulting for the general business market.
THE ICON MEMBERS
The Members interests in Icon were held by four individuals: Jay S. Moeller, who
was President, Thomas Jones, who was Chief Technology Officer, Alan Lash and
Stuart Guild (collectively, the "Icon Principals").
THE ACQUISITION
On January 15, 1999, the Company acquired the assets of Icon for consideration
consisting of 2,500 shares of Series E Preferred Stock of the Company, which is
convertible into 2,500,000 shares of Common Stock upon stockholder approval.
Additionally, the Company entered into employment contacts with each of the Icon
Principals as part of the acquisition. The Company is obligated to seek
stockholder approval, as required by applicable rules of the American Stock
Exchange ("AMEX"), to approve the conversion of the 2,500 shares of Series E
Preferred Stock into 2,500,000 shares of Common Stock as a prerequisite to
listing such Common Stock with the AMEX.
PURCHASE AGREEMENT
The terms and conditions of the acquisition of the assets of Icon by the Company
are set forth in an Asset Purchase Agreement dated as of January 15, 1999, by
and among the Company, Icon and the Icon Principals (the "Asset Purchase
Agreement"), and certain exhibits and schedules to the Asset Purchase Agreement.
The Asset Purchase Agreement is attached as Annex A to this Proxy Statement. The
description in this Proxy Statement of the Asset Purchase Agreement, the
acquisition and their terms and conditions is qualified in its entirety by
reference to the Asset Purchase Agreement and the pertinent exhibits and
schedules thereto, and is not, and does not purport to be complete, although all
material elements of the Asset Purchase Agreement are described in this Proxy
Statement.
REASONS FOR THE ACQUISITION
The Board of Directors believed that the Icon acquisition will further expand
the Company's range of software products and will be a significant step toward
the Company's goal of becoming a leading accounting and management software
company for the legal and professional markets. The Board further anticipates
that the acquisition will result in several important benefits to the Company,
among which are: (i) making available to the
<PAGE> 12
Company the extensive management experience and qualifications of the Icon
Principals; (ii) increased revenues and profits; (iii) capturing cost savings,
synergies and efficiencies primarily by creating cross-marketing opportunities
with the respective customers of the Company and Icon; (iv) utilizing and
growing Icon's already existing consulting business and experience; and (v)
enhancing both companies' ability to pursue opportunities for growth.
LETTER OF FINANCIAL ADVISOR
Buffalo Ventures, Inc. ("BVI") delivered a written letter dated December 31,
1998 to the Board of Directors that, as of the date of such opinion, the
consideration of stock to be paid by the Company pursuant to the Asset Purchase
Agreement is reasonable from a financial point of view, to the Company.
ACCOUNTING TREATMENT
The acquisition was accounted for using the purchase method of accounting.
Consequently, the assets and liabilities of Icon have been recorded at their
estimated fair value, with any difference between the amount of such fair value
and the purchase price being recorded as goodwill. The operating results of Icon
have been included in the statement of operations from January 1, 1999.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors believes that the terms and conditions of the acquisition
are in the best interests of the Company and the Board of Directors recommends
that the Stockholders vote FOR approval of the issuance of 2,500,000 shares of
Common Stock in exchange for the 2,500 shares of Series E Preferred Stock issued
as consideration for the Icon acquisition.
VOTE REQUIRED FOR APPROVAL
Pursuant to the rules of the AMEX, an issuer must obtain stockholder approval as
a prerequisite to the listing with the AMEX of any common stock issued as
consideration pursuant to an acquisition of the assets of another company, where
such issuance could result in an increase in outstanding common stock of 20% or
more. The issuance of the 2,500,000 shares of Common Stock on conversion of the
Series E Preferred Stock would represent an increase in outstanding common stock
of 20% or more. Thus approval by the Company's Stockholders of the issuance is
required. Such approval may be obtained by the affirmative vote of a majority of
the votes cast on the proposal in person or by proxy.
Pursuant to the Asset Purchase Agreement, Icon and the Icon Principals received
proxies from BIS Partners, L.P. and First Carolina Investors, representing
5,523,153 shares of Common Stock, agreeing to permit the Icon Principals to vote
their shares in connection with the conversion of the 2,500 shares of Series E
Preferred Stock to 2,500,000 shares of Common Stock.
For the reasons set forth in "The Acquisition - Reasons for the Acquisition",
the Board believes that the acquisition is in the best interests of the Company
and its Stockholders. The Board recommends that the Stockholders of the Company
vote "FOR" the issuance of the 2,500,000 shares of Common Stock on conversion of
the Series E Preferred Stock.
THE ACQUISITION
The following summary of the acquisition is qualified in its entirety by
reference to the provisions in the Asset Purchase Agreement which is included as
Annex A to this Proxy Statement, although all material elements of the Asset
Purchase Agreement are described in this Proxy Statement.
GENERAL DESCRIPTION OF THE ACQUISITION
Icon was a California limited liability corporation whose membership interests
were, prior to the acquisition, owned by the Icon Principals. The Company
acquired all of the assets of Icon (the "Acquisition") in return for 2,500
shares of Series E Preferred Stock (the "Acquisition Consideration").
As a result of the Acquisition, all of the Icon assets are owned by the Company.
<PAGE> 13
BACKGROUND OF THE ACQUISITION
In July 1998, Henry P. Semmelhack, President and Chief Executive Officer of
Company, was introduced to Jay Moeller, President of Icon. Mr. Semmelhack and
Mr. Moeller discussed the possibility of a business transaction involving their
respective businesses. The Company and Icon did not, at that meeting, discuss
specific terms with regard to the potential acquisition of Icon's assets by the
Company. Mr. Moeller, however, did express interest in continuing discussions
and the parties agreed that Icon would provide to the Company financial,
software product, and operations information.
After the meeting, Icon forwarded to the Company Icon's previous year financial
history. After reviewing this information, Henry Semmelhack and Mr. Moeller had
a telephone conversation to discuss various financial and operating information
relative to each other's businesses, including the Company's and Icon's
stockholders' equity, tangible versus intangible assets, goodwill, revenues,
gross profit and pre-tax income, and potential benefits that could result from
the merger of the two companies. No specific economic terms were discussed.
At a special Board meeting held on July 28, 1998, management of the Company
advised the Board regarding the discussions with Icon and with another company,
and management's analysis of the information regarding Icon that had been
provided to the Company. The Board authorized management to continue discussions
in respect of a business relationship with or potential acquisition of Icon.
Following the Board meeting of July 28, 1998, and in reliance upon the
information provided by Icon, the Company contacted and met with BVI. The
purpose of this meeting was to explore various strategic and transactional
alternatives available to the Company should it decide to proceed with
negotiations relating to a possible transaction with Icon.
The Company held meetings with BVI and the Company's outside counsel to receive
their assistance in developing an acceptable acquisition structure and an
initial acquisition proposal. During this time, and into early September, 1998,
Mr. Semmelhack continued discussions with Mr. Moeller. At the regular Board
meeting on September 3, 1998, management of the Company advised the Board of the
structure of the potential acquisition that was taking place with Icon. Company
management noted that the acquisition would require further study, analysis and
due diligence. Company General Counsel Mark Donadio began having extensive
discussions with Icon's counsel. Company's management traveled to Icon's offices
in California to perform additional due diligence, including visiting Icon's
offices, meeting and interviewing all Icon employees, meeting with clients,
reviewing records and meeting with Icon's financial advisor. The Company
prepared a draft non-binding Letter of Intent which the Board approved at a
special meeting on September 16, 1998 including a preliminary offer of 2,500,000
shares of Common Stock to acquire Icon's assets. This preliminary offer, subject
to resolution of certain tax and structuring issues, was received favorably by
Icon. A non-binding letter of intent was executed by the Company and Icon.
During October 1998 and November 1998, the Company continued its review of
Icon's financials and the Company and Icon completed their purchase price
negotiations and agreed on the material terms of the Asset Purchase Agreement.
In December 1998, the Company distributed the first draft of the Asset Purchase
Agreement and Icon and its counsel responded with their comments to this initial
draft. Over the next several weeks, the parties reached agreement on the
definitive form of the Asset Purchase Agreement.
On January 6, 1999, BVI made a presentation to the Board and delivered a letter
dated December 31, 1998 ("Letter of Financial Advisor"). In its presentation BVI
reviewed historical and projected performance of Icon, explained the valuation
procedures utilized in evaluating Icon and stated their preliminary assessment,
subject to review of the execution version of the Asset Purchase Agreement, that
the Acquisition Consideration offered to Icon was reasonable to the Company from
a financial point of view.
On January 6, 1999, the Board met with Company management and BVI, reviewed the
Letter of Financial Advisor and unanimously concluded that the Asset Purchase
Agreement and the Acquisition were fair to and in the best interests of the
Company and its Stockholders, approved the Asset Purchase Agreement and certain
related matters, and resolved to recommend that the Stockholders of the Company
approve the Acquisition and the stock issuances in connection therewith pursuant
to the terms of the Asset Purchase Agreement.
On January 15, 1999 the Asset Purchase Agreement was executed by the Company and
Icon, substantially in the form presented to the Board of Directors and the
Acquisition was closed.
<PAGE> 14
REASONS FOR THE ACQUISITION
The Board believed that the Acquisition would further expand the Company's range
of software products and would be a significant step toward the Company's
objective of becoming a leading software company for the legal market. In
approving the Asset Purchase Agreement and the Acquisition and concluding that
they were in the best interests of the Company and its stockholders, the Board
considered the following material factors:
1. The Board considered that Icon's main product, LegalHouse, had a
demonstrated ability to sell into the large law firm base, a market the
Company believed represented good business opportunities.
2. The Board considered the competency and qualifications of the management of
Icon. The Board believed that the competence and experience of Icon's
management will provide the Company with the opportunity to expand Icon's
business without exceeding the capacity of such management to handle such
growth. On May 6, 1999, the Company announced that it had promoted Jay
Moeller to President of the Company's entire Software Division.
3. The Board considered Icon's demonstrated experience in providing third
party software consulting services, and that this represented an area of
new growth for the Company.
4. The Board reviewed carefully the respective businesses, financial
condition, results of operations and cash flows of each of the Company and
Icon, both on a historical and on a prospective basis. The Board noted that
Icon's historical financial performance has achieved consistent
profitability and that Icon has the potential to increase sales in the
future, both in its product offerings and consultant services, and the
ability to attract new large law firms and professional accounts.
Management of the Company therefore anticipated that the Acquisition would
increase the Company's revenues and profitability.
5. The Board evaluated the demonstrated capability of Icon's management to
leverage expertise in general software consulting by outsourcing its
employee consultants and maintaining low overhead expenses in order to
generate significant revenues.
6. The Board believed that valuable business synergies exist in bringing
together the product offerings and management teams of Icon and the
Company, primarily in cross-marketing opportunities to the respective
customers of each of Icon and the Company, and in utilizing the Company's
significant experience in marketing and sales into the legal market to
expand Icon's business, particularly in the small and mid-sized legal
market coupled with Icon's strength and potential in the large law firm
market. Therefore the Board concluded that significant opportunities for
growth exist in this business.
7. The Board considered the advice BVI delivered to the Board at its meeting
on January 6, 1999 and BVI's letter dated December 31, 1998, both of which
indicated that the Acquisition Consideration was reasonable to the Company
from a financial point of view.
8. The Board believed that, considering the above factors, particularly the
enhanced opportunities available to the Company and Icon to compete
effectively in the legal marketplace as a consolidated entity, the
Acquisition affords the Company's stockholders greater opportunity to
realize appreciation in the value of their equity investment in the
Company.
There can be no assurance, of course, that the benefits anticipated to result
from the Acquisition will, in fact, be achieved.
In addition to the anticipated benefits of the Acquisition, the Board considered
the following potential risks and disadvantages:
1. The Acquisition involves the combination of two companies that have
operated independently. The successful development of the procedures
and systems appropriate to integrate the Icon business with the
operations of the Company poses management challenges, including the
dedication of management resources which may temporarily detract from
management's attention to the day to day business of the Company and
Icon. There can be no assurance that such diversion of management
resources will not adversely affect operations or that other material
adverse effects will not result from such activities, nor can there be
any assurance that future consolidated results will improve as a result
of the Acquisition, or as to the timing or extent to which cost savings
and efficiencies, if any, will be achieved.
<PAGE> 15
2. Any substantial delay in or reduction of expected benefits from the
Acquisition could adversely impact the value of the Company's Common
Stock.
3. Following the Acquisition, the Icon Principals now own approximately
20% of the voting stock of the Company. As a result, the equity
percentage of ownership of current stockholders will be reduced and,
the Icon Principals will be able to exert influence over the outcome of
corporate actions requiring stockholder approval.
4. The Company's future success depends to a significant extent on its
management team. The President of Icon, Jay Moeller, is now the
President of the Company's Software Division. The success of the
Company's entire Software Division will now depend to a large extent on
Mr. Moeller's leadership, initiatives, and management directives.
Although the Company entered into a five year employment agreement with
Jay Moeller, a four year employment agreement with Tom Jones and three
year employment agreements with Alan Lash and Stuart Guild, the loss of
the services of any of them, and especially Jay Moeller or Tom Jones
could have a material adverse effect on the Company's business,
financial condition and future prospects.
5. Future sales of the shares issued in the acquisition could adversely
affect the market price of the Common Stock. Although the Icon
Principals are each subject to limitations on resales of Common Stock
received on conversion of the Series E Preferred Stock pursuant to the
terms of the Asset Purchase Agreement and limitations imposed by the
Securities Act of 1933, as amended (the "Securities Act"), there can be
no assurance as to when, and how many of, such shares of Common Stock
will be sold and the effect such sales may have on the market price of
the Common Stock. Under the Asset Purchase Agreement, beginning one
year after the Closing, so long as they are employed, the Icon
Principals will be eligible to sell 10% of their shares, following two
years, an additional 15% of their shares, following three years, an
additional 20% of their shares, following four years, an additional 25%
of their shares and following five years, an additional 30% of their
shares, all subject to the manner of sale, volume, notice and
information restrictions of Rule 144. See "The Asset Purchase
Agreement". The Company has agreed to register the Icon shares on terms
as favorable as those granted to any other holder of Common Stock. In
the event of the resale of a substantial number of shares of Common
Stock, or a perception that such sales could occur, there could be a
material adverse effect on the prevailing market price of the Common
Stock. In view of the nature and variety of factors considered in
connection with its evaluation of the Acquisition, the Board did not
find it practicable to quantify or otherwise assign specific weights to
specific factors. Each anticipated benefit was deemed to support the
conclusions of the Board, and the anticipated benefits, considered as a
whole, were determined to outweigh the potential risks and
disadvantages, considered as a whole.
LETTER OF FINANCIAL ADVISOR
On January 6, 1999 the Company's financial advisor, Buffalo Ventures, Inc.
("BVI"), delivered a letter dated December 31, 1998 to the Board of Directors
that, as of the date of such letter, the Acquisition Consideration to be paid by
the Company is reasonable to the company from a financial point of view.
In arriving at its opinion, BVI (i) reviewed the consideration to be paid by the
Company in the Acquisition as set forth in the Asset Purchase Agreement, (ii)
reviewed certain available audited and unaudited financial statements of the
Company as well as certain other publicly available information of the Company
as well as certain unaudited financial statements of Icon, (iii) reviewed
certain internal information, primarily financial in nature, concerning the
Company and Icon, prepared by their respective managements, (iv) discussed the
past and current operations and financial condition and prospects of the Company
with its senior management, (v) discussed the operations and financial condition
and prospects of Icon with the senior management of Icon, (vi) reviewed forecast
financial statements of the Company prepared and furnished by its senior
management, (vii) reviewed forecast financial statements of Icon prepared and
furnished by the senior management of Icon, (viii) reviewed publicly available
information concerning the terms of selected merger and acquisition transactions
that it considered relevant to its inquiry, (ix) considered the trading range of
the Company's Common Stock and, (x) considered the pro forma financial effects
of the Acquisition on the Company.
No limitations were placed by the Board or management of the Company with
respect to the investigations made or the procedures followed by BVI. In
connection with its review, BVI assumed and relied upon the accuracy and
completeness of all financial and other information supplied to it by the
Company and Icon, and all publicly available information, and did not
independently verify such information. BVI also relied upon the managements of
the Company and Icon as to the reasonableness and achievability of the forecast
financial statements (and the assumptions and bases therein) provided to it for
the Company and Icon, respectively, and it assumed that such
<PAGE> 16
projections were reasonably prepared on bases reflecting the best currently
available estimates and judgments of management as to the future operating
performance of each respective entity.
BVI was not requested to make, and did not make, an independent appraisal or
evaluation of the assets, properties, facilities or liabilities of either the
Company or Icon, and was not furnished with any such appraisals or evaluations.
The BVI opinion is necessarily based on stock prices and economic and other
conditions and circumstances as existed or were in effect on, and the
information made available to it as of, the date of the opinion. BVI expressed
no opinion as to the value of the shares of Common Stock or as to the price or
trading range at which the shares of Common Stock may trade following the
Acquisition.
The following is a summary of the principal financial and valuation analyses
performed by BVI in connection with the preparation of the BVI letter.
In performing its analysis, BVI examined the aggregate equity value of the
outstanding common equity (defined as the number of outstanding shares times the
assessed price per share of $1.00) (hereafter the "Equity Value"). As of the
date of the BVI letter, the value of the consideration to be paid by the Company
was estimated to be $2,500,000 based on a value of Company stock at the time of
BVI's review of $1 per share.
CASH FLOW ANALYSIS
BVI performed a discounted cash flow analysis of Icon premised upon the
assumptions summarized below. BVI also reviewed the impact of the projected
Earnings Per Share ("EPS") on the common stock of the Company in determining the
reasonableness of the consideration. Based on the information provided by Icon
and the Company and the valuation methodologies discussed above, BVI determined
it appears the consideration paid by the Company for the assets of Icon is
reasonable from a financial point of view.
BVI reviewed limited historical financial information provided by Icon and
projected financial results prepared by the Company and reviewed by the
management of Icon. BVI relied on this information for all analyses performed
and any valuation conclusions described herein. BVI has performed no due
diligence on Icon or the Company and does not warrant the financial information
provided by the Company and Icon is true or correct.
OTHER FACTORS
BVI, as part of its investment banking business, is regularly engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, and secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. The Company selected BVI as
its financial advisor because it has worked with the Company previously, knew
the Company's business well and because BVI is a regionally recognized
investment banking firm that has substantial experience in transactions similar
to the Acquisition.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a general summary of the material federal income tax
consequences to the Company and its stockholders from the Acquisition. This
summary does not discuss state or local taxation, or all aspects of federal
taxation that may be relevant to the Acquisition.
As more fully discussed elsewhere, the Acquisition is being accomplished through
the use of stock. There is no cash consideration. The depreciable tax basis of
the acquired assets will remain unchanged. In addition, the issuance of stock
will not impair or otherwise modify the amount or availability of the Company's
existing net operating loss carryovers. The Acquisition was consummated on a tax
free basis. As such the future amortization of goodwill will not create a tax
deduction for the Company. There were no other material tax consequences to the
Company from the transaction.
The Acquisition will not result in any independent federal income tax
consequences to the stockholders of the Company.
<PAGE> 17
ACCOUNTING TREATMENT
The Acquisition will be accounted for using the purchase method of accounting
applied in accordance with generally accepted accounting principles.
Consequently, the assets and liabilities of Icon have been recorded at their
estimated fair value, with any difference between the amount of such fair value
and the purchase price being recorded as goodwill. Goodwill will be amortized on
the straight line method over a period of seven years. The operating results of
the combined company will include the results of operations of that part of the
combined company which is currently Icon from and after January 1, 1999.
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION
Jay Moeller, formerly President of Icon, after the January 15, 1999 transaction
became a Vice President of the Company and was appointed by the Board of
Directors as a Class I director to fill a vacancy on the Board until the Year
2000 Annual Meeting of Stockholders. On May 6, 1999, the Company announced that
Mr. Moeller was appointed as President of the Company's Software Division.
Thomas Jones, formerly Chief Technology Officer of Icon, after the January 15,
1999 meeting became a Vice President of the Company.
Following the Acquisition, Mr. Moeller and Mr. Jones own approximately 18% of
the voting stock of the Company (including Common Stock already owned and Series
E Preferred Stock which votes with the Common Stock as a class). On approval of
this proposal by the stockholders, the Series E Preferred Stock held by Messrs.
Moeller and Jones will be converted into shares of Common Stock of the Company.
RECOMMENDATION OF BOARD OF DIRECTORS
The Board of the Company believes the Acquisition is in the best interests of
the Company and its stockholders and recommends that the stockholders vote "FOR"
approval of the issuance of Common Stock on conversion of the Series E Preferred
Stock.
THE ASSET PURCHASE AGREEMENT
The following summary of the Asset Purchase Agreement is not complete and is
qualified in its entirety by reference to the provisions in the Asset Purchase
Agreement, which is included as Annex A hereto, although all material elements
of the Asset Purchase Agreement are described in this Proxy Statement.
