<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
/X/ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended September 30, 1997
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
COMMISSION FILE NO. 0-16530
FINANCIAL PERFORMANCE CORPORATION
(Name of small business issuer in its charter)
NEW YORK 13-3236325
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
335 MADISON AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices, including zip code)
(212) 557-0401
Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act None.
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, $0.01 PAR VALUE
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in
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definitive proxy or information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-KSB. [X]
Issuer's revenue for the fiscal year ended September 30, 1997 were
$7,785,250.
The aggregate market value of the voting stock (Common Stock) held by
non-affiliates of the registrant on December 30, 1997 was approximately
$1,754,710, based on the volume-weighted average price of such stock on such
date, as reported by the OTC Bulletin Board.
The number of shares outstanding of each of the issuer's classes of
common equity, as of January 5, 1998, was: 8,021,534 shares of Common Stock,
$0.01 par value.
DOCUMENTS INCORPORATED BY REFERENCE None.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
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FINANCIAL PERFORMANCE CORPORATION
ANNUAL REPORT ON FORM 10-KSB
TABLE OF CONTENTS
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Page
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PART I............................................................................................................1
ITEM 1 - DESCRIPTION OF BUSINESS.........................................................................1
ITEM 2 -- DESCRIPTION OF PROPERTY........................................................................14
ITEM 3 -- LEGAL PROCEEDINGS..............................................................................14
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................................14
PART II...........................................................................................................15
ITEM 5 -- MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS..................................................................................15
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS......................................................15
ITEM 7 - FINANCIAL STATEMENTS...........................................................................21
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE......................................................21
PART III.........................................................................................................22
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE
EXCHANGE ACT.............................................................................22
ITEM 10 - EXECUTIVE COMPENSATION........................................................................25
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT..............................................................................30
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................................32
ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K..............................................................35
FINANCIAL STATEMENTS............................................................................................F-1
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PART I
ITEM 1 -- DESCRIPTION OF BUSINESS
INTRODUCTION
Financial Performance Corporation and its subsidiaries (the "Company")
market specialized merger communications consulting services and computer
software to the financial services industry. The Company's services and software
are designed to identify and analyze the financial impact and competitive
position of its customer's products and services and assist its customers in
developing and analyzing marketing and communications strategies. The Company's
current and recent customers include First Union National Bank, Chemical Bank
(now The Chase Manhattan Bank), First National Bank of Maryland, The Dime
Savings Bank of New York, The Bank of New York, Citibank, CIT Group, PNC
National Bank, Fleet Bank and NatWest Bank.
The Company's principal business is merger communications and marketing
services to financial institutions. The Company has developed a particular
expertise in providing services to banks with respect to communications
concerning mergers and other business combinations, marketing and financial
information software.
The Company's software, referred to as MARS(TM) (Managing Account
Relationships), functions as an integrated planning and sales management system
designed to coordinate the user's marketing activity and analyze the results of
its sales efforts and the profitability of its products. The Company believes
that MARS(TM) enables its users to monitor the income and new business
contributions of each department, branch, sector or group within a business
enterprise faster and more efficiently than current applications. The Company
also believes that future projections by a business enterprise using MARS(TM)
will be easier since the software regularly maintains information regarding
pending sales.
HISTORY
The Company was incorporated in New York in August 1984 under the name
Performance Services Group, Inc. and changed its name to Financial Performance
Corporation in June 1986. In January 1987, the Company consummated an initial
public offering of its Common Stock and in July 1989, the Common Stock was
delisted from the Nasdaq over-the-counter market for failure to maintain
Nasdaq's minimum capital requirements. In February 1990, the Company ceased
day-to-day operations and was inactive from February 1990 to November 1992.
The Company resumed operations in January 1993. At that time, the
Company raised working capital through private debt and equity issuances. In
1994, the Company began implementing a business strategy of establishing
subsidiary companies to engage in related or complementary areas of the
financial services industry. As a result, the Company, together with other
parties, formed three subsidiaries (Michaelson Kelbick Partners Inc. ("MKP"),
FPC Information Corp. ("FPC Information") and Aspen Capital Management, LLC
("Aspen")). MKP is engaged in providing merger communications and marketing
services to the financial services industry. FPC Information was formed to
market the Company's software and Aspen was formed to operate as an
international sponsor of cash management funds. For further information
concerning these subsidiaries, see "--
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Subsidiaries" and "Item 6 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations."
The Company incurred losses in each of the three fiscal years ended
September 30, 1995. For the year ended September 30, 1996, the Company generated
approximately $8,780,000 in revenues, $278,000 in operating income, a loss of
approximately $15,000 from continuing operations, and a net loss of
approximately $235,000. For the year ended September 30, 1997, the Company
generated approximately $7,785,000 in revenues, had an operating loss of
approximately $569,000, a loss from continuing operations of approximately
$545,000 and a net loss of approximately $545,000.
As of November 27, 1996, the Company's Common Stock resumed trading on
the OTC Bulletin Board under the symbol "FPCX". The high and low sale price of
the Common Stock for the period from November 29, 1996 to January 5, 1998 were
$2.75 and $0.22, respectively.
The Company's offices are located at 335 Madison Avenue, New York, New
York 10017. The Company's telephone number is (212) 557-0401. Unless the context
is otherwise, the term the "Company" shall mean Financial Performance
Corporation and its subsidiaries.
SUBSIDIARIES
In 1994, the Company began implementing a business strategy of
establishing subsidiary companies to engage in related or complementary areas of
the financial services industry. As a result, the Company, together with other
parties, formed three subsidiaries.
MICHAELSON KELBICK PARTNERS INC. In October 1994, the Company, together
with Susan Michaelson and Hillary Kelbick, formed Michaelson Kelbick Partners
Inc. ("MKP"). The Company owns 80% of the outstanding equity of MKP and each of
Ms. Michaelson and Ms. Kelbick own 10% of the outstanding equity of MKP. MKP is
engaged in providing specialized business and marketing services to the
financial services industry. MKP has developed particular expertise in providing
advice to its customers with respect to communications concerning mergers and
other business combinations and sales promotions.
Ms. Michaelson and Ms. Kelbick have over 32 years of combined
experience in financial services marketing. They were both formerly employed as
Senior Vice Presidents by Wilcox Associates, in New York, New York, where they
were primarily responsible for the planning, development and execution of
marketing communications projects for numerous financial institutions. See "Item
9 -- Directors, Executive Officers, Promoters and Control Persons."
