SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended January 31, 1996 Commission File No. 33-3133
New Jersey 22-2588030
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
MULTI SOFT, INC.
(Name of Small business issuer in its charter)
4262 US Route 1, Monmouth Junction, New Jersey 08852
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (908) 329-9200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act, during the past 12 months (or for
such shorter period that the registrant was required to file such reports) and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ X ]
Issuer revenue for the fiscal year: $1,399,180
The aggregate market value of the voting stock held by non-affiliates (1) of the
registrant based on the average between the high ($ 3/8) and low ($ 1/4) bid
price of such stock, as of April 30, 1996 is $1,453,831 based upon $.3125
multiplied by the 4,652,259 Shares of Registrant's Common Stock held by
non-affiliates.
The number of shares outstanding of each of the registrant's classes of common
stock, as of April 30, 1996, is 11,483,979 shares, all of one class of $.001 par
value Common Stock.
(1) Affiliates for purposes of this item refers to those persons who, during the
preceding 3 months, were officers, directors and/or owners of 5% or more of the
Company's outstanding stock.
DOCUMENTS INCORPORATED BY REFERENCE: None
Transitional Small Business Disclosure Format (check one):Yes No X
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MULTI SOFT, INC.
Form 10-KSB
Year Ended January 31, 1996
Table of Contents
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Page
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PART I....................................................................................................................3
Item 1. Business.........................................................................................................3
Item 2. Properties.......................................................................................................7
Item 3. Legal Proceedings................................................................................................7
Item 4. Submission of Matters to a Vote of Security Holders..............................................................8
PART II...................................................................................................................9
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters...........................................9
Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations..........................10
Item 7. Financial Statements............................................................................................12
Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures...........................12
PART III.................................................................................................................14
Item 9. Directors, Executive Officers, Promoters and Control Persons; compliance with Section 16(a) of the Exchange Act.14
Item 10. Executive Compensation..........................................................................................15
Item 11. Security Ownership of Certain Beneficial Owners and Management..................................................18
Item 12. Certain Relationships and Related Transactions..................................................................19
PART IV..................................................................................................................21
Item 13. Exhibits and Reports on Form 8-K................................................................................21
Signatures...............................................................................................................23
Financial Statements.....................................................................................................F1
Exhibits.................................................................................................................E1
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PART I
Item 1. Business.
General
Multi Soft, Inc. (the "Company" or "Multi Soft") was incorporated in
January 1985 as a wholly owned subsidiary of Multi Solutions, Inc. ("MSI") and,
as of the date hereof, is a 56.8% owned subsidiary of MSI. The Company engages
in the production, marketing and maintenance of communications front-ending,
client-server and cooperative processing technologies called The Windows
Communications LibraryTM (WCL(TM)) for Windows and INFRONT and QuickFRONT For
DOS.
The Technology
The Multi Soft product line consists of tools for the development of
client-server applications using the mainframe as the Enterprise Server. There
are four key elements to the real world development, delivery and production
maintenance of these applications, and all are supported by the Multi Soft
product line. These include screen-based access to mainframe data and processes;
message-based access to mainframe data and processes; integration of
screen-based and message-based access to the mainframe in the same application;
and control and distribution management.
Screen-based access to Mainframe Data and Processes (which includes
front-ending) allows the user to enhance existing mainframe applications through
the integration of client technologies such as GUIs (graphical user interfaces),
imaging and local data, without changing any mainframe code. This allows
companies to leverage their PC capabilities to streamline user processes and for
presenting mainframe data to users in a way that is intuitive, easy to use and
productive. Screen-based access to the mainframe is supported by WCL, QuickFRONT
and INFRONT.
Message-based access to Mainframe Data and Processes allows companies to
create client-server applications, where the PC is used for the client portion
of the application (i.e., all user interaction, dialogue flow and access to
local data) and the mainframe is used for the server portion of the application
(i.e., management of database interaction, data integrity and security). In this
architecture, only data and messages are passed between the PC and host, which
results in a streamlined and optimized production application. Message-based
access to the mainframe is supported by WCL's WCL/Enterprise Server Option
("WCL/ESO"), and by INFRONT's and QuickFRONT's Host Processing Option ("HPO").
Integrity Control and Distribution Management allows companies to use the
mainframe system to centrally manage the integrity of the work station logic and
distribute new version releases. In production client-server applications it is
important to ensure that the programs, files and data residing on the PC are
correct before the user starts the application. When changes are made to the
work station logic, the host can also be used to manage the distribution of
these changes. Integrity control and distribution management is supported by
WCL's WCL/Software Distribution Option ("WCL/SDO") and by INFRONT's and
QuickFRONT's Software Distribution Facility ("SDF").
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The Multi Soft Product Line
The Multi Soft Product line consists of two product sets: the WCL product
set and the INFRONT/QuickFRONT product set. The WCL product set is an open
environment that runs under Windows and includes WCL, WCL/ESO and WCL/SDO. The
INFRONT and QuickFRONT product set is an integrated environment that runs under
DOS and Windows. It includes INFRONT, QuickFRONT, HPO and SDF.
WCL is a toolkit and a set of DLLs (Dynamic Linked Libraries) that work in
conjunction with Windows 3270 emulation products to provide easy integration of
data and processing between PC/LANs (local area networks) and the mainframe.
Because WCL is open, any of the standard Windows development tools such as
PowerBuilder, Visual Basic, and C++, can be used with WCL to create the client
application. It supports the development of GUI front-ends, client-server
applications that use the mainframe as a server and integrity control and
distribution management. The WCL toolkit provides an automated development
environment that includes, among other things, a screen capture mechanism, a
screen maintenance and a screen matching facility. In addition, it provides code
generation to remove the complexity and development effort associated with
building GUI front-end applications.
WCL/ESO is the host component to WCL and provides a message-based transport
layer between client PC/LANs and the mainframe. The client application is
created using any of the standard Windows tools and products, and the server
application is created using a standard language, such as COBOL. Any mainframe
file structure or database, such as VSAM, DB2, or IMS, can be accessed using
WCL/ESO through CICS (an IBM mainframe operating environment). Client-server
applications developed using WCL/ESO have the added advantage of using a
company's existing mainframe skills and infrastructure, including security, data
integrity, backup and recovery and disaster recovery.
WCL/SDO is a WCL/ESO application created for the centralized control and
management of application code, data and software for distributed client-server
applications. It allows companies to control, audit and distribute from central
host-based master libraries to distributed PCs. These PCs can be clients and/or
servers. WCL/SDO is used as a verification mechanism to ensure all files, and
appropriate versions of files are present on a PC or in a host library. It will
automatically update the PC or Host with correct versions of files if any are
found to be missing or invalid. This facility is important for the successful
production management of large-scale distributed applications.
QuickFRONT is a powerful, but easy to use, tool which offers the ability to
rapidly improve existing mainframe applications by creating new PC-based
interfaces for them. This can be accomplished without programming, without
training, without any significant learning curve and without any changes to the
mainframe code. If the user needs special functions that are not generated
automatically through QuickFRONT's dialogues, the user also has access to a
powerful 4GL (fourth generation language) called CPL/1. QuickFRONT is designed
to give the user the maximum benefit from front-ending with maximum investment
from both a development resource and software expenditure standpoint.
INFRONT is a comprehensive and integrated development environment for
building PC front-ends and client-server applications with the mainframe. The
development environment includes: an intelligent forms subsystem with screen
capture, screen painting, editing and validation assignment facilities, data
dictionary; a 4GL; an intelligent editor with language templates and reusable
code library; a PC-resident database, including database maintenance facilities
such as sorting and reorganizing; sophisticated debugging facilities, including
a source-level language debugger, and other utilities such as code libraries and
forms libraries.
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HPO (Host Processing Option) is the host component to QuickFRONT and
INFRONT that supports the development of client-server applications using the
mainframe as a server. HPO is also used to incrementally migrate legacy systems
into a client-server architecture. It uses a message-based protocol for
peer-to-peer interaction between PC/LANs and host systems. HPO delivers the
capabilities of APPC and LU6.2 (communications protocols) over the user's
existing LU2 and asynchronous networks without requiring any upgrades. HPO
allows the user to offload 60% to 80% of an application's logic to the client,
thereby reducing the mainframe to the role of a server.
SDF (Software Distribution Facility) is a client-server application based
on HPO. It is a utility for the centralized, host-based management of work
station integrity and the automated distribution of updates and new versions of
PC software, files and data. With SDF a master production library of all PC
programs, files and data is stored on the host. As a user logs on to the system,
SDF can automatically check to see if the programs, files and data on the work
station are correct according to the master library on the host. If they are not
correct, SDF will automatically download the correct versions before the
application is started. If they are correct, the application proceeds
immediately.
Key Services
Multi Soft offers a wide array of training and consulting services designed
to help its new customers get a fast start in client\server development and to
help existing customers with additional resources to facilitate successful
production application roll-outs.
Training Services include basic and advanced product training, as well as
courses such as "Design and Development Methodologies," which covers the major
issues companies need to understand for successfully developing applications
running on distributed platforms.
Consulting Services range from human factors design and project management
to assisting licensees with application development and/or the development of
complete applications.
Technical Support Services include a telephone hotline staffed by
knowledgeable personnel trained and experienced with the Multi Soft product
line. An online bulletin board system is also used to augment hotline and fax
support to customers.
Clients
Multi Soft's past and current client base spans over 40,000 users
throughout approximately 125 Fortune 500 companies. Customers that have licensed
Multi Soft's products include: American Cyanamid, Bell Atlantic, ITT Hartford,
Honda, Con Edison, Hoescht, American International Group, Ciba Geigy, Comdisco,
EDS, Exxon, General Electric, Hilton, Lever Brothers, Teachers Insurance,
Chicago Northwestern and US West Business.
In-House Marketing and Sales
In addition to their management responsibilities, Charles Lombardo and
Miriam Jarney also are active in sales. At present, in-house sales are generally
made through telemarketing. If the Company obtains additional funds from
operations or otherwise, it plans to further market its products through
advertisements in trade publications and targeted mailings. No assurance can be
given that the Company will have sufficient funds to increase its in-house sales
and marketing activities.
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Distributors
To supplement its domestic sales and marketing efforts, Multi Soft has
built an international distribution network. Business arrangements have been
established with software distributors in European markets and Australia. These
organizations include: Ferntree Computer Services (Australia), SEE Software
Engineering (Switzerland) and Software Engineering (Holland, Germany, UK).
Strategic Alliances
Multi Soft has established strategic relationships with complementary
hardware and software vendors. Most notable among these are the relationships
with IBM (see "IBM" below) and Computer Data Systems, Inc. ("CDSI"). CDSI, a
supplier of financial systems and consulting services to the government market
place, licenses Multi Soft products into it existing customer base and to new
clients.
IBM
In October 1993, the Company entered into a Software Licensing Agreement
("SLA") and other ancillary agreements with IBM Corporation ("IBM") providing
IBM with certain exclusive marketing rights for the Company's flagship product,
WCL (runtime version) with IBM IMS Extensions. This IBM EXTENDED VERSION of
Multi Soft's WCL is named IMS Client ServerTM for Windows. Specifically modified
for use with IBM mainframe systems, IMS Client ServerTM for Windows provides
remote presentation support for IMS.
The IBM agreement, effective for a term of seven years with automatic
renewals for two more one year periods, provides for the payment of percentage
royalties and unit royalties as specified in the agreement. The Agreement is
terminable by IBM upon 90 days notice. As of April 1996 the Company has been
receiving monthly maintenance for the above agreement.
Multi Soft and IBM also have entered into International Marketing
Agreements to market Multi Soft's WCL Toolkit under the name IMS Client Server
ToolkitTM for Windows in the United States, Puerto Rico, the Asian Pacific
Region, Europe, the Middle East, Africa and Canada. IMS Client Server ToolkitTM
facilitates the generation of client application which run with IMS Client
ServerTM for Windows.
In addition, in September 1994, Multi Soft entered into an International
Software Licensing Agreement with IBM's Personal Communications 3270 division
("P-Comm"). This agreement allows IBM to logo and market a P-Comm specific
version of both the Toolkit and Runtime of Multi Soft's WCL. Pursuant to this
agreement, the Company will receive a minimum of $75,000 per quarter over a two
year period representing minimum advances against royalties. This IBM agreement
is effective for a term of two years and is renewable by IBM for two more one
year periods. The Agreement is terminable by the Company or IBM upon 90 days
notice in the event of a default by the other party.