ACQUISITION CONSIDERATION
The consideration paid by the Company for all of the assets of Icon consists of
2,500 shares of Series E Preferred Stock convertible upon stockholder approval
into 2,500,000 shares of Common Stock.
Upon issuance in accordance with the terms of the Asset Purchase Agreement, the
2,500,000 shares of Common Stock will be fully paid and non-assessable. Pursuant
to the Asset Purchase Agreement, BIS Partners, L.P. and First Carolina Investors
provided Icon and the Icon Principals with proxies representing 5,523,153 shares
of Common Stock in favor of the conversion of the 2,500 shares of Series E
Preferred Stock to 2,500,000 shares of Common Stock.
REPRESENTATIONS AND WARRANTIES
In the Asset Purchase Agreement, Icon and the Icon Principals made various
representations and warranties relating to, among other things Icon's business
and financial condition, Icon's requisite corporate (and/or other) authority to
enter into and perform their obligations under the Asset Purchase Agreement, the
absence of a breach or violation of or default under such parties' charter or
bylaws or internal rules or regulations governing conduct of corporate or
partnership (as the case may be) actions as a result of the consummation of the
Acquisition, the accuracy of Icon's financial statements, tax returns and other
filings with applicable taxing authorities, the satisfaction of certain legal
requirements, including the receipt of all governmental, regulatory and other
necessary consents or waivers for the Acquisition and the absence of certain
changes in Icon's business, including the absence of undisclosed liabilities,
and material litigation matters, employee benefit plans, material contracts, the
nature of its transactions with affiliates and the condition and sufficiency of
its assets. In addition, Icon and the Icon Principals made representations and
warranties that each of the Sellers has good and marketable title to the Icon
assets and interests
<PAGE> 18
free and clear of any liens, and that the transfer of such assets and interests
in connection with the Acquisition will pass good and marketable title to such
assets and interests, free and clear of any liens. The Company made
representations and warranties relating to, among other things, the Company's
requisite corporate authority to enter into and perform the obligations under
the Asset Purchase Agreement, the absence of a breach or violation of or
default under the Company's charter or bylaws, the accuracy of the Company's
various filings with the SEC, and the satisfaction of certain legal
requirements, including the receipt of all governmental, regulatory and other
necessary consent or waivers for the Acquisition.
NO REGISTRATION RIGHTS RELATING TO THE COMPANY SECURITIES
The Asset Purchase Agreement does not grant to Icon and the Icon Principals the
right to demand the registration under the Securities Act of the shares of
Common Stock constituting the Acquisition Consideration. The Asset Purchase
Agreement does grant Icon and Icon Principals "piggyback" registration rights
with respect to future registrations by the Company.
INDEMNIFICATION
The Asset Purchase Agreement provides for various indemnification obligations of
Icon and the Icon Principals and the Company. Pursuant to the Asset Purchase
Agreement, the Icon Principals agree severally (to the extent of the
consideration received by such Seller) to indemnify and hold harmless, subject
to certain limitations, the Company from and against any and all losses, claims,
damages, liabilities, costs and expenses (collectively, "Damages") suffered by
them resulting from or in respect of any breach or default in the performance by
Icon and the Icon Principals of their covenants and agreements in the Asset
Purchase Agreement or any representation or warranty which survives the Closing;
provided that, no Damages resulting from or arising out of a breach of certain
representations set forth in the Asset Purchase Agreement will be deemed to have
occurred unless and until all such Damages exceed an aggregate of $50,000. The
maximum aggregate liability of Icon and the Icon Principals under the
indemnification provisions of the Asset Purchase Agreement is the value of the
Series E Preferred Shares (or the shares of Common Stock into which they have
been converted) determined by reference to the average closing price of a share
of Common Stock on AMEX during the five trading day period ending on the day
prior to delivery of such shares, but in no event will the Icon Principals'
indemnification obligation under the Asset Purchase Agreement exceed $2.5
million (which may be satisfied by the return of unsold shares of stock plus the
proceeds from the sale of any sold shares).
EMPLOYMENT AGREEMENTS WITH ICON PRINCIPALS
In accordance with the terms and conditions of the Asset Purchase Agreement, the
Company, upon consummation of the Acquisition, entered into employment
agreements (the "Employment Agreements") with each of the Icon Principals.
Pursuant to the Employment Agreements, Jay Moeller agreed to serve as Vice
President (he has since been appointed by the Company and the Board as President
of the Company's Software Division and has moved from California to Company
headquarters in Buffalo.), Mr. Jones' will serve as Vice President and Mr. Lash
and Mr. Guild will serve as employees. The Employment Agreements with Mr.
Moeller is for a term of five years, expiring on the fifth anniversary of the
Closing Date of the Acquisition, and provides for Mr. Moeller to receive an
annual base salary of $155,000, plus incentive bonuses. Mr. Jones' Employment
Agreement is for a term of four years, and provides for him to receive an annual
base salary of $95,000, plus incentive bonus payments based on the achievement
of certain levels of pre-tax profit. Mr. Lash and Mr. Guild have three year
employment agreements.
In addition, the Employment Agreements contains standard confidentiality
provisions requiring each Icon Principal to maintain the confidentiality of the
proprietary information of the Company. Each agreement also contains standard
non-compete and non-solicitation provisions which prevent them from competing
with, or soliciting the employees, suppliers or customers of, the Company or its
business for a period (the "Restricted Period") equal to the longer of five (5)
years after the Effective Date or three (3) years following the actual date of
termination of the Employment Agreement, but in no event not less than one (1)
year after termination of employment should such termination occur at any time
on or after five (5) years after the Effective Date. Each of the Employment
Agreements provides for termination of employment thereunder in the event that
the employee dies, or is ill or incapacitated for longer than six (6) months, or
by the Company for "cause" upon written notice to the employee, which for
purposes of the Employment Agreements, means: (A) any breach by the employee of
any of the covenants relating to confidential information, company property, and
non-competition, (B) material failure by the employee to fulfill his employment
duties, or (C) other conduct of the employee involving any type of disloyalty to
the Company or willful misconduct with respect to the Company, including without
limitation fraud, embezzlement, theft or proven dishonesty in the course of his
employment or conviction of a felony. In the case of termination for
<PAGE> 19
cause, the employee will only be entitled to receive upon such termination
the accrued and unpaid (as of the date of such termination) portion of such
employee's salary and benefits, and shall be entitled to no additional
severance or other compensation.
<PAGE> 20
ICON FINANCIAL STATEMENTS
Set forth below are the consolidated financial statements of Icon as of and for
the years ended December 31, 1998 and 1997, together with Independent Auditors'
Report.
ICON TECHNOLOGY LLC
BALANCE SHEETS
December 31, 1998 and 1997
(In thousands)
<TABLE>
<CAPTION>
1998 1997
---- ----
ASSETS
<S> <C> <C>
Cash $ 13 $ 1
Accounts receivable 72 95
Prepaid expenses 3 --
---- ----
Total current assets 88 96
==== ====
Computer and other equipment 40 --
Less accumulated depreciation 8 --
---- ----
Net computer and other equipment 32 --
---- ----
Other assets 2 --
---- ----
Total assets $122 $ 96
==== ====
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 35 $ 96
Customer advances 26 --
---- ----
Total current liabilities 61 96
---- ----
Capital 7 4
Accumulated earnings (deficit) 54 (4)
---- ----
Total shareholders' equity 61 --
---- ----
Total liabilities and shareholders' equity $122 $ 96
==== ====
</TABLE>
See accompanying notes to financial statements.
<PAGE> 21
ICON TECHNOLOGY LLC
STATEMENTS OF OPERATIONS
(In thousands)
Year Ended December 31
----------------------
1998 1997
------- -------
Product Sales $ 60 $ --
Services 1,026 866
------- -------
Total revenues 1,086 866
------- -------
Cost of product sales 12 --
Cost of services 1,018 874
------- -------
Total expenses 1,030 874
------- -------
Earnings (loss) from operations 56 (8)
Interest income 2 --
------- =======
Net earnings (loss) $ 58 $ (8)
======= =======
See accompanying notes to financial statements.
ICON TECHNOLOGY LLC
STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Members' Accumulated
Capital Earnings (Deficit)
------- ------------------
<S> <C> <C>
Balance, January 1, 1997 $ 2 $ 4
Net loss (8)
Capital contributed 2
------- -------
Balance, December 31, 1997 4 (4)
Net earnings 58
Capital contributed 3
------- -------
Balance, December 31, 1998 $ 7 $ 54
======= =======
</TABLE>
See accompanying notes to financial statements.
<PAGE> 22
ICON TECHNOLOGY LLC
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 58 $ (8)
Adjustments to reconcile net earnings (loss) to net
cash provided (used) by operating activities:
Depreciation 8 --
Changes in current assets and liabilities:
Accounts receivable 23 (74)
Prepaid expenses (3) --
Accounts payable (61) 76
Customer advances 26 --
---- ----
Net cash provided (used) by operating activities 51 (6)
---- ----
Cash flows from investing activities:
Additions to computer and other equipment (40) --
Other (2) --
---- ----
Net cash used by investing activities (42) --
---- ----
Cash flows from financing activities:
Proceeds from capital transactions 3 2
---- ----
Net cash provided by financing activities 3 2
---- ----
Net increase (decrease) in cash 12 (4)
Cash at beginning of year 1 5
---- ----
Cash at end of year $ 13 $ 1
==== ====
</TABLE>
See accompanying notes to financial statements.
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(1) Summary of Significant Accounting Policies
(a) Nature of Organization - Icon Technology LLC (the "Company")
is a limited liability company that was engaged in the
business of providing computer related consulting services
primarily to the legal market. The Company is also a developer
and seller of a software product called LegalHouse. A typical
software transaction will consist of an initial license fee
for the delivery of the software and separately priced fees
for software conversion, installation, training and any
customer programming.
(b) The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
(c) Revenue Recognition - Product sales consist of LegalHouse
licensing fees. Software license revenue is recognized upon
delivery of the software product to the customer, unless the
Company has significant related obligations remaining or the
probability of collection is in doubt. When obligations remain
after delivery, revenue is recognized when such obligations
are no longer significant.
Services revenues include consulting services and services
associated with LegalHouse sales, such as system conversions,
installation, training and custom programming. Service
revenue, which is priced separately from the software license,
is recognized as the service is provided.
The American Institute of Certified Public Accountants'
Accounting Standards Executive Committee (AcSEC) has issued
Statements of Position (SOP) 97-2 "Software Revenue
Recognition" and 98-9 "Modification of SOP 97-2, Software
Revenue Recognition, with Respect to Certain Transactions."
The Company has adopted SOP 97-2 which specifies the
accounting requirements for software revenue recognition,
including the methods used to allocate revenues among elements
(licensing, support, services, etc.) in a multiple-element
software arrangement. The Company is presently reviewing the
impact, if any, of SOP 98-9 on revenue recognition.
(d) Equipment and Leasehold Improvements - Depreciation is
recorded on the double-declining method based on the estimated
useful lives of the assets. Computer and other equipment are
depreciated over estimated useful lives of five years.
(2) Cost of Services
Included in the cost of services are payments to the owners of $614,000
and $570,000 for the years ended December 31, 1998, and 1997,
respectively.
(3) Income Taxes
The Company operated as a partnership in 1997 and as a limited
liability company in 1998. The Company elected to be taxed as a
partnership on the cash basis. Therefore no income taxes are included
in the financial statements.
(4) Lease Commitment
The Company conducts its operations from a leased facility. The lease
runs for a one year period beginning July 1, 1998, at a monthly cost of
$1,644. It is expected that in the normal course of business, this
lease will be renewed or replaced.
(5) Major Customers
<PAGE> 24
Sales to the Company's largest customer accounted for 55% and 90% of
total revenues for 1998 and 1997 respectively. Sales to another
customer were 34% of total revenues for 1998, with no sales to this
customer in 1997.
(6) Subsequent Event
On January 15, 1999, the Company exchanged substantially all its assets
for 2,500 shares of preferred stock of Barrister Information Systems
Corporation, which will be converted into 2,500,000 shares of common
stock after shareholder approval at the next annual meeting. Barrister
develops and licenses software for professional organizations and
provides computer equipment maintenance services to its clients.
INDEPENDENT AUDITORS' REPORT
The Members of Icon Technology LLC:
We have audited the accompanying balance sheets of Icon Technology LLC as of
December 31, 1998 and 1997, and the related statements of operations,
shareholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Icon Technology LLC as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
Buffalo, New York
March 12, 1999
ICON MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Year ended December 31, 1998 as compared with year ended December 31, 1997.
SALES
Revenues for the year ended December 31, 1998, approximating $1,086,000 exceeded
the 1997 revenues of $866,000 due to increased product sales and consulting
revenues.
OPERATING INCOME
Operating income increased to $56,000 for 1998 as compared to ($8,000) for 1997.
This increase was primarily attributed to product sales associated with
licensing of LegalHouse and consulting revenues.
INCOME TAXES
Icon operated as a partnership in 1997 and as a limited liability company in
1998. Icon elected to be treated as a partnership on a cash basis. Accordingly,
Icon did not provide for federal and state income taxes during the respective
periods of 1998 and 1997.
LIQUIDITY
<PAGE> 25
Icon's cash balances increased from $1,000 to $13,000 between December 31, 1997
and December 31, 1998. The principal source of cash in 1998 was $51,000 provided
by operating activities and the principal use of cash was $40,000 for purchases
of computer and other equipment. Icon's principal liquidity needs were the
funding of accounts receivable and salaries and related employment expenses,
which were funded out of operations.
BUSINESS OF ICON
HISTORY AND BUSINESS OF ICON
Icon was founded in 1997 as a partnership and engaged in the business of
developing, marketing and licensing high end budget and executive information
software to the legal and professional markets and in consulting on third party
software products.
CUSTOMERS AND SALES. The market for Icon's consulting services is the general
business market. The primary market for Icon's LegalHouse product is the large
law firm and professional services company. In 1998, sales to Icon's largest
customer totaled 55% as compared to 90% in 1997. At the time of the Acquisition,
Icon employed ten consultants and software developers. These individuals were
subsequently employed by the Company on a full time basis following the
Acquisition.
COMPETITION. The software industry is very competitive. However, the Company's
management believes that the Icon software product, LegalHouse, holds a unique
position in being the only product to market of its type. While the Company
believes that competitive products may be developed, LegalHouse should be able
to command and maintain a market controlling influence. The primary customers of
LegalHouse are presently the large law firm and large professional services
firm.
PROPERTIES. At the time of the Acquisitions, Icon leased one principal facility
as follows:
<TABLE>
<CAPTION>
LOCATION SQUARE FOOTAGE PURPOSE
<S> <C> <C>
San Rafael, California 1,500 Office
</TABLE>
The Company assumed this lease in connection with the Acquisition.
LEGAL PROCEEDINGS. At the time of the Acquisition, Icon was not involved in any
pending legal proceedings.
COMPANY FINANCIAL STATEMENTS
The Company's audited financial statements and Management Discussion and
Analysis for the year ended March 31, 1999, are contained in the Company's
Annual Report to stockholders for the fiscal year ended March 31, 1999 which
Annual Report is being provided to stockholders with this Proxy Statement and is
incorporated by reference herein.
PRO FORMA FINANCIAL INFORMATION
The following Unaudited Pro Forma Condensed Consolidated Balance Sheet and the
Unaudited Pro Forma Condensed Consolidated Statements of Operations give effect
to the acquisition of Icon by the Company as if the acquisition, as further
described below, had occurred on December 25, 1998, for purposes of the
Unaudited Pro Forma Condensed Consolidated Balance Sheet, April 1, 1997, for
purposes of the Unaudited Pro Forma Condensed Consolidated Statements of
Operations for the year ended March 31, 1998, and April 1, 1998 for purposes of
the Unaudited Pro Forma Condensed Consolidated Statements of Operations for the
nine month period ended December 25, 1998.
The unaudited pro forma condensed consolidated financial statements are not
necessarily indicative of the financial position or future results of operations
or results that might have been achieved if the foregoing transaction had been
consummated as of the indicated dates. The unaudited pro forma condensed
consolidated financial statements should be read in conjunction with the related
notes thereto and the Company's historical financial statements incorporated by
reference into this Proxy Statement from the Company's Annual Report to
Stockholders for the year ended March 31, 1999, which Annual Report accompanies
this Proxy Statement.
<PAGE> 26
The unaudited pro forma condensed consolidated financial statements,
presented below, present the Acquisition based on a preliminary allocation of
the purchase price. The Company has accounted for the Acquisition as a purchase,
with the purchase price being determined by taking an average of the market
price of the Company's common stock three days before and after the closing date
of the Acquisition and then applying a discount based primarily on certain
restrictions associated with the resale of the common shares. Assets acquired
and liabilities assumed will be recorded at their estimated fair values at the
date of acquisition. The excess of the purchase price over the fair value of
tangible and intangible net assets acquired will be recorded as goodwill and
amortized over a period of 7 years.
<PAGE> 27
BARRISTER INFORMATION SYSTEMS CORPORATION
AND ICON TECHNOLOGY LLC
Unaudited Pro Forma
Condensed Consolidated Statements of Operations
For the Year Ended March 31, 1998
(In thousands, except per share data)
<TABLE>
<CAPTION>
Barrister
Information Systems
Corporation For Icon Technology LLC Combined Unaudited
the Year Ended For the Year Ended Unaudited Pro Forma Note Pro Forma
March 31, 1998 December 31, 1997 Adjustments Ref. Statements
-------------- ----------------- ----------- --- ----------
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales $ 1,927 $ - $ - $ 1,927
Services 15,138 866 - 16,004
------------- ------------- ------------- -------------
Total revenues 17,065 866 - 17,931
------------- ------------- ------------- -------------
Costs and expenses:
Cost of product sales 392 - 392
Cost of services 11,657 873 (235) (3) 12,295
------------- ------------- ------------- -------------
Total cost of revenues 12,049 873 (235) 12,687
Selling, general and
administrative expenses 4,023 - 209 (2) 4,232
Product development and
engineering 779 - 779
------------- ------------ ------------- -------------
Total costs and
expenses 16,851 873 (26) 17,698
------------- ------------- ------------- -------------
Operating earnings (loss) 214 (7) 26 233
Interest expense 191 - 191
------------- ------------- ------------- -------------
Net earnings (loss) $ 23 $ (7) $ 26 $ 42
============= ============== ============= =============
Net earnings per common share: $ 0.00
=============
Basic $ 0.00
==============
Diluted $ 0.00 $ 0.00
============= ==============
Weighted average number of
common shares outstanding:
Basic 8,207 (1) 10,707
============= ==============
Diluted 8,478 10,978
============= ==============
</TABLE>
See accompanying notes to the unaudited pro forma condensed consolidated
financial statements.
<PAGE> 28
BARRISTER INFORMATION SYSTEMS CORPORATION
AND ICON TECHNOLOGY LLC
Unaudited Pro Forma
Condensed Consolidated Statements of Operations
For the Nine Months Ended December 25, 1998
(In thousands, except per share data)
<TABLE>
<CAPTION>
Barrister
Information Systems
Corporation For the Icon Technology LLC
Nine Months For the Nine Months
Ended Ended Unaudited Pro Note Combined Unaudited
December 25, September 30, Forma Adjustments Ref. Pro Forma Statements
1998 1998 ----------- --- ----------------
---- ---------------
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 1,576 $ 30 $ - $ 1,606
Services 9,594 777 10,371
------------- ------------- ------------- -------------
Total revenues 11,170 807 - 11,977
------------- ------------- ------------- -------------
Costs and expenses:
Cost of product sales 324 6 330
Cost of services 7,407 744 (87) (3) 8,064
------------- ------------- ------------- -------------
Total cost of revenues 7,731 750 (87) 8,394
Selling, general and
administrative expenses 2,625 - 157 (2) 2,782
Product development and
engineering 456 - 456
------------- ------------ ------------- -------------
Total costs and
expenses 10,812 750 70 11,632
------------- ------------- ------------ -------------
Operating earnings 358 57 (70) 345
Interest expense 146 - 146
------------- ------------ ------------- -------------
Net earnings $ 212 $ 57 $ (70) $ 199
============= ============= ============= =============
Net earnings per common share:
Basic $ 0.03 $ 0.02
============= ==============
Diluted $ 0.03 $ 0.02
============= ==============
Weighted average number of
Common shares outstanding:
Basic 8,224 (1) 10,724
============= ==============
Diluted 8,445 10,945
============= ==============
</TABLE>
See accompanying notes to the unaudited pro forma condensed consolidated
financial statements.