FPC INFORMATION CORP. In November 1994, the Company, together with
Robert S. Trump, formed FPC Information Corp. ("FPC Information"). Mr. Trump
furnished $150,000 to the Company in connection with the establishment and
initial operations of FPC Information in exchange for a 20% equity interest in
FPC Information. In October, 1997, Mr. Trump acquired an additional 30% equity
interest in FPC Information in exchange for an additional investment of
$225,000. Accordingly, as of January 5, 1998, Mr. Trump owns 50% of the
outstanding equity of FPC Information. However, the Company has the option to
repurchase a 30% equity interest in FPC Information from Mr. Trump exercisable
at any time prior to September 30, 1999 at the fair market value of such
interest, but in no event less than $225,000.
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The MARS(TM) software and any rights associated therewith and related
liabilities have been transferred by the Company to FPC Information Corp.
Accordingly, the Company functions as a holding company and will continue to
seek investment and acquisition opportunities in the financial services
industry. As of January 5, 1998, Mr. Trump beneficially owned approximately
60.93% of the Company's shares of Common Stock. See "Item 11 -- Security
Ownership of Certain Beneficial Owners and Management."
ASPEN CAPITAL MANAGEMENT, LLC. In January 1995, the Company, together
with Messrs. Richard Loos and Sean Brennan, formed Aspen Capital Management, LLC
("Aspen"). Aspen was established to operate as an international sponsor of cash
management funds. In February 1995, Aspen was converted to a New York limited
liability company.
In connection with Aspen's formation and operation, the Company entered
into shareholders' and executive employment agreements with Richard Loos and
Sean Brennan. Richard J. Loos previously was Managing Director and a member of
the Board of Directors of HSBC Asset Management Americas Inc., a global asset
management group, and Sean P. Brennan previously was affiliated with CS First
Boston Investment Management Group. The Company owns 80% of the outstanding
equity of Aspen and each of Messrs. Loos and Brennan own 10% of the outstanding
equity of Aspen.
During the period from January through April 1995, Robert S. Trump, one
of the principal stockholders of the Company, loaned the Company an aggregate of
$500,000, which was utilized in connection with the funding and the initial
operations of Aspen. In August 1995, Aspen officially commenced operations with
the formation of the Aspen Worldwide Dollar Fund (the "Fund"). The Fund was
administered by ABN--AMRO Trust Company (Cayman) Limited. The Fund received
approximately $5,000,000 through initial subscriptions provided by persons
associated with Mr. Trump and raised with Mr. Trump's assistance. The Fund never
received any additional subscriptions. As a result, during the fiscal year ended
September 30, 1996, the initial investors redeemed all of their interests in the
Fund. The Fund is currently inactive. In July and September 1996, Messrs.
Brennan and Loos, respectively, resigned as officers of the Company and have no
affiliation with the Fund. There can be no assurance that the Company will
retain an investment advisor for the Fund or that the Fund or Aspen will
recommence operations.
MERGER COMMUNICATIONS SERVICES
Since the resumption of the Company's operations, substantially all of
the Company's revenues have been generated by MKP. MKP's primary business is
bank merger communications, which accounts for approximately 85% of MKP's
revenues. MKP also specializes in marketing planning and communications
strategies, sales promotion and direct mail. The principals of MKP have managed
over 50 merger communications and other projects for banks, including Bank of
Boston/Bay Bank, The Bank of New York, Citibank, First Union National Bank,
First National Bank of Maryland, Nat West Bank, Fleet Bank, The Dime Savings
Bank of New York, Great Western, First Fidelity, CIT Group, PNC and Chemical
Bank (now The Chase Manhattan Bank).
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The merger communications projects which are undertaken by MKP involve
planning, strategizing, managing and executing customer communications in
support of the merger related events, including:
- Systems conversions
- Product consolidations
- Price changes
- Branch Closings
MERGER COMMUNICATIONS SERVICES
MKP's merger communications services include:
- Business Strategies and Marketing Planning
- Advisory Services: impact assessments by product, service and
customer group
- Data Processing: data sources, customer account file
integration
- Proprietary methodologies for Matrix programming instructions
for customized copy block messaging
- Communications Development and Execution: Comprehensive
layouts, pre-press production, mail file development, print
and mail production
- Project Management including milestones and budgets
- Communications Recommendations: vehicles, audiences, timing
- File Collapse Methodology (definition of the customer)
- Regulatory requirements for disclosure
DATA MANAGEMENT
MKP's data management services include:
- PLANNING. Includes defining the communications requirements,
including product/account types, file integration and
merge/purge requirements and level of personalization
required.
- DATA SOURCE(S) AND EXTERNAL SUPPLIERS. MKP advises on the most
advantageous data source(s) for each project (i.e., operating
systems, CIF or a combination thereof). In addition, MKP can
assist in assessing internal and external data processing
requirements.
- TAPE SPECIFICATIONS. Includes definition of tape formats,
record information, and all file coding required for data
integration and the customization of messages.
- CUSTOMER MAIL FILE DEVELOPMENT. Includes development of
specifications and procedures for record selection, file
clean-up programming, merge/purge and file verification.
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- VERIFICATION/QUALITY CONTROL. Includes development of detailed
procedures to ensure that counts are correct (all records are
accounted for), established procedures are followed, all
programming steps are verified and exceptions are identified
and properly handled. A key step includes the creation of a
test file including all copy blocks and block assignment
criteria existing in the main file.
MKP QUALITY CONTROL
MKP's premise is that quality control begins with the initial steps in
planning a project. As MKP works to develop concepts and strategies for its
clients, MKP confirms that the concepts and strategies which are developed can
be properly executed. MKP adheres to strict quality control procedures and uses
numerous quality control/verification checks in this process, including the
following:
- Developing tape specifications and mail house instructions
(before tape is cut)
- Initial tape verification (immediately upon receipt of type)
- File clean-up verification
- Merge/Purge verification
- Verification of programmed data, including copy block
assignment and line count
- Account number verifications
- Verification of live laser proofs
- Laser printing quality control
- Lettershop quality control
- Postal receipts
DATA MANAGEMENT/QUALITY CONTROL
MKP has significant experience in developing systems for customizing
data processing and programming verification in order to ensure quality control
integrity of each merger project. MKP must often operate under tight time frames
and legal deadlines that generally accompany merger projects. MKP assembles and
manages both internal and external resources in support of large-scale, complex
projects.
CROSS-SELLING POTENTIAL
The Company believes that services furnished by MKP to its banking
clients could provide a significant opportunity for the Company's subsidiary,
FPC Information Corp., to introduce its software and related services to these
institutions. The Company also believes that the type of analysis generally
performed by MKP for its bank clients in connection with its merger
communications services can often be instrumental in planning the foundation for
a more efficient MIS gathering system for such clients. In the Company's view,
with this type of information about potential clients, FPC Information could
have certain advantages over its competitors when making proposals to implement
system-wide computer software improvements in such banking institutions.