Management believes, but cannot assure, that these marketing and
distribution agreements will provide Multi Soft with a significant presence in
the marketplace, enhance the visibility and credibility of Multi Soft, and
result in increased sales of Multi Soft's products by Multi Soft and its
existing distributors. Management expects that, as the IBM relationship matures,
significant revenues will be generated by IBM and Multi Soft's product sales
base will continue to expand. In addition, management expects that, as the
products sales base expands, so will the subsequent maintenance and support
revenue.
Since fiscal 1994, IBM has represented a significant percentage of Multi
Soft's revenues See "Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations".
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Bellcore
In 1995 Multi Soft, Inc. entered a joint development and marketing
agreement with Bellcore to develop and market a Sun Solaris Unix version of its
WCL product. The agreement provides that Bellcore pay Multi Soft for developing
an extension of its WCL product to the Sun Solaris Unix environment. Also, it
provides for a joint marketing agreement in which both companies will share
marketing royalties.
Employees
The Company has twelve employees and consultants, including two officers,
three support personnel, four technical and engineering personnel, and three
administrative/secretarial personnel.
Competition
The Company operates in a business composed of strong competitors, many of
whom have substantially greater resources, are better established, and have a
longer history of operations than the Company. In addition, many competitors
have more extensive facilities than those which now or in the foreseeable future
will become available to the Company.
The Company competes directly with computer manufacturers, large computer
service companies and independent software suppliers. The Company believes that
hundreds of firms that manufacture software applications products are
significant competitors, and the Company is one of the smaller entities in the
field.
The Company's products provide front-ending, client-server and cooperative
processing technologies which the Company believes represent a significant
advance over other products being marketed.
Item 2. Properties.
The Company subleases approximately 3,300 square feet of office space at
4262 US Route 1, Monmouth Junction, New Jersey 08852 from C&S Consulting, Inc.,
a company owned by the Company's Chairman and his wife. C&S Consulting, Inc.
leases the space from an unaffiliated party. The lease commenced on December 1,
1993 and is terminable at any time on three months notice. Monthly rent is
$3,750 during the first year, $4,250 during the second year and $4,750 during
the third year. The Company is responsible for all utilities.
Item 3. Legal Proceedings.
The Company is not presently a party to any material litigation; however,
the Company was a party in the following matters:
Tax Liens
As of January 31, 1996, the federal tax was paid in full and the tax liens
were released. Certain state taxes, interest, and penalties aggregating
approximately $26,000 remain unpaid at January 31, 1996.
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The Company was a defendant in a lawsuit for a defaulted real property
lease regarding facilities no longer occupied by the Company. Pursuant to a
settlement between the landlord and the Company, the Company is obligated to pay
$30,000 over an 18 month period. As of the date hereof, the company is in full
compliance with this settlement.The balance remaining on this settlement is
approximatley $3,334.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of Security Holders in the last quarter
of the Company's fiscal year ended January 31, 1996.
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
(a) Market Information -- The Company's Common Stock and the Common Stock
Purchase Warrants (for one share of Common Stock) are traded is in the
over-the-counter market, and are quoted on The OTC Bulletin Board (symbol:
"MSOF").
The following tables set forth the range of high and low bid prices for the
Company's Common Stock on a quarterly basis for the past two fiscal years as
reported by the National Quotation Bureau (which reflect inter-dealer prices,
without retail mark-up, mark-down, or commission and may not necessarily
represent actual transactions). The Warrants are unpriced.
Bid Prices
Period - Fiscal Year 1995 High Low
--------------------------------------------------------------------------
First Quarter ending April 30, 1994 9/16 3/16
Second Quarter ending July 31, 1994 5/16 3/32
Third Quarter ending October 31, 1994 .22 .10
Fourth Quarter ending January 31, 1995 .31 3/16
Period - Fiscal Year 1996 High Low
--------------------------------------------------------------------------
First Quarter ending April 30, 1995 1/4 1/8
Second Quarter ending July 31, 1995 3/8 3/16
Third Quarter ending October 31, 1995 .29 1/8
Fourth Quarter ending January 31, 1996 9/32 1/8
(b) Holders -- There were approximately 160 holders of record of the
Company's Common Stock and 16 holders of record of the Company's Common Stock
Purchase Warrants as of May 8, 1996 inclusive of those brokerage firms and/or
clearing houses holding the Company's securities for their clientele (with each
such brokerage house and/or clearing house being considered as one holder).
(c) Dividends -- The Company has not paid or declared any dividends upon
its Common Stock since its inception and, by reason of its present financial
status and its contemplated financial requirements, does not contemplate or
anticipate paying any dividends upon its Common Stock in the foreseeable future.
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Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Fiscal Year Ended January 31, 1996 Compared to Fiscal Year Ended January 31,
1995
Revenues for the fiscal year ended January 31, 1996 were $1,399,180 as
compared to $939,195 in fiscal year 1995, an increase of $459,985 (49%).This
increase is primarily due to a 138% increase in revenues from license fees from
$340,832 to $812,069, much of which come from the companies largest customers.
In fiscal 1996, Multi Soft's two principal sources of revenues were license
fees and maintenance fees which represented approximately 58% ($812,069) and
40.3% ($545,977) percent of revenues in 1996, respectively.
Revenues in fiscal 1996 include $192,856 of the $300,000 nonrefundable
royalty payment advance from IBM (see Note I to the financial statements as of,
and for the year ended January 31, 1996).
Management believes that the growth in maintenance fees during the year
ended January 31, 1996 is due to an increase in requests from customers for
product updates, technical assistance and support.
Operating expenses decreased 7.8% from fiscal 1995 ($1,517,237) to fiscal
1996 ($1,399,476) primarily as a result of a 16.6% decrease in selling and
administrative costs. The increase in software development costs is principally
due to an increase in the base of capitalized development costs.
Other income (expenses) changed from $11,695 in fiscal 1995 to $49,249 in
fiscal 1996. 1995 includes special discount to investors of ($28,215) is
included in fiscal 1995. Also, settlements of accounts payable is included as
other income in the amount of $54,782 in 1996 and $45,630 in 1995. See "Item 12.
Certain Relationships and Related Transactions."
As a result of all of the foregoing, Multi Soft's income in fiscal 1996
$48,953 increased improved substantially compared to its loss in 1995
($566,347).
Major Customers
In fiscal 1996, IBM accounted for 42% of total revenues. In fiscal 1995 IBM
accounted for 33% of total revenues.
Liquidity and Capital Resources
At January 31, 1996, the Company had a working capital deficiency of
$537,862 and has experienced cash flow problems.
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Management of Multi Soft has taken various steps to correct this situation.
Overhead costs have been cut drastically as a result of staff reductions and
curtailment of all outside marketing and advertising costs. In addition, senior
staff salaries were reduced and executive officers' salaries were partly
deferred. Secondly, Multi Soft broadened its product base into the Windows
environment and has made its Windows based products easier to learn and use.
In addition, in September 1994, Multi Soft entered into an International
Software Licensing Agreement with IBM's Personal Communications 3270 division
("P-Comm"). This agreement allows IBM to logo and market a P-Comm specific
version of both the Toolkit and Runtime of Multi Soft's WCLTM. Pursuant to this
agreement, the Company will receive a minimum of $75,000 per quarter over a two
year period representing minimum advances against royalties (see "Item 1.
Business - IBM").
It is Multi Soft's intent to remain a technology provider and search out
multiple distribution channels, rather than to try and grow via an expensive
direct sales force. This allows the focus to stay on technology, with a low
overhead cost for each distribution channel used. However, if the Company
obtains additional funds from operations or otherwise, it plans to expand
in-house marketing activities by advertising in trade publications and by
conducting targeted mailing. (See "Item 1. Business - In-House Marketing and
Sales").
Dividend Policy
The Company has not declared or paid any dividends on its common stock
since its inception and does not anticipate the declaration or payment of cash
dividends in the foreseeable future. The Company intends to retain earnings, if
any, to finance the development and expansion of its business. Future dividend
policy will be subject to the discretion of the Board of Directors and will be
contingent upon future earnings, if any, the Company's financial condition,
capital requirements, general business conditions and other factors. Therefore,
there can be no assurance that dividends of any kind will ever be paid.
Effect of Inflation
Management believes that inflation has not had a material effect on its
operations for the periods presented.
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Item 7. Financial Statements.
The following financial statements have been prepared in accordance with
the requirements of Item 310(a) of Regulation S-B.
MULTI SOFT, INC.
FINANCIAL STATEMENTS
FISCAL YEAR ENDED January 31, 1996
INDEX
Page #
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Report of Independent Certified Public Accountant F1
Balance Sheets - January 31, 1996 and 1995 F2, F3
Statements of Operations for Each of the Two Years in the
Period Ended January 31, 1996 F4
Statements of Changes in Stockholders' Equity (Deficiency) for
Each of the Two Years in the Period Ended January 31, 1996 F5
Statements of Cash Flows for Each of the Two Years in the
Period Ended January 31, 1996 F6
Notes to Financial Statements F7 - F15
Schedules
All schedules of the Company have been omitted because they are
inapplicable or not required, or the information is included elsewhere in the
financial statements or notes thereto.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.
On March 15, 1994, the Company terminated Stewart W. Robinson as its
certifying accountant and retained Grant Thornton as its certifying accountants.
In connection with the audit of the financial statements of the Company for
the fiscal year ended January 31, 1993 and during the period commencing February
1, 1993 through March 15, 1994 there were no disagreements with Stewart W.
Robinson on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of Stewart W. Robinson, would have caused him
to make reference to the subject matter of the disagreement in his report.
Except for an explanatory paragraph concerning the Company's ability to
continue as a going concern, Stewart W. Robinson's report on the Company's
financial statements for the fiscal year ended January 31, 1993 did not contain
an adverse opinion or disclaimer of opinion, nor was it modified as to
uncertainty, audit scope or accounting principles.
The decision to change accountants was approved by the Board of Directors
of the Company.
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On April 25, 1995, the company terminated Grant Thornton as its certifying
accountants and retained Stewart W. Robinson as its accountant.
In connection with the audit of the financial statements of the Company for the
year ended January 31, 1994 and during the period commencing February 1, 1994
through April 25, 1995, there were no disagreements with Grant Thornton on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of Grant Thornton would have caused them to make reference to the
subject matter of the disagreement in their report.
Except for an explanatory paragraph concerning the Company's ability to continue
as a going concern, Grant Thornton's report on the Company's financial
statements for the fiscal year ended January 31, 1994 did not contain an adverse
opinion or disclaimer of opinion, nor was it modified as to uncertainty, audit
scope or accounting principles.
The decision to change accountants was approved by the Board of Directors of the
Company.
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PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
Name Position(s) Held
Charles J. Lombardo Chairman of the Board of Directors, Chief Executive
Officer, Chief Financial Officer and Treasurer
Miriam G. Jarney Executive Vice President, Secretary and Director
Larry Spatz Director
Directors are elected to serve until the next annual meeting of
stockholders and until their successors have been elected and have qualified.
Officers are appointed to serve until the meeting of the Board of Directors
following the next annual meeting of stockholders and until their successors
have been elected and have qualified.
A summary of the business experience for each officer and director of the
Company is as follows:
CHARLES J. LOMBARDO, age 53, has been the Company's Chairman of the Board
of Directors since January 1985 and has been the Company's Chief Executive
Officer, Chief Financial Officer and Treasurer since December 1988. He has been
MSI's Chief Executive Officer and Secretary-Treasurer since August 1982. From
1972 to 1993, Mr. Lombardo also served as the President of Petro-Art, Ltd., an
inactive publicly owned company and its wholly owned subsidiary JCT Enterprises,
Inc. Mr. Lombardo was President of Hopewell Graphic Industries from 1969 through
1971 and from 1967 to 1969 was associated with Keystone Computer Associates as a
staff member in the Physics Section of the Systems Analysis Department. From
1965 to 1967, Mr. Lombardo served as a scientist in the Plasma Physics
Department of Raytheon Space and Information Systems Division. Mr. Lombardo has
a Bachelor of Science degree in Physics from Worcester Polytechnic Institute
(1964), a Master of Science degree in Physics from Northeastern University
(1966) and has continued studies toward a Ph.D. in Theoretical Physics. Mr.
Lombardo is a Member of the American Physical Society, The American Mathematical
Society, The Society for Industrial and Applied Mathematics, The American
Association of Physics Teachers, and the Philosophy of Science Association.