<PAGE> 29
BARRISTER INFORMATION SYSTEMS CORPORATION
AND ICON TECHNOLOGY LLC
Unaudited Pro Forma
Condensed Consolidated Balance Sheet
(In thousands)
<TABLE>
<CAPTION>
Barrister Information Icon Technology
Systems Corporation LLC Unaudited Pro Combined Unaudited
December 25, September 30, Forma Note Pro Forma
1998 1998 Adjustments Ref. Statements
---- ---- ----------- ---- ----------
ASSETS
<S> <C> <C> <C> <C>
Cash $ 159 $ 76 $ (8) (5) $ 227
Accounts receivable 2,534 111 2,645
Inventories 2,487 2,487
Prepaid expenses 27 27
------------- ------------ ------------- ------------
Total current assets 5,207 187 (8) 5,386
Net equipment and leasehold
improvements 384 26 (9) (5) 401
Software production costs 824 115 (7) 939
Goodwill - 1,198 (6) 1,198
Other assets 254 2 256
------------- ------------ ------------ ------------
Total assets $ 6,669 $ 215 $ 1,296 $ 8,180
============= ============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Note payable to bank $ 245 $ $ $ 245
Note payable to related party 100 100
Current installments of long-term debt
222 222
Accounts payable 994 154 107 (8) 1,255
Accrued compensation and benefits 641 641
Customer advances and unearned
revenue 757 757
Other liabilities 146 146
------------- ------------ ------------ -----------
Total current liabilities 3,105 154 107 3,366
------------- ------------ ----------- -----------
Long-term debt, excluding current
installments 1,355 1,355
Preferred stock - 1,250 (4) 1,250
Common stock 1,974 7 (7) (9) 1,974
Additional paid-in capital 21,567 21,567
Accumulated deficit (21,332) 54 (54) (9) ( 21,332)
------------- ------------ ------------ --------
Total shareholders' equity 2,209 61 1,189 $ 3,459
------------- ------------ ----------- ------------
Total liabilities and shareholders'equity $ 6,669 $ 215 $ 1,296 $ 8,180
============= ============= ============ ============
</TABLE>
See accompanying notes to the unaudited pro forma condensed consolidated
financial statements.
<PAGE> 30
BARRISTER INFORMATION SYSTEMS CORPORATION
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statement
1. The accompanying pro forma condensed consolidated financial statements
of Barrister Information Systems Corporation (the "Company") are
presented to reflect the acquisition of Icon Technology LLC ("Icon").
On January 15, 1999, the Company acquired the assets of Icon in
exchange for 2,500 shares of preferred stock which are convertible into
2,500,000 shares of common stock. The weighted average number of common
shares outstanding used in the computation of the pro forma net
earnings per common share assumes that the preferred stock has been
converted. The unaudited pro forma condensed consolidated balance sheet
as of December 25, 1998, gives effect to the acquisition as if it had
occurred on December 25, 1998. The unaudited pro forma condensed
consolidated statements of operations for the year ended March 31,
1998, and for the nine months ended December 25, 1998, give effect to
the acquisition as if the transaction occurred on April 1, 1997, and
April 1, 1998, respectively.
2. The acquisition is accounted for as a purchase. Accordingly, assets
acquired and liabilities assumed are recorded at their estimated fair
values at the date of acquisition. The pro forma financial statements
reflect a preliminary allocation of the purchase price based on
information presently available. The excess of the purchase price over
the fair value of net assets acquired is recorded as goodwill and
amortized over a period of 7 years. The pro forma adjustment represents
amortization of certain intangible assets in connection with the
acquisition as follows: a) the excess of the Icon purchase price over
the fair market value of the net assets acquired totaling $1,198,000
and b) software capitalized at $115,000.
3. Represents compensation paid to Icon principals in excess of current
compensation arrangements established with the Company.
4. Estimated value of the preferred shares issued in exchange for Icon's
assets. The value was determined by taking an average of the market
price of the Company's common stock three days before and after the
January 15, 1999 acquisition date and then applying a discount based
primarily on certain restrictions associated with the resale of the
common shares.
5. Represents an adjustment to record assets at their estimated fair
market value or assets retained by Icon on the date of acquisition.
6. Represents the excess of the Icon purchase price over the fair value of
the net assets acquired. This intangible asset will be amortized using
the straight-line method over a period of 7 years.
7. Estimated fair value of capitalized software which will be amortized
over three years beginning January 1, 1999.
8. Legal and professional fees incurred in connection with the
transaction.
9. Reflects the elimination of Icon's shareholders' equity.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES OF THE COMBINED
VOTING POWER OF COMMON STOCK AND SERIES E PREFERRED STOCK OF THE COMPANY VOTING
AS A CLASS PRESENT OR REPRESENTED AT THE MEETING IS REQUIRED TO APPROVE THE
ISSUANCE OF 2,500,000 SHARES OF COMMON STOCK ON CONVERSION OF THE COMPANY'S
OUTSTANDING SHARES OF SERIES E PREFERRED STOCK WHICH WERE ISSUED AS
CONSIDERATION FOR THE PURCHASE OF THE ASSETS OF ICON TECHNOLOGY LLC PURSUANT TO
AN ASSET PURCHASE AGREEMENT DATED JANUARY 15, 1999. AN AFFIRMATIVE VOTE IS
RECOMMENDED BY THE BOARD OF DIRECTORS.
<PAGE> 31
PROPOSAL NO. 3
APPROVAL OF
1999 STOCK INCENTIVE PLAN
The Company's 1999 Stock Incentive Plan (the "Plan"), was approved by the Board
of Directors on June 29, 1999 contingent upon approval by the stockholders.
To adequately accommodate the need of the Company to incentivize, attract and
retain key employees, the directors have approved the Plan and recommend that
the stockholders approve the Plan.
PURPOSE
The Plan is designed to help the Company in retaining and attracting personnel
of outstanding competence by rewarding them for their achievements. The Plan
also is intended to encourage a sense of proprietary interest by such personnel
by providing them with a means to acquire, or increase an interest in the
Company as a stockholder. The Plan also is intended to provide a means of
compensating non-employee directors of the Company by compensation in a form
other than cash. A copy of the Plan is set forth in Annex B and the following
summary of its principal provisions is subject in all respects to the full text
of the Plan.
TYPES AND NUMBER OF INCENTIVE AWARDS PERMITTED TO BE GRANTED UNDER THE PLAN
Under the Plan, the Company may grant stock options, including incentive stock
options ("Incentive Stock Options") and non-qualified stock options
("Non-Qualified Stock Options") collectively, ("Options"), restricted stock
("Restricted Stock"), a stock bonus, a cash bonus for not more than the
anticipated tax liability associated with the grant, exercise or vesting of an
Option or share of Restricted Stock, or a loan for the purpose of exercising an
option granted under the Plan or the payment of any taxes as aforesaid (any of
the foregoing being an "Incentive Award"). Under the Plan, 600,000 shares of
Common Stock are available for Incentive Awards, subject to adjustment on
certain events. To the extent that shares of Common Stock subject to an
outstanding Incentive Award are not delivered by reason of the expiration,
termination, cancellation or forfeiture of such award, then such shares of
Common Stock shall again be available under the Plan.
ADMINISTRATION OF THE PLAN
The Plan is administered by a Committee of the Board of Directors (the
"Committee") consisting of not less than two directors who are "non-employee
directors", within the meaning of Rule 16b-3 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). The Committee will determine the
persons to be granted Incentive Awards, the number of shares of the Company's
Common Stock relating to such Incentive Award and any other terms and conditions
of an Incentive Award not otherwise specifically prescribed by the Plan.
The Board of Directors may add members to the Committee and will fill all
vacancies. The Committee will select one of its members as chairperson, and will
hold meetings at such times and places as it may determine. The acts of a
majority of the Committee at which a quorum is present, or acts reduced to or
approved in writing by a majority of the members of the Committee, will be the
valid acts of the Committee. The Committee shall determine those employees,
officers and directors to be granted Incentive Awards and the number of shares
of Common Stock and other terms and conditions relating to each such Incentive
Award.
ELIGIBILITY
Key employees, officers and directors of the Company or any of its subsidiaries
are eligible to receive Incentive Awards under the Plan (such persons being
"Participants") except that non-employee directors are not eligible to be
granted awards of Incentive Stock Options. A Participant may hold more than one
Incentive Award subject to restrictions as set forth in the Plan or as may be
provided in an Incentive Award granted pursuant to the Plan.
EXERCISE PRICE AND AMOUNT OF OPTIONS
Each Option granted under the Plan is, and will be, evidenced by an agreement in
a form approved by the Committee. Each Option shall be identified in the
agreement as either an Incentive Stock Option or as a Non-Qualified Stock
Option.
<PAGE> 32
Each Incentive Stock Option will state the option price, which may not be
less than 100% of the fair market value of the shares of Common Stock subject to
such Option on the date such Option was granted; provided, however, that if such
Option on the date such Option is granted to an optionee who then owns (within
the meaning of the Internal Revenue Code of 1986, as amended ("the Code"))
Common Stock possessing more than ten percent (10%) of the total combined voting
power of the Company or of its subsidiaries or parent, the option price may not
be less than 110% of the fair market value of the shares of Common Stock subject
to such Option on the date such Option is granted. Subject to the foregoing, the
Committee has full authority and discretion and will be fully protected in
fixing the option price. Notwithstanding the foregoing, the aggregate fair
market value (determined as of the time such Option is granted) of the Common
Stock for which an employee may exercise Incentive Stock Options in any calendar
year under all plans of the Company and its subsidiaries pursuant to which
Incentive Stock Options have been awarded shall not exceed $100,000. Any
Incentive Stock Options granted in excess of the aforesaid $100,000 aggregate
fair market value limitation shall be deemed to be a Non-Qualified Stock Option.
The option price is payable upon the exercise of the Option and may be paid in
cash or by check, or, if so authorized upon the grant of the Options by
delivering of shares of Common Stock, which, at the time of such payment have a
fair market value equal to the option price of the shares to be acquired
pursuant to such Option, or by any combination of the foregoing.
DURATION AND EXERCISE OF OPTIONS
Each Option is exercisable, either in whole or in part, at a date or during a
period and for a number of shares as the Committee may determine. Any Option may
be exercised in whole at any time or in part at any time, in accordance with
certain restrictions described in the Plan and as determined by the Committee at
the time the Option is granted, by giving written notice to the Company to that
effect; provided, however, that the Committee may require that any Option
granted is exercisable only after a minimum period from the date of such grant.
Notwithstanding the foregoing, no Option will be exercisable more than ten years
after its date of grant.
RESTRICTED STOCK
Each share of Restricted Stock granted under the Plan shall be in accordance
with an agreement in a form approved by the Committee which shall state the date
the Restricted Stock is issued and the date the grantee's ownership of the
shares of Restricted Stock shall vest ("Vesting Date") subject to restrictions
and conditions to such vesting determined by the Committee at the date of grant.
Among other things, the Committee may require that the Participant or the
Company achieve certain performance criteria as specified at the time of the
grant of such shares or that the Participant remain in the Company's employ,
subject to certain exceptions as stated in the Plan, at the Vesting Date. Any
attempt by a Participant to transfer such shares prior to the Vesting Date will
cause such Restricted Stock to be forfeited. Each share issued under the Plan
will carry a restrictive legend and be held by a custodian designated by the
Company who may be an officer or employee of the Company.
ADDITIONAL OPTIONS
In the case where payment of the exercise price of an Option with shares of
Common Stock is approved, an additional number of Options of the same nature
(I.E. Incentive Stock Options or Non-Qualified Stock Options) may be granted in
an amount not exceeding the number of common shares surrendered in payment,
which additional Options are exercisable at such price and such time and upon
such terms as are established by the Committee and as otherwise in compliance
with the Plan.
STOCK BONUS, BONUSES AND LOANS
The Plan also authorizes the Committee to grant a Stock Bonus under which a
Participant may, subject to meeting of such conditions the Committee may
determine, receive shares of Common Stock. A Participant may also be granted a
right to receive a cash bonus, subject to the Plan, payable not later than 120
days after the last day of the calendar year for which the Participant may be
required to recognize federal income tax in connection with the grant of
Restricted Stock or Stock Bonus or the issuance or exercise of a Non-Qualified
Stock Option; or a Participant may be granted a loan under the Plan for any of
the foregoing purposes in such amounts and upon such terms, including interest
and repayment, as the Committee may determine. The amount of any bonus or loan
will in no event exceed the lesser of the Participant's estimated federal tax
liability or the value of the Company's deduction for federal tax purposes,
determined according to a formula as described in the Plan, accruing to the
Company as a result of such grant, issuance or exercise.
<PAGE> 33
TERMINATION OF EMPLOYMENT
If a Participant resigns or his employment with the Company or any of its
subsidiaries ceases for any reason other than death, retirement, disability or
discharge without cause, the option period of any unexercised Option granted to
such optionee thereupon will terminate.
If a Participant's employment ceases because of retirement, he may exercise such
Option, if otherwise exercisable and to the extent then unexercised, within
three months after such termination of employment.
If a Participant's employment ceases because of disability (within the meaning
of the Code), he may exercise such Option, if otherwise exercisable and to the
extent then unexercised, within one year after such termination of employment.
If a Participant's employment ceases because of death, or if he dies within
three months after his employment terminates, his executors or administrators
may exercise such Option, if otherwise exercisable and to the extent then
unexercised, within six months after such death.
If a Participant's employment ceases because of discharge without cause, as
defined in the Plan, he may exercise such Option, if otherwise exercisable and
to the extent then unexercised, within three months after such termination of
employment.
Any right of a Participant to exercise unexpired, exercisable Options upon
termination of employment or within a specified period thereafter as set forth
above shall be subject to the requirement that the Participant shall have been
employed by the Company for a period of two years immediately preceding such
termination in the case of Incentive Stock Options or, in the case of
Non-Qualified Stock Options for such period as the Committee may have specified.
In the case of a Non-Qualified Stock Option, the Committee may provide for
survival of such Options beyond any of the periods as described above.
Any Options that are not otherwise exercisable at the time of termination of
employment shall terminate at such time.
If a Participant's employment ceases for any reason other than by Participant's
voluntary quit or resignation prior to the vesting of shares of Restricted Stock
granted to such Participant, such Restricted Stock will, if not previously
cancelled or forfeited pursuant to the Plan, vest in such proportion, including
zero proportion, as the Committee has determined at the time of grant based on
the circumstances of termination and achievement of any conditions related to
the vesting of such Restricted Stock. In the case of a Participant's termination
for cause as defined in the Plan, voluntary quit or resignation, all shares of
Restricted Stock not then vested are forfeited.
ASSIGNABILITY OF OPTIONS
During the lifetime of the Participant, an Option may be exercised only by him
and no other person may acquire the rights therein. No Option is transferable by
the Optionee otherwise than by will or the laws of descent and distribution.
LIMITATION ON TRANSFER OF CERTAIN SHARES
Any shares of Common Stock received under the plan by persons subject to Section
16(b) of the Securities Exchange Act of 1934 may not be sold or transferred for
a period of six months from the date of grant of the respective Option in the
case of Option Shares, or six months from the date of grant or award in the case
of Restricted Stock and Stock Bonuses.
AMENDMENT AND TERMINATION OF THE PLAN
Insofar as permitted by law, the Committee may, with respect to shares of Common
Stock at the time not subject to Options, suspend or discontinue the Plan or
revise or amend it in any respect whatsoever (except that, without approval of
the stockholders of the Company, no such revision or amendment to the Plan shall
increase the number of shares of Common Stock that may be issued under the Plan
otherwise than in connection with certain corporate changes as defined in the
Plan, or materially increase the benefits accruing to holders of Incentive
Awards granted pursuant to the Plan or materially modify the requirements for
eligibility for participation in the Plan) or remove the
<PAGE> 34
administration of the Plan from the Committee. No revision or amendment
shall adversely affect any Incentive Award previously granted. No grants will be
made under the Plan after December 31, 2008.
ADJUSTMENTS UPON CHANGES IN COMMON STOCK
Subject to any required action by the Company's stockholders, the aggregate
number of shares of Common Stock for which Options, Restricted Stock and stock
bonuses that may be granted under the Plan and the number of shares of Common
Stock may be covered by each outstanding Incentive Award, and the price per
share thereof as provided in each such Incentive Award, will be proportionately
adjusted for any increase or decrease in the Common Stock issued and
outstanding, including treasury shares, resulting from a consolidation or
subdivision of shares or payment of a stock dividend (but only on the shares of
Common Stock) or a stock split, recapitalization, merger, combination or
exchange of shares or similar corporate change. Any such adjustment shall also
include an adjustment in the number of shares of Common Stock subject to an
Option. In the event of a change in the Common Stock of the Company as presently
constituted, which is limited to a change of all of its authorized shares with
par value, the shares resulting from any such change will be deemed to be the
Common Stock within the meaning of the Plan.
MERGER, CONSOLIDATION OR CHANGE IN CONTROL
Subject to any required action by the Company's stockholders, if the Company is
the surviving corporation in any merger or consolidation (except a merger or
consolidation as a result of which the holders of shares of Common Stock receive
securities of another corporation) each outstanding Option will pertain to the
securities which a holder of the number of shares of Common Stock subject to
such Option would have received in such merger or consolidation. A dissolution
or liquidation of the Company, a sale of substantially all of the assets of the
Company, or a merger or consolidation in which the Company is not the surviving
corporation may result, at the election of the Committee, in the cancellation,
prior to such event, of each Option then outstanding. In the event of such
cancellation the holder of such Option or Award shall receive an amount in cash
equal to the excess of the value, as determined by the Committee, of the
property received by a holder of a share of Common Stock as a result of such
event over the exercise price of such option. Alternatively, the Committee may
provide for the exchange of each such Option then outstanding prior to such
event for an Option on some or all of the property for which such Option could
if fully exercisable be exchanged and, incident thereto, make an equitable
adjustment in the exercise price of the Option or the number of shares or amount
of property subject to the Option, as determined by the Committee. In the event
of any other change in the capitalization of the Company or other corporate
change as specified in the Plan, the Committee may make adjustments in the
number of shares subject to Options outstanding on the date in which such change
occurs and in the per share exercise price of each such Option as is considered
by the Committee appropriate to prevent dilution or enlargement of rights.
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS
No tax consequences result to the Participant or the Company from the grant or
the exercise of an Incentive Stock Option (except for application of the
alternative minimum tax on exercise). Instead, the Participant recognizes gain
or loss when the shares acquired by exercising the Incentive Stock Option are
sold. For purposes of determining any gain or loss, the Participant's basis in
the shares is the option price. If the date of sale is at least two years after
the date of the grant of the Incentive Stock Option and at least one year after
acquiring the shares by exercising the Incentive Stock Option, the Participant
will realize long-term capital gain or loss.
Generally, the Company is not allowed a deduction with respect to an Incentive
Stock Option. However, if a Participant fails to meet the holding period
requirements, any gain realized by the Participant upon selling the shares
acquired by exercising an Incentive Stock Option is treated as ordinary income
rather than capital gain, to the extent of the excess, if any, of the fair
market value of the shares at the time of exercise (or, if less, in certain
cases the amount realized on the sale) over the option price. In that case, the
Company is allowed a corresponding deduction.
NON-QUALIFIED STOCK OPTIONS
A Participant does not recognize income and the Company does not receive a
deduction at the time a Non-Qualified Stock Option is granted.
<PAGE> 35
Except as described in the following paragraph, a Participant exercising a
Non-Qualified Stock Option recognizes ordinary income and the Company is
entitled to a deduction equal to the excess of the fair market value of the
stock purchased (determined at the time of exercise) over the amount paid for
the stock.
Generally, a Participant selling shares acquired by exercising a Non-Qualified
Stock Option, recognizes capital gain or loss (assuming the shares are held as a
capital asset). The amount of gain or loss is the difference between the amount
realized upon the sale and the sum of the option price and the amount of
ordinary income recognized in connection with exercising the Non-Qualified Stock
Option. If the shares are held for more than a year any gain or loss is
long-term capital gain or loss.
EFFECT OF PAYMENT OF EXERCISE PRICE OF OPTIONS BY DELIVERY OF SHARES
Generally, payment for shares acquired by exercising an option with other shares
of stock of the Company owned by the Participant constitutes a tax-free exchange
which does not result in recognition of income. The receipt of additional shares
requires recognition of ordinary income in an amount equal to the value of such
additional shares. The holding period of the newly-acquired shares includes the
holding period of the exchanged shares (assuming the shares surrendered were
held as capital assets on the date of the exchange), and the tax basis of the
shares acquired by the Participant is the tax basis of the shares surrendered.
The tax basis of any additional shares is equal to the amount of ordinary income
recognized by the Participant under the Code, and the holding period of these
shares begin on the date of transfer.
RESTRICTED STOCK
- ----------------
Unless an election is made as described below, a Participant who receives a
Restricted Stock Award will recognize income, taxable as ordinary income for
federal income tax purposes, at the time the restrictions on the awarded shares
lapse, in an amount equal to the fair market value of the stock at such time.
The Company will be entitled to a federal income tax deduction in the year in
which the restrictions lapse in an amount equal to the taxable income recognized
by the Participant.
Under Section 83 of the Code, a Participant may elect within 30 days after the
date of the Award of Restricted Stock to include in the Participant's taxable
income an amount equal to the fair market value of the Restricted Stock (without
regard to the restrictions) at the time of the transfer. No additional taxable
income will be recognized to the Participant at the time the restrictions lapse.