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FINANCIAL INFORMATION SOFTWARE
MARS(TM) (MANAGING ACCOUNT RELATIONSHIPS)
GENERAL. The Company has developed a software program referred to as
MARS(TM) (Managing Account Relationships). MARS(TM) functions as an integrated
planning and sales management system designed to coordinate the user's sales and
marketing activity and analyze the results of its sales efforts and the
profitability of its products. MARS(TM) was designed to allow management at
banks to analyze in greater detail the products it offers in light of an
increasingly competitive industry environment. The Company believes that
MARS(TM) enables its users to monitor income and new business contributions of
each department, branch, sector or group within a business enterprise faster and
more efficiently than current applications. The Company also believes that
future projections by a business enterprise using MARS(TM) will be easier since
the software regularly maintains information regarding pending sales.
The Company believes that the sales management aspect of MARS(TM) can
also provide management with extensive "on line" information to enable fast and
informed decisions to be made based upon total customer sales and other
financial information. MARS(TM) can retrieve data directly from the customer's
mainframe computers, access overall sales information and match the retrieved
data to targets previously set by the customer. Reporting can be done by
customer, product, account officer, department or division.
In addition to the capability of MARS(TM) to coordinate sales and
marketing activities, individual department managers can use MARS(TM) to measure
productivity of each employee on a daily, weekly, monthly or annual basis. The
overall performance of a business enterprise can be evaluated and compared
against the contributions of each employee. Planning and performance results can
be accessed instantly through standard reports or by means of customized
reporting formats.
Another way of describing MARS(TM) is in the context of the emerging
trend toward Sales Force Automation (SFA) which is beginning to have a major
impact in the business world. SFA involves the use of computers, armed with a
sophisticated software program, which allows an organization to more efficiently
and effectively manage the sales function with the objective of enhancing
profitability. The Company believes that the necessity for SFA techniques is
particularly important to the banking industry, which is currently faced with
acute competitive pressures and the necessity to more effectively cross-sell
products to customers. The Company's research suggests that the banking industry
is in serious need of applications that will complement the goal of executing
successful selling strategies. The senior management of the Company, with its
experience in the banking area, recognized the acute need for SFA early in the
development stage for the MARS(TM) product. Accordingly, the MARS(TM) system was
targeted specifically to the banning and financial services community.
In the Company's view, a primary reason that banks and other financial
institutions are in need of a SFA program is represented by the so-called
"80-20" rule, a measure of profitability used in the banking industry which
suggests that, as a general rule of thumb, approximately 80% of a business
enterprise's profits come from approximately 20% of its customers, on average.
Additionally, the wide range of products offered by the typical large bank makes
cross-selling strategies extremely complex. For example, corporate banking
relationships encompass many product categories ranging from loans to cash
management. Larger banks, in particular, have had a difficult time assembling a
company-wide
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view of what products and services have been sold, or could be sold, to an
established client base. Because banks are usually organized on a very
structured departmental basis, each department operating with its own systems
and sales force, information that would be useful in the cross-selling of
products is often dispersed among a myriad of confusing systems. MARS(TM) is
designated to allow the integration of vital relationship information on a firm
(bank) wide basis, while at the same time providing the tools for enhanced
productivity. The Tower Group, which provides technology consulting services to
financial institutions, has stated in a May 1995 report titled "Sales
Applications for Wholesale Banking" that "successful cross-selling is one of the
keys to bank profitability, as it maximizes the return on each relationship. An
additional component to successful relationship management in the banking
industry is the continuous delivery of high quality customer service, which is
also enhanced by multi-user access to a database which describes a customer
relationship". The Tower Group report also estimates that "85% of the top 100
banks and 20% of all other banks will have installed at least departmental sales
and relationship management application for users on the wholesale side of the
bank by the year 2000. Of the larger banks, half will have extended these
systems beyond a single functional department by that time". The Company
believes that the MARS(TM) product is well suited to meet the SFA needs of both
larger and smaller banking institutions.
MARKETING STRATEGIES RELATING TO MARS(TM)
In the Company's view, the senior management of the Company's
subsidiary, FPC Information Corp., in addition to developing the MARS(TM)
software, has developed an excellent reputation within the banking community for
its ability to provide quality, high level consultation in the areas of
strategic business planning and product management. Moreover, the Company's 80%
owned subsidiary, MKP, specializes in market and communications strategies for
the financial services community involving a wide array of services. The Company
believes that the natural synergy of these closely connected organizations
allows for a cross-selling opportunity with which to successfully launch the
MARS(TM) product. In fact, the MARS(TM) product is currently under evaluation at
four banks. The Company believes that by the end of calendar year 1998, at least
one highly recognizable banking institution will have committed to MARS(TM),
thereby providing a valuable reference from which to pursue future
installations.
If reliable references MARS(TM) are developed, the Company will seek to
build a channel of product distribution to augment its own direct selling
efforts. In this regard, the banking industry is served by a large number of
consulting firms specializing in financial services industry information
technology. For example, the "Big Six" accounting firms and most of the second
tier accounting firms provide information technology services to banks. The
Company believes that the MARS(TM) product is the best available solution for
SFA to the banking and financial services community and that certain accounting
firms could have a substantial interest in representing MARS(TM) to their
clients as part of the services such firms can offer.
In addition to these potential business partners, the Company believes
that the opportunity exists for possible alliances with over a dozen regional
systems integrators whose businesses are primarily concerned with the
installation and modification of banking and financial services applications.
The third group which the Company intends to target in the channel strategy is
software product companies with banking specific applications which would
complement MARS(TM). The Company also intends to explore a less formal lead
sharing relationship with hardware providers who have relationships with the
banking market. The Company believes in the possibility that a MARS(TM) sale
could justify the purchase of a large number of both PC's and laptops. The
Company expects
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these channel development efforts to result in a number of product relationships
over the course of the next twelve to eighteen months.
If MARS(TM) becomes well accepted within the banking community, the
Company plans to modify the product in a second version which would be suitable
for the insurance industry. A third version of MARS(TM) for the brokerage
community could then be developed. In the view of the Company's management, both
of these industries, like the banking industry, could benefit from effective
cross selling, but until now have lacked the proper computer software to achieve
this goal.
SPECIFIC PRODUCT DESCRIPTION. The MARS(TM) program contains modules for
key areas, including customer information, product information, customization,
management reports, report writer, SOL (Structured Query Language) Support and
MARS(TM) Remote.
- CUSTOMER AND PRODUCT INFORMATION. The customer and product
information modules of MARS(TM) allow a user to retrieve in
real time its client's record and select marketing and
technical information on its products, programs and services.
The customer and product information modules are designed to
enable the user's sales team to offer the most suitable
products to its clients. The product files contain pricing and
competitive information and textual descriptions of features,
benefits and various terms and conditions of the products
offered.