MIRIAM G. JARNEY, age 55, has been a Director of the Company since January
1985, Executive Vice President of the Company since 1986 and Secretary of the
Company since December 1988. She has been Executive Vice President and a
Director of MSI since January 1982. From 1973 to February 1982, Ms. Jarney was a
marketing representative for National CSS, Inc., a computer services company
that has since been acquired by Dun & Cst, Inc. From 1972 through 1973, Ms.
Jarney was associated with Mathematica, Inc., which originated a Data Base
Management System called RAMIS, for which National CSS has exclusive marketing
rights. Ms. Jarney has also worked as a computer systems analyst for Western
Electric Company and Exxon Corporation. She graduated from the Hebrew University
in Jerusalem with a degree in Economics and Statistics and has a Master's degree
in Computer Science from Stevens Institute of Technology. In February 1982, Ms.
Jarney started her own company, Dedicated Systems, Inc., for the purpose of
packaging computer software for the microprocessor market, which company is
inactive.
LARRY SPATZ, age 52, as been a director of the Company since May 12, 1986,
and a director of Multi Solutions since July 14, 1989. He has been Chief
Executive Officer and Chairman of the Board of Heartthrob Enterprises, Inc., a
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restaurant and night club management and development company since September
1985. From 1982 to 1984, Mr. Spatz was President of Universal Petroleum, Inc.
From 1979 to 1982, he was Vice President and a director of Mercantile Trading
Company. Mr. Spatz is also a director of Centrex Communications Systems, Inc.
and Ultramed, Inc.
Compliance With Section 16(a) of The Securities Exchange Act of 1934
To the Company's knowledge, based solely on a review of such materials as
are required by the Securities and Exchange Commission, no officer, director or
beneficial holder of more than ten percent of the Company's issued and
outstanding shares of Common Stock failed to timely file with the Securities and
Exchange Commission any form or report required to be so filed pursuant to
Section 16(a) of the Securities Exchange Act of 1934 during the fiscal year
ended January 31, 1996.
Item 10. Executive Compensation.
The following table shows all the cash compensation paid or to be paid by
the Company or its parent, as well as certain other compensation paid or
accrued, during the fiscal years indicated, to the Chief Executive Officer and
Executive Vice President (collectively, "Principal Officers") for such period in
all capacities in which they served. No other Executive Officer received total
annual salary and bonus in excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long Term Compensation
- ------------------------------------------------------------------------------------------------------------------------------------
Awards Payouts
- ------------------------------------------------------------------------------------------------------------------------------------
Name & Fiscal Salary ($) Bonus ($) Other Annual Restricted Options SARs LTIP All Other
Principle Year Compensation Stock Award Payouts ($) Compensa-tion
Position ($) ($) ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles J. 1996 (A)$104,505 $0 (C)$36,750 $0 $0 $0 $0
Lombardo CEO 1995 $104,505 $0 $0 $0 $0 $0 $0
1994 $103,470 $0 $0 $0 $0 $0 $0
1993 $117,862 $0 $43,937 $0 $0 $0 $0
1992 $128,279 $0 $55,155 $0 $0 $0 $0
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Miriam Jarney 1996 (B)$$98,491 $0 $0 $0 $0 $0 $0
Exec. V.P. 1995 $98,491 $0 $0 $0 $0 $0 $0
1994 $98,559 $0 $0 $0 $0 $0 $0
1993 $107,247 $0 $4,991 $0 $0 $0 $0
1992 $113,233 $0 $20,611 $0 $0 $0 $0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Accrued and unpaid to Charles J. Lombardo $78,255
(B) Accrued and unpaid to Miriam Jarney $39,576
(C) Consulting fees
- 15 -
<PAGE>
The following table sets forth information with respect to the Principal
Officers concerning the grants of options and Stock Appreciation Rights ("SAR")
during the past fiscal year:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Name Options/SARs Percent of Total Exercise or Expiration
Granted Options/SARs Granted Base Price Date
to Employees in ($/Sh)
Fiscal Year
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charles J. Lombardo -0- - - -
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
Miriam Jarney -0- - - -
- -------------------------------------------------------------------------------------------
</TABLE>
The following table sets forth information with respect to the Principal
Officers concerning exercise of options during the last fiscal year and
unexercised options and SARs held as of the end of the fiscal year:
Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Values
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Number of Securities Value of
Underlying Unexercised
Shares Unexercised In-The-Money
Acquired on Options/SARs at Options/SARs at
Name Exercise (#) Value Realized ($) FY-End (#) FY-End ($)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charles J. Lombardo -0- -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Miriam Jarney -0- -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
*
Directors' Compensation
Directors are not compensated for acting in their capacity as Directors.
Directors are reimbursed for their accountable expenses incurred in attending
meetings and conducting their duties.
- 16 -
<PAGE>
Employment Agreements
On July 14, 1989, the Company entered into a five-year employment agreement
with its Chairman of the Board and Chief Executive Officer, Charles J. Lombardo,
which may be renewed for successive periods unless terminated by the Company on
twelve months notice or by Mr. Lombardo on six months notice. Mr. Lombardo is
the Chairman of the Board, Chief Executive Officer, Chief Financial Officer and
Treasurer of the Company. The agreement contains non-disclosure provisions and a
one year restrictive covenant preventing Mr. Lombardo from becoming employed by
a similar company in any state or country in which the Company does business, or
engaging in a competitive business for his own account. Mr. Lombardo is entitled
to annual salary increases of at least 10%, plus additional annual compensation
equal to 2% of the Company's after tax profits. The employment agreement has
been renewed for an additional year on an annual basis.
Mr. Lombardo also receives a salary from MSI of $25,000 per year. Through
the end of MSI's fiscal year ended January 31, 1994, MSI owed Mr. Lombardo
$98,946 in accrued salary. In July 1994, MSI authorized the issuance of 549,700
shares of its Common Stock to Mr. Lombardo in lieu of the foregoing accrued
salary.
On August 1, 1989, the Company entered into a five-year employment
agreement with Miriam Jarney, Executive Vice-President and a Director of both
the Company and MSI, which may be renewed for additional periods, unless
terminated by the Company on twelve months notice or Ms. Jarney on six months
notice. Ms. Jarney is entitled to annual salary increases of at least 10%, plus
additional annual compensation equal to 1.5% of the Company's after tax profits.
The agreement also contains non-disclosure provisions and a one year restrictive
covenant preventing Ms. Jarney from becoming employed by a similar company in
any state or country in which the Company does business, or engaging in any
competitive business for her own account. The employment agreement has been
renewed for an additional year on an annual basis.
During fiscal 1995 and fiscal 1996, Mr. Lombardo and Ms. Jarney accrued a
portion of their salaries. See financials. The balance due between both officers
as of January 31, 1996 is $746,621 including deferred increases of $636,605.
- 17 -
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
(a) Security Ownership of Certain Beneficial Owners -- The persons listed
in the chart below are known to the Company to be the beneficial owners of more
than 5% of the 11,483,979 Shares of the Company's outstanding Common Stock,
$.001 par value, as of April 30, 1996.
(b) Security Ownership of Management -- The number and percentage of Shares
of Common Stock of the Company owned of record and beneficially by each officer
and director of the Company and by all officers and directors of the Company as
a group are set forth on the chart below.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Name and Address of Beneficial Owner Amount and Nature of Percent of Class
Beneficial
Ownership
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
MSI(1) 6,526,722 56.8%
4262 US Route 1, Monmouth Junction, NJ 08852
- -----------------------------------------------------------------------------------------------------------
Charles J. Lombardo 6,688,387(1) 58.2%
Chairman of the Board, Chief Executive Officer, Chief
Financial Officer, & Treasurer
1511 Laurie Lane, Yardley, PA 19067
- -----------------------------------------------------------------------------------------------------------
Miriam G. Jarney 6,670,055(1) 58.1%
Executive Vice President, Secretary, Director
21 Doering Way, Cranford, NJ 07106
- -----------------------------------------------------------------------------------------------------------
Larry Spatz 6,526,722(1)(2) 56.8%
Director
Suite 332, 401 East Illinois St., Chicago, IL 60611
- -----------------------------------------------------------------------------------------------------------
All Executive Officers and Directors as a group (3 persons) 6,831,720(1) 59.5%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* Except as indicated below in the footnotes, each person has sole voting and
dispositive power over the Shares indicated. All numbers have been revised
to give retroactively effect to the one-for-three reverse stock split which
occured on January 31, 1996.
(1) Messrs. Lombardo and Spatz and Ms. Jarney are also officers and/or
directors of MSI. Therefore, together with the other directors of MSI, they
share the voting power of the Company shares owned by MSI, and the shares
owned by MSI have been deemed to be owned by the officers and directors of
the Company. The shares listed as owned by Charles J. Lombardo, Miriam
Jarney and Larry Spatz include the 6,526,722 shares owned by MSI.
(2) Excludes shares owned beneficially by a family trust of which Mr. Spatz'
wife is one of the beneficiaries. Mr. Spatz has confirmed to the Company
that neither he nor his wife has any voting or dispositive power with
regard to the shares owned by the trust.
- 18 -
<PAGE>
Item 12. Certain Relationships and Related Transactions.
The Company has a demand loan with a commercial bank. Borrowings are
collateralized by the Company's accounts receivable and bear interest at the
bank's prime rate plus 2% (10.75% at January 31, 1996). The Company was in
default on this loan. The Company obtained a forbearance from the bank in
November 1993 requiring an initial $20,000 payment and monthly payments of
$1,500 of principal and interest and the personal guarantee of the Company's
Chairman. As of March 1, 1996, the Company is in compliance with the terms of
the forbearance agreement and owes approximately $41,000. During 1996 and 1995,
the maximum amount of borrowings outstanding were $53,729 and $61,415,
respectively.
In June 1993, the Company conducted a private placement of the Company's
common stock for a total of 268,671 shares at $.03 per share, in connection with
the private placement by Multi Solutions, Inc. ("MSI") of $260,000 in
convertible 8% promissory notes (the "Notes"). MSI used $210,000 of the net
proceeds from the Notes to purchase an additional 700,000 shares of the Company.
The principal and interest due under the Notes, pursuant to the terms of the
Notes, have been converted into restricted shares of the Company's common stock
at the rate of $.30 per share (936,450 shares in the aggregate). The holders of
the Notes and the 268,671 shares have exercised their right to demand
registration of these shares and accordingly, on March 17, 1995 a registration
statement on Form SB-2 was filed with the Securities and Exchange Commission to
register these shares and certain other shares.
In January and March 1994, the Company issued an aggregate of 254,500
shares at $.03 per share to the individuals who converted their MSI notes into
Company shares and 254,500 shares to MSI for $.03 per share.
In consideration of MSI incurring the risk of potentially having to pay off
the Notes if the Noteholders had not elected to convert their Notes into the
Company's shares, and in consideration for MSI's purchase of a bulk of
restricted Company shares with the proceeds of the Note offering at or slightly
above the market value of the Company's freely tradeable shares (i.e., well
above the actual value of such shares given the size of the purchase, the
restriction on transfer and the extreme liquidity problems of the Company at
that time), the Company issued an additional 283,334 shares of its restricted
common stock to MSI.
Although there is no written agreement between MSI and the Company granting
MSI preemptive rights with regard to MSI's majority ownership of Company common
stock, in practice, MSI has and plans to continue to acquire sufficient shares
of the Company's common stock to assure its majority ownership in the Company.
In January 1996, Multi Soft issued 1,500,000 shares of its common stock to the
Company. The transaction was valued at $.22 per share ($330,000) for which Multi
Solutions was to issue a note.
In connection with this transaction, Multi Soft paid for the acquisition of
1,000,000 each of the Company's common shares (valued at $0.08 per share) to the
chairman and vice president by allowing the indebtedness of the Company to Multi
Soft to be reduced by $160,000 which thereby reduced the debt of Multi Soft to
the two officers by the same amount.
After completion of this series of transactions, the net debt due to Multi Soft
in connection with the common stock sale was reduced to $170,000.
Through the end of MSI's fiscal year ending January 31, 1994, MSI owed Mr.
Lombardo $98,946 in accrued salary. In July 1994, MSI authorized the issuance of
549,700 shares of its Common Stock to Mr. Lombardo in lieu of the foregoing
accrued salary. During fiscal 1996, the company issued 1,000,000 shares to each
Charles Lombardo and Miriam Jarney, such transaction being effected to pay
accrued salary
- 19 -
<PAGE>
of Multi Soft and reducing debts of the company to Multi Soft. The balance due
between both officers as of January 31, 1986 is $696,621 including deferred
increases of $586,605.