The Company will be entitled to a federal income tax deduction in an amount
equal to the taxable income recognized by the Participant, in the same taxable
year.
Unless the election has been made, dividends received during the period prior to
the end of the restriction must be treated by the employee and the Company as
additional compensation (and not dividend income) received from the Company.
Upon subsequent sale or exchange of Restricted Stock, the recipient will realize
as capital gain the amount by which the exchange or sale price for such shares
exceeds the fair market value of the shares on the date of the lapse of all
restrictions on their transfer (or the date of grant if a Section 83 election
has been made). Whether such capital gains (or losses) will be treated as
"long-term capital gains" (or "long-term capital losses") will depend on the
length of time the shares are considered to have been held by the recipient. The
holding period begins just after all restrictions lapse, except in the case of a
recipient who has made a Section 83 election, for whom the holding period begins
just after the date the stock is transferred. The minimum ownership period for
long-term capital gain or loss treatment is twelve months.
STOCK BONUS
- -----------
A participant receiving a Stock Bonus will recognize income, taxable as ordinary
income for federal income tax purposes, at the time the bonus stock is awarded
in an amount equal to the then fair market value of such stock.
This amount is deductible by the Company as compensation expense.
The foregoing constitutes a brief summary of the applicable federal income tax
laws and should not be relied upon as being a complete statement of the federal
income tax aspects of the Plan.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE COMBINED VOTING POWER
OF COMMON STOCK AND SERIES E PREFERRED STOCK VOTING AS A CLASS PRESENT OR
REPRESENTED AT THE MEETING IS REQUIRED TO APPROVE THE 1999 INCENTIVE STOCK
OPTION PLAN. AN AFFIRMATIVE VOTE IS RECOMMENDED BY MANAGEMENT.
<PAGE> 36
PROPOSAL NO. 4
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
Subject to approval of the stockholders, the Board of Directors, upon the
recommendation of the Audit Committee, has selected KPMG Peat Marwick LLP ("Peat
Marwick"), independent public accountants, to audit the financial statements of
the Company for the fiscal year ending March 31, 2000. Peat Marwick has audited
the Company's financial statements for each of the Company's fiscal years since
the Company's formation in 1982. One or more representatives of Peat Marwick
will be present at the Annual Meeting and will have the opportunity to make a
statement and/or respond to appropriate questions that may be raised by
stockholders.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES OF THE COMBINED
VOTING POWER OF COMMON STOCK AND SERIES E PREFERRED STOCK OF THE COMPANY VOTING
AS A CLASS PRESENT OR REPRESENTED AT THE MEETING IS REQUIRED TO APPROVE THE
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS. AN AFFIRMATIVE VOTE
IS RECOMMENDED BY MANAGEMENT.
OTHER INFORMATION
DIRECTORS AND OFFICERS LIABILITY INSURANCE
The Company, pursuant to its by-laws, indemnifies its directors and officers as
permitted by law in connection with proceedings which might be instituted
against them by reason of their service for or on behalf of the Company. The
Company has purchased directors' and officers' liability insurance which
provides insurance and indemnification for the Company and its directors and
officers. Coverage is provided by the Reliance Insurance Company of
Philadelphia, Pennsylvania, and expires August 1, 1999. It is anticipated that
the Company will seek to renew coverage for directors' and officers' liability
insurance.
STOCKHOLDERS' PROPOSALS FOR FISCAL 2000 ANNUAL MEETING
Stockholders may submit proposals appropriate for shareholder action at the
Company's Annual Meeting consistent with regulations adopted by the Securities
and Exchange Commission. For such proposals to be considered for inclusion in
the proxy statement and formal proxy for the 2000 Annual Meeting, they must be
received by the Company no later than February 22, 2000. Proposals should be
directed to Mark C. Donadio, Vice President and Secretary, Barrister Information
Systems Corporation, 465 Main Street, Suite 700, Buffalo, New York 14203.
OTHER BUSINESS
As of the date of this Proxy Statement, the only business which the Board of
Directors intends to present or knows that others will present at the Annual
Meeting is that hereinabove set forth. If any other matter or matters are
properly brought before the Annual Meeting, or any adjournment or postponement
thereof, it is the intention of the persons named in the accompanying form of
proxy to vote the proxy on such matters in accordance with their judgment.
INCORPORATION BY REFERENCE
The SEC allows the Company to "incorporate by reference" information into this
Proxy Statement, which means that the Company can disclose important information
to you by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this Proxy
Statement, except for any information superseded by information contained
directly in this Proxy Statement. This Proxy Statement incorporates by reference
the Company's Annual Report to Stockholders for the fiscal year ended March 31,
1999, which Annual Report is being provided to you with this Proxy Statement.
<PAGE> 37
A COPY OF THE COMPANY'S FISCAL 1999 ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K WILL BE AVAILABLE AFTER JUNE 29, 1999 AND PROVIDED
WITHOUT CHARGE TO STOCKHOLDERS UPON WRITTEN REQUEST DIRECTED TO THE SECRETARY,
BARRISTER INFORMATION SYSTEMS CORPORATION, 465 MAIN STREET, SUITE 700, BUFFALO,
NEW YORK 14203.
By the Order of the Board of Directors,
Mark C. Donadio
Vice President and Secretary
Dated: July 19, 1999
<PAGE> 38
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, dated as of January 15, 1999, is by and among Barrister
Information Systems Corporation, a Delaware corporation with its principal place
of business at 465 Main Street, Buffalo, New York 14203 ("Purchaser"), and Icon
Technology LLC, a California limited liability company with its principal place
of business at 4340 Redwood Highway #D320, San Rafael, California 94903
("Seller"), and Jay Moeller, Tom Jones, Alan Lash and Stuart Guild (together,
the "Principals").
WHEREAS, Seller is engaged in the business of consulting and in
designing, engineering, writing and distributing computer software including
source code and object code (collectively the "Seller's Business"); and
WHEREAS, a portion of Seller's Business is certain consulting
activities and the production and distribution of LegalHouse software, source
code, object code and related software, software services and support products
(the "LegalHouse Business"); and
WHEREAS, Purchaser desires to acquire from Seller and Seller desires to
transfer to Purchaser substantially all of the assets used by Seller in the
operation of the LegalHouse Business upon the terms and conditions contained in
this Agreement;
NOW, THEREFORE, in consideration of the mutual promises set forth in
this Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are acknowledged, the parties hereto agree as follows:
1. Defined Terms. In this Agreement, capitalized terms shall have the
following meanings:
(a) "Shares" shall mean the shares of Series E Preferred Stock
of Purchaser, convertible into Common Stock, to be paid as the Purchase
Price (including shares of Common Stock issued upon conversion
thereof).
(b) "Books and Records" shall mean each copy of any book,
computer disk, document, file, list, magnetic tape, record and other
tangible item relating to the LegalHouse Business or customers or
suppliers of, or any other Person having contracts or other business
relationships with, Seller that relate, directly or indirectly, to the
LegalHouse Business including, but not limited to, license labels,
programmer reference material and programmer notebooks, machine
readable copies of all support materials such as datasheets, contracts,
pricing information, marketing materials, presentations, marketing
plans, internet and intranet documents, advertising, trade show support
materials and news releases but excluding any physical media containing
the source code relating to the Products.
(c) "Customer Contracts" shall mean each contract, whether
oral or written, between Seller and any other Person pursuant to which
such Person has agreed to purchase or license Products, or be supplied
with services relating to the LegalHouse Business and which is listed
on Schedule 1(c) hereto.
(d) "Effective Date" or "Closing Date" shall mean the date of
the Closing.
(e) "Encumbrances" shall mean any claim, lien, pledge, option,
charge, easement, security interest, right-of-way, encumbrance or other
right of any Person.
(f) "Goodwill" shall mean the goodwill of Seller relating to
the LegalHouse Business.
(g) "Governmental Authority" shall mean any federal, state,
local or foreign government, or any political subdivision of any of the
foregoing, or any court, agency or other entity, body, organization or
group, exercising any executive, legislative, judicial, quasi-judicial,
regulatory or administrative function of government or any
supernational body (including the European Union).
(h) "Intellectual Property Rights" shall mean each copyright,
patent, service mark, brand name, trademark, trade secret and other
intellectual property right used by Seller to publish and distribute,
or otherwise used in, the Products or other aspects of the LegalHouse
Business as of the date of this Agreement.
(i) "Assumed Liabilities" shall mean the liabilities of Seller
assumed by Purchaser, not otherwise excluded in this Agreement,
consisting of (i) those liabilities incurred by Seller in the normal
course of business at or prior to the Closing (including trade
payables, accrued compensation (including liabilities related to the
assets described in clause (xi) of Section 1(o)), (ii) future lease
payments on Seller's lease of premises at 4340 Redwood Highway #D320,
San Rafael, California and (iii) those additional liabilities of Seller
set forth on Schedule 1(i).
(j) "Licensed Property" shall mean each copyright, patent,
service mark, brand name, trademark, trade secret and other
intellectual property right used by Seller in conjunction with the
Products or the LegalHouse Business.
<PAGE> 39
(k) "Permits" shall mean each authorization, approval,
consent, license and permit of Seller that relates to the LegalHouse
Business, if any.
(l) "Person" shall mean any corporation, Governmental
Authority, individual, limited liability company, partnership, trust or
other entity.
(m) "Products" shall mean the source code, object code and
various software and materials described as follows:
(i) all LegalHouse software, source code and
object code;
(ii) all LegalHouse system setup and
configuration software, source code and
object code;
(iii)) all tools, utilities, companion products,
documentation and sales materials related to
or used with all of the items above.
(n) "Purchase Price" shall mean (ii) 2,500 shares of
Purchaser's Series E Preferred Stock (convertible into 2,500,000 shares
of Purchaser's Common Stock as further set forth in the Certificate of
Designation attached hereto as Exhibit A (the "Series E Certificate of
Designation").
(o) "Purchased Assets" shall mean all right, title and
interest of Seller in and to the following:
(i) the Books and Records;
(ii) the Customer Contracts;
(iii) the Consulting Contracts, except as
limited herein;
(iv) the Goodwill;
(v) the Intellectual Property Rights;
(vi) the Products;
(vii) the Tangible Personal Property;
(viii) the Permits;
(ix) accounts and notes receivable;
(x) cash in excess of $10,000.00, if
any:
(xi) all unbilled revenue including
unbilled work in progress and
unbilled LegalHouse product sales;
and
(xii) all claims and causes of action
(except those arising out of this
Agreement and the transactions
related thereto).
(p) "Purchaser Related Agreements" shall mean each agreement,
instrument and other writing listed in Section 10 or 11 of this
Agreement, or otherwise contemplated by this Agreement, to be executed
by Purchaser.
(q) "Series E Preferred Stock" shall mean the Series E
Preferred Stock of Purchaser having the rights, preferences and
privileges set forth in the Series E Certificate of Designation.
(r) "Consulting Contracts" shall mean the agreements with
customers, whether written or oral, listed on Schedule 1(t) attached
hereto, entered into by Seller for certain consulting and/or
engineering work, support and/or maintenance.
(s) "Tangible Personal Property" shall mean all of the
equipment, computers, telecommunication equipment, furniture and
decoration items used in the operation of Seller's Business and which
are listed on Schedule 1(u) to this Agreement.
<PAGE> 40
(2) Sale of Assets and Operation of LegalHouse Business.
(a) Subject to the terms and conditions set forth in
this Agreement, Seller shall assign, convey, deliver, sell and transfer
to Purchaser, and Purchaser shall acquire from Seller, the Purchased
Assets, free and clear of all Encumbrances, effective as of the opening
of business on the Effective Date. The parties agree that all revenues
and expenses accrued in connection with the LegalHouse Business on or
after the Effective Date shall be for the account of Purchaser, and
that the LegalHouse Business shall be operated for the benefit of
Purchaser on and after the Effective Date. On the Effective Date,
Seller shall provide a closing balance sheet on the accrued accounting
basis in a form mutually acceptable to both parties. Subject to the
terms and conditions set forth in this Agreement and with no further
action required by Purchaser or Seller, Purchaser shall assume the
Assumed Liabilities upon the Closing.
(b) The source code for the Products will be
transmitted by network wire from disk media owned by Seller (which disk
media shall hereinafter be referred to as "Seller Media") to tape media
owned by Purchaser. The Seller Media will not be sold, transferred or
delivered to Purchaser, notwithstanding anything to the contrary in
this Agreement or any Bill of Sale related thereto, but will remain the
property of Seller and in its possession. Upon written instructions
from Purchaser, Seller will immediately erase the Seller Media and
certify same to Purchaser and certify that no copies have been made or
retained by Seller, its employees or independent contractors, or
Principals. The retention of the Seller Media by Seller shall not imply
any retention of ownership or other rights to source code for the
Products, the ownership of which shall pass to Purchaser upon the
Closing.
(c) The fair market value of the Tangible Personal
Property is $12,000.
3. Purchase Price.
(a) General. The Series E Preferred Stock shall
automatically convert into 2,500,000 shares (as adjusted for stock
splits, stock dividends and the like) of Common Stock in accordance
with the terms of the Series E Certificate of Designation upon approval
of the Shareholders of Purchaser at Purchaser's 1999 Annual Meeting of
Shareholders (or, if no such approval is required by the rules and
regulations of the American Stock Exchange, then immediately).
Purchaser will register the Common Stock shares on terms at least as
favorable as those that may be granted from time to time to other
holders of Common Stock of Purchaser (or securities exercisable or
convertible thereinto). The Shares will be restricted from sale as
follows (each period of time measured from the date hereof):
(i) After one year Seller and/or
Principals may sell 10% of the Shares.
(ii) After two years Seller and/or
Principals may sell an additional 15% of the Shares.
(iii) After three years Seller and/or
Principals may sell an additional 20% of the Shares.
(iv) After four years Seller and/or
Principals may sell an additional 25% of the Shares.
(v) After five years Seller and/or
Principals may sell an additional 30% of the Shares.
After one year, all of the Shares shall become immediately available
for sale in the event of termination of employment of a Principal by Purchaser
for convenience (with respect to the portion of the Shares held by such
Principal) or the acquisition of Purchaser (including, without limitation, the
consolidation or merger of Purchaser with or into any other entity, or any other
transaction or series of transactions in which the stockholders of Purchaser
immediately prior to such consolidation, merger or transactions own less than
50% of the Purchaser's voting power after such consolidation, merger or
transactions (an "Acquisition Event")) or the sale of all or substantially all
of the Software business of Purchaser. The Share certificates will be
appropriately legended to reflect the substance of the above provisions of
restriction.
(b) Payment of Purchase Price. Stock certificates
representing the Purchase Price shall be delivered to Seller at the
Closing.
4. Non-Assumed Items. Purchaser is not purchasing, and shall not
assume, and shall not be liable to perform on, any Consulting Contracts, whether
written or oral, which require Purchaser's unauthorized access to or
unauthorized use of the proprietary, confidential or intellectual property,
products or information of any competitor to Purchaser ("Restricted Consulting
Contracts"). Purchaser is not, pursuant to this Agreement, assuming any
indebtedness, liability or obligation of Seller whatsoever with respect to said
Restricted Consulting Contracts.
<PAGE> 41
5. Taxes. Seller and Purchaser shall each pay one-half of all
applicable transfer, sales, use or other similar taxes imposed as a result of
the transfer of the Purchased Assets and any deficiency, interest or penalty
with respect to such taxes.
6. Closing. The closing of the transaction contemplated by this
Agreement shall be held, at 1:00 P.M., Eastern Time, on January __, 1999 and
following the satisfaction or waiver of all conditions to each party's
obligation to close the transaction as set forth herein, at the offices of
Purchaser, or any other time, date and place that Purchaser and Seller shall
mutually agree (the "Closing").
7. Representations and Warranties of Seller. Except as set forth on
the Schedule of Exceptions attached as Exhibit B hereto ("Seller's Schedule of
Exceptions"), Seller hereby represents and warrants to Purchaser as follows:
(a) Status. Seller (1) is a limited liability company
duly formed and organized, validly existing and in good standing under
the laws of the State of California, (2) has full power and authority
to conduct its business as it is currently being conducted and to own
and lease its assets and (3) is duly qualified to do business in, and
is in good standing under the laws of each jurisdiction in which such
qualification is necessary as a result of the conduct of its business
and the ownership of its properties.
(b) Authorization. Seller has all necessary power
and authority and has taken all action necessary to execute, deliver
and perform this Agreement . The execution, delivery and performance of
this Agreement has been duly authorized by all appropriate limited
liability company action.
(c) Enforceable. This Agreement has been duly
executed and delivered by Seller and constitutes a legal, valid and
binding obligation of Seller enforceable against Seller in accordance
with its terms, except that the validity, binding effect or
enforceability of this Agreement may be limited or otherwise affected
by (i) any bankruptcy, insolvency or other similar law affecting the
enforcement of creditors' rights and remedies generally or (ii) the
discretion of the appropriate court with respect to specific
performance, injunctive relief or other terms of equitable remedies.
(d) Title. Seller is the true owner of good and clear
title to the Purchased Assets and shall assign, deliver, convey, sell
and transfer to Purchaser at the Closing good and marketable title to
the Purchased Assets, free and clear of all Encumbrances.
(e) No Conflict or Violation. The execution, delivery
and performance of this Agreement shall not result in (i) a violation
of or a conflict with any provision of the articles of organization or
operating or similar agreement of Seller, (ii) a breach of or a default
under any provision of, or result in the acceleration of any
obligations under any agreement, contract, indebtedness, encumbrance,
commitment, license, franchise, permit, authorization or consent to
which Seller is a party or by which Seller is bound, (iii) a violation
by Seller of any applicable law or any rule, order or judgment of any
court or other Governmental Authority or (iv) the creation of any
Encumbrance on any of the Purchased Assets.
(f) Consents. No consent, approval or authorization
of, or declaration, filing or registration with, any Governmental
Authority or any other Person is required to be made or obtained by
Seller in connection with the execution, delivery and performance of
this, except the consent of Brobeck, Phleger & Harrison LLP to the sale
of the Products and the assignment to Purchaser of the License
Agreement between Brobeck, Phleger & Harrison LLP and Seller with
respect to the Products.
(g) Proceedings. There is no claim, demand, action,
suit, litigation, dispute, order, writ, injunction, judgment,
assessment, decree, grievance, arbitral action, investigation or
proceeding pending or, to the knowledge of Seller or Principals,
threatened against or relating to the transactions contemplated by this
Agreement
(h) Taxes. All taxes (including, but not limited to,
income, property, sales, use, franchise, added value, withholding and
social security taxes) imposed by any Governmental Authority or other
taxing authority that are due or payable by Seller, and all interest
and penalties on such taxes, whether or not disputed by Seller or
Principals, have been paid in full. All tax returns required to be
filed are correct in all material respects and have been duly and
timely filed. Neither Seller nor Principals have received and no claim
has been made within the last five (5) years by any Governmental
Authority in a jurisdiction where Seller does not file a tax return
that it is or may be subject to taxation by that jurisdiction. All
taxes required to have been withheld in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or
third-party have been withheld. There are no Encumbrances on any of the
Purchased Assets that arose in connection with any failure (or alleged
failure) to pay any tax.
<PAGE> 42
(i) No Changes. Seller has not encumbered or disposed of, or
contracted to encumber or dispose of, any of the Purchased Assets.
(j) Absence of Certain Changes or Events. Since September 25,
1998, there has not been (a) any change, or any development or
combination of developments of which management of the Seller has
knowledge, which Seller has not disclosed to Purchaser in writing,
which has had or would reasonably be expected to have a material
adverse effect on the business, condition, assets, results of
operations or prospects (a "Material Adverse Effect") of , Seller, (b)
any damage, destruction or loss, whether or not covered by insurance
which has had or would reasonably be expected to have a Material
Adverse Effect on Seller or (c) any legal proceeding pending or, to the
knowledge of , Seller threatened, against or affecting Seller which,
alone or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect on Seller
(k) Litigation. There is neither any claim, action, suit,
arbitration, investigation or other proceeding, nor any order, decree,
injunction, judgment or writ, pending, in effect or, to the knowledge
of Seller, threatened against or relating to Seller the Purchased
Assets, the LegalHouse Business, this Agreement, the Seller Related
Agreements, or the transactions contemplated by this Agreement.
(l) Tangible Personal Property and Products. The Tangible
Personal Property is, taken as a whole, in reasonable working order and
adequate for its intended use, ordinary wear and tear accepted. The
Products, taken as a whole, substantially conform to their
documentation and functional specifications (a copy of which is
attached hereto as Exhibit D hereto), and including compliance of the
Products with operation into and through year 2000.