- MARS-TM- CUSTOMIZATION. MARS(TM) customization allows a user
to set system capabilities for office automation, passwords
and access paths to customer information and product
databases. Additionally, it provides the user with the ability
to pre-load the system with text and terminology for windows
and menus so that the particular culture and methodology of
the user is replicated throughout the system.
- MANAGEMENT REPORTS. MARS(TM) allows the user to generate
management reports on officer performance, sales in process
and other sales information by month and quarter. These
reports can be accessed by the user at any time and viewed
on-line or in a printed report. Management can access a
complete picture of the activities of each employee by task,
account or as a calendar of activities. Many of the major
reports of the system are also presented graphically as pie or
bar charts, allowing for alternative presentations of complex
relationships.
- REPORT WRITER. In addition to the standard reports provided by
MARS(TM), the system supports the popular report writer called
"Crystal Reports," which is considered by the Company and
others as virtually an industry standard. Through the use of
this third party product, the Company believes the user can
easily add new reports to its MARS(TM) installation, thereby
potentially increasing the value of the data provided.
- SOL SUPPORT. The Company expects to complete shortly a module
for MARS(TM) which will include SOL (Structured Query
Language) support thus enabling MARS(TM) to be used as a
single desk top sales support system or a system that is
implemented throughout an organization.
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- E-MAIL SUPPORT. The Company is currently designing a module to
the MARS(TM) system to include its own E-Mail capability,
thereby connecting all users and enabling effective data
sharing for management communication or team selling efforts.
Alternatively, the system could be supported by connections to
popular E-Mail products such as Microsoft Mail and Lotus
Notes.
- ADVANCED SOFTWARE TECHNOLOGY. MARS(TM) is fully compliant with
the Microsoft Windows user interface. MARS(TM) system
navigation is mouse driven requiring minimum keying by the
user. A simple export of MARS(TM) files to Microsoft Word or
spread sheets tools, such as EXCEL, allows the user to quickly
gather, sort, and combine information from multiple sources
into one format.
- MARS-TM- REMOTE. MARS(TM) permits mobile computing by the
exchange and synchronization of information between the
computer of the remote user and the server data base. The
system supports both direct or Internet connections, thereby
providing its users with greater availability and flexibility.
TECHNICAL INFORMATION. The MARS(TM) system can produce over 30 on-line
reports to assist the user and management in recommending appropriate products
to customers in a short period of time. Each transaction can be monitored in
real time.
The Company provides a wide range of delivery options for MARS(TM),
including installation of a fully-configured workstation. MARS(TM) is a
client/server application implemented with state-of-the-art technologies.
MARS(TM) requires an IBM compatible PC with a 386 or higher processor, 8MB RAM
and a 20 MB hard drive. The front-end windows-based application provides a
user-friendly, easy-to-access graphic user interface and is consistent to all
users with different desktop or laptop operating systems, such as Windows, OS/2,
Windows 95 or Windows NT. The back-end server can be implemented with a wide
range of relational database systems such as MS Access, MS Fox-Pro, NS SQL
Server for Windows NT, Sybase Infomix, or Oracle, which also may reside on a
variety of platforms.
MARS(TM) ran be used in a wide range of working environments, ranging
from a single PC or a workstation, or a small LAN, to a large corporate setting
with multiple sites connected by Wide Area Network. MARS(TM) supports a variety
of networking communication environments including Novell NetWare, Microsoft
Windows for Workgroups, Microsoft Windows NT, IBM LAN Manager, the TCP/IP
Networks (UNIX bases networks) and remote dial-up.
SOFTWARE LICENSING
The Company expects to license MARS(TM) to customers under nonexclusive
license agreements. Under a standard Company licensing arrangement, the Company
anticipates that the customer will pay a fixed license fee and acquire the
nontransferable and nonexclusive right to use MARS(TM) at one or more designated
sites. The Company anticipates that additional license fees can be negotiated
between the parties depending upon the number of sites at which the customer
intends to use the Company's software. As part of the fixed license fee for
MARS(TM), customers will receive, for a period of one year after installation,
all announced software enhancements to the licensed software at the latest
standard release level being offered for license by the Company, including all
software and documentation updates. The Company has not derived any revenues
from MARS(TM) since the recommencement of its
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operations in November 1992 and there can be no assurance it will generate any
such revenues in the future,
The Company expects to recognize revenue from license fees after
delivery of the documentation and the software components to the customer and
upon final customer acceptance, provided that no significant Company obligations
remain and collection of the resulting receivable is deemed probable. Because of
the nature of the Company's software and the overall commitment to a software
based, integrated sales and marketing approach, the Company anticipates that the
installation of MARS(TM) can take from up to several months for a single
customer and up to twelve months for an entire integrated system. The period of
installation is also dependent upon the level of commitment made by the customer
to installation as well as the learning speed of the customer's personnel.
Lengthy installation periods can delay the recognition of revenue from the
Company's software licensing fees.
CUSTOMER SUPPORT; SOFTWARE MAINTENANCE AND SERVICE
In connection with MARS(TM), the Company expects to provide support
services such as project planning, system installation, software implementation,
user training and ongoing technical support and documentation. In addition, the
Company expects to offer a full range of consulting services, including
planning, research and custom design for modifications to meet the specific
needs of a customer. Support services will be provided either by Company
personnel or independent subcontractors.
The Company anticipates that it will offer software maintenance
services to its customers for a period of time following the installation of
MARS(TM). The Company expects that its software maintenance agreements will
generally provide for the maintenance of Company-licensed software at a specific
site for a specified period of time. The Company will be required to remedy
significant programming errors, as well as provide the customer with certain
improvements, revisions or modifications.
There have been no revenues from customer support, software maintenance
and service fees since the recommencement of operations by the Company in
November 1992. While it is expected that the Company will recognize revenues
from such activities, there can be no assurance that any such revenues will be
generated.
FINANCIAL SERVICES INDUSTRY
Consulting services currently provided to the financial services
industry are rendered by a diverse group of companies or firms, substantially
all of which are privately-held. These companies or firms range in size from
large firms which are divisions or subsidiaries of major accounting firms or
Fortune 100 companies to organizations which are smaller than the Company.
The Company believes that the recent increase of mergers and
acquisitions in the financial services industry has generated an increase in
demand for related consulting services. The Company believes that this increased
demand includes a trend towards outsourcing certain services and a greater focus
on product and sales analyses and marketing and communications strategies used
in connection with business combinations.
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<PAGE> 14
The Company believes that the industry will continue to consider
methods to analyze the financial impact and competitive position of its products
and reduce in-house corporate functions which may be more efficiently
effectuated by outside resources. The Company believes it can capitalize on this
trend.