The Company subleases its office space from C&S Consulting, Inc., a company
owned by the Company's Chairman and his wife (see "Item 2. Properties").
- 20 -
<PAGE>
PART IV
Item 13. Exhibits and Reports on Form 8-K.
Exhibits
3.a Certificate of Incorporation and Certificate of Correction of the
Company (1)
3.b By-Laws of the Company (1)
10.a Employment Agreement with Charles J. Lombardo (6)**
10.b Employment Agreement with Miriam G. Jarney (6)**
10.c Facility sublease (8)
10.d IBM Agreement executed October 1993*(8)
10.e IBM Agreement executed August 1994*(8)
10.f IBM Amendment executed May 15, 1995
10.g Copy of MSI's Non-Qualified Stock Option Plan, Stock Grant Program
and Employee Incentive Stock Option Plan (3)
10.h Amendments to MSI's Non-Qualified Stock Option and Stock Grant
Program (4)
16. The required letters from the former accountant(2)(5)(7)
27. Financial Data Schedules (electronic form only)
* Certain information contained in these exhibits has been omitted and filed
separately with the Commission.
** Management contracts or compensatory plan or arrangement required to be
filed as an exhibit.
(1) Previously filed as an Exhibit to the Company's Registration Statement on
Form S-1, SEC File No. 33-3133, filed with the Commission on February 4,
1986, and incorporated herein by reference.
(2) Previously filed as an Exhibit to the Company's Form 8-K dated March 15,
1994, as filed with the Commission on or about March 21, 1994, and
incorporated herein by reference.
(3) Previously filed as an Exhibit to MSI's Form 10-K for the fiscal year ended
January 31, 1984 as filed with the Commission on or about May 15, 1984, and
incorporated herein by reference.
(4) Previously filed as part of the MSI's proxy materials for the Annual
Meeting of Stockholders held on July 9, 1985, as filed with the Commission
on or about May 24, 1985, and incorporated herein by reference.
(5) Previously filed as an Exhibit to the Company's Form 8-K dated July 9, 1993
as filed with the Commission on or about July 12, 1993, and incorporated
herein by reference.
(6) Previously filed as an Exhibit to the Company's Form 10-K for the fiscal
year ended January 31, 1990 as filed with the Commission on or about April
29, 1990, under SEC File No. 33-3133-NY, and incorporated herein by
reference.
(7) Previously filed as an Exhibit to the Company's Form 8-K dated April 25,
1995 as filed with the Commission on or about April 25, 1995, and
incorporated herein by reference.
- 21 -
<PAGE>
(8) Previously filed as an Exhibit to the Company's Registration Statement on
Form SB-2, SEC File No. 33-87460, filed with the Commission on March 15,
1995, and incorporated herein by reference.
Reports of Form 8-K
No reports on Form 8-K were filed during the last quarter of the fiscal
year ended January 31, 1995.
- 22 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MULTI SOFT, INC.
Dated: May 10, 1996 By: /s/ CHARLES J. LOMBARDO
-----------------------
Charles J. Lombardo,
Chief Executive Officer,
Chief Financial Officer
and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
<S> <C> <C>
/s/ CHARLES J. LOMBARDO May 10, 1996
- -------------------------------
Charles J. Lombardo Chairman of the Board of Directors, Chief
Executive Officer, Financial Officer, and
Treasurer
/s/ MIRIAM JARNEY May 10, 1996
- -------------------------------
Miriam Jarney Executive Vice President, Secretary, and
Director
/s/ LARRY SPATZ May 10, 1996
- -------------------------------
Larry Spatz Director
</TABLE>
- 23 -
<PAGE>
Stewart W. Robinson
Certified Public Accountant
450 Seventh Avenue, Suite 1009
New York, NY 10123
Tel: (212) 629-7323
Fax: (212) 629-7052
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
To the Board of Directors
Multi Soft, Inc.
I have audited the accompanying balance sheets of Multi Soft, Inc. ( a New
Jersey corporation and 56.8% owned subsidiary of Multi Solutions, Inc.) as of
January 31, 1996 and 1995 and the related statements of operations, changes in
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Multi Soft, Inc. as of January 31,
1996 and 1995 and the results of its operations and its cash flows for the years
then ended, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company has suffered recurring losses from operations
and has a working capital deficiency, raising substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note A. The financial statements do not include
any adjustments relating to the recoverability and classification of asset
carrying amounts or the amount and classification of liabilities that might
result should the Company be unable to continue as a going concern.
STEWART W. ROBINSON
New York, New York
April 25, 1996
F 1
<PAGE>
MULTI SOFT, INC.
a 56.8% owned subsidiary of Multi Solutions, Inc.
BALANCE SHEETS
January 31 ,1996 and 1995
1996 1995
----------- -----------
ASSETS
CURRENT ASSETS
Cash $ 88,015 $ --
Accounts Receivable (net of allowance
of $37,240 and $32,880 respectively) 100,428 95,791
Prepaid expenses and other current assets 13,532 17,310
----------- -----------
201,975 113,101
FURNITURE AND EQUIPMENT
Research and Development Equipment 259,907 259,907
Office furniture and other equipment 10,053 10,052
----------- -----------
269,960 269,959
Less: Accumulated Depreciation (266,066) (263,693)
----------- -----------
3,894 6,266
OTHER ASSETS
Capitalized software development costs 1,980,130 1,613,516
Less accumulated amortization (1,256,153) (886,605)
----------- -----------
723,977 726,911
Due from Solutions 408,762 256,912
----------- -----------
$ 1,338,608 $ 1,103,190
=========== ===========
See notes to financial statements
F 2
<PAGE>
MULTI SOFT, INC.
a 56.8% owned subsidiary of Multi Solutions, Inc.
BALANCE SHEETS
January 31, 1996 and 1995
LIABILITIES AND STOCKHOLDERS' 1996 1995
---------- ----------
DEFICIENCY
CURRENT LIABILITIES
Loan payable to bank $41,099 $53,729
Accrued payroll 30,285 31,190
Payroll and other taxes payable 74,993 78,607
Accounts Payable 173,652 303,238
Accrued officer compensation 110,016 152,246
Deferred Revenues 309,792 289,391
Deferred compensation due officer /shareholders 586,605 346,713
Loans from Officers -- 22,000
---------- ----------
1,326,442 1,277,114
Deferred Revenues - net of current portion 8,022 200,885
STOCKHOLDERS' DEFICIENCY
Common stock, authorized 30,000,000 shares
$.001 par value, issued and outstanding
11,483,979 (1996) and 9,983,979 (1995) 11,484 9,984
Additional paid-in capital, net of deferred
compensation $234 (1996) and $595 (1995) 5,862,316 5,533,816
Accumulated deficit (5,869,656) (5,918,609)
---------- ----------
4,144 (374,809)
COMMITMENTS AND CONTINGENCIES - Note F
SOFTWARE LICENSING AGREEMENT - Note I
SUBSEQUENT EVENTS - Note J
$1,338,608 $1,103,190
========== ==========
See notes to financial statements
F 3
<PAGE>
MULTI SOFT, INC.
STATEMENTS OF OPERATIONS
Years ended January 31, 1996 and 1995
1996 1995
------------ ------------
REVENUES
License fees $ 812,069 $ 340,832
Maintenance fees 545,977 542,918
Consulting and Other fees 41,134 55,445
------------ ------------
Total revenues 1,399,180 939,195
EXPENSES
Software development and technical support 369,548 281,623
Selling and administrative 1,029,928 1,235,614
------------ ------------
Total expenses 1,399,476 1,517,237
------------ ------------
(Loss) from operations (296) (578,042)
OTHER INCOME (EXPENSE)
Other Revenues 54,782 45,630
Interest Expense (5,533) (5,720)
Special discount granted to investors (28,215)
------------ ------------
Total other income 49,249 11,695
Net Income (Loss) $ 48,953 $ (566,347)
============ ============
Weighted average shares outstanding 10,109,000 9,189,000
============ ============
Income (Loss) per share a (0.06)
============ ============
(a) less then $.01 per share
See notes to financial statements
F 4
<PAGE>
MULTI SOFT
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFECIENCY
Years ended January 31, 1996 and 1995
<TABLE>
<CAPTION>
Total Total
Common Stock paid in Deferred Accumulated stockholders
Shares Amount capital Compensation deficit deficiency
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at February 1, 1994
as originaly reported 8,176,534 $ 8,177 $ 5,105,609 $ (1,429) $(5,424,193) $ (311,836)
Prior period adjustment 71,932 71,932
----------- ----------- ----------- ----------- ----------- -----------
Balance as of February 1 ,1994 as adjusted 8,176,534 8,177 5,105,609 (1,429) (5,352,261) (239,904)
Issuance of resticted common stock 1,735,668 1,735 428,157 429,892
Issuance of stock grants 71,777 72 645 (717) --
Amortization of deferred compensation 1,551 1,551
Net loss (566,347) (566,347)
----------- ----------- ----------- ----------- ----------- -----------
Balance at January 31, 1995 9,983,979 9,984 5,534,411 (595) (5,918,608) (374,808)
Issuance of resticted common stock 1,500,000 1,500 328,139 329,639
Amortization of deferred compensation 361 361
Net Income 48,953 48,953
----------- ----------- ----------- ----------- ----------- -----------
Balance at January 31, 1996 11,483,979 $ 11,484 $ 5,862,550 $ (234) $(5,869,655) $ 4,145
=========== =========== =========== =========== =========== ===========
</TABLE>
See notes to financial statements
F 5
<PAGE>
MULTI -SOFT, INC.
STATEMENTS OF CASH FLOWS
Years ended January 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Net Income (loss) $ 48,953 $(566,347)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Prior period adjustment -- 71,932
Depreciation and amortization 371,921 308,114
Common stock issued as compensation to employees -- 18,000
Discount to investors -- 28,215
Common stock issued to Solutions 160,000 59,500
Changes in assets and liabilities
Due to / from Multi Solutions (151,851) 11,901
Accounts receivable (4,630) 157,431
Prepaid expenses and other current assets 3,778 (4,482)
Accrued payroll (906) 213
Payroll and other taxes payable (3,614) (39,427)
Accounts payable and accrued expenses (129,586) (37,886)
Accrued officer compensation (42,234) 135,330
Deferred officer compensation 239,892 170,717
Deferred revenues 20,401 (3,444)
Long term deferred revenues (192,864) (42,865)
--------- ---------
Net cash provided by operating activities 319,260 266,902
Cash flows from investing activities
Capital expenditures -- (1,700)
Capitalized software development costs (366,615) (324,310)
--------- ---------
Net cash used in investing activities (366,615) (326,010)
Cash flows from financing activities
Net repayments under loan and line of credit ageements (12,630) (7,685)
Loan from officer (22,000) 22,000
Restricted Common stock issued to Solutions 170,000 (280,935)
Issuance of capital stock -- 325,728
--------- ---------
Net cash provided by financing activities 135,370 59,108
--------- ---------
NET INCREASE IN CASH 88,015 0
Cash at beginning of year -- 0
--------- ---------
Cash at end of year $ 88,015 $ --
========= =========
</TABLE>
See notes to financial statements
F 6
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1996 and 1995
NOTE A - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Multi Soft, Inc. (the Company) was incorporated on January 29, 1985 under
the laws of the State of New Jersey. At January 31, 1996, the Company was
56.8% owned by Multi Solutions, Inc. The Company is principally involved in
the design, production and delivery of computer applications development
software for sale to large corporate customers throughout the United States
and overseas.
The Company's financial statements have been presented on a going concern
basis which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The liquidity of the Company
has been adversely affected in recent years by significant losses from
operations. The Company earned net income of $48,953 in 1996 but incurred a
loss of $566,347 in 1995. In addition, at January 31, 1996, the Company's
current liabilities exceeded current assets by $1,124,467 and total assets
exceeded total liabilities by $4,144.
The Company intends to aggressively market its new products, control
operating costs and broaden its product base through enhancements of
products for use by non-technical computer personnel.
The Company believes that these measures will provide sufficient liquidity
for it to continue as a going concern in its present form. Accordingly, the
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amount
and classification of liabilities or any other adjustments that might be
necessary should the Company be unable to continue as a going concern in
its present form.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Furniture and Equipment
Furniture and equipment are stated at cost. Depreciation is provided on the
straight-line method over the estimated useful lives of the assets which
range from three to seven years.
Depreciation expense was $2,372 and $9,964 for the years ended January 31,
1996 and 1995.
2. Capitalization of Computer Software
Capitalized software development costs relating to products for which
technological feasibility has been established qualify for capitalization
under Statement of Financial Accounting Standards (SFAS) No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed."