(m) Compliance with Laws. To its knowledge, and Seller has
received no notice and has no reason to believe otherwise, Seller has
complied with each law, rule, regulation, ordinance, order, injunction,
judgment, decree and writ applicable to it, its business, assets,
operations or the Purchased Assets. Seller and Principals have not
received any notice to the effect that, or otherwise been advised that,
Seller is not in compliance with any applicable law, rule, regulation,
ordinance, order, injunction, judgement, decree and writ applicable to
it, and Seller and Principals have no reason to anticipate that any
presently existing circumstances might result in any violation of any
such law, rule, regulation, ordinance, order, injunction, judgement,
decree or writ.
(n) Intellectual Property Rights. Seller has all right, title
and interest (including, but not limited to, all copyrights, patents,
service marks, trademarks and other intellectual property rights) (or
has a valid license) to conduct the LegalHouse Business as it is
currently conducted and such conduct does not infringe any right, title
or interest (including, but not limited to, any copyright, patent,
service mark, trademark or other intellectual property right) of any
Person. Seller has delivered to Purchaser correct and complete copies
of all patents, registrations, applications, licenses and agreement and
all other written documentation evidencing ownership of Seller and
prosecution by Purchaser (if applicable) of all its intellectual
property rights in the LegalHouse Business. Other than routine
indemnities given to distributors, sales representatives, dealers and
customers, Purchaser has no current obligation to indemnify any Person
for or against any interference, infringement, misappropriation, or
other conflict with any intellectual property rights. The installation,
operation, training of users of, or use of the Products, does not
violate the patent, service mark, trademark copyright rights or
confidential rights or trade secrets or intellectual property rights of
any third party.
(o) Customer Contracts. Seller has delivered true and correct
copies of all available Customer Contracts to Purchaser. Each of the
Customer Contracts is enforceable against the Customer and, to the
knowledge of Seller , each other party thereto, in accordance with its
terms except that such enforcement may be limited by such other parties
(i) bankruptcy, insolvency, reorganization, moratorium or similar law
now or hereafter in effect relating to creditors' rights or (ii) the
discretion of the appropriate court with respect to specific
performance, injunctive relief or other terms of equitable remedies. To
the knowledge of Seller , neither Seller nor any other party to a
Customer Contract is in default thereunder or in breach thereof, and
Seller has not during the past two years obtained or been granted any
waiver of or under any provision of any Customer Contract. There exists
no event, occurrence, condition or act which constitutes or, with the
giving of notice or the lapse of time would be or become a default by
Seller, or to the knowledge of Seller and Principals, any other party
under any Customer Contract.
(p) Business Records. No records of accounts, personnel
records or other business records for the past five years relating to
the LegalHouse business or Products have been destroyed and all such
records are available, upon request, from Seller.
(q) No Brokers. Seller has not entered into any agreement with
any Person that will result in the obligation of Purchaser or Seller to
pay any finder's fee, brokerage commission or similar payment in
connection with the transaction contemplated by this Agreement.
<PAGE> 43
(r) Material Misstatements or Omissions. None of the
representations or warranties by Seller in this Agreement contains any
untrue statement of a material fact or omits to state any material fact
necessary to make the statements or facts contained therein not
misleading.
(s) Investment. Seller (i) understand that the Shares have not
been registered under the Securities Act of 1933, as amended (the
"Securities Act"), or under any state securities laws, and are being
offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, (ii) is acquiring the
Shares solely for its own account for investment purposes, and not with
a view to the distribution thereof (except to the Principals), (iii) is
sophisticated investors with knowledge and experience in business and
financial matters (iv) has received certain information concerning
Purchaser and has had the opportunity to obtain additional information
as desired in order to evaluate the merits and the risks inherent in
holding the Shares and (v) is able to bear the economic risk and lack
of liquidity inherent in holding the Shares.
8. Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to Seller and the Principals as follows:
(a) Status. Purchaser (i) is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
Delaware and (ii) has full power and authority to conduct its business
which is presently being conducted and to own or lease its assets.
(b) Authorization. Purchaser has all necessary corporate power
and authority and has taken all corporate action necessary to execute,
deliver and perform this Agreement and the Purchaser Related
Agreements. The execution, delivery and performance of this Agreement
and the Purchaser Related Agreements have been duly authorized by the
board of directors of Purchaser.
(c) Enforceable. Each of this Agreement and the Purchaser
Related Agreements has been duly executed and delivered by Purchaser
and is a legal, valid and binding obligation of Purchaser, enforceable
against Purchaser in accordance with its terms, except that the
validity, binding effect or enforceability of this Agreement or any of
the Purchaser Related Agreements may be limited or otherwise affected
by (i) any bankruptcy, insolvency or other similar law affecting the
enforcement of creditors' rights and remedies generally or (ii) . the
discretion of the appropriate court with respect to specific
performance, injunctive relief or other terms of equitable remedies.
(d) No Conflict or Violation. The execution, delivery and
performance of this Agreement and each of the Purchaser Related
Agreements shall not result in (i) a violation of or a conflict with
any provision of the articles or certificate of incorporation
(including any certificates of designation) or by-laws of Purchaser,
(ii) a breach of, or a default under, any term or provision of any
agreement to which Purchaser is a party or (iii) a violation of any
applicable law, rule, order or judgment of any court or other
Governmental Authority.
(e) Consents. No consent, approval or authorization of, or
declaration, filing or registration with, any Governmental Authority or
any other Person is required to be made or obtained by Purchaser in
connection with the execution, delivery and performance of this
Agreement or any of the Purchaser Related Agreements.
(f) Capitalization. The authorized capital stock of Purchaser
consists of: 20,000,000 shares of Common Stock, $0.24 par value per
share, of which 8,225,737 shares are issued and outstanding; and
2,000,000 shares of Preferred Stock, $1.00 par value per share, of
which 2,500 shares have been designated as Series E Preferred Stock, of
which no shares are issued and outstanding (excluding the Shares to be
issued at the Closing), and of which 1,997,500 shares remain
undesignated Preferred Stock. All the issued and outstanding shares of
Purchaser are validly issued, fully paid and nonassessable and free of
preemptive rights. Schedule 8(f) hereto lists all outstanding options
and warrants of Purchaser (including owner, quantity and exercise
price), which in the aggregate are exercisable to purchase a total of
1,397,928 shares of Purchaser's Common Stock. Except as set forth
above, there are not any shares of capital stock of Purchaser
authorized, issued or outstanding or any outstanding subscriptions,
options, warrants, stock appreciation rights, calls, rights,
convertible securities or other securities convertible into,
exchangeable for, or evidencing the right to subscribe for, any shares
of the capital stock of Purchaser. Purchaser has delivered to Seller
complete and accurate copies of Purchaser's Certificate of
Incorporation (including all amendments and certificates of designation
thereto) and Bylaws.
(g) SEC Filings. Purchaser has provided Seller with copies of
each report, schedule, registration statement and definitive proxy
statement (including all exhibits thereto) filed by Purchaser with the
Securities and Exchange Commission (the "Commission") on or after March
31, 1997 (the "Purchaser SEC Reports"), which are all the forms,
reports and documents required to be filed by Purchaser with the
Commission since such date. Purchaser's SEC Reports (i) complied with
the requirements of the Securities Act or the Securities Exchange Act
of
<PAGE> 44
1934, as amended, as the case may be, at the times they were filed,
(or if amended or superseded by a filing prior to the date of this
Agreement then or the date of such filing) and (ii) did not at and as
of the time they were filed (or if amended or superseded by a filing
prior to the date of this Agreement then on the date of such filing)
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading.
(h) Financial Statements. Each of the sets of
financial statements (including, in each case, any notes thereto)
contained in the Purchaser SEC Reports was prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved and fairly presents the financial
position of Purchaser as at the respective dates thereof and the
consolidated results of their operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were
or are subject to normal year-end audit adjustments which were not or
are not expected to be material in amount.
(i) No Undisclosed Liabilities. To the best of the
Purchaser's knowledge, Purchaser has no liabilities or obligations of
any nature (whether absolute, accrued, contingent or otherwise), except
for the liabilities or obligations reflected or reserved against in the
balance sheet contained in Purchaser's report on Form 10-Q for the
quarter ended September 25, 1998 and current liabilities incurred in
the ordinary course of business since such date.
(j) Absence of Certain Changes or Events. Since
September 25, 1998, there has not been (a) any change, or any
development or combination of developments of which management of the
Purchaser has knowledge, which Purchaser has not disclosed to Seller in
writing, which has had or would reasonably be expected to have a
material adverse effect on the business, condition, assets, results of
operations or prospects (a "Material Adverse Effect") of Purchaser, (b)
any damage, destruction or loss, whether or not covered by insurance
which has had or would reasonably be expected to have a Material
Adverse Effect on Purchaser or (c) any legal proceeding pending or, to
the knowledge of Purchaser, threatened, against or affecting Purchaser
which, alone or in the aggregate, has had or would reasonably be
expected to have a Material Adverse Effect on Purchaser.
(k) Validity of Shares. The Shares when issued by
Purchaser pursuant to the terms of this Agreement, will be duly
authorized, validly issued, fully paid and non-assessable, will be
issued in compliance with applicable federal and state securities laws
and will be free and clear of all liens, encumbrances and adverse
claims.
(l) Litigation. There is neither any claim,
action, suit, arbitration, investigation or other proceeding pending,
nor any order, decree, injunctions, judgment or writ, whether pending,
in effect or, to the knowledge of Purchaser, threatened, against or
relating to Purchaser, this Agreement, any of the Purchaser Related
Agreements or the transaction contemplated by this Agreement.
(m) Intellectual Property Rights. Purchaser has all
right, title and interest (including, but not limited to, all
copyrights, patents, service marks, trademarks and other intellectual
property rights) (or has a valid license) to conduct its business as it
is currently conducted and such conduct does not infringe any right,
title or interest (including, but not limited to, any copyright,
patent, service mark, trademark or other intellectual property right)
of any Person. Purchaser has delivered to Seller correct and complete
copies of all patents, registrations, applications, licenses and
agreement and all other written documentation evidencing ownership of
Purchaser and prosecution by Purchaser (if applicable) of all its
intellectual property rights. Other than routine indemnities given to
distributors, sales representatives, dealers and customers, Purchaser
has no current obligation to indemnify any Person for or against any
interference, infringement, misappropriation, or other conflict with
any intellectual property rights. The installation, operation, training
of users of, or use of the products of Purchaser, does not violate the
patent, service mark, trademark copyright rights or confidential rights
or trade secrets or intellectual property rights of any third party.
(n) Board Approval. Purchaser's Board of Directors
has determined (i) in its reasonable business judgment that the
Agreement is fair from a financial point of view to, and in the best
interests of Purchaser, and , (ii) to recommend that the stockholders
of Purchaser approve (x) any and all proposals as may be necessary to
cause the conversion of the Series E Preferred Stock to Common Stock at
Purchaser's next annual meeting of stockholders in accordance with the
Series E Certificate of Designation and the satisfaction of the
American Stock Exchange rules with respect to such conversion and (y)
the issuance of the Shares to Seller.
(o) Tax Free Reorganization. Schedule 8(o) hereto
accurately sets forth the names of certain stockholders of Purchaser,
the number of shares of Purchaser's Common Stock owned by each such
stockholder immediately prior to the Closing, the additional shares of
Common Stock purchased by each such stockholder at the Closing pursuant
to a Transferors Agreement in the form attached hereto as Exhibit E_
and the number of shares of Purchaser's Common Stock owned by each such
stockholder immediately after the Closing. To the best of Purchaser's
knowledge, immediately after the Closing, the total number of shares of
Common Stock owned by such stockholders plus shares of Common Stock
issuable upon conversion of the Shares will exceed 80% of the
outstanding capital stock
<PAGE> 45
of Purchaser. To the knowledge of Purchaser, Purchaser has not taken
and has not agreed to, and does not plan, to take any action that would
prevent the transaction contemplated by this Agreement from qualifying
as a tax-free reorganization under Section 351 of the Internal Revenue
Code of 1986, as amended (the "Code").
(p) Preferred Stock. The rights, preferences and privileges of
the Series E Preferred are as set forth on the Series E Certificate of
Designation , which Certificate has not been modified, superceded or
amended. Purchaser has delivered to Seller herewith irrevocable proxies
to of Jay Moeller, Tom Jones and Icon representing _________ shares of
Purchaser's Common Stock in favor of any and all proposals as may be
necessary to cause the conversion of the Series E Preferred Stock to
Common Stock in accordance with the Series E Certificate of Designation
and the satisfaction of the American Stock Exchange rules with respect
to such conversion and against any and all proposals which could impair
the foregoing.
(q) No Brokers. Purchaser has not entered into any agreement
with any Person that will result in the obligation of Purchaser or
Seller to pay any finder's fee, brokerage commission or similar payment
in connection with the transaction contemplated by this Agreement.
(r) Material Misstatements or Omissions. None of the
representations or warranties by Purchaser in this Agreement contains
any untrue statement of a material fact or omits to state any material
fact necessary to make the statements or facts contained therein not
misleading.
9. Covenants and Conduct of the Parties.
(a) Employment.
(i) Purchaser may offer employment to any Person
previously or presently employed by Seller in connection with the
LegalHouse Business; provided, however, that Purchaser shall not have
any obligation to make any such offer of employment. Nothing contained
in this Section shall be construed to affect any right Purchaser may
have after the Effective Date to terminate the employment of, or change
the salary or benefits of, any employee at any time, except as may be
agreed between the employee and Purchaser whether or not covered by
collective bargaining agreement, to the extent consistent with
applicable law.
(ii) No provision of this Agreement shall confer upon
any present or former employee, consultant or subcontractor of Seller,
any union, collective bargaining agent or other Person any right or
remedy (including, but not limited to, any right to employment, or
continued employment, for any specified period or any right to any
particular benefit in connection with any employment) of any nature
pursuant to or by reason of this Agreement.
(iii) Seller shall be responsible for providing all
notices and other communications to employees, consultants and
subcontractors of Seller, that may be required under applicable law,
including without limitation the laws of the State of California.
Purchaser shall assume no indebtedness, obligation or liability with
respect to any employee, consultant or subcontractor of Seller
(including, but not limited to, any severance obligation, payroll or
unemployment tax, or pension, profit-sharing, health insurance or other
employee benefit liabilities, or any obligations set forth on Seller's
Schedule of Exceptions, but excluding obligations arising from Seller's
contracts with such persons which have been expressly assumed in
writing by Purchaser at the time of closing.
(b) Non-competition and Nondisclosure.
(i) During the period beginning on the Effective Date
and ending on the earlier to occur of (i) five (5) years after the
Effective Date or (ii) with respect to each Principal, three (3) years
after the termination of such Principal's employment with Seller, but
in no event not to be less than one (1) year after termination of such
Principal's employment with Seller should such termination of
Principal's employment occur at any time on or after five (5) years
after the Effective Date, Seller and Principal shall not (except as
employees of Purchaser), directly or indirectly, for their own account
or as an agent, employee, officer, director, trustee, consultant or
member, partner, shareholder or other equity holder of any Person,
engage in any LegalHouse Related Business, as such term is hereinafter
defined, anywhere in the world. "LegalHouse Related Business" shall
mean the sale, licensing, or distribution of the LegalHouse Finance and
Management System or similar products or services or consulting with
respect thereto. Seller and Principals acknowledge that the terms of
this subparagraph 9(b)(i) are fair and reasonable in the context of
this Asset sale and this Agreement. In the event of a breach by
Purchaser of its obligations to Seller under this Agreement and if such
breach remains uncured 30 days after written notice of the same to
Purchaser, then Sellers obligations under this Section 9(b)(i) shall
immediately terminate. In the event of a breach by Purchaser of its
obligations under this Agreement that would prevent or impair the
conversion of the Shares to Common Stock in accordance with the Series
E Certificate of Designation and if such breach remains uncured 30 days
after written notice of the same to Purchaser, then the Principals
obligations under this Section 9(b)(i) shall immediately terminate.
<PAGE> 46
(ii) During the period beginning on the Effective
Date and ending ten (10) years after the Effective date, Seller and
Principals shall not disclose to any Person other than Purchaser any
information concerning Seller's marketing plans or strategies, pricing,
customers, suppliers, technical data, development plans or strategies,
or other business information pertaining to the LegalHouse Related
Business.
(iii) Further Assurances. After the Closing,
Purchaser and Seller and Principals each agree to take whatever further
reasonable action is necessary and to execute whatever further
documents, instruments of assignment, transfer, conveyance or
authorization and agreements as may be reasonably requested by
Purchaser or by Seller or by Principals in order to fulfill the intent
of this Agreement.
(iv) Notwithstanding anything to the contrary
contained elsewhere in this Agreement, Seller and Principals will not
bring with them or provide to Purchaser any information, data, records
or documents which contain or represent the confidential information,
or trade secrets or intellectual property of any third party or as to
which Seller or Principals owe an obligation of confidentiality and/or
nonuse to any third party, except on consent of such third party.
(c) Employment Agreements. At the Closing, each of the
Principals will each enter into a employment agreement with Purchaser
in the form attached hereto as Exhibit F. The provisions of this
Agreement shall control over any inconsistent provisions contained in
the employment agreements. On Closing, upon Seller's recommendation,
Purchaser will offer consultants currently engaged by Seller as
employees and/or independent contractors (including but not limited to
Elizabeth Romo, Steven Heathcock, Rich Jones, James Troy Hojel, Richard
Garro, and Larry Canter) employment and upon employment with Purchaser
each will enter into a non-competition agreement with Purchaser on
essentially the same terms that Purchaser has with its current
employees. Seller agrees to use commercially reasonable efforts to
cause such consultants to accept such employment. The employment
offered to said consultants will include participation in all
applicable employee benefit plans of Purchaser.
(d) After execution of this Agreement, in connection with
implementing the LegalHouse Finance and Management Information System,
Seller and Principals agree to abide by and follow the guidelines set
forth in Schedule 9(d).
(e) Board of Directors. The Board of Directors of Seller
will , include Jay Moeller upon the Closing. Mr. Moeller's term as a
director expires at the year 2000 annual meeting of shareholders. So
long as Mr. Moeller owns at least 5% of the outstanding Common Stock of
Purchaser (determined on an "as converted" basis), then Purchaser
agrees to nominate Mr. Moeller for membership to the Board of Directors
of Purchaser.
(f) Press Releases. Neither Seller nor Purchaser shall issue
any press release announcing, describing or any way relating to the
transactions contemplated by this Agreement until such press release
has been reviewed and consented to by the other party, which consent
shall not be unreasonably withheld.
(g) Restricted Consulting Contracts. After the execution
of this Agreement, Seller will not engage in Restricted Consulting
Contracts (as defined in Section 4 of this Agreement) without the prior
written consent of Purchaser. Purchaser agrees to cooperate with Seller
and Principals, at no expense to Purchaser, to permit routine
maintenance and support of Purchaser's existing customers, so long as
such routine maintenance does not violate or potentially violate the
intellectual property rights of any third party without such third
party's express written consent.
(h) Tax Liability. In the event that the acquisition of
Seller's Assets by Purchaser results in a current tax liability to the
Principals, then Purchaser will use its best efforts to enable the
Principals to secure the funds to cover the tax liability, including
for example, at Purchaser's sole discretion: registering a sufficient
number of the shares acquired by Seller so as to permit a sale of stock
to cover such tax liability; or Purchaser will utilize best efforts to
assist Principals in procuring a prime rate loan to the Principals to
cover such tax liability; or by another mutually acceptable technique
to cover such tax liability.
(i) Notwithstanding anything to the contrary contained
elsewhere in this Agreement, Seller and Principals will not bring with
them or provide to Purchaser any information, data, records or
documents which contain or represent the confidential information or
trade secrets or intellectual property of any third party or as to
which Seller or Principals owe an obligation of confidentiality and/or
non-use to any third party, except on consent of such third party.
(j) Purchaser shall (i) include among the proposals to be
considered at its 1999 Annual Meeting of Stockholders, a proposal in
satisfaction of the applicable rules and regulations of the American
Stock Exchange to cause the Shares to convert to Common Stock in
accordance with the terms of the Certificate of Designation upon the
<PAGE> 47
approval of such proposal, (ii) cause such 1999 Annual Meeting of
Stockholders to be held no later than September 30, 1999 and (iii) not
attempt to amend its Certificate of Incorporation or the Series E
Certificate of Designation or participate in any Acquisition Event or
take any other voluntary action that has the effect of avoiding or
delaying the rights of the holders of the Series E Preferred Stock and
the conversion thereof to Common Stock, but shall at all times in good
faith assist in carrying out all such actions as may be reasonably
necessary or appropriate in order to protect the rights of the holders
of the Series E Preferred Stock and the conversion thereof to Common
Stock against impairment.
(k) Purchaser shall not make any redemption,
repurchase, payment of dividends or other distribution with respect to
Purchaser's Common Stock without a corresponding redemption,
repurchase, payment of dividends or other distribution to the Series E
Preferred Stock.
10. Conditions to Seller's Obligations. The obligation of Seller to
consummate the transaction contemplated by this Agreement is subject, in the
sole discretion of Seller, to the satisfaction, on or prior to the Closing, of
each of the following conditions (any of which may, in the sole discretion of
Seller, be waived in whole or in part):
(a) Representations, Warranties and Obligations.