COMPETITION
Competition among enterprises which render merger communications
services and software products to financial institutions and other business
organizations is intense. The Company faces competition from other companies
which offer services or products similar to those offered by the Company and
which have greater financial resources, more technical personnel and more
extensive service capabilities than the Company. For example, MKP competes
against larger and more established companies such as Harte-Hanks Communication,
Dimac Corporation and Arthur Anderson LLP.
The Company is aware of several competitors which offer computer
software products as comprehensive as MARS(TM) as well as other competitors. The
Company believes that the software products which most directly compete with
MARS(TM) are Lotus NOTES, Siebel Systems SALES ENTERPRISES, Aurum Software SALES
TRAK and Borealis ARSENAL. In particular, Lotus Development Corp. markets the
Notes product as a universal information sharing tool for collaborative work
groups. The Company believes that the flexibility and workflow components of
NOTES makes that product a viable competitor, although at a significantly higher
cost than MARS(TM).
The Company endeavors to distinguish its services and software from
those of its competitors based upon the following factors: (i) its services and
software are specifically designed for application in financial institution
environments, unlike most competitive products which are designed for more
general applications and require modification for effective utilization by
financial institutions; and (ii) the experience of the Company's management in
the financial services industry.
There can be no assurances that the Company will be successful in its
efforts to distinguish the qualities of its services and software in the
marketplace. Other entities, with substantially greater resources than the
Company, compete directly with the Company, by offering services and/or software
to the same industry.
The Company believes, however, that MKP possesses certain competitive
advantages in the merger communications field. Specifically, the principals of
MKP, Susan Michaelson and Hillary Kelbick, have over 32 years of combined
experience and have successfully completed more than 50 merger projects. Prior
to the establishment of MKP in 1994, Ms. Michaelson and Ms. Kelbick completed
the NationsBank merger which created the then third largest banking organization
in the United States. MKP's first two major merger assignments were the First
Union/First Fidelity merger and the Bank of Boston/Bay Bank merger. Since its
formation, MKP has also performed services for various other banking
institutions, including Chemical Bank (now The Chase Manhattan Bank), The Bank
of New York, Citibank, First National Bank of Maryland, The Dime Savings Bank of
New York, Fleet Bank, CIT Group and PNC National Bank. MKP was recently awarded
the First Union/Signet Bank merger and has received a "Future Bank Initiative"
assignment from First Union National Bank. In 1997, MKP received the Vendor of
the Year Award from First Union National Bank.
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<PAGE> 15
MARKETING
The Company's founder and principal executive officer, together with
the Company's other executive officers, are primarily responsible for marketing
its services and software. In the past, the Company conducted its marketing
activities primarily through advertising in selected financial institution trade
media and at professional financial institution conventions. The Company
currently markets its services and software primarily through direct sales
calls, referral business and personal contacts.
The Company markets primarily to domestic and foreign banks. The
Company believes that there are approximately 500 banks in the United States
engaged in activities which may require services and/or software offered by the
Company. The Company also believes that significant opportunities exist for it
to sell its services and/or software in Europe and the Far East, where it
believes that market conditions have made financial institutions acutely aware
of the necessity to develop sales, marketing and business development
priorities.
The Company's overall marketing strategy includes internal as well as
external channels of distribution. The Company believes that cross-selling its
services and software will provide it with greater opportunities. For example,
the Company believes that it can build a channel of product distribution for
MARS(TM) through its consulting services to augment its own direct selling
efforts. The Company intends to develop relationships with accounting firms
which sponsor information technology services to banks. In addition, the Company
believes that there are additional opportunities for alliances with regional
system integrators whose business is composed entirely of the installation and
modification of banking and financial services applications.
In general, the Company is primarily retained to fulfill specific needs
of its customers. Accordingly, the success of the Company is dependent upon its
ability to attract a flow of new customers as well as new assignments from past
customers. The solicitation of new assignments from past customers has been and
is expected to be an integral part of the Company's marketing strategy.
INTELLECTUAL PROPERTY RIGHTS AND PROTECTION
Like many software companies, the Company does not hold any patents and
relies upon a combination of copyright and trade secret laws and contractual
restrictions to protect its rights in its software, technology and trade
secrets. There can be no assurance that the Company's proprietary technology
will remain a secret or that others will not develop similar technology and use
such technology to compete with the Company.
Although there can be no assurance, the Company believes that its
software and related technology are proprietary and protected by copyright law,
license agreements and non-disclosure agreements. The Company intends to require
its customers to sign license agreements. Although there can be no assurance,
the Company believes that copyright protection, regardless of whether a license
agreement exists, is sufficient to protect the Company's rights in its software
and technology. Certain protections, such as limitations on use of a product and
limitations on warranties and liability, are not afforded by copyright law and
may not be available without an enforceable license agreement. The ability of
software companies to enforce its licenses has not been clearly defined and
there can be no assurances that the Company will be successful in any
enforcement proceedings. In addition, there can be no assurance that the Company
will have the ability or the resources necessary to enforce its rights
-12-
<PAGE> 16
under such licenses or agreements or defend any action commenced by another
party for infringement or any other similar claim.
Pursuant to the indemnification provisions included in its license
agreements, the Company generally will agree to indemnify its customers from
losses resulting from any third-party claims that the Company's software
infringes upon proprietary rights of such third parties. The amount of such
indemnification is generally limited to the amount of the license fee paid by
the customer to the Company. To date, the Company has not received any written
claims of infringement.
The Company also owns exclusive rights to videotapes, manuals and
workbooks utilized in its sales, marketing and business programs and seeks to
protect its proprietary rights therein through restrictions in its license
agreements. The licenses for videotapes, manuals and workbooks generally have a
term of one year. To date, the Company has not been required to enforce these
contractual safeguards relating to the use of its videotapes, manuals and
workbooks. There can be no assurance that the Company would have the ability or
the resources necessary to enforce its rights under such licenses.
EMPLOYEES
As of January 5, 1998, the Company had 17 full-time employees. The
Company also engages independent contractors and consultants from time to time
in connection with certain projects. The Company expects to employ additional
personnel as needed in connection with its operations. The Company believes that
it has good relations with its employees and independent contractors.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report on Form 10-KSB,
including without limitation, statements containing the words "believes,"
"anticipates," "may," "intends," "expects" and words of similar import,
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that may cause
the actual results, performance or achievements of the Company or industry
results to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions, both nationally and in the regions in which the Company operates;
competition; changes in business strategy or development plans; the development
or testing of the Company's software; technological, engineering, manufacturing,
quality control or other problems which could delay the sale of the Company's
software; the Company's ability to obtain appropriate licenses from third
parties, protect its trade secrets, operate without infringing upon the
proprietary rights of others and prevent others from infringing on the
proprietary rights of the Company; and the Company's ability to obtain
sufficient financing to continue operations. Certain of these factors are
discussed in more detail elsewhere in this Annual Report on Form 10-KSB,
including without limitation, under the caption "Item 6 -- Management's
Discussion and Analysis of Financial Condition and Results of Operations."