Research and development costs associated with the creation of computer
software prior to reaching technological feasibility are expensed as
incurred, except for related computer equipment expenditures such as
personal computers and other hardware components, which are capitalized and
depreciated over their useful lives if the equipment is deemed to have
alternative future use.
F 7
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1996 and 1995
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Capitalized software development costs are amortized to operations when the
product is available for general release to customers. Amortization is
calculated using (a) the ratio of current gross revenues for the product to
the total of current and anticipated gross revenues for the product or (b)
the straight-line method over the remaining useful life of the product,
whichever is greater.
The Company is amortizing, over a sixty month period, the capitalized
software costs for its Windows-based products. The period is based on sales
forecasts for the seven year agreement with IBM which began in October
1993. The Company's Windows products are compatible with Windows 95 and
further modifications are continually made specifically for 32 bit
environments (Windows 95 or Windows NT). Unamortized costs relating to
Windows products as of January 31, 1996 and 1995 are $723,978 and $657,053,
respectively.
The unamortized capitalized software costs relating to the two DOS products
are being amortized over the two year remaining life as of January 31,
1996. The unamortized costs relating to DOS products at January 31, 1996
and 1995 are $4,878 and $69,791, respectively.
Amortization expense for 1996 and 1995, for all products, was $369,548 and
$298,150 respectively.
3. Revenue Recognition
In accordance with Statement of Position 91-1, "Software Revenue
Recognition" (SOP 91-1), the Company's policy is to recognize license and
maintenance fees which earned and consulting fee income when services are
rendered. License fees are recognized upon shipment of the software while
maintenance fees are recorded over the period covered by the related
contract. Consulting is performed on a time and material basis.
4. Deferred Compensation
Deferred compensation arising from the issuance of stock grants is
amortized over the term of the related grant or employment agreements (one
to five years). The amount of compensation attributable to stock grants is
determined by the market price of the Company's stock on the date of grant.
5. Income (Loss) Per Share
Income (loss) per share is computed using the weighted average number of
common shares outstanding during the period. Common stock equivalents are
antidilutive and, therefore, are not considered in the computation of loss
per share.
6. Income Taxes
The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) NO. 109, "Accounting for Income
Taxes," which significantly changed the accounting for deferred income
taxes. The standard provides for a liability approach under which deferred
income taxes are provided for based upon enacted tax laws and rates
applicable to the periods in which the taxes become payable. The Company
adopted the new standard for the year ended January 31, 1994.
F 8
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1996 and 1995
7. Estimates
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 reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
NOTE C - LOAN PAYABLE
The Company has a demand loan payable to a commercial bank ($41,099 and
$53,729 at January 31, 1996 and 1995 respectively). Borrowings are
collateralized by the Company's accounts receivable and bear interest at
the bank's prime rate plus 2% (10.75% and 9% at January 31, 1996 and 1995
respectively). The loan is currently in default. The Company obtained a
forbearance from the bank in November 1993 requiring a $20,000 payment upon
execution, monthly payments of $1,500 principal and interest and the
personal guarantee of the Company's chairman. As of January 31, 1996, the
Company is in compliance with the terms of the forbearance agreement.
During 1996 and 1995, the maximum amount of borrowings outstanding was
$53,729 and $61,415 respectively, the average borrowings were $47,819 and
$58,000, respectively, and the weighted average interest rates were 11.0%
and 9.5%, respectively.
NOTE D - INCOME TAXES
As a result of losses incurred in recent years, the Company has net
operating loss carry forwards available to offset future federal taxable
income of approximately $5.6 million. These losses expire at various dates
through 2011.
The Company adopted, effective February 1, 1993, SFAS No. 109, "Accounting
for Income Taxes." Under the liability method specified by SFAS No 109,
deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax basis of assets and liabilities as
measured by the enacted tax rates which will be in effect when these
differences reverse. Deferred tax expense is the result of changes in
deferred tax assets and liabilities. The principal types of differences
between assets and liabilities for financial statement and tax return
purposes are capitalized software development costs, deferred compensation,
deferred income and allowance for uncollectible accounts.
The deferred method, used in years prior to 1993, required the Company to
provide for deferred tax expense based on certain items of income and
expense which were reported in different years in the financial statements
and the tax returns as measured by the tax rate in effect for the year the
difference occurred.
F 9
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1996 and 1995
Deferred tax (liabilities) assets consist of the following at January 31:
1996 1995
---- ----
Capitalized software $ (289,000) $ (313,000)
Allowance for bad debts 15,000 14,000
Deferred compensation 234,000 149,000
Deferred revenue - royalties 127,000 125,000
Loss carry forwards 2,237,000 2,087,000
---------- ----------
Gross deferred tax assets 2,324,000 2,062,000
Deferred tax assets valuation allowance 2,324,000 2,062,000
---------- ----------
$ - 0 - $ - 0 -
========== ==========
NOTE E - STOCKHOLDERS' EQUITY
1. Stock Transactions
During fiscal year 1994, the Company recognized an expense for the sale of
418,667 shares of common stock at $0.03 per share, a price which was below
the fair market value. This sale was an additional inducement to the
investors in Multi Solutions, Inc.'s (MSI) private placement offering of
$260,000 in convertible promissory notes. A portion of the proceeds of such
placement were used by MSI to increase its investment in the Company.
In March 1994, the Company issued an additional 104,500 shares to MSI's
investors at $0.03 per share and an additional 254,500 shares to MSI for
$0.03 per share. This resulted in a charge of $28,215 on the statement of
operations.
The expiration date of the Company's 714,012 outstanding warrants has been
extended to December 1, 1996.
F 10
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1996 and 1995
NOTE E - STOCKHOLDERS' EQUITY - Continued
In September, 1994, the Company issued 936,450 shares at $0.30 per share to
convert MSI's investors' promissory notes of $260,000 including accrued
interest. The Company also issued 283,333 shares of its restricted common
stock to MSI at $0.21 per share in connection with MSI pre-emptive rights.
In January 1996, the Company issued 1,500,000 shares of common stock to
Multi Solutions, Inc. The transaction was valued at $.22 per share
($330,000) for which Multi Solutions was to issue a note.
In connection with this transaction, the company paid for the acquisition
of 1,000,000 shares each of Multi Solutions common stock (valued at $0.08
per share) by the chairman and vice president by allowing the indebtedness
of Multi Solutions to the company to be reduced by $160,000 which thereby
reduced the debt of the company to the two officers by the same amount.
After completion of this series of transactions, the net debt due from
Multi Solutions in connection with the common stock sale was reduced to
$170,000.
2. Prior Period Adjustment
During the year ended January 31, 1996 the Company discovered an error in
accounts payable originating in the fiscal year ended January 31, 1994.
This error has no effect on current year operations.
3. Option and Stock Grant Program
During fiscal 1992, the Company issued to an officer/director employee
stock purchase warrants to purchase 66,667 shares and 33,334 shares,
respectively, of its common stock at $0.27 per share. The exercise price
was in excess of the fair market value of the Company's common stock at the
date of issuance. The warrants are exercisable through June 1, 1996.
In June 1993, the Company adopted an Employee, Consultant and Advisor Stock
and Option Compensation Plan (the Plan). Pursuant to the terms of the Plan,
an aggregate of up to 1,000,000 shares of common stock, .001 par value per
share (the common stock), and/or options to purchase common stock may be
granted to persons who are, at the time of issuance or grant, employees or
officers of, or consultants or advisors to, the Company. At January 31,
1996 and 1995, an aggregate of 283,638 shares have been issued pursuant to
the Plan.
F 11
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1996 and 1995
The Company has issued stock grants as follows:
Stock grants as of January 31, 1992 427,500
Stock grants issued to employees 13,334
-------
Stock grants of January 31, 1993 440,834
Stock grants issued to employees 73,334
-------
Stock grants as of January 31, 1994 514,168
Stock grants issued to employees 71,166
-------
Stock grants as of January 31, 1995 585,334
Stock grants issued to employees 0
-------
Stock grants as of January 31, 1996 585,334
=======
As of January 31, 1996, employees were not fully vested in 71,666 of the
aforementioned stock grants. Amortization of deferred compensation for the
stock grants to employees was $361 and $1,551 for the years ended January
31, 1996 and 1995, respectively.
4. Shares Issued to Officers as Compensation
In March 1994, the Company issued 66,666 to Miriam Jarney in lieu of
$18,000 salary. (Also see note E 1.)
F 12
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1996 and 1995
NOTE F - COMMITMENTS AND CONTINGENCIES
1. Leases
The Company is a subtenant in office space leased by an entity
substantially owned by the Company's chairman and his wife. This lease is
on a quarter-by-quarter term with a base rent of $4750 per month.. Rental
expense under the lease aggregated approximately $52,000 and $46,000 for
the years ended January 31, 1996 and 1995, respectively.
In June 1995 the Company entered into a three year noncancelable operating
lease for a color laser copier with monthly payments of $606 plus tax and
per copy charges through May 1998.
Future minimum lease payments under the noncancelable equipment operating
lease is as follows:
Year Ending
January 31,
-----------
1997 $7,000
1998 7,000
1999 3,000
-----
$17,000
=======
In August 1991, the Company renewed a lease for office space in Edison, New
Jersey, commencing November 1, 1991 for a term of five years at an annual
base rent of $72,600 plus escalations. The Company no longer occupies the
space and settled litigation related to this space in May 1994 for $30,000
to be paid over 18 months. As of January 31, 1996 the company is in full
compliance with the payments of this settlement.
There was no rent expense for the Edison office charged to operations for
the years ended January 31, 1996 and 1995.
2. Employment Agreements
The Company has employment agreements with two officers which provide
minimum annual compensation of $182,000 through July 1996.
In addition, the employment agreements entitle the two employees to 2% and
1.5% respectively, of each fiscal year's after tax profits of the Company.
3. Payroll Taxes
As of January 31, 1994, the Company had not remitted payroll taxes,
interest, and penalties to federal and state taxing authorities in the
amount of approximately $58,000. As of January 31, 1995, the federal tax
was paid in full and the tax liens were released. Certain state taxes,
interest, and penalties in aggregating approximately $26,000 remain unpaid
at January 31, 1996.
F 13
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1996 and 1995
4. Litigation
The Company and its parent, Multi Solutions, Inc. have been from time to
time parties to legal actions arising in the course of their business. The
disposition of these actions have not had a material effect on the
financial position or results of operations of the Company taken as a
whole.
NOTE G - MAJOR CUSTOMER
In fiscal 1996, one customer accounted for 42% of total revenue. In fiscal
1995, one customer accounted for 33% of total revenue.
NOTE H - SUPPLEMENTAL INFORMATION
Supplemental disclosures of cash flow information for the years ended
January 31, 1996 and 1995 are as follows:
1996 1995
---- ----
Cash paid during the year for Interest $5,533 $5,720
During the year ended January 31, 1995, the Company exchanged 219,797
shares of the Company's common stock at fair market value for legal and
other services rendered to the Company valued at $53,893.
NOTE I - SOFTWARE LICENSING AGREEMENTS
1. Software Licensing Agreements
On October 8, 1993, the Company entered into a Software Licensing Agreement
and other ancillary agreements with IBM Corporation (IBM) providing for
certain exclusive marketing rights for the Company's principal product:
WCL(TM) with IBM IMS Extensions. This is a software product specifically
modified for use with IBM's IMS mainframe systems.
The agreements, effective for a term of seven years with automatic renewals
for two additional one year periods, provide for the payment of percentage
royalties and unit royalties as specified in the agreement. IBM may
terminate the agreement after the first year upon 90 days notice. The
agreement further provides for minimum non-refundable royalty advances to
the Company aggregating $300,000 through April 1996.
As of July 1995 the company has been receiving monthly maintenance from IBM
regarding the above license agreement.
The $300,000 royalty advance has been recorded as deferred revenue in
fiscal year 1994 and is being recognized as income over the longer of:
o The 21 month period of maintenance included in the agreement
without additional fees; or
F 14
<PAGE>
Multi Soft, Inc.
NOTES TO FINANCIAL STATEMENTS
January 31, 1996 and 1995
o The period in which the royalty is earned through IBM sales
throughout the seven year term of the agreement.
Effective June 1, 1995 Multi Soft and IBM amended their Software License
Agreement number: STL93199 and its related worldwide marketing agreements,
such that, $150,000 dollars of the $300,000 advance amount deferred as of
January 31, 1994 shall, as of June 1, 1995 no longer be subject to offset
against royalties accrued.