All representations and warranties of Purchaser contained in this
Agreement shall be true and correct in all respects as of the Closing
and Purchaser shall have performed all obligations to be performed by
it as of the Closing pursuant to this Agreement.
(b) Performance. All covenants, agreements and
obligations and all conditions precedent on the part of Purchaser to be
performed hereunder or at or prior to the Closing shall have been duly
performed and complied with in all material respects.
(c) Bringdown Certificate. Purchaser shall have
furnished Seller with a certificate executed by an officer of
Purchaser, bearing the date of the Closing and stating that (i) all
representations and warranties made by Purchaser and contained in this
Agreement are true and accurate in all material respects as of the date
of the Closing, and (ii) all terms, conditions and provisions of this
Agreement to be met by Purchaser prior to the date of the Closing have
been complied with in all material respects.
(d) Consents. All approvals, consents, permits and
waivers necessary for Purchaser to perform pursuant to this Agreement
shall have been obtained.
(e) Absence of Investigations and Proceedings. No
investigation, proceeding or action is pending which purports to
challenge the validity of this Agreement or the consummation of the
transactions contemplated hereby. No investigation, proceeding or
action shall have been initiated by any government agency with respect
to the acquisition or its legality under any antitrust law.
(f) Tax Free Transaction. Such additional shares of
Purchaser's Common Stock shall have been sold so that the transaction
contemplated by this Agreement shall qualify as a tax free
reorganization under Section 351 of the Code.
11. Conditions to Purchaser's Obligations. The obligation of
Purchaser to consummate the transaction contemplated by this Agreement is
subject, in the sole discretion of Purchaser, to the satisfaction, on or prior
to the Closing, of each of the following conditions (any of which may, in the
sole discretion of Purchaser, be waived in whole or in part):
(a) Representations, Warranties and Obligations.
All representations and warranties of Seller contained in this
Agreement shall be true and correct in all respects as of the Closing,
and Seller shall have performed all obligations to be performed by them
as of the Closing Date pursuant to this Agreement.
(b) Consents. All approvals, consents, permits,
releases and waivers necessary for Seller to transfer the Products and
Purchased Assets free and clear of any Encumbrances, , pursuant to this
Agreement, shall have been obtained.
(c) Bringdown Certificate. Seller shall deliver to
Purchaser a certificate executed by Seller bearing the date of the
Closing and stating that (i) all representations and warranties made by
Seller and contained in this Agreement are true and accurate in all
material respects as of the date of the Closing, and (ii) all terms,
conditions and provisions of this Agreement to be met by Seller prior
to the date of the Closing have been complied with in all material
respects.
(d) Transfer of Purchased Assets and Grant of
License. Seller shall have transferred, delivered and set over
possession of all the real and personal property (tangible and
intangible) and records and other assets constituting the Purchased
Assets.
<PAGE> 48
(e) Absence of Investigations and Proceedings. No
investigation, proceeding or action is pending which purports to
challenge the validity of this Agreement or the consummation of the
transactions contemplated hereby. No investigation, proceeding or
action shall have been initiated by any government agency with respect
to the acquisition or its legality under any antitrust law.
(f) The execution of employment agreements with
each of the Principals, for a period following closing on terms
mutually acceptable.
(g) Receipt of the consent of Seller's landlord to
the assignment of the real property lease for Seller's current offices.
12. Survival. All representations and warranties made by Seller and
Purchaser in this Agreement shall survive the Closing. All obligations of
Seller, Principals and Purchaser pursuant to this Agreement shall survive the
Closing and remain in effect until performed (including, but not limited to, the
obligations of Seller not to compete with Purchaser and indemnify Purchaser
pursuant to this Agreement).
13. Indemnification.
(a) Indemnification by Seller and Principals. Seller
and Principals (collectively, the "Indemnifying Parties") shall,
jointly and severally, indemnify and hold Purchaser harmless from and
against each cost, damage, expense, loss, indebtedness, liability,
deficiency or damage incurred by Purchaser (including, but not limited
to, fees and disbursements of counsel to Purchaser) (i) by reason of
any warranty or representation given by Seller in this Agreement being
untrue or misleading in any respect or (ii) for the failure of Seller
to comply with the bulk sale transfer provisions of the Uniform
Commercial Code ("Damages") or (iii) by the failure of Seller or
Principals to comply with any covenant set forth in this Agreement and
specifically in Sections 7 and 9.
(b) Claims. Except as otherwise set forth in this
Agreement, in order for Purchaser to be entitled to any indemnification
provided in this Section 13, in connection with a claim made by any
Person other than Purchaser, Purchaser shall notify Indemnifying
Parties in writing of such claim promptly after receipt by Purchaser of
written notice of such claim. If Seller notifies Purchaser within 30
days from the receipt of the foregoing notice that it wishes to defend
against such claim, then Seller shall have the right to assume and
solely control the defense, solely at Seller's expense, of such claim
and Purchaser shall cooperate fully with Seller in such defense. In the
event that Seller assumes the defense of such claim, Seller shall not
make any settlement with respect to any such claim without the consent
of Purchaser, which consent shall not be unreasonably withheld.
(c) The Indemnifying Parties shall not be required to
make any indemnification payment pursuant to this Section 13 until such
time that the total amount of all Damages suffered by Purchaser exceeds
$50,000 in the aggregate.
(d) The maximum aggregate liability of the
Indemnifying Parties hereunder shall be limited to the value of the
Shares (as determined pursuant to clause (f) below) but in no event
more than $2.5 Million Dollars (which may be fully satisfied by the
return to Purchaser of all of the unsold Shares plus any proceeds from
the sale of any sold Shares). Subject to the foregoing, after the
distribution of the Shares to the Principals, the aggregate liability
of the Principals hereunder shall be allocated among the Principals
according to the percentages set forth on Schedule 13(e) hereto. (which
may be fully satisfied .as to any Principal by such Principal returning
to Purchaser the unsold Shares distributed to such Principal plus any
proceeds from the sale thereof). Prior to the distribution of the
Shares to the Principals, the Principals shall have no liability
hereunder.
(e) In the event any Indemnifying Party shall have
any liability to Purchaser, such Indemnifying Party may satisfy such
liability in whole or in part by delivering to Purchaser shares of (i)
Series E Preferred Stock having a deemed value per share of (a) the
Common Stock Price times (b) 1,000 (as adjusted for stock splits, stock
dividends and the like) and/or (ii) Common Stock of Purchaser having a
deemed value per share of the Common Stock Price. The Common Stock
Price shall be determined as the average closing price of the Common
Stock on the American Stock Exchange (or other principal trading
exchange, market or forum) for the five consecutive trading days in the
period ending the on the trading day immediately prior to the date such
shares are delivered.
(f) Exclusive Remedy. Except for acts constituting
fraud, the indemnification provided in this Section 13 shall be the
exclusive remedy of Purchaser under this Agreement, including, without
limitation, any right of set-off, and no claim or cause of action by
Purchaser shall be enforceable unless made in accordance with the
procedures set forth in this Section 13 and prior to 24 months after
the Closing Date.
<PAGE> 49
14. Dispute Resolution.
(a) Binding Arbitration. Any dispute, claim or
controversy of whatever nature arising out of or relating to the
provisions of this Agreement or any Employment Agreements
(collectively, the "Arbitrable Provisions"), including, without
limitation, any action or claim based on tort, contract, or statute, or
concerning the interpretation, effect, termination, validity,
performance and/or breach of any of the Arbitrable Provisions, shall be
resolved by final and binding arbitration administered by the American
Arbitration Association subject to its Commercial Arbitration Rules.
Notwithstanding the foregoing or any other provision contained in this
Section 14, the parties shall have the right to request provisional
relief from a court of competent jurisdiction.
Venue for any such arbitration shall be Erie County, New York. Claims
exceeding $50,000 exclusive of interest shall be determined by a panel
of three arbitrators. Each party shall select one arbitrator for the
panel within 60 days after the filing of a claim. The parties shall
mutually agree upon the third member of the panel, who must be a
computer expert, within 30 days thereafter. If no agreement is reached
by the end of such period, then the Association shall appoints a
computer expert as the third member of the panel within an additional
30 days thereafter. The arbitrators shall not have the authority to
award punitive damages. Any award shall include all applicable interest
and attorney's fees, costs and expenses including the expenses of
arbitration, of the prevailing party and shall be enforceable in any
court of competent jurisdiction. This agreement shall be governed by,
and the arbitrator(s) shall apply, the laws of the State of New York
except for its principles of conflict of laws.
(b) Survival. The provisions in this Section 14 shall survive
and apply in all events, including, without limitation, after the
breach, repudiation and/or termination of the Arbitrable Provisions.
(c) Notice. Any notice or document required to be served by
one party on the other party under this Section 14 shall be served in
accordance with the provisions of this Agreement or the Employment
Agreement, as the case may be. After a party appears in the arbitration
proceeding through its attorney, all further service shall be made upon
that party's attorney.
(d) Finality of Award. The award of the arbitrator shall be
final and binding upon the parties without appeal or review except as
permitted by New York law. Any party may apply to any court of
competent jurisdiction for confirmation and entry of judgment based on
said award. In connection with any application to confirm, correct or
vacate the arbitration award, any appeal of any order rendered pursuant
to any such application, or any other action required to enforce the
arbitration award, the prevailing party shall be entitled to recover
its reasonable attorneys' fees, disbursements and costs incurred in
such post-award activities.
15. Miscellaneous.
(a) Notices. Unless otherwise provided in this
Agreement, any notice, request, instruction or other communication to
be given pursuant to this Agreement shall be in writing and (i)
delivered personally, (ii) mailed by certified mail, postage prepaid,
return receipt requested or (iii) sent by telecopy, with a confirmation
sent via one of the methods described in clause (i) or (ii) of this
sentence, as follows:
If to Purchaser, addressed to:
Barrister Information Systems Corporation
Attn: Mark C. Donadio, Esq.
465 Main Street
Buffalo, New York 14203
Telecopier: (716) 845-5033
With a copy to:
Hodgson, Russ, Andrews, Woods & Goodyear, LLP
Attn: John Zak, Esq.
1800 One M & T Plaza
Buffalo, New York 14203
Telecopier: (716) 849-0349
<PAGE> 50
If to Seller, addressed to:
Icon Technology LLC
Attn: Jay Moeller
4340 Redwood Highway #D320
San Rafael, CA 94903
Telecopier: (650) 347-4388
With a copy to:
Cooley Godward LLP
Attn: David Emerson, Esq.
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Telecopier: (650) 849-7400
Any party may designate in a writing to any other party any other address or
telecopy number to which, and any other Person to whom or which a copy of, any
such notice, request, instruction or other communication should be sent.
(b) Applicable Law. This Agreement shall be
interpreted and the rights of the parties determined in accordance with
the laws of the State of New York, without regard to principles of
conflicts of law.
(c) Venue. Any legal action or other legal proceeding
relating to this Agreement or the enforcement of any provision of this
Agreement or the transactions related thereto shall be brought or
otherwise commenced in any state court located in the City of Buffalo,
New York or in the federal district court located in the City of
Buffalo, New York. Each party to this Agreement:
(i) expressly and irrevocably consents
and submits to the jurisdiction of the New York state and federal
courts (and the appellate courts having jurisdiction over appeals from
actions in said courts) in connection with any such legal proceeding
which the other party has properly brought or commenced in accordance
with this subsection (c);
(ii) agrees that said New York state and
federal courts in which the other party has properly brought or
commenced in accordance with this subsection (c) shall be deemed to be
a convenient forum; and
(iii) agrees not to assert (by way of
motion, as a defense or otherwise), in any such legal proceeding
commenced in any state or federal court which the other party has
properly brought or commenced in accordance with this subsection (c)
any claim that such party is not subject personally to the jurisdiction
of such court, that such legal proceeding has been brought in an
inconvenient forum, that the venue of such proceeding is improper or
that this Agreement or the subject matter thereof may not be enforced
in or by such court.
(d) Assignability. This Agreement, and the rights and
liabilities created by or arising under this Agreement, shall be
assignable by Purchaser without the consent of Seller. Upon such
assignment and assumption, all of the rights, title, and interest and
the liabilities and obligations of Purchaser created by or arising
under this Agreement shall thereupon cease and be of no further force
and effect whatsoever with respect to Purchaser, and shall vest instead
in Purchaser's assignee. This Agreement, and the rights and obligations
created by or arising under this Agreement, may not be assigned by
Seller in any case.
(e) Expenses. Purchaser shall pay at the Closing the
reasonable fees and reasonable disbursements owed as a direct result of
Seller having received legal counsel or business advice for purposes of
the negotiation and consummation of the transactions contemplated by
this Agreement. Except for such fees and disbursements and as otherwise
set forth in this Agreement, each of Seller, Principals, and Purchaser
shall pay its or his legal advice, or own business advice, accounting
and other expenses in connection with the transactions contemplated by
this Agreement.
(f) Headings. The headings of the sections of this
Agreement are inserted for convenience of reference only and shall not
affect the interpretation of this Agreement.
(g) Waiver. No failure of Seller or Purchaser to
require, and no delay by Seller or Purchaser in requiring, the other to
comply with any provision of this Agreement shall constitute a waiver
of the right to require
<PAGE> 51
such compliance. No failure of Seller or Purchaser to exercise, and no
delay by Seller or Purchaser in exercising, any right or remedy under
this Agreement shall constitute a waiver of such right or remedy. No
waiver by Seller, Principals or Purchaser of any right or remedy under
this Agreement shall be effective unless made in writing. Any waiver by
Seller, Principals or Purchaser of any right or remedy under this
Agreement shall be limited to the specific instance and shall not
constitute a waiver of such right or remedy in the future.
(h) Binding. This Agreement shall be binding upon
Seller, Principals and Purchaser and upon each successor and assignee
of Seller and Purchaser and shall inure to the benefit of, and be
enforceable by, Seller and Purchaser and each successor and assignee of
Seller and Purchaser.
(i) Entire Agreement. This Agreement contains the
entire agreement among Seller, Principals and Purchaser with respect to
the subject of this Agreement, and supersedes each course of conduct
previously pursued, accepted or acquiesced in, and each oral agreement
and representation previously made, by Seller, Principals and Purchaser
with respect thereto, whether or not relied or acted upon.
(j) Partial Invalidity Shall Not Affect Other
Provisions - parties to Renegotiate Provision. In the event any term or
provision of this Agreement shall be deemed by a court of competent
jurisdiction to be overly broad in scope, duration or area of
applicability, such court shall have the power and is hereby authorized
and requested, to limit such scope, duration or area of applicability,
or all of them so that such term or provision is not overly broad, and
to enforce the same as so limited. Subject to the foregoing sentence,
in the event any provision of this Agreement shall be held invalid or
unenforceable for any reason, such invalidity or unenforceability shall
attach only to such provision and shall not affect or render invalid
any other provision of this Agreement, and the invalid provision shall
be replaced by a provision which the parties agree to fully negotiate
and substitute for the invalid provision, which, being valid, comes
closest to the intention underlying the invalid provision.
(k) Modification. No course of performance or other
conduct hereafter pursued, accepted or acquiesced in, and no oral
agreement or representation made in the future, by Seller, Principals
or Purchaser whether or not relied or acted upon, and no usage of
trade, whether or not relied or acted upon, shall modify or terminate
this Agreement, impair or otherwise affect any obligation of Seller or
Purchaser pursuant to this Agreement or otherwise operate as a waiver
of any such right or remedy. No modification of this Agreement or
waiver of any such right or remedy shall be effective unless made in
writing duly executed by Seller and Purchaser.
(l) Execution. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original and all
of which taken together shall constitute one and the same instrument.
Any party may execute this Agreement by facsimile signature and the
other parties shall be entitled to rely on such facsimile signature as
evidence that this Agreement has been duly executed by such party. Any
party executing this Agreement by facsimile signature shall immediately
forward to the other parties an original signature page by overnight
mail; provided, however, that the failure to do so will not affect the
binding effect of this Agreement on such party.
(m) Schedule of Exceptions. Seller's Schedule of
Exceptions is intended solely to qualify and limit the representations
and warranties of Seller contained in this Agreement and shall not be
deemed to constitute or be construed as an admission against or by
Seller, Purchaser or the Principals.
<PAGE> 52
IN WITNESS WHEREOF, Purchaser and Seller and Principals have duly
executed this Agreement as of the date indicated at the beginning of this
Agreement.
BARRISTER INFORMATION SYSTEMS CORPORATION
By: Title:
----------------------- ------------------
Henry P. Semmelhack President
ICON TECHNOLOGY LLC
By: Title: Member
----------------------- -------------------
Jay Moeller
By: Title: Member
----------------------- -------------------
Tom Jones
By: Title: Member
----------------------- -------------------
Stuart Guild
By: Title: Member
----------------------- -------------------
Alan Lash
PRINCIPALS
-----------------------
Jay Moeller
-----------------------
Tom Jones
-----------------------
Stuart Guild
-----------------------
Alan Lash
<PAGE> 53
LIST OF SCHEDULES
Schedule 1(c) Customer Contracts
Schedule 1(i) Assumed Liabilities
Schedule 1(t) Consulting Contracts
Schedule 1(u) Tangible Personal Property
Schedule 8(f) Schedule of Purchaser's Options and Warrants
Schedule 8(o) Schedule of Purchasers of Common Stock
Schedule 13(e) Indemnification Allocation
LIST OF EXHIBITS
Exhibit A Series E Certificate of Designation
Exhibit B Schedule of Exceptions
Exhibit C Product Documentation and Functional Specifications
Exhibit D Post-Closing Operational Guidelines
Exhibit E Common Stock Purchase Agreement
Exhibit F Form of Employment Agreement
<PAGE> 54
SCHEDULE 1(c)
CUSTOMER CONTRACTS
Lillick & Charles LLP
Littler Mendelson
Brobeck, Phleger & Harrison LLP
Kilpatrick Stockton(1)
Covington Burling(1)
(1) Pending signed license agreement.
<PAGE> 55
SCHEDULE 1(i)
ASSUMED LIABILITIES
<PAGE> 56
SCHEDULE 1(t)B
CONSULTING CONTRACTS
Brobeck, Phleger & Harrison LLP
Cooley Godward LLP
Littler Mendelson
Synergy Business Solutions
webtv
Kilpatrick Stockton
Covington Burling
Consulting relationships are not documented with formal agreements and
consulting services are provided on a time and materials basis based on demand.
<PAGE> 57
SCHEDULE 1(u)
TANGIBLE PERSONAL PROPERTY
<PAGE> 58
SCHEDULE 8(f)
SCHEDULE OF PURCHASER'S OPTIONS AND WARRANTS
<PAGE> 59
SCHEDULE 8(o)
SCHEDULE OF PURCHASERS OF COMMON STOCK
<PAGE> 60
SCHEDULE 13(e)
INDEMNIFICATION ALLOCATION
<TABLE>
<CAPTION>
NAME PERCENTAGE
- ---- ----------
<S> <C>
Jay Moeller 45.70%
Tom Jones 36.20%
Alan Lash 9.05%
Stuart Guild 9.05%
</TABLE>
<PAGE> 61
EXHIBIT A
CERTIFICATE OF DESIGNATION
SERIES E PREFERRED STOCK
<PAGE> 62
EXHIBIT B
SELLER'S SCHEDULE OF EXCEPTIONS
<PAGE> 63
EXHIBIT C
PRODUCT DOCUMENTATION AND FUNCTIONAL SPECIFICATIONS
<PAGE> 64
EXHIBIT D
POST-CLOSING OPERATIONAL GUIDELINES
<PAGE> 65
EXHIBIT E
COMMON STOCK PURCHASE AGREEMENT
<PAGE> 66
EXHIBIT F
FORM OF EMPLOYMENT AGREEMENT
<PAGE> 67
ANNEX B
BARRISTER INFORMATION SYSTEMS CORPORATION
1999 STOCK INCENTIVE PLAN
1. PURPOSE OF THE PLAN
This Barrister Information Systems Corporation 1999 Stock Incentive
Plan is intended to benefit the Company (as hereinafter defined) by
attracting and retaining personnel of outstanding competence and, in
stimulating and rewarding them for their achievements. This Plan is
also intended to encourage stock ownership by such personnel of the
Company so that they may acquire or increase their proprietary interest
in the success of the Company. It is further intended, to the extent
hereinafter set forth, that options issued pursuant to this plan as
"Incentive Stock Options" shall constitute "incentive stock options"
within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended, but that other "Incentive Awards" hereunder shall not
constitute incentive stock options.
2. DEFINITIONS
As used in the Plan, the following definitions apply to the terms
indicated below:
(a) "Barrister" means Barrister Information Systems Corporation, a
Delaware corporation.
(b) "Board of Directors" or "Board" shall mean the Board of Directors
of Barrister.