-13-
<PAGE> 17
ITEM 2 -- DESCRIPTION OF PROPERTY
The Company's principal executive offices are located in New York City
at 335 Madison Avenue, 8th Floor, New York, New York. In September 1995, the
Company entered into a direct sub-sublease agreement with MCI Telecommunications
Corp. ("MCI") covering approximately 5,000 rentable square feet on the llth
floor of 335 Madison Avenue. The sub-sublease expired on December 29, 1996,
which coincided with the expiration date of MCI's sublease arrangement with its
sublessor. However, Builtland Partners, the owner of the building known as 335
Madison Avenue, New York, New York, agreed to permit the Company to remain in
occupancy of the llth floor premises until May, 1997 on the same terms and
conditions set forth in the Company's sub-sublease with MCI.
In October 1996, the Company entered into a direct lease with Builtland
Partners, covering approximately 11,142 square feet on the 8th floor at 335
Madison Avenue. This lease has a ten-year term commencing as of October 1996.
Fixed minimum rent of approximately $31,000 per month is payable by the Company
during the first five years of the term and fixed minimum rent of approximately
$35,000 per month is payable by the Company during the final five years of the
term. Under the terms of the lease, the Company's fixed minimum rent obligations
have been abated until March 20, 1997 and for the months of October, November
and December in each of the first four years of the lease term. Additionally, in
September 1997, the landlord agreed to a further one month abatement of fixed
minimum rent. The Company will be required to pay operating expense and real
estate tax escalation payments as additional rent. Also, the landlord has paid
or reimbursed the Company for approximately $500,000 of construction and other
related costs. The Company assumed occupancy of the 8th floor premises in May
1997.
The Company believes that the facilities which it presently occupies
are well maintained, in good condition and suitable for the Company to continue
its operations in the foreseeable future, including the needs generated by any
future growth.
ITEM 3 -- LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
The Company did not submit any matters to a vote of its shareholders
during the Company's fiscal year ended September 30, 1997.
-14-
<PAGE> 18
PART II
ITEM 5 -- MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
From January 1987 until July 6, 1989, the Common Stock traded in the
over-the-counter market under the Nasdaq symbol "FPCC." The Company's Common
Stock was delisted by Nasdaq in July 1989 primarily due to its failure to
maintain Nasdaq's minimum capital requirements.
As of November 27, 1996, the Company's Common Stock resumed trading
quoted on the OTC Bulletin Board under the symbol "FPCX." The high and low sale
price quotations for the Company's Common Stock for the period November 29, 1996
to January 5, 1998 were $2.75 and $0.22, respectively, as reported by the OTC
Bulletin Board. The Company believes that these quotations represent interdealer
quotations, without adjustment for retail mark-up, mark-down or commissions. The
average weekly volume of the Common Stock since the resumption of trading on the
OTC Bulletin Board in November 1996 was approximately 34,150 shares. The Company
believes that there are at least twelve "market-makers" in the Common Stock
including Van Kasper & Company, Inc., Laidlaw Equities, Inc., Value Investing
Partners, Inc., Fahnstock, Hill Thompson, Nash Weiss and Wilson Davis. See "Item
9 -- Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act" and "Item 12 -- Certain Relationships
and Related Transactions -- Transactions with Directors and Executive Officers."
As of January 5, 1998, the Company had approximately 181 shareholders
of record, excluding the number of beneficial owners whose securities are held
in "streetname." The Company believes that a substantial number of shares of
Common Stock are held in "streetname."
To date, the Company has not paid any dividends on its Common Stock and
does not anticipate paying any such dividends in the foreseeable future. The
Company intends to retain any future earnings to finance the growth and
development of its business. Any future determination as to the payment of
dividends will be at the discretion of the Board of Directors and will depend
on, among other things, the Company's operating results, financial condition,
capital requirements and such other factors as the Board of Directors may deem
relevant.
ITEM 6 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
HISTORY. The Company was incorporated in New York in 1984 under the
name Performance Services Group, Inc. and at that time was primarily engaged in
offering banking institutions a range of proprietary sales and marketing
products, strategic planning and product consulting services and financial
software products. From its inception in 1984 through February 1990, it incurred
continuous losses and working capital deficiencies which limited its marketing
efforts and operations. In July 1989, the Company's Common Stock was delisted
from the Nasdaq over-the-counter market and from February 1990 to November 1992
the Company was inactive.
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<PAGE> 19
In January 1993, the Company recommenced its operations and raised
working capital through private debt and equity issuances, including issuances
to one of the Company's principal stockholders. Although the Company generated
revenues for each of the last four fiscal years ended September 30, 1997, it
incurred losses of $146,036, $801,296, $235,049 and $544,848 for the fiscal
years ended September 30, 1994, 1995, 1996 and 1997, respectively. In addition,
the report of the Company's independent accountants for its balance sheet as of
September 30, 1995 and 1994 and the results of operations, stockholders' equity
and cash flows for the years then ended included an explanatory paragraph which
referred to the Company's substantial losses and concluded that such results
raised substantial doubt about its ability to continue as a going concern.
REVENUES. The Company's revenues historically have been derived from a
limited number of customers. For the year ended September 30, 1997, two
customers accounted for approximately 72% for the Company's revenues, with one
customer accounting for approximately 56% of its revenues. The Company
anticipates that a substantial amount of its revenues will continue to be
concentrated from a limited number of customers. As a result, the Company's
sales and operating results are subject to substantial variations in any given
year and from quarter to quarter. The Company's sales and net income (if any) in
a particular quarter may be lower than the sales and net income (if any) of the
Company for the comparable quarter in the prior year. In addition, sales and net
income (if any) of the Company in any particular quarter may not necessarily
reflect the results of operations for the Company for the full year.
SUBSIDIARIES. The Company's consolidated financial statements include
the accounts of Financial Performance Corporation and its three subsidiaries.
All significant intercompany accounts and transactions have been
eliminated.
Summary financial information concerning MKP, excluding intercompany
eliminations, as of September 30, 1997 and 1996 and for the years then ended, is
as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash............................................. $ 1,091,000 $ 1,685,000
Accounts receivable.............................. 1,646,000 903,000
Other assets..................................... 47,000 14,000
Accounts payable................................. 1,435,000 1,705,000
Revenues......................................... 7,785,000 8,784,000
Operating costs.................................. 7,167,000 8,178,000
Net income....................................... 642,000 504,000
</TABLE>
Summary financial information concerning the Company's other two
subsidiaries, FPC Information and Aspen, as of September 30, 1997 and 1996 and
for the years then ended, is not separately set forth as these entities had no
revenues for such periods and their assets and liabilities during such periods
were immaterial.