The net effect was to remove $150,000 from deferred revenues and increase
license fee revenues by $150,000.
For the years ended January 31, 1996 and 1995, the Company recognized as
income $192,866 and $56,249 of $300,000 advance respectively.
The contract with IBM's Network Software Division provides that Multi Soft
will receive prepaid royalties of $600,000 in quarterly installments over a
two year period. As a result, IBM receives non exclusive and non
transferable license to market certain Multi Soft products. The product is
marketed under IBM's logo as "Personal Communications Toolkit for Visual
Basic".
2. Marketing Agreements with IBM
The Company entered into marketing agreements with IBM providing for the
marketing rights of the WCL software with IBM IMS Extensions in the United
States, Puerto Rico, the Asia Pacific Region, Europe, the Middle East and
Africa.
The agreements are for three year terms and provide for the payment of
percentage royalties as specified in the agreement.
3. Joint Development and Marketing Agreement with Bellcore
In 1995 Multi Soft, Inc. entered a joint development and marketing
agreement with Bellcore to develop and market a Sun Solaris Unix version of
its WCL product. The agreement provides that Bellcore pay Multi Soft for
developing an extension of its WCL product to the Sun Solaris Unix
environment. Additionally, Bellcore shall pay a specified monthly
maintenance fee for a period of one year. Also, it provides for a joint
marketing agreement in which both companies will share marketing royalties.
NOTE J - SUBSEQUENT EVENTS
On May 7, 1996 the board extended the warrant exercise period to December
1, 1996.
F 15
AMENDMENT 002
To
Software License Agreement
Agreement Number: STL93199
between
International Business Machines Corporation
Santa Teresa Laboratory
555 Bailey Avenue
San Jose, CA 95141
and
Multi Soft, Inc.
4262 U.S. Route # 1
Monmouth Junction, NJ 08852-1905
IBM CONFIDENTIAL
<PAGE>
May 15, 1995 Amendment 002
Software License Agreement # STL93199
This is Amendment Number 002 (hereinafter referred to as "AMND2") to
Software License Agreement # STL93199 (hereinafter referred to as "SLA")
between International Business Machines Corporation (hereinafter called
"IBM"), with an address for purposes of this AMND2 at Santa Teresa
Laboratory, 555 Bailey Avenue, San Jose, CA 95141, and Multi Soft, Inc.,
(hereinafter called "Multi Soft"), with an address at 4262 U.S. Route # 1,
Monmouth Junction, NJ 08852- 1 905.
I Section 4.3.1 "Maintenance Option" of the SLA is hereby deleted in its
entirety and replaced with the following:
4.3.1 Maintenance Option
If, at anytime after July 1, 1995, the average total combined monthly
royalties accrued to Multi Soft under this SLA and marketing agreements,
between the parties or between Multi Soft and IBM Subsidiaries, including
but not limited to, (i) the International Software Marketing Agreement
numbered ISMA-MPC-006, dated January 12, 1994, (ii) the Product Remarketing
Supplement to International Software Marketing Agreement ISMA-MPC-006,
dated May 3, 1994; (iii) the License Agreement for Use and Marketing of
Program Materials numbered 9661, dated June 20, 1994, and (iv), the Product
Remarketing Territory Agreement numbered 649-REM9407, dated October 28,
1994 (total royalty amounts paid and/or accrued to Multi Soft pursuant to
agreement between the parties, including any advances on royalties, divided
by the number of full calendar months that have passed since the end of the
sixth (6th) month following execution of this SLA), shall be less than ten
thousand U.S. dollars ($10,000.00) per month, then for any month during
which the accrued royalties due Multi Soft are less than ten thousand U.S.
dollars ($10,000.00), IBM will either (a) for as long as IBM continues to
require Technical Support from Multi Soft, pay Multi Soft, in addition to
the royalty amount otherwise due for each such month, an amount equal to
the difference between ten thousand U.S. dollars ($10,000.00) and the
amount of royalties accrued by Multi soft for such month, or (b) notify
Multi soft in writing that IBM no longer requires that Multi soft provide
Technical Support. If IBM so notifies Multi Soft that it no longer requires
Multi Soft to provide Technical Support, Multi Soft shall be relieved of
its obligations under this Section 4 3, "Maintenance and Support."
Any amounts paid to Multi Soft pursuant to Sub-Section 4.3.1 (a) above,
shall be considered a non-refundable, advance against royalties and subject
to reconciliation terms as specified in Section 6.1, "Advance on
Royalties".
Page 2 of 15
IBM CONFIDENTIAL
<PAGE>
May 15, 1995 Amendment Number: 002
Software License Agreement # STL93199
II Section 6.0 "Royalties and Payments" of the SLA is hereby deleted in its
entirety and replaced with the following:
6.0 Royalties and Payments
6.1 Advance on Royalties
1. To the extent that royalties accrued to Multi Soft during a Royalty
Accounting Period are less than the amounts specified in the schedule
below, IBM shall pay Multi Soft up to three hundred thousand ($300,000.00)
dollars as a non-refundable advance against future royalties due Multi Soft
pursuant to the royalty terms of this Agreement. Such advances will be
provided according to the following schedule or, with the exception of the
first payment, within thirty (30) days of receipt of a Multi Soft invoice
in accordance with subsection 3. herein:
-- $50,000.00 upon the execution of this Agreement
-- $50,000.00 thirty (30) days after the Agreement's execution date;
-- $50,000.00 sixty (60) days after the Agreement's execution date;
-- $50,000.00 ninety (90) days after the Agreement's execution date;
-- $10,000.00 at the end of each of the next seven (7) months; and
-- $30,000.00 within thirty (30) days after the seventh (7) month.
2. All royalty advance amounts will be reconciled against future royalties
due Multi Soft (i.e., royalties that become due will be credited as paid
out of royalty advance amounts) at a 100% rate until April 1, 1995. One
hundred fifty thousand U.S. dollars ($150,000.00) of the advance amounts
specified in Section 6. 1( 1 ) shall, as of June I, 1995, no longer be
subject to offset against royalties accrued. The remaining amount, up to
one hundred fifty thousand U.S. dollars ($150,000.00) shall be reconciled
against all future royalties or payments due Multi Soft from IBM (e.g.,
royalties or payments that become due pursuant to this SLA and any
marketing agreements between the parties, including but not limited to, (i)
the International Software Marketing Agreement numbered ISMA-MPC-006, dated
January 12, 1994; (ii) the Product Remarketing Supplement to International
Software Marketing Agreement ISMA-MPC-006, dated May 3, 1994; (iii) the
License Agreement for Use and Marketing of Program Materials numbered 966
1, dated June 20, 1 994, and (iv), the Product Remarketing Territory
Agreement numbered 649-REM9407, dated October 28, 1994,) and will be
credited as paid out of royalty advance amounts at a fifty percent (50%)
rate. In other words, fifty percent (50%) of the royalties or payment
amounts accrued during any Royalty Accounting Period shall be credited
toward any outstanding advance amounts until the one hundred and fifty
thousand U.S. dollars ($150,000.00) is fully credited, while fifty
Page 3 of 15
IBM CONFIDENTIAL
<PAGE>
May 15,1995 Amendment Number: 002
Software License Agreement # STL93199
percent (50%) of the royalties or payment amounts accrued during any
Royalty Accounting Period shall be paid to Multi Soft.
3. Multi Soft will submit invoices, referencing this Agreement by Agreement
Number and Date, to the following address:
IBM Corporation
Software Royalty Accounting
Dept. B2-152
50 Kettletown Road
Southbury, CT 064X8
6.2 Royalties
1. Other than as specified in Sections 6.2 (2) and 6.2 (3) below, in
consideration of the rights and licenses granted to IBM pursuant to Section
3.0, "Grants of Rights and License", in the case of licenses sold to
customers based on offers IBM extends to potential customers generally, IBM
shall pay Multi Soft twenty-two percent (22%) of the IBM revenue received
from customers for each copy of the Licensed Work which is licensed as a
Product to an end user customer and for which IBM receives a Product
license fee (following any IBM authorized test or trial period).
2. In further consideration of the rights and licenses granted to IBM
pursuant to Section 3.0, "Grants of Rights and License", in situations
where IBM makes a Negotiated Sale of (i) a Product and/or (ii) the WCL
Development Toolkit With IBM IMS Extensions which IBM markets pursuant to
marketing agreements in place with Multi Soft, IBM shall, notwithstanding
Section 6.2 (1) above, pay Multi Soft twenty-five percent (25%) of the
revenue IBM receives from customers for the copies of the Licensed Work
which is licensed as a Product and for which IBM receives a Product license
fee (following any IBM authorized test or trial period). For purposes of
this Section 6.2 (2), "Negotiated Sale(s)" means agreement by a customer to
purchase licenses to a Product and/or WCL Development Toolkit With IBM IMS
Extensions on teens more favorable than those IBM extends to potential
customers generally. Any fees due Multi Soft for sales of the WCL
Development Toolkit With IBM IMS Extensions as part of such Negotiated Sale
shall be as specified in the marketing agreement between IBM or an IBM
Subsidiary and Multi Soft, pursuant to which IBM is authorized to market
the WCL Development Toolkit With IBM IMS Extensions.
3. In further consideration of the rights and licenses granted to IBM
pursuant to Section 3.0, "Grants of Rights and License", in situations
where IBM negotiates a Site License Sale of (i) a Product and/or (ii) the
WCL Development Toolkit With IBM IMS Extensions
Page 4 of 15
IBM CONFIDENTIAL
<PAGE>
May 15, 1995 Amendment Number: 002
Software License Agreement # STL93199
which IBM markets pursuant to marketing agreements in place with Multi
Soft, IBM shall, notwithstanding Sections 6.2 (1) and 6.2 (2) above, pay to
Multi Soft twenty five thousand U.S. dollars ($25,000.00) as a complete and
total royalty obligation for each such sale. For purposes of this Section
6.2 (3) "Site License Sale" means licensing and authorizing a customer to
make an unlimited number of copies of WCL Development Toolkit With IBM IMS
Extensions for use within a single physical site (or complex with a single
location address), along with an unlimited number of Product copies for use
both at the customer's single physical site and all its remote sites.
Notwithstanding anything to the contrary in any marketing agreements
between IBM and Multi Sot] pursuant to which IBM is authorized to market
the WCL Development Toolkit With IBM IMS Extensions, the twenty five
thousand U.S. dollar ($25,000.00) payment specified herein shall be the
only payment due Multi Soft from IBM or any IBM Subsidiary for each such
Site License Sale.
4. Notwithstanding Sections 6.2 (1) and 6.2 (2) above, IBM agrees to pay or
accrue to Multi Soft a minimum royalty for each copy of the Licensed Work
for which IBM receives revenue as specified in Sections 6.2 (1) and 6.2 (2)
(but not Section 6.2 (3)) above, of an amount equal to twenty two percent
(22%) of an amount equal to fifty percent (50%) of a Product's United
States List Price (i.e. eleven percent (11%) of such Product's U.S. List
Price). This minimum royalty shall also apply in any cases where IBM
packages a Product with other IBM and/or non-lBM products and offers them
at a single price to customers, where the portion of the single price
attributable to the Product is not readily ascertainable.
5. Notwithstanding the foregoing, Multi Soft agrees to waive all royalty
fees for copies of the Licensed Work which IBM or its Subsidiaries (a) use
or distribute solely for (i) education and training of employees of IBM or
its Subsidiaries in the use of the Licensed Work, (ii) education of IBM's
or its Subsidiary's customers, (iii) or demonstration, evaluation
(including copies provided to potential customers for such purposes),
archival or backup purposes, including the distribution of Products on a CD
ROM or other media on which the Product is capable of being secured (e.g.,
"locked" or "encrypted") to limit a recipient's use of a Product, where IBM
may allow some limited preview, trial or demonstration use of the Product,
but will deny the recipient the ability to make full, intended use of the
Product, unless and until the recipient obtains a full license from IBM and
receives an unlocking or decryption facility, (iv) licenses for copies of
the Product to be installed and used by the primary work location user at
home or on a portable computer, when a valid license to an identical copy
has been right procured for installation and use on a machine (other than a
network server) used at a primary work location, and provided that the user
is authorized to use the Product on only one machine at a time, or (b)
sublicense to educational institutions pursuant to HESC/ESAP or similar
programs.