(c) "Cause" when used in connection with the termination of a
Participant's employment with the Company, shall mean the termination
of the Participant's employment by the Company on account of
intemperate use of alcohol or addictive drugs while engaged in Company
business, or conviction of a felony, or conviction of any other crime
involving the affairs or interests of the Company, or gross violation
of any duty or obligation to the Company, or substantial evidence of
dishonesty in relation to the property, funds or affairs of the Company
or any other employee thereof or any person dealing therewith.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(e) "Committee" shall mean such committee of the Board of Directors as
the Board of Directors may appoint from time to time to administer the
Plan pursuant to Article 4 hereof.
(f) "Common Stock" shall mean Barrister's common stock, $.24 par value
per share.
(g) "Company" shall mean Barrister and any and all of its Subsidiaries.
(h) "Disability" shall mean a permanent and total disability within the
meaning of Section 22(e)(3) of the Code.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" of a share of Common Stock shall be (i) the
closing sale price of a share of Common Stock as reported on the
principal securities exchange on which shares of Common Stock are then
listed or admitted to trading on the day as of which such determination
of Fair Market Value is to be made, or if no trading shall have
occurred on such day, then on the latest preceding day on which trading
shall have occurred or (ii) if not so traded, the average of the
closing bid and ask prices as reported on the National Association of
Securities Dealers Automated Quotation System or if not so reported, as
furnished by any member of the National Association of Securities
Dealers, Inc. selected by the Committee, on the day as of which such
determination of Fair Market Value is to be made, or if no sales shall
have occurred on such day, then on the latest preceding day on which
sales shall have occurred. In the event that the price of a share of
Common Stock shall not be reported in any manner described in the
preceding sentence, the Fair Market Value of a share of Common Stock
shall be determined by the Committee in its absolute discretion.
(k) "Incentive Award" shall mean an Option, share of Restricted Stock,
Stock Bonus or cash bonus or loan granted pursuant to the terms of the
Plan.
(l) "Incentive Stock Option" shall mean an Option which is an
"incentive stock option" within the meaning of Section 422 of the Code
and which is identified as an Incentive Stock Option in the agreement
by which it is evidenced.
(m) "Issue Date" shall mean the date established for the issuance by
Barrister of certificates representing shares of Restricted Stock
pursuant to the terms of Section 7(d) hereof.
(n) "Non-Qualified Stock Option" shall mean an Option which is not an
Incentive Stock Option.
(o) "Option" shall mean an option to purchase shares of Common Stock of
Barrister granted pursuant to Section 6 hereof. Each Option shall be
identified as either an Incentive Stock Option or a Non-Qualified Stock
Option in the agreement by which it is evidenced.
(p) "Participant" shall mean an employee of the Company who is eligible
to participate in the Plan and to whom an Incentive Award is granted
pursuant to the Plan, and, upon his or her death, his or her
successors, heirs, executors and administrators, as the case may be.
"Participant" shall also include Directors of the Company with respect
to forms of Incentive Awards other than Incentive Stock Options.
(q) "Person" shall mean a "person," as such term is used in Sections
13(d) and 14(d) of the Exchange Act.
<PAGE> 68
(r) "Plan" shall mean this Barrister Information Systems Corporation
1999 Stock Incentive Plan, as it may be amended from time to time.
(s) "Restricted Stock" shall mean a share of Common Stock which is
granted pursuant to the terms of Section 7 hereof and which is subject
to the restrictions set forth in Section 7(c) hereof for so long as
such restrictions continue to apply to such share.
(t) "Securities Act" shall mean the Securities Act of 1933, as amended.
(u) "Stock Bonus" shall mean a grant of a bonus payable in shares of
Common Stock pursuant to Section 8 hereof.
(v) "Subsidiary" shall mean any corporation in which at the time of
reference Barrister owns, directly or indirectly, stock comprising more
than fifty percent of the total combined voting power of all classes of
stock of such corporation.
(w) "Vesting Date" shall mean the date established pursuant to the
terms of Section 7 hereof on which a share of Restricted Stock may
vest.
3. STOCK SUBJECT TO THE PLAN
Under the Plan, Participants may be granted (i) Options, (ii) shares of
Restricted Stock, (iii) Stock Bonuses, and (iv) Cash Bonuses or Loans.
Subject to adjustment as provided in Section 10 hereof, Options, shares
of Restricted Stock, and Stock Bonuses may be granted under the Plan
with respect to a number of shares of Common Stock that in the
aggregate does not exceed six hundred thousand (600,000) shares. The
grant of a cash bonus or Loan shall not reduce the number of shares of
Common Stock with respect to which Options, shares of Restricted Stock,
or Stock Bonuses may be granted pursuant to the Plan.
In the event that any outstanding Option expires, terminates or is
forfeited or cancelled for any reason the shares of Common Stock
subject to the unexercised portion of such Option shall again be
available for grants under the Plan, subject to the aggregate limit
specified above in this Article 3. In the event that any shares of
Restricted Stock or any shares of Common Stock granted in a Stock Bonus
are forfeited or cancelled for any reason, such shares shall again be
available for grants under the Plan, subject to the aforesaid aggregate
limit.
Shares of Common Stock issued under the Plan may be either newly issued
shares or treasury shares, at the discretion of the Committee.
4. ADMINISTRATION OF THE PLAN
The Plan shall be administered by a Committee appointed by the Board of
Directors. Such Committee will consist of at least two (2) members of
the Board of Directors, and the Board of Directors shall have authority
to remove members from or add members to such Committee, and to fill
all vacancies. All of the directors serving on the Committee shall be
"non-employee directors" within the meaning of Rule 16b-3 promulgated
under the Exchange Act.
The Committee will select one of its members as chairperson, and will
hold meetings at such times and places as it may determine. The acts of
a majority of the Committee at which a quorum is present, or acts
reduced to or approved in writing by a majority of the members of the
Committee, will be the valid acts of the Committee. The Committee shall
make determinations regarding those employees to be granted Incentive
Awards, the amount and type of such Awards, and the terms and
conditions thereof subject to the powers and authority in this Plan set
forth.
The Committee may, in its absolute discretion, recommend the granting
of Incentive Awards to Participants on the condition that such
Participants surrender for cancellation such other Incentive Awards
(including, without limitation, Incentive Awards with higher exercise
prices) as the Committee specifies. Notwithstanding Section 3 herein,
the limits set forth therein shall not be deemed to be exceeded by
Incentive Awards granted pursuant to the preceding sentence of this
Section 4 if such limits would not be exceeded as of immediately after
the surrender of such other Incentive Awards.
The Committee shall have authority to interpret and construe any
provision of the Plan and the terms of any Incentive Award issued under
it, and to adopt such rules and regulations as it deems necessary for
administration of the Plan. Decisions of the Committee on such matters
shall be final and binding on the Company and all Participants.
Anything in the foregoing to the contrary notwithstanding, any act of
the Board that is within the power and authority of the Committee
hereunder shall be valid and binding as if done by the Committee. If at
any time a Committee shall not have been appointed or shall not be
validly constituted, the Board shall act on its behalf.
No member of the Committee shall be liable for any action, omission, or
determination relating to the Plan, and Barrister shall indemnify and
hold harmless each member of the Committee and each other director or
employee of the Company to whom any duty or power relating to the
administration or interpretation of the Plan has been or shall be
delegated against any cost or expense (including counsel fees) or
liability (including any sum paid in settlement of a claim with the
approval of the Committee) arising out of any action, omission or
determination relating to the Plan, unless, in either case, such
action, omission or determination was taken or made by such member,
director or employee in bad faith and without reasonable belief that it
was in the best interests of the Company. Nothing in the preceding
sentence shall be construed to limit or restrict any provision of the
certificate of incorporation or bylaws, as respectively amended, of
Barrister, or of applicable law, with respect to immunity of directors
from liability and/or indemnification of directors, and all such
provisions shall be fully applicable with respect to actions, omissions
or determinations under or relating to this Plan.
<PAGE> 69
5. ELIGIBILITY
The persons who shall be eligible to receive Incentive Awards shall be
key employees, officers, or directors of the Company provided that
Incentive Stock Options shall not be awarded to Directors who are not
employees of the Company. A Participant may hold more than one
Incentive Award, but only on the terms and subject to the restrictions
hereinafter set forth or as may be set forth in connection with the
grant of such Incentive Award pursuant to this Plan.
6. OPTIONS
The Committee may grant Options pursuant to the Plan, which Options
shall be evidenced by written agreements executed by the Company and
the Optionee, in such form as the Committee shall from time to time
approve. Options shall comply with and be subject to the following
terms and conditions:
(a) IDENTIFICATION OF OPTIONS
All Options granted under the Plan shall be clearly identified in the
agreement evidencing such Options as either Incentive Stock Options or
as Non-Qualified Stock Options.
(b) EXERCISE PRICE
The exercise price of any Non-Qualified Stock Option granted under the
Plan shall be such price as the Committee shall determine on the date
on which such Non-Qualified Stock Option is granted; provided that such
price may not be less than 100% of the Fair Market Value of a share of
Common Stock on the date of grant unless the Committee shall otherwise
determine. The exercise price of any Incentive Stock Option granted
under the Plan shall also be as determined by the Committee, but in any
event shall be not less than 100% of the Fair Market Value of a share
of Common Stock on the date on which such Incentive Stock Option is
granted (but not less than 110% of such Fair Market Value if Section
6(d)(2) applies).
(c) TERM AND EXERCISE OF OPTIONS
(1) Each Option shall be exercisable on such date or dates, during such
period and for such number of shares of Common Stock as shall be
determined by the Committee not later than the day on which such Option
is granted and set forth in the Option agreement with respect to such
Option; provided, however, that no Option shall be exercisable prior to
approval or ratification of this Plan by the stockholders of Barrister
in accordance with its bylaws and applicable law, nor after the
expiration of ten years from the date such Option shall be granted;
and, provided, further that each Option shall be subject to earlier
termination, expiration, forfeiture or cancellation as provided in
accordance with the Plan.
(2) Each Option shall be exercisable in whole or in part; provided that
no partial exercise of an Option shall be for an aggregate exercise
price of less than $1,000 or, if the exercise price is less than $10
per share, for fewer than 100 shares. The partial exercise of an Option
shall not cause the expiration, termination or cancellation of the
remaining portion thereof. Upon the partial exercise of an Option, the
agreements evidencing such Option shall be delivered to the Company for
endorsement or notation of such partial exercise and thereafter, and
upon payment of the exercise price, shall be returned to the
Participant exercising such Option together with the delivery of the
certificates representing the shares of Common Stock issuable upon such
exercise.
(3) An Option shall be exercised by delivering notice to Barrister's
principal office, to the attention of its Secretary, no less than three
business days in advance of the effective date of the proposed
exercise. Such notice shall be accompanied by the agreements evidencing
the Option, shall specify the number of shares of Common Stock with
respect to which the Option is being exercised and the effective date
of the proposed exercise and shall be signed by the Participant. The
Participant may withdraw such notice at any time prior to the close of
business on the business day immediately preceding the effective date
of the proposed exercise, in which case such agreements shall be
returned to him. Payment for shares of Common Stock purchased upon the
exercise of an Option shall be made on the effective date of such
exercise either (i) in cash, by certified check, bank cashier's check
or wire transfer or (ii) subject to the approval of the Committee, in
shares of Common Stock owned by the Participant and valued at their
Fair Market Value on the effective date of such exercise, or partly in
shares of Common Stock with the balance in cash, by certified check,
bank cashier's check or wire transfer. Any payment in shares of Common
Stock shall be effected by the delivery of such shares to the Secretary
of Barrister, duly endorsed in blank or accompanied by stock powers
duly executed in blank, together with any other documents and evidences
as the Secretary of Barrister shall require from time to time.
In the case of exercise of any Non-Qualified Stock Option, and subject
to the approval of the Committee, the Participant may give notice of
the exercise of the Option by directing that shares of Common Stock
issuable upon exercise shall be deemed to be tendered in payment for
exercise of the Option, all as shall be specified in the Participant's
notice.
(4) In granting any Option, the Committee may provide that such Option
may be exercised by a broker-dealer acting on behalf of a Participant
if (i) the broker-dealer has received from the Participant or Barrister
a fully and duly endorsed agreement evidencing such Option and
instructions signed by the Participant requesting Barrister to deliver
the shares of Common Stock subject to such Option to the broker-dealer
on behalf of the Participant and specifying the account into which such
shares should be deposited, (ii) adequate provision has been made with
respect to the payment of any withholding taxes due upon such exercise
and (iii) the broker-dealer and the Participant have otherwise complied
with all provisions of applicable law and have provided the Secretary
of Barrister or other person that the Committee may designate any
evidence of such compliance that the Committee may reasonably require.
(5) Certificates for shares of Common Stock purchased upon the exercise
of an Option shall be issued in the name of the Participant and
delivered to the Participant as soon as practicable following the
effective date on which the Option is exercised. If the sale, transfer
or other disposition by the Participant of such shares shall be limited
or restricted pursuant to applicable law or agreement, the Committee
shall have authority to cause a legend to be placed on such certificate
setting forth or giving notice of such limitation or restriction.
<PAGE> 70
(6) During the lifetime of a Participant, each Option granted to the
Participant shall be exercisable only by the Participant. No Option
shall be assignable or transferable otherwise than by will or by the
laws of descent and distribution.
(d) LIMITATIONS ON GRANT OF INCENTIVE STOCK OPTIONS
(1) The aggregate Fair Market Value (determined as of the date of grant
of the related Options) of shares of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by a
Participant during any calendar year under the Plan and any other stock
option plan of the Company (or any "subsidiary" of Barrister as such
term is defined in Section 424 of the Code) shall not exceed $100,000.
In the event that the aggregate Fair Market Value of shares of Common
Stock with respect to such Incentive Stock Options exceeds $100,000,
then Incentive Stock Options granted hereunder to such Participant
shall, to the extent and in the order required by Regulations
promulgated under the Code (or any other authority having the force of
Regulations), automatically be deemed to be Non-Qualified Stock
Options, but all other terms and provisions of such Incentive Stock
Options shall remain unchanged. In the absence of such Regulations (and
authority), or in the event such Regulations (or authority) require or
permit a designation of the options which shall cease to constitute
Incentive Stock Options, Incentive Stock Options shall, to the extent
of such excess and in the order in which they were granted,
automatically be deemed to be Non-Qualified Stock Options, but all
other terms and provisions of such Incentive Stock Options shall remain
unchanged.
(2) No Incentive Stock Option may be granted to an individual if, at
the time of the proposed grant, such individual owns stock possessing
more than ten percent of the total combined voting power of all classes
of stock of Barrister or any of its "subsidiaries" (within the meaning
of Section 424 of the Code), unless (i) the exercise price of such
Incentive Stock Option is at least one hundred and ten percent (110%)
of the Fair Market Value of a share of Common Stock at the time such
Incentive Stock Option is granted and (ii) such Incentive Stock Option
is not exercisable after the expiration of five years from the date
such Incentive Stock Option is granted.
(e) EFFECT OF TERMINATION OF EMPLOYMENT
(1) In the event that the employment of a Participant with the Company
shall terminate for any reason other than Disability, death, discharge
without cause or retirement, Options granted to such Participant shall
expire at the close of business on the date of such termination (except
as otherwise provided herein); provided, however, that no Option shall
be exercisable after the expiration of its term.
(2) In the event that the employment of a Participant with the Company
shall terminate on account of the Disability of the Participant, then
(except as otherwise provided herein), (i) Options granted to such
Participant, to the extent that they were exercisable at the time of
such termination, shall remain exercisable until the expiration of one
year after such termination, on which date they shall expire, and (ii)
Options granted to such Participant, to the extent that they were not
exercisable at the time of such termination, shall expire at the close
of business on the date of such termination; provided, however that no
Option shall be exercisable after the expiration of its term; and
provided further that no Option granted to such Participant shall be
deemed to have been exercisable at the time of such termination if such
Participant had not been employed by the Company for a period (A) of
two years immediately preceding such termination in the case of
Incentive Stock Options, or (B) as the Committee may specify in the
case of Non-Qualified Stock Options.
(3) In the event that the employment of a Participant with the Company
shall terminate on account of the retirement of the Participant or
discharge of the Participant without cause, then, except as otherwise
provided herein, (i) Options granted to such Participant, to the extent
that they were exercisable at the time of such termination, shall
remain exercisable until the expiration of three months after such
termination, on which date they shall expire, and (ii) Options granted
to such Participant, to the extent that they were not exercisable at
the time of such termination, shall expire at the close of business on
the date of such termination; provided, however that no Option shall be
exercisable after the expiration of its term; and provided, further
that no Option granted to such Participant shall be deemed to have been
exercisable at the time of such termination if such Participant had not
been employed by the Company for a period (A) of two years immediately
preceding such termination in the case of Incentive Stock Options, or
(B) as the Committee may specify in the case of Non-Qualified Stock
Options. Retirement as used herein shall mean a termination of
employment upon attainment of such age as constitutes "normal
retirement" age under any qualified retirement plan of the Company, or
in the absence of any such retirement plan, pursuant to the Company's
employment policies.
(4) In the event that the employment of a Participant with the Company
shall terminate on account of the death of the Participant, or in the
event of the Participant's death within three months after termination
of his employment in respect of any Options that have not at the time
of death expired or terminated (whether or not by virtue of the
termination of employment), then except as otherwise provided herein,
(i) Options granted to such Participant, to the extent that they were
exercisable at the time of such termination, shall remain exercisable
until the expiration of six months after such termination by the
executors or administrators of the Participant or by any person who
acquires the option from the Participant by bequest or inheritance, on
which date they shall expire, and (ii) Options granted to such
Participant, to the extent that they were not exercisable at the time
of such termination, shall expire at the close of business on the date
of such termination; provided, however that no Option shall be
exercisable after the expiration of its term; and provided, further
that no Option granted to such Participant shall be deemed to have been
exercisable at the time of such termination if such Participant had not
been employed by the Company for a period (A) of two years immediately
preceding such termination in the case of Incentive Stock Options, or
(B) as the Committee may specify in the case of Non-Qualified Stock
Options.
(5) In the event of the termination of a Participant's employment for
Cause, all outstanding Options granted to such Participant shall expire
at the commencement of business on the date of such termination.
(6) Anything in the preceding subparagraphs (1) through (4) to the
contrary notwithstanding, the Committee may provide with respect to any
Award of a Non-Qualified Stock Option that such Option shall not expire
until such later time following termination of the Participant's
employment as shall be specified by the Committee.
(f) ADDITIONAL FEATURES
The Committee shall also have authority in connection with the grant of
any award of or including an Option to determine that if payment of the
exercise price with shares of Common Stock is approved, an additional
number of Options of the same nature (i.e.
<PAGE> 71
Incentive Stock Options or Non-Qualified Stock Options) may be granted
in an amount not exceeding the number of shares of Common Stock
surrendered in payment (provided that the aggregate limit of Section 3
shall not be exceeded), exercisable at such price and upon such terms
as the Committee shall establish or based upon any formula that the
Committee may have established and that is otherwise in compliance with
applicable provisions of this Plan.
(g) CANCELLATION
Without limitation of any other provision relating to cancellation,
termination or forfeiture of Options, the Committee shall have
authority to cancel any unexercised Non-Qualified Stock Option upon the
issuance of a replacement Option having an exercise price no greater
than, covering a number of shares not less than, and that is first
exercisable no later than, the cancelled Option. Any other Option may
be cancelled with the Participant's written consent.
(h) LIMITATION ON TRANSFER OF CERTAIN OPTION SHARES
Shares acquired pursuant to the exercise of an Option or portion
thereof, by persons subject to Section 16(b) of the Exchange Act, shall
not be sold or transferred for a period of six months after the date of
grant.
7. RESTRICTED STOCK
The Committee may grant shares of Restricted Stock pursuant to the
Plan. Each grant of shares of Restricted Stock shall be evidenced by a
written agreement in such form as the Committee shall from time to time
approve. Each grant of shares of Restricted Stock shall comply with and
be subject to the following terms and conditions:
(a) ISSUE DATE AND VESTING DATE
At the time of the grant of shares of Restricted Stock, an Issue Date
or Issue Dates and a Vesting Date or Vesting Dates with respect to such
shares shall be established. The Committee may divide such shares into
classes and assign a different Issue Date and/or Vesting Date for each
class. Unless the Participant's employment with the Company shall have
terminated prior thereto, upon the occurrence of the Issue Date with
respect to a share of Restricted Stock, a share of Restricted Stock
shall be issued in accordance with the provisions of Section 7(d)
hereof. Provided that all conditions to the vesting of a share of
Restricted Stock imposed pursuant to Section 7(b) hereof are satisfied,
and except as provided in Sections 7(c) hereof, upon the occurrence of
the Vesting Date with respect to a share of Restricted Stock, such
share shall vest and the restrictions of Section 7(c) hereof shall
cease to apply to such share.
(b) CONDITIONS TO VESTING
At the time of the grant of shares of Restricted Stock, the Committee
may impose such restrictions or conditions, not inconsistent with the
provisions hereof, to the vesting of such shares as it deems
appropriate. By way of example and not by way of limitation, the
Committee may require, as a condition to the vesting of any class or
classes of shares of Restricted Stock, that the Participant or the
Company achieve certain performance criteria, such criteria to be
specified at the time of the grant of such shares, and that the
Participant remain in the employ of the Company (subject to permissible
exceptions if such employment is terminated upon death, Disability, or
by the Company without cause) at the Vesting Date.