-16-
<PAGE> 20
Aspen had no revenues and incurred losses of $219,872 and $530,644 for
the years ended September 30, 1996 and 1995, respectively. Aspen, whose
operations commenced in March 1995, suspended its operations in September 1996.
Aspen was reported as a discontinued operation at September 30, 1996. The net
assets and liabilities relating to the disposal of the discontinued operation is
immaterial.
FPC Information had no revenues and incurred losses of $340,540 and
$428,245 for the fiscal years ended September 30, 1997 and 1996, respectively.
OTHER. Income taxes are computed in accordance with the provisions of
Financial Accounting Standards Board Statement No. 109, "Accounting for Income
Taxes" ("SFAS 109"), which requires, among other things, a liability approach to
calculating deferred income taxes. SFAS 109 requires a company to recognize
deferred tax liabilities and assets for the expected future tax consequences of
events that have been recognized in a company's financial statements or tax
returns. Under this method, deferred tax liabilities and assets are determined
based on the difference between the financial statement carrying amounts and tax
basis of assets and liabilities using enacted tax rates in effect in the years
in which the differences are expected to reverse.
At September 30, 1997, the Company had net operating loss carryforwards
of approximately $1,150,000, which will expire in 2012. Certain provisions of
the tax law may limit the net operating loss carryforwards available for use by
the Company in the event of a significant change in the ownership interest of
the Company. At September 30, 1997, the Company had a deferred tax asset of
approximately $460,000. The deferred tax asset consisted primarily of net
operating loss carryforwards and was fully offset by a valuation allowance of
the same amount.
The income tax expense of $25,397 represents state and local income
taxes on the income of MKP.
Costs associated with software development subsequent to the
establishment of technological feasibility, including enhancements to software
products, are capitalized and amortized as required by Statement of Financial
Accounting Standards No. 86. Costs incurred prior to achieving technological
feasibility are expenses as incurred and classified as research and development
costs. There were no research and development costs incurred by the Company for
the years ended September 30, 1997 and 1996.
Amortization of capitalized software development costs is generally
provided on a product-by-product basis at the greater of the amount computed by
using the ratio of current gross revenue to total current and anticipated gross
revenue of the product or on the straight-line method over the sixty-month
estimated useful life of the product, commencing when the product is available
for general release to customers.
The Company's consolidated financial statements listed under "Item 7 --
Financial Statements" should be read in connection herewith.
FORWARD-LOOKING STATEMENTS. Certain statements contained in this Annual
Report on Form 10-KSB, including, without limitation, statements containing the
words "believes," "anticipates," "may," "intends," "expects" and words of
similar import, constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause the actual
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<PAGE> 21
results, performance or achievements of the Company or industry results to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: general economic and business conditions, both
nationally and in the regions in which the Company operates; competition;
changes in business strategy or development plans; the development or testing of
the Company's software; technological, engineering, manufacturing, quality
control or other problems which could delay the sale of the Company's software;
the Company's ability to obtain appropriate licenses from third parties, protect
its trade secrets, operate without infringing upon the proprietary rights of
others and prevent others from infringing on the proprietary rights of the
Company; and the Company's ability to obtain sufficient financing to continue
operations. Certain of these factors are discussed in more detail elsewhere in
this Annual Report on Form 10-KSB, including without limitation, under the
caption "Item 1 -- Description of Business."
RESULTS OF OPERATIONS
FISCAL YEARS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
REVENUES. Revenues for the fiscal year ended September 30, 1997
decreased by $998,887 to $7,785,250 from $8,784,137 for the fiscal year ended
September 30, 1996. This decrease was attributable to a decrease in revenues
generated by MKP, resulting from the reduced scope of the merger projects for
which MKP was engaged during this period.
COST OF REVENUES. Cost of revenues decreased by $788,572 to $6,482,542
for the fiscal year ended September 30, 1997 from $7,271,114 for the fiscal year
ended September 30, 1996. This decrease was attributable primarily to the
reduced costs of performing the merger projects for which MKP was engaged during
this period.
SALARIES AND RELATED EXPENSES. Payroll expenses increased by $80,187 to
$605,864 for the fiscal year ended September 30, 1997 from $525,677 for the
fiscal year ended September 30, 1996. This increase was attributable primarily
to the increase in staff employed by MKP.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $556,685 to $1,265,803 for the fiscal year
ended September 30, 1997 from $709,118 for the fiscal year ended September 30,
1996. This increase was attributable primarily to increased expenditures
relating to the Company's new lease for expanded premises, increased
professional fees as well as additional Company personnel and independent
contractors retained in connection with MKP's business operations.
OPERATING LOSS. The Company had an operating loss of $568,959 for the
fiscal year ended September 30, 1997 as compared to an operating profit of
$278,228 for the fiscal year ended September 30, 1996.
NET LOSS. The Company had a net loss of $544,848 for the fiscal year
ended September 30, 1997 as compared to a net loss of $235,049 for the fiscal
year ended September 30, 1996.
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<PAGE> 22
FISCAL YEARS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
REVENUES. Revenues during the fiscal year ended September 30, 1996
increased by $7,468,537 to $8,784,137 from $1,315,600 for the prior year. This
increase was attributable to revenues generated by MKP. During this period, MKP
was awarded a contract to work on merger and marketing communications for two
major banking institutions. MKP generated approximately 100% of the consolidated
revenues of the Company for the fiscal year ended September 30, 1996.
COST OF REVENUES. Cost of revenues increased by $6,454,999 to
$7,271,114 for the fiscal year ended September 30, 1996 from $816,115 for the
fiscal year ended September 30, 1995. This increase resulted primarily from a
substantial increase in outsourcing expenses and fees for independent
contractors retained by MKP in connection with its increased business during
such period and bonuses paid to the two Managing Directors of MKP in the
aggregate amount of approximately $344,000.
SALARIES AND RELATED EXPENSES. Payroll expenses increased by $161,497
to $525,677 for the fiscal year ended September 30, 1996 from $364,180 for the
fiscal year ended September 30, 1995. This increase was primarily due to the
increase in staff employed by MKP as well as the payment of year-end bonuses to
the two Managing Directors of MKP.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $312,230 to $615,106 for the fiscal year
ended September 30, 1996 from $302,876 for the fiscal year ended September 30,
1995. This increase was due primarily to increased expenditures related to
additional Company personnel and independent contractors.
OPERATING PROFIT. The Company had an operating profit of $278,228 for
the fiscal year ended September 30, 1996 compared to an operating loss of
$284,898 for the fiscal year ended September 30, 1995.