6. No royalty or other charge shall be payable by IBM for pictorial,
graphic or audio/visual works, including but not limited to, icons,
screens, music and characters, created as a result of execution of the
Licensed Work or Derivative Works thereof, whether such Works are
Page 5 of 15
IBM CONFIDENTIAL
<PAGE>
May 15, 1995 Amendment Number: 002
Software License Agreement # STL93199
created by use of the Licensed Work or with other programming or through
other means. No royalty or other charge shall be payable by IBM for use in
IBM products of the same or similar protocols and/or interfaces related to
or contained in the Licensed Work.
7. In cases of IBM or IBM Subsidiary marketing of licenses to a Product
outside of the United States and Puerto Rico markets, revenue, for purposes
of this SLA shall be deemed to equal the number of copies of the Product
licensed multiplied by fifty percent (50 %) of the then current United
States List Price of the Product.
6.3 SCCT Royalties
In the event that IBM obtains the possession of the Trust Property, as
defined in the SCCT:
1. The WCL Development Toolkit With IBM IMS Extensions shall be deemed to
be a Licensed Work under this SLA, and all other provisions of this SLA
shall apply to such Licensed Work; and
2. With regard to the WCL Runtime With IBM IMS Extensions as a Licensed
Work, IBM shall continue to pay Multi Soft any as yet unpaid amounts
specified in Section 6.1 "Advance on Royalties" and in place of the amounts
specified in Section 6.2, Royalties, fifty percent (50%) of the royalty
amounts specified in Section 6.2, "Royalties" herein (i.e. in Section 6.2
(1) twenty-two percent (22%) shall be eleven percent (11%); in Section 6.2
(2) twenty-five percent (25%) shall be twelve and one half percent (12.5%);
in Section 6.2 (3) twenty-five thousand dollars ($25,000.00) shall be
twelve thousand, five hundred dollars ($12,500.00) and in Section 6.2 (4)
twenty-two percent (22%) of an amount equal to fifty percent (50%) shall be
eleven percent (11%) of an amount equal to fifty percent (50%) of a
Product's U.S. List Price). Section 6.2(7) continues to apply to licenses
marketed outside of the United States and Puerto Rico. Such royalty
payments will continue for five (5) years after the date IBM exercises its
rights under the SCCT, and thereafter, IBM shall have no further royalty or
payment obligations pursuant to such Licensed Work; and
3. With regard to the WCL Development Toolkit With IBM IMS Extensions as a
Licensed Work, IBM will pay Multi Soft the royalty amounts specified in
Sections 6.3(3)a - 6.3(3)f below, rather than any amounts specified in
Sections 6 2(1) - 6.2(4).
6.3(3)a Other than as specified in Sections 6.3(3)b and 6.3(3)c below, in
consideration of the rights and licenses granted to IBM pursuant to Section
3.0, "Grants of Rights and License" in the case of licenses sold to
customers based on offers IBM extends to potential customers generally, IBM
shall pay Multi Soft seventeen and one half percent (17.5%) of the revenue
received from customers for each copy of the Licensed Work which is
licensed as a Product to an end user customer and for which IBM receives a
Product license fee (following any IBM authorized test or trial period).
Such payments shall continue for five
Page 6 of 15
IBM CONFIDENTIAL
<PAGE>
May 15, 1995 Amendment Number: 002
Software License Agreement # STL93199
(5) years after the date IBM exercises its rights under the SCCT, and
thereafter, IBM shall have no further royalty or payment obligations
pursuant to such Licensed Work; and
6.3(3)b In further consideration of the rights and licenses granted to IBM
pursuant to Section 3.0, "Grants of Rights and License," in situations
where IBM makes a Negotiated Sale of (i) a Product based on a WCL Runtime
With IBM IMS Extensions and/or (ii) a product based on a WCL Development
Toolkit With IBM IMS Extensions, IBM shall, notwithstanding Section 6.3(3)a
above, pay Multi Soft twelve and one-half percent (12.5%) of the revenue
IBM receives from customers for the copies of the Licensed Work which is
licensed as a Product and for which IBM receives a Product license fee
(following any IBM authorized test or trial period). For purposes of this
Section 6.3(3)b, "Negotiated Sale(s)" means agreement by a customer to
purchase licenses to a Product based on a WCL Runtime With IBM IMS
Extensions and/or a Product based on WCL Development Toolkit With IBM IMS
Extensions in any combination on fee terms more favorable than those IBM
extends to potential customers generally. No other fees shall be due to
Multi Soft for sales of the WCL Development Toolkit With IBM IMS Extensions
under any marketing agreement between IBM and Multi Soft pursuant to which
IBM is authorized to market the WCL Development Toolkit With IBM IMS
Extensions. Such payments specified in this Section 6 3(3)b shall continue
for five (5) years after the date IBM exercises its rights under the SCCT,
and thereafter, IBM shall have no further royalty or payment obligations
pursuant to such Licensed Work, and
6.3(3)c In further consideration of the rights and licenses granted to IBM
pursuant to Section 3.0, "Grants of Rights and License," in situations
where IBM negotiates a Site License Sale of (i) a Product based on a WCL
Runtime With IBM IMS Extensions and/or (ii) a Product based on a WCL
Development Toolkit With IBM IMS Extensions, IBM shall, notwithstanding
Sections 6.3(3)a and 6.3(3)b and 6.2(3) above, pay or accrue to Multi Soft
twelve thousand five hundred dollars ($12,500) as a complete and total
royalty obligation for such sale. For purposes of this Section 6.3(3)c
"Site License Sale" means licensing and authorizing a customer to make an
unlimited number of copies of Products based on WCL Development Toolkit
With IBM IMS Extensions for use within a single physical site (or complex
with a single location address), along with an unlimited number of copies
of Product based on a WCL Runtime With IBM IMS Extensions for use at both
the customers single physical site and all remote sites. No other fees
shall be due to Multi Soft for sales of the WCL Development Toolkit With
IBM IMS Extensions under any marketing agreement between IBM and Multi Soft
pursuant to which IBM is authored to market the WCL Development Toolkit
With IBM IMS Extensions. The twelve thousand five hundred dollar amount
specified in this Section 6.3(3)c is not to be paid in addition to the
amount specified in Section 6.2(3) - only one such amount shall be paid for
each Site License Sale. Such payments specified in this Section 6.3(3)c
shall continue for five (5) years after the date IBM exercises its rights
under the SCCT, and thereafter, IBM shall have no further royalty or
payment obligations pursuant to such Licensed Work, and
Page 7 of 15
IBM CONFIDENTIAL
<PAGE>
May 15, 1995 Amendment Number: 002
Software License Agreement # STL93199
6.3(3)d Notwithstanding Sections 6.3(3)a and 6.3(3)b above, IBM agrees to
pay or accrue to Multi Soft a minimum royalty for each copy of the Product
based on WCL Development Toolkit With IBM IMS Extensions for which IBM
receives revenue as specified in Sections 6.3(3)a and 6.3(3)b (but not
Section 6.3(3)c) above of an amount equal to seventeen and one-half percent
(17.5%) of an amount equal to fifty percent (50%) of the United States List
price of a Product based on WCL Development Toolkit With IBM IMS
Extensions. This minimum royalty shall also apply in any cases where IBM
packages such a Product with other IBM and/or non-IBM products and offers
them at a single price to customers, where the portion of the single price
attributable to the Product is not readily ascertainable. Such payments
specified in this Section 6.3(3)d shall continue for five (5) years after
the date IBM exercises its rights under the SCCT, and thereafter, IBM shall
have no further royalty or payment obligations pursuant to such Licensed
Work; and
6.3(3)e In cases of IBM or IBM Subsidiary marketing of licenses to the
Product based on WCL Development Toolkit With IBM IMS Extensions outside of
the United States and Puerto Rico markets, revenue, for purposes of this
SLA shall be deemed to equal the number of copies of the Product licensed
multiplied by seventy percent (70 %) of the then current United States List
Price of the Product; and
6.3(3)f The payments specified herein shall replace and supersede any
payments otherwise specified in any marketing agreements between the
parties or between Multi Soft and any IBM Subsidiaries; and
4. Notwithstanding the foregoing, Multi Soft agrees to waive all royalty
fees for copies of the WCL Development Toolkit With IBM IMS Extensions or
WCL Runtime With IBM IMS Extensions which IBM or its Subsidiaries (a) use
or distribute solely for (i) education and training of employees of IBM or
its Subsidiaries in the use of the WCL Development Toolkit With IBM IMS
Extensions or WCL Runtime With IBM IMS Extensions, (ii) education of IBM's
or its Subsidiary's customers, (iii) demonstration, evaluation (including
copies provided to potential customers for such purposes), archival or
backup purposes, including the distribution of Products on a CD ROM or
other media on which the Product is capable of being secured (e.g.,
"locked" or "encrypted") to limit a recipient's use of a Product, where IBM
may allow some limited preview, trial or demonstration use of the Product,
but will deny the recipient the ability to make full, intended use of the
Product, unless and until the recipient obtains a fill license from IBM and
receives an unlocking or decryption facility, (iv) licenses for copies of
the Product to be installed and used by the primary work location user at
home or on a portable computer, when a valid license to an identical copy
has been rightfully procured for installation and use on a machine (other
than a network server) used at a primary work location, and provided that
the user is authorized to use the Product on only one machine at a time, or
(b) sublicense to educational institutions pursuant to HESC/ESAP or similar
programs.
Page 8 of 15
IBM CONFIDENTIAL
<PAGE>
May 15, 1995 Amendment Number: 002
Software License Agreement # STL93199
5. No royalty or other charge shall be payable by IBM for pictorial,
graphic or audio/visual works, including but not limited to, icons,
screens, music and characters, created as a result of execution of the WCL
Development Toolkit With IBM IMS Extensions or WCL Runtime With IBM IMS
Extensions or Derivative thereof, whether such Works are created by use of
the WCL Development Toolkit With IBM IMS Extensions or WCL Runtime With IBM
IMS Extensions or with other programming or through other means. No royalty
or other charge shall be payable by IBM for use in IBM products of the same
or similar protocols and/or interfaces related to or contained in the
Licensed Work.
6. Multi Soft shall deliver a newly completed Certificate of Originality
covering the WCL Development Toolkit With IBM IMS Extensions and the WCL
Runtime With IBM IMS Extensions within ten (10) working days of receiving
notice from IBM that IBM is obtaining possession of the Trust Property.
6.4 Payment of Royalties
Payments will be made on a quarterly basis. Within thirty (30) days after
the end of each calendar quarter, IBM shall pay, net of refunds to
customers and adjustments (e.g., outstanding advance on royalties),
royalties accrued during the Royalty Accounting Periods of such calendar
quarter.
6.5 Audit
IBM shall maintain complete and accurate accounting records, in accordance
with sound accounting practices, to support and document royalties payable
in connection with the Licensed Works. Such records shall be retained for a
period of at least three (3) years after the royalties to which such
records relate have accrued and been paid. IBM shall, upon written request,
during normal business hours, but not more frequently than once each
calendar year, provide access to such records for the immediately preceding
three (3) year period to an independent accounting firm chosen and
compensated by Multi Soft for purposes of audit. Such accounting firm shall
be required to sign an agreement with IBM protecting IBM's confidential
information and shall be authorized by IBM to report to Multi Soft only the
amount of royalties due and payable for the period examined.
6.6 Alternative Competitive Royalties
Notwithstanding any provisions in this SLA or any marketing agreement
between the parties or between Multi Soft and an IBM Subsidiary, if IBM
identifies an opportunity to market multiple Product licenses to a customer
in one (l) transaction, and a lower royalty amount is deemed by IBM to be
required for IBM to be competitive, IBM may request a lower royalty amount
from Multi Soft for such transaction. If Multi Soft agrees to such lower
royalty amount for the transaction, Multi Soft shall send a letter to IBM,
executed by an authorized representative of Multi Soft, specifying such
lower royalty amount.
Page 9 of 15
IBM CONFIDENTIAL
<PAGE>
May 15, 1995 Amendment Number: 002
Software Agreement # STL93199
6.7 Exclusive Statement of Royalty Obligations
This Section 6 0, Royalties and Payments" and Section 7.0, "Source Code
License Option" shall constitute the complete and exclusive statement of
payment to which Multi Soft shall or may be entitled to in consideration of
rights and licenses granted in this SLA.