(c) RESTRICTIONS ON TRANSFER PRIOR TO VESTING
Prior to the vesting of a share of Restricted Stock, no transfer of a
Participant's rights with respect to such share, whether voluntary or
involuntary, by operation of law or otherwise, shall vest the
transferee with any interest or right in or with respect to such share,
but immediately upon any attempt to transfer such rights, such share
shall be forfeited by the Participant and the transfer shall be of no
force or effect.
(d) ISSUANCE OF CERTIFICATES
(1) Except as provided in Section 7(f) hereof, reasonably promptly
after the Issue Date with respect to shares of Restricted Stock,
Barrister shall cause to be issued a stock certificate, registered in
the name of the Participant to whom such shares were granted,
evidencing such shares; provided, that Barrister shall not cause to be
issued such a stock certificate unless it has received from the
Participant a stock power duly endorsed in blank with respect to such
shares. Each such stock certificate shall bear the following legend:
The transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and
conditions (including forfeiture and restrictions against transfer)
contained in the Barrister Information Systems Corporation 1999 Stock
Incentive Plan and an Agreement entered into between the registered
owner of such shares and Barrister Information Systems Corporation. A
copy of the Plan and Agreement is on file in the office of the
Secretary of Barrister Information Systems Corporation, 465 Main
Street, Buffalo, NY 14203.
Such legend shall not be removed from the certificate evidencing such
shares until such shares vest pursuant to the terms hereof.
(2) Each certificate issued pursuant to Section 7(d)(1) hereof,
together with the stock powers relating to the shares of Restricted
Stock evidenced by such certificate, shall be deposited by the Company
with a custodian designated by the Company, who may be an officer or
employee of the Company. The Company shall cause such custodian to
issue to the Participant a receipt evidencing the certificates held by
it which are registered in the name of the Participant.
(e) CONSEQUENCES UPON VESTING
Upon the vesting of a share of Restricted Stock pursuant to the terms
hereof, the restrictions of Section 7(c) hereof shall cease to apply to
such share. Reasonably promptly after a share of Restricted Stock vests
pursuant to the terms hereof, Barrister shall cause to be issued and
delivered to the Participant to whom such shares were granted, a
certificate evidencing such shares, free of the legend set
<PAGE> 72
forth in Section 7(d)(1) hereof, and the custodian referenced in
Section 7(d)(2) hereof shall cause the legended certificate theretofore
delivered to it to be delivered to the Secretary of Barrister, transfer
agent or other appropriate person for cancellation.
(f) RIGHTS SUBJECT TO VESTING
All issued shares of Restricted Stock shall be deemed to be issued and
outstanding for purposes of dividends and/or distributions thereon in
cash or property, and voting rights, until such time, if any, that a
forfeiture or cancellation of such shares may occur pursuant to this
Plan; provided, however that the Committee shall have the discretion to
determine that any shares of Common Stock or other equity securities
that are issued or distributed in respect of shares of Restricted Stock
that have not vested shall be subject to the restrictions and vesting
conditions applicable to such shares of Restricted Stock.
(g) EFFECT OF TERMINATION OF EMPLOYMENT
(1) In the event that the employment of a Participant with the Company
shall terminate for any reason other than Cause or the Participant's
voluntary quit or resignation prior to the vesting of shares of
Restricted Stock granted to such Participant, a proportion of such
shares, to the extent not forfeited or cancelled on or prior to such
termination pursuant to any provision hereof, shall vest on the date of
such termination. The proportion referred to in the preceding sentence
shall be determined by the Committee at the time of the grant of such
shares of Restricted Stock and may be based on the achievement of any
conditions imposed with respect to vesting of such shares pursuant to
Section 7(b). Such proportion may be equal to zero. Subject to the
first sentence of this paragraph, the Committee shall have authority to
provide for different proportions that shall be applicable relating to
different circumstances of termination.
(2) In the event of the termination of a Participant's employment for
Cause, or a voluntary quit or resignation by such Participant, all
shares of Restricted Stock granted to such Participant that have not
vested as of the date of such termination shall immediately be
forfeited.
(h) LIMITATION ON THE TRANSFER OF RESTRICTED STOCK
Whether or not such shares are subject to vesting requirements,
Restricted Stock granted to persons subject to Section 16(b) of the
Exchange Act shall not be sold or transferred for a period of six
months after the date of grant.
8. STOCK BONUSES
The Committee may recommend the granting of Stock Bonuses in such
amounts as it shall determine from time to time. A Stock Bonus shall be
paid at such time and subject to such conditions as the Committee shall
determine at the time of the grant of such Stock Bonus. Certificates
for shares of Common Stock granted as a Stock Bonus shall be issued in
the name of the Participant to whom such grant was made and delivered
to such Participant as soon as practicable after the date on which such
Stock Bonus is required to be paid. Stock Bonuses granted to persons
who are subject to Section 16(b) of the Exchange Act shall not be sold
or transferred for a period of six months after the date of grant.
9. BONUSES AND LOANS
The Committee may grant, in connection with any grant of Restricted
Stock or Stock Bonus, or upon the issuance or exercise of a
Non-Qualified Stock Option, or at any time thereafter, a cash bonus
payable not later than 120 days after the last day of the calendar year
for which the Participant is required to recognize income for federal
income tax purposes in connection with such grant, issue or exercise,
in such amounts as the Committee shall determine from time to time;
provided, however, that in no event shall the amount of a cash bonus
exceed the lesser of (i) the amount resulting from multiplying the
amount of income to be so recognized by the Participant by such
Participant's anticipated marginal federal income tax bracket
(determined in such manner as is satisfactory to the Committee) or (ii)
the amount resulting from multiplying the deduction that will accrue to
the Company for federal income tax purposes by virtue of such grant,
issue or exercise by the Company's anticipated marginal federal income
tax bracket. The Committee may also in connection with any grant
described in the first sentence of this Section 9, grant a loan for all
or any part of a Participant's anticipated federal income tax liability
as described above and/or, in the case of the exercise of an Option,
all or part of the exercise price thereof. A cash bonus and/or a loan
shall be subject to such conditions as the Committee shall determine at
the time of the grant thereof, including without limitation, interest
and repayment terms of loans.
10. ADJUSTMENT UPON CHANGES IN COMMON STOCK
(a) SHARES AVAILABLE FOR GRANTS
In the event of any change in the number of shares of Common Stock
outstanding by reason of any stock dividend or split, recapitalization,
merger, consolidation, combination or exchange of shares or similar
corporate change, the maximum aggregate number of shares of Common
Stock with respect to which Options, shares of Restricted Stock, and
Stock Bonuses may be granted shall be appropriately adjusted by the
Committee. In the event of any change in the number of shares of Common
Stock outstanding by reason of any other event or transaction, the
Committee may, but need not, make such adjustments in the number and
class of shares of Common Stock with respect to which Options, shares
of Restricted Stock and Stock Bonuses may be granted as the Committee
may deem appropriate.
(b) ADJUSTMENTS IN OUTSTANDING SHARES OF RESTRICTED STOCK
The Committee may adjust any grant of shares of Restricted Stock, the
Issue Date with respect to which has not occurred as of the date of the
occurrence of any of the following events, to reflect any dividend,
stock split, recapitalization, merger, consolidation, combination,
exchange of shares or similar corporate change as may be deemed
appropriate to prevent the enlargement or dilution of rights of
Participants under the grant. Any adjustment under any provision of
this Section 10 with respect to Restricted Stock issued or to be issued
pursuant to a Tandem Award shall also result in an appropriate
adjustment in the number of Common Shares that is subject to a related
Option.
<PAGE> 73
(c) OUTSTANDING OPTIONS, INCREASE OR DECREASE IN ISSUED SHARES WITHOUT
CONSIDERATION
Subject to any required action by the stockholders of Barrister, in the
event of any increase or decrease in the number of issued shares of
Common Stock resulting from a subdivision or consolidation of shares of
Common Stock or the payment of a stock dividend (but only on the shares
of Common Stock), or any other increase or decrease in the number of
such shares effected without receipt of consideration by Barrister, the
Committee shall proportionally adjust the number of shares of Common
Stock subject to each outstanding Option, and the exercise price per
share of Common Stock of each such Option.
(d) OUTSTANDING OPTIONS - CERTAIN MERGERS
Subject to any required action by the stockholders of Barrister, in the
event that Barrister shall be the surviving corporation in any merger
or consolidation (except a merger or consolidation as a result of which
the holders of shares of Common Stock receive securities of another
corporation), each Option outstanding on the date of such merger or
consolidation shall pertain to and apply to the securities which a
holder of the number of shares of Common Stock subject to such Option
would have received in such merger or consolidation.
(e) OUTSTANDING OPTIONS - CERTAIN OTHER TRANSACTIONS
In the event of (i) a dissolution or liquidation of Barrister, (ii) a
sale of all or substantially all of Barrister's assets, (iii) a merger
or consolidation involving Barrister in which Barrister is not the
surviving corporation or (iv) a merger or consolidation involving
Barrister in which Barrister is the surviving corporation but the
holders of shares of Common Stock receive securities of another
corporation and/or other property, including cash, the Committee shall
have the power to:
(i) cancel, effective immediately prior to the occurrence of
such event, each Option outstanding immediately prior to such
event (whether or not then exercisable), and, in full
consideration of such cancellation, pay to the Participant to
whom such Option or Award was granted an amount in cash, for
each share of Common Stock subject to such Option, equal to
the excess of (A) the value, as determined by the Committee,
of the property (including cash) received by the holder of a
share of Common Stock as a result of such event over (B) the
exercise price of such Option; or
(ii) provide for the exchange of each Option outstanding
immediately prior to such event (whether or not then
exercisable) for an option on some or all of the property for
which such Option could if fully exercisable be exchanged and,
incident thereto, make an equitable adjustment as determined
upon the basis of a recommendation by the Committee in the
exercise price of the option, or the number of shares or
amount of property subject to the option.
(f) OUTSTANDING OPTIONS - OTHER CHANGES
In the event of any change in the capitalization of Barrister or
corporate change other than those specifically referred to in Sections
10(c), (d) or (e) hereof, the Committee may make such adjustments in
the number of shares subject to Options, outstanding on the date on
which such change occurs and in the per share exercise price of each
such Option, as is considered appropriate to prevent dilution or
enlargement of rights.
(g) NO OTHER RIGHTS
Except as expressly provided in the Plan, no Participant shall have any
rights by reason of any subdivision or consolidation of shares of stock
of any class, the payment of any dividend, any increase or decrease in
the number of shares of stock of any class or any dissolution,
liquidation, merger or consolidation of Barrister or any other
corporation. Except as expressly provided in the Plan, no issuance by
Barrister of shares of stock of any class, or securities convertible
into shares of stock of any class, shall affect, and no adjustment by
reason thereof shall be made with respect to, the number of shares of
Common Stock subject to an Incentive Award or the exercise price of any
Option.
11. RIGHTS AS A STOCKHOLDER
No person shall have any rights as a stockholder with respect to any
shares of Common Stock covered by or relating to any Incentive Award
granted pursuant to this Plan until the date of the issuance of a stock
certificate with respect to such shares. Except as otherwise expressly
provided in Section 10 hereof, no adjustment to any Incentive Award
shall be made for dividends or other rights for which the record date
occurs prior to the date such stock certificate is issued.
12. NO SPECIAL EMPLOYMENT RIGHTS; NO RIGHT TO INCENTIVE AWARD
Nothing contained in the Plan or any Incentive Award shall confer upon
any Participant any right with respect to the continuation of his
employment by the Company or interfere in any way with the right of the
Company, subject to the terms of any separate employment agreement to
the contrary, at any time to terminate such employment or to increase
or decrease the compensation of the Participant from the rate in
existence at the time of the grant of an Incentive Award.
No person shall have any claim or right to receive an Incentive Award
hereunder. The granting of an Incentive Award to a Participant at any
time shall neither require the grant of an Incentive Award to such
Participant or any other Participant or other person at any time nor
preclude the Committee from making subsequent grants to such
Participant or any other Participant or other person.
13. SECURITIES MATTERS
(a) The Company shall be under no obligation to effect the registration
pursuant to the Securities Act of any shares of Common Stock to be
issued hereunder or to effect similar compliance under any state laws.
Notwithstanding anything herein to the contrary, the Company shall not
be obligated to cause to be issued or delivered any certificates
evidencing shares of Common Stock pursuant to the Plan unless and until
the Company is advised by its counsel that the issuance and delivery of
such certificates is in compliance with all applicable laws, rules and
regulations of governmental authorities and the requirements of any
securities exchange on which shares of
<PAGE> 74
Common Stock are traded. The Committee may require, as a condition of
the issuance and delivery of certificates evidencing shares of Common
Stock pursuant to the terms hereof, that the recipient of such shares
make such covenants, agreements and representations, and that such
certificates bear such legends, as the Committee, in its sole
discretion, deems necessary or desirable.
(b) The exercise of any Option granted hereunder shall only be
effective at such time as the Company shall have determined (based upon
the advice of counsel or otherwise) that the issuance and delivery of
shares of Common Stock pursuant to such exercise is in compliance with
all applicable laws, rules and regulations of governmental authorities
and the requirements of any securities exchange on which shares of
Common Stock are traded. The Company may, in its sole discretion, defer
the effectiveness of any exercise of an Option granted hereunder in
order to allow the issuance of shares of Common Stock pursuant thereto
to be made pursuant to registration or an exemption from registration
or other methods for compliance available under federal or state
securities laws. The Company shall inform the Participant in writing of
its decision to defer the effectiveness of the exercise of an Option
granted hereunder. During the period that the effectiveness of the
exercise of an Option has been deferred, the Participant may, by
written notice, withdraw such exercise and obtain the refund of any
amount paid with respect thereto.
14. WITHHOLDING TAXES
(a) CASH REMITTANCE
Whenever shares of Common Stock are to be issued upon the exercise of
an Option, upon the occurrence of the Issue Date or Vesting Date with
respect to a share of Restricted Stock, or upon the payment of a Stock
Bonus, the Company shall have the right to require the Participant to
remit to the Company in cash an amount sufficient to satisfy federal,
state and local withholding tax requirements, if any, attributable to
such exercise, occurrence or payment prior to the delivery of any
certificate or certificates for such shares. In addition, upon the
grant of a Cash Bonus, the Company shall have the right to withhold
therefrom an amount sufficient to satisfy federal, state and local
withholding tax requirements, if any, attributable to such grant.
(b) STOCK REMITTANCE
At the election of the Participant, subject to the approval of the
Committee, when shares of Common Stock are to be issued upon the
exercise of an Option, upon the occurrence of the Issue Date or the
Vesting Date with respect to shares of Restricted Stock, or upon the
grant of a Stock Bonus, in lieu of the remittance required by Section
14(a) hereof, the Participant may tender to the Company such number of
shares of Common Stock (but not Restricted Stock) the Fair Market Value
of which at the tender date the Committee determines to be, together
with any cash to be remitted by such Participant, sufficient to satisfy
the federal, state and local withholding tax requirements, if any,
attributable to such exercise, occurrence or grant.
(c) STOCK WITHHOLDING
At the election of the Participant, subject to the approval of the
Committee, when shares of Common Stock are to be issued upon the
exercise of an Option, upon the occurrence of the Issue Date or the
Vesting Date with respect to shares of Restricted Stock, or upon the
grant of a Stock Bonus, in lieu of the remittance required by Section
14(a) hereof, the Company may withhold a number of such shares the Fair
Market Value of which at the exercise date the Committee determines to
be sufficient to satisfy the federal, state and local withholding tax
requirements, if any, attributable to such exercise, occurrence or
grant.
15. AMENDMENT OF THE PLAN
The Committee may at any time suspend or discontinue the Plan or revise
or amend it in any respect whatsoever; provided however, that without
approval of the stockholders no revision or amendment shall (i) except
as provided in Section 10 hereof, increase the number of shares of
Common Stock that may be issued under the Plan, (ii) materially
increase the benefits accruing to individuals holding Incentive Awards
granted pursuant to the Plan or (iii) materially modify the
requirements as to eligibility for participation in the Plan; and
provided further that no revision or amendment shall adversely affect
any Incentive Award theretofore granted.
16. NO OBLIGATION TO EXERCISE
The grant to a Participant of an Option shall impose no obligation upon
such Participant to exercise such Option.
17. TRANSFERS UPON DEATH
Upon the death of a Participant, outstanding Incentive Awards granted
to such Participant may be exercised only by the executors or
administrators of the Participant's estate or by any person or persons
who shall have acquired such right to exercise by will or by the laws
of descent and distribution. No transfer by will or the laws of descent
and distribution of any Incentive Award, or the right to exercise any
Incentive Award, shall be effective to bind the Company unless the
Committee shall have been furnished with (a) written notice thereof and
with a copy of the will and/or such evidence as the Committee may deem
necessary to establish the validity of the transfer and (b) an
agreement by the transferee to comply with all the terms and conditions
of the Incentive Award that are or would have been applicable to the
Participant and to be bound by the acknowledgments made by the
Participant in connection with the grant of the Incentive Award.
18. EXPENSES AND RECEIPTS
The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Incentive Award will be
used for general corporate purposes.
19. FAILURE TO COMPLY
In addition to the remedies of the Company elsewhere provided for
herein, failure by a Participant to comply with any of the terms and
conditions of the Plan or the Agreement executed by such Participant
evidencing an Incentive Award, unless such failure is remedied
<PAGE> 75
by such Participant within ten days after having been notified of such
failure by the Committee, shall be grounds for the cancellation and
forfeiture of such Incentive Award, in whole or in part, as the
Committee may determine.
20. EFFECTIVE DATE AND TERM OF PLAN
The Plan was adopted by the Board of Directors on June 29, 1999,
subject to approval by the stockholders of Barrister at their next
annual meeting during 1999 in accordance with applicable law and the
requirements of Section 422 of the Code. No grants may be made under
the Plan after December 31, 2008.
BARRISTER SYSTEMS INFORMATION CORPORATION
By /s/ MARK C. DONADIO
-----------------------
Its Secretary
<PAGE> 76
BARRISTER INFORMATION SYSTEMS CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS, SEPTEMBER 16, 1999
The undersigned hereby appoints HENRY P. SEMMELHACK and MARK C. DONADIO
as proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated on the reverse side, all the shares
of Common Stock of Barrister Information Systems Corporation held of record by
the undersigned on July 19,1999 at the Annual Meeting of Shareholders to be held
on September 16, 1999, or any adjournments thereof, upon the matters set forth
in the Proxy Statement and, in their judgment and discretion, upon such other
business as may properly come before the meeting. THIS PROXY WILL BE VOTED FOR
ELECTION OF THE DIRECTORS AND FOR ALL OTHER ITEMS, UNLESS A CONTRARY INSTRUCTION
IS GIVEN, IN WHICH CASE IT WILL BE VOTED IN ACCORDANCE WITH SUCH INSTRUCTION.
PLEASE FILL IN, DATE AND SIGN ON THE REVERSE SIDE AND RETURN
THIS PROXY IN THE ACCOMPANYING ENVELOPE.
<PAGE> 77
PROXY BALLOT CARD
BARRISTER INFORMATION SYSTEMS CORPORATION
COMMON STOCK
[ ] -------------------------- -------------------------------
Account Number Common Stock
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION
OF ALL THE NOMINEES IN PROPOSAL 1 AND FOR PROPOSAL 2, 3, AND 4.
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1. ELECTION OF FOR all nominees WITHHOLD
DIRECTORS: listed below (except AUTHORITY to vote
as marked to the for all nominees listed
contrary below)
[ ] [ ]
Class II: Henry P. Semmelhack, James D. Morgan, Richard P. Beyer,
Warren E. Emblidge, Jr.
WITHHOLD AUTHORITY to vote for the following nominees only
(write name(s)):
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2. TO APPROVE THE ISSUANCE OF 2,500,000 SHARES OF COMMON STOCK, $.24 PAR
VALUE PER SHARE, ON CONVERSION OF THE OUTSTANDING SHARES OF SERIES E
PREFERRED STOCK OF THE COMPANY WHICH WERE ISSUED AS CONSIDERATION FOR
THE PURCHASE OF THE ASSETS OF ICON TECHNOLOGY, LLC PURSUANT TO AN ASSET
PURCHASE AGREEMENT DATED JANUARY 15, 1999.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
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3. TO APPROVE THE COMPANY'S 1999 STOCK INCENTIVE PLAN.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
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4. RATIFICATION OF SELECTION OF KPMG LLP, Independent auditors for the
current fiscal year ending March 31, 2000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
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[ ] Please sign here exactly as name appears to left.
Dated: ______________________, 1999
[ ] ___________________________________________________
Signature of Shareholder
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Signature of Shareholder
Persons signing in a representative capacity should
indicate their capacity.