III Section 7.0 "Source Code License Option" through Section 7.1.1 "Option
Royalties" of the SLA are hereby deleted in its entirety and replaced with
the following:
7.0 Source Code License Option
At anytime during the term of this SLAY IBM shall have the option to obtain
the rights and licenses to all of the then current Code and related
internal and external documentation of the WCL Development Toolkit With IBM
IMS Extensions and the WCL Runtime With IBM IMS Extensions, identical in
scope to the rights and licenses to the Licensed Work presently contained
herein, including, but not limited to, the provisions of Section 3.1,
"Grants of License to IBM" on page 6, (but such licenses shall not be
limited to the term of this SLA), in return for amounts specified in
Section 7.1, "Source Code License Payment" below, at the time IBM elects to
exercise this option.
7.1 Source Code License Payment
In return for the rights and licenses granted to IBM pursuant to Section
7.0, Source Code License Option" of this SLA, IBM shall pay to Multi Soft:
If IBM chooses to exercise its Then IBM shall pay to Multi Soft
option on or before: the amount of:
October 8, 1994 $1,500,000.00
October 8, 1995 $1,750,000.00
October 8, 1996 $2,000,000.00 .
If IBM chooses to exercise its option during any year after October, 8,
1996, IBM shall pay to Multi Soft an additional ten percent (10%)
compounded annually. For example, (i) if the option is exercised between
October 9, 1996 and October 8, 1997, IBM will pay Multi Soft two million,
two hundred thousand U.S. dollars ($2,200,000.00), and (ii) if exercised
between October 9, 1997 and October 8, 1998, IBM will pay Multi Soft two
million, four hundred and twenty thousand U.S. dollars ($2,420,000.00),
etc.
Page 10 of 15
IBM CONFIDENTIAL
<PAGE>
May 15, 1995 Amendment Number: 002
Software License Agreement # STL93199
7.1.1 Option Royalties
In the event that IBM exercises this option:
1. The WCL Development Toolkit With IBM IMS Extensions shall be deemed to
be a Licensed Work under this SLA, and all other provisions of this SLA
shall apply to such Licensed Work; and
2. Multi Soft deliver the Code and other materials licensed pursuant to
this Section to IBM within ten (10) working days of having received
notification that IBM is exercising its option. After IBM's written
acceptance of such code and other materials are provided by Multi Soft, IBM
shall:
a. Terminate the SCCT, relieving Multi Soft of its obligations to deposit
the Trust Property as defined in such SCCT; and
b. Terminate the SLA according to its terms, relieving Multi Soft of its
obligations thereunder, other than those that survive;
3. With regard to the WCL Runtime With IBM IMS Extensions as a Licensed
Work IBM shall continue to pay Multi Soft fifty percent (50%) of the
royalty amounts specified in Section 6.2, "Royalties" herein (i.e. in
Section 6.2 (1) twenty-two percent (22%) shall be
eleven percent (11%); in Section 6.2 (2) twenty-five percent (25%) shall be
twelve and one half percent (12.5%); in Section 6.2 (3) twenty-five
thousand dollars ($25,000.00) shall be twelve thousand, five hundred
dollars ($12,500.00) and in Section 6.2 (4) twenty-two percent (22%) shall
be eleven percent (11%) of an amount equal to fifty percent (50%) of a
Product's U.S. List Price). Such royalty payments will continue for five
(5) years after the date IBM exercises its Source Code License Option, and
thereafter, IBM shall have no further royalty or payment obligations
pursuant to such Licensed Work; and
4. With regard to the WCL Development Toolkit With IBM IMS Extensions as a
Licensed Work, IBM will pay Multi Soft the royalty amounts specified in
Sections 7.1.1(4)a - 7.1.1(4)f below, rather than any amounts specified in
Sections 6.2(1) - 6.2(4).
7.1.1(4)a Other than as specified in Sections 7.1.1(4)b and 7.1.1(4)c
below, in consideration of the rights and licenses granted to IBM pursuant
to Section 3.0, "Grants of Rights and License" in the case of licenses sold
to customers based on offers IBM extends to potential customers generally,
IBM shall pay Multi Soft seventeen and one half percent ( 17. 5%) of the
revenue received from customers for each copy of the Licensed Work which is
licensed as a Product to an end user customer and for which IBM receives a
Product license fee (following any IBM authorized test or trial period).
Such payments shall continue for five (5) years after the date IBM
exercises its rights under the SCCT, and thereafter, IBM shall have no
further royalty or payment obligations pursuant to such Licensed Work; and
Page 11 of 15
IBM CONFIDENTIAL
<PAGE>
May 15, 1995 Amendment Number: 002
Software License Agreement # STL93199
7.1.1(4)b In further consideration of the rights and licenses granted to
IBM pursuant to Section 3.0, "Grants of Rights and License," in situations
where IBM makes a Negotiated Sale of (i) a Product based on a WCL Runtime
With IBM IMS Extensions and/or (ii) a Product based on a WCL Development
Toolkit With IBM IMS Extensions, IBM shall, notwithstanding Section
7.1.1(4)a above, pay Multi Soft twelve and one-half percent (12.5%) of the
revenue IBM receives from customers for the copies of the Licensed Work
which is licensed as a Product and for which IBM receives a Product license
fee (following any IBM authorized test or trial period). For purposes of
this Section 7.1.1(4)b, "Negotiated Sale(s)" means agreement by a customer
to purchase licenses to a Product based on a WCL Runtime With IBM IMS
Extensions and/or a Product based on WCL Development Toolkit With IBM IMS
Extensions in any combination on fee terms more favorable than those IBM
extends to potential customers generally. No other fees shall be due to
Multi Soft for sales of the WCL Development Toolkit With IBM IMS Extensions
under any marketing agreement between IBM and Multi Soft pursuant to which
IBM is authorized to market the WCL Development Toolkit With IBM IMS
Extensions. Such payments specified in this Section 7.1.1(4)b shall
continue for five (5) years after the date IBM exercises its rights under
the SCCT, and thereafter, IBM shall have no further royalty or payment
obligations pursuant to such Licensed Work; and
7.1.1(4)c In further consideration of the rights and licenses granted to
IBM pursuant to Section 3 0, "Grants of Rights and License," in situations
where IBM negotiates a Site License Sale of (i) a Product based on a WCL
Runtime With IBM IMS Extensions and/or (ii) a Product based on a WCL
Development Toolkit With IBM IMS Extensions, IBM shall, notwithstanding
Sections 7.1 .1 (4)a, 7.1 .1(4)b and 6.2(3) above, pay or accrue to Multi
Soft twelve thousand five hundred dollars ($12,500) as a complete and total
royalty obligation for such sale. For purposes of this Section 7.1.1(4)c
"Site License Sale" means licensing and authorizing a customer to make an
unlimited number of copies of Products based on WCL Development Toolkit
With IBM IMS Extensions for use within a single physical site (or complex
with a single location address), along with an unlimited number of copies
of Product based on a WCL Runtime With IBM IMS Extensions for use at both
the customer's single physical site and all remote sites. No other fees
shall be due to Multi Soft for sales of the WCL Development Toolkit With
IBM IMS Extensions under any marketing agreement between IBM and Multi Soft
pursuant to which IBM is authorized to market the WCL Development Toolkit
With IBM IMS Extensions. The twelve thousand five hundred dollar ($12,500)
amount specified in this Section 7.1.1(4)b is not to be paid in addition to
the amount specified in Section 6.2(3) - only one such amount shall be paid
for each Site License Sale. Such payments specified in this Section
7.1.1(4)c shall continue for five (5) years after the date IBM exercises
its rights under the SCCT, and thereafter, IBM shall have no further
royalty or payment obligations pursuant to such Licensed Work; and
7.1.1(4)d Notwithstanding Sections 7.1.1(4)a and 7.1.1(4)b above, IBM
agrees to pay or accrue to Multi Soft a minimum royalty for each copy of
the Product based on WCL
Page 12 of 15
IBM CONFIDENTIAL
<PAGE>
May 15,1995 Amendment Number: 002
Software License Agreement # STL93199
Development Toolkit With IBM IMS Extensions for which IBM rives as
specified in Sections 7.1.1(4)a and 7.1.1(4)b (but not Section 7.1.1(4)c)
above of an amount equal to seventeen and one-half percent ( 17.5%) of an
amount equal to fifty percent (50%) of the United States List pace of a
Product based on WCL Development Toolkit With IBM IMS Extensions. This
minimum royalty shall also apply in any cases where IBM packages such a
Product with other IBM and/or non-lBM products and offers them at a single
pace to customers, where the portion of the single pace attributable to the
Product is not readily ascertainable. Such payments specified in this
Section 7.1.1(4)d shall continue for five (5) years alter the date IBM
exercises its rights under the SCCT, and thereafter, IBM shall have no
further royalty or payment obligations pursuant to such Licensed Work; and
7.1.1(4)e In cases of IBM or IBM Subsidiary marketing of licenses to the
Product based on WCL Development Toolkit With IBM lMS Extensions outside of
the United States and Puerto Rico markets, revenue, for purposes of this
SLA shall be deemed to equal the number of copies of the Product licensed
multiplied by seventy percent (70 %) of the then current United States List
Price of the Product; and
7.1.1(4)f The payments specified herein shall replace and supersede any
payments otherwise specified in any marketing agreements between the
parties or between Multi Soft and any IBM Subsidiaries; and
5. Notwithstanding the foregoing, Multi Soft agrees to waive all royalty
fees for copies of the WCL Development Toolkit With IBM IMS Extensions or
WCL Runtime With IBM IMS Extensions which IBM or its Subsidiaries (a) use
or distribute solely for (i) education and training of employees of IBM or
its Subsidiaries in the use of the WCL Development Toolkit With IBM IMS
Extensions or WCL Runtime With IBM IMS Extensions, (ii) education of IBM's
or its Subsidiaries customers, or (iii) demonstration, evaluation
(including copies provided to potential customers for such purposes),
archival or backup purposes, including the distribution of Products on a CD
ROM or other media on which the Product is capable of being secured (e.g.,
"locked" or "encrypted") to limit a recipient's use of a Product, where IBM
may allow some limited preview, trial or demonstration use of the Product,
but will deny the recipient the ability to make full, intended use of the
Product, unless and until the recipient obtains a full license from IBM and
receives an unlocking or decryption facility, (iv) licenses for copies of
the Product to be installed and used by the primary work location user at
home or on a portable computer, when a vapid license to an identical copy
has been right procured for installation and use on a machine (other than a
network server) used at a primary work location, and provided that the user
is authorized to use the Product on only one machine at a time, or (b)
sublicense to educational institutions pursuant to HESC/ESAP or similar
programs.
Page 13 of 15
IBM CONFIDENTIAL
<PAGE>
May 15,1995 Amendment Number: 002
Software License # STL93199
6. No royalty or other charge shall be payable by IBM for pictorial,
graphic or audio/visual works, including but not limited to, icons,
screens, music and characters, created as a result of execution of the WCL
Development Toolkit With IBM IMS Extensions or WCL Runtime With IBM IMS
Extensions or Derivative Works thereof, whether such Works are created by
use of the WCL Development Toolkit With IBM IMS Extensions or WCL Runtime
With IBM IMS Extensions or with other programming or through other means.
No royalty or other charge shall be payable by IBM for use in IBM products
of the same or similar protocols and/or interfaces related to or contained
in the Licensed Work.
7. Multi Soft shall deliver a newly completed Certificate of Originality
covering the WCL Development Toolkit With IBM IMS Extensions and the WCL
Runtime With IBM IMS Extensions within ten (10) working days of receiving
notice from IBM that IBM is exercising Source Code License Option.
IV Section 16.2 "Technical Coordinators" of the SLA is hereby deleted in its
entirety and replaced with the following:
For IBM: For Multi Soft:
Dan Wardman Ray Ingram
IBM Corporation Multi Soft, Inc.
555 Bailey Avenue 4262 US Route I
P. O. Box 49023
San Jose, CA 95161-9023 Monmouth Junction, NJ 088512-1905
Phone: (408) 463-2581 Phone: (908) 329-9200
Fax: (408)463~101 Fax: (908)329-1386
All other provisions of this SLA remain in full force and effect in accordance
with their terms.
Page 14 of 15
IBM CONFIDENTIAL
<PAGE>
May 15, 1995 Amendment Number: 002
Software License Agreement STL93199
IN WITNESS WHEREOF, the parties hereto have caused this Amendment Number 002 to
the SLA to be executed by their respective authorized representatives:
Multi Soft, Inc. International Business Machines
Corporation
ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
By: By:
--------------------------- --------------------------------
Name Charles Lombardo Name C. E. Tadlock
Title: Chairman Title: Business Alliances & Contracts Manager
Date: Date:
--------------------------- --------------------------------
Page 15 of 15
IBM CONFIDENTIAL
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