NET INCOME (LOSS). The Company had a net loss of $235,049 for the
fiscal year ended September 30, 1996 as compared to a net loss of $801,296 for
the fiscal year ended September 30, 1995. The Company's operating loss from
continuing operations after income taxes for the fiscal year ended September 30,
1996 was $15,177. Without giving effect to payments made to two of the Company's
executive officers (the two Managing Directors of MKP) in the aggregate of
approximately $430,000, the Company would have had net income of approximately
$155,000 for the fiscal year ended September 30, 1996. These payments were made
in connection with annual incentive pool provisions contained in such
executives' employment agreements with the Company. See "Item 10 --Executive
Compensation -- Employment Agreements."
LIQUIDITY AND CAPITAL RESOURCES
In the past, the Company required continuous capital to fund its operating
losses which were primarily attributable to expenses in connection with
marketing activities, research and development costs and other expenses
including salaries and related expenses and selling, general and administrative
expenses. The Company has financed its operations to date primarily through
public and private sales of its debt and equity securities, including
significant sales to one of its principal stockholders, and more recently
through revenues generated by the Company's subsidiary, MKP. See "Item 1
- -- Description of Business" and "Item 12 -- Certain Relationships and Related
Transactions -- Transactions with Principal Stockholders."
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<PAGE> 23
As of September 30, 1997, the Company had working capital of $1,121,581,
stockholders' equity of $1,753,415 and a working capital ratio (current assets
to current liabilities) of 1.65:1. As of September 30, 1997 and 1996, the
Company had cash and cash equivalents of $1,139,974 and $1,972,056 ,
respectively. For the years ended September 30, 1997 and 1996, the Company used
cash for operations of $800,432 and generated positive cash flow from operations
of $262,290, respectively, primarily as a result of a decrease in revenues and
utilized $406,727 and $320,076 for investing activities during the years ended
September 30, 1997 and 1996, respectively. Net cash provided by the Company's
financing activities for the years ended September 30, 1997 and 1996 were
$375,077 and $1,681,087, respectively.
As of September 30, 1997, the Company had no short-term debt and no
long-term debt. In November 1996, long and short-term debt plus accrued interest
thereon in the aggregate amount of $289,614 which was due to a principal
stockholder was converted into shares of the Company's common stock.
As of September 30, 1997, the Company has made no material capital
commitments other than those related to non-cancelable operating leases for
office space and equipment. For the years ended September 30, 1998, 1999, 2000
and 2001, the Company's minimum payments in connection with these leases are
approximately $281,000, $281,000, $281,000 and $374,000 per year, respectively.
In addition, the Company expects to spend approximately $100,000 for the fiscal
year ending September 30, 1998 in connection with its research and development
activities.
Based on the Company's current plan of operations, it is anticipated that
the Company's existing working capital and expected operating revenues will
provide sufficient working capital for operations through September 30, 1998.
However, there can be no assurance that the Company will not require additional
financing prior to that time. For the years ended September 30, 1998, 1999, 2000
and 2001, the Company's minimum payments in connection with the leases are
approximately $281,000, $281,000, $281,000 and $374,000 per year, respectively.
The Company anticipates that it will require additional capital to fund its
operations. The Company's capital requirements depend on, among other things,
whether the Company is successful in generating revenues and income from its
marketing efforts, including those related to MARS(TM), the progress and costs
of the Company's research and development programs, the ability of the Company
to successfully market its software and services and the effect of such efforts
on the Company's operations, competing technological and market developments,
the costs involved in protecting and enforcing its proprietary rights and any
litigation related thereto and the cost and availability of third-party
financing.
The Company may also seek additional financing in connection with the
acquisition of one or more products (or rights related thereto) or entities or
the consummation of other business combinations. Although the Company has
engaged in discussions with third parties from time to time concerning potential
acquisitions and other business combinations and anticipates continuing such
activities in the future, the Company has no current commitments regarding such
acquisitions or other business combinations.
Financing may be raised by the Company through additional equity offerings,
joint ventures or other collaborative relationships, borrowings and other
transactions. The Company may seek additional funding through any such
transaction or a combination thereof. There can be no assurance that additional
financing will be available to the Company or, if available, that such financing
will be available on acceptable terms.
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<PAGE> 24
INFLATION
In general, the Company believes that it will be able to offset any
inflationary pressures by increasing operating efficiency, monitoring and
controlling expenses and increasing prices to the extent permitted by
competitive factors.
ITEM 7 -- FINANCIAL STATEMENTS
The audited consolidated financial statements of the Company for the fiscal
years ended September 30, 1997 and 1996 are set forth at the end of this Annual
Report on Form 10-KSB and begin on page F-1.
ITEM 8 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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<PAGE> 25
PART III
ITEM 9 -- DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE
EXCHANGE ACT
The following table sets forth certain information concerning the
Company's directors, executive officers and key employees:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
William F. Finley 54 President; Chief Executive Officer; Chief Financial
Officer; Chairman of the Board of Directors
Duncan G. Burke 54 Vice President and Director
Richard Levy 62 Secretary and Director
Susan Michaelson 40 Managing Director of MKP
Hillary Kelbick 41 Managing Director of MKP
</TABLE>
The business experience of each of the directors, executive officers and
key employees of the Company for at least the most recent five years is as
follows:
WILLIAM F. FINLEY is the founder of the Company and has served as its
President, Chief Executive Officer and Chairman of the Board since its inception
in 1984, and has served as its Chief Financial Officer since December 1987. From
1978 through 1984, Mr. Finley served as Vice President-Corporate Banking and
Manager of a consulting services group known as the Performance Services
Department of Marine Midland Bank, N.A. Prior thereto, from 1971 to 1978, Mr.
Finley held the position of Personnel-Training Director at Irving Trust Company.
From 1969 to 1971, Mr. Finley was employed in the Corporate and Management
Development Department at Chase Manhattan Bank. Mr. Finley has a Masters Degree
in Business Administration from New York University and a Bachelors of Arts
Degree in Psychology and Sociology from Miami University (Ohio). Mr. Finley is
the husband of Susan Michaelson, one of the two Managing Directors of MKP.
DUNCAN G. BURKE has served as a Director of the Company since April 1994.
He has also been the sole principal of Burke Capital Group, Greenwich,
Connecticut since 1994. From 1992 to 1994, Mr. Burke was a Senior Vice President
of Laidlaw Holdings Asset Management, Inc. and from August 1991 to November 1992
he served as a Vice President of Laidlaw Equities, Inc. From 1989 to 1991, Mr.
Burke was a Vice President with Tucker Anthony Incorporated. He was in the
investment banking group with Dean Witter Reynolds, Inc. from 1970 to 1989. Mr.
Burke holds a B.A. in Economics from Dartmouth College and an M.B.A. in Finance
from Columbia University Graduate School of Business.
RICHARD LEVY has served as a Director of the Company since April 1994. He
is a Senior Director at Cushman & Wakefield, Inc., a real estate consulting and
brokerage firm, and has been
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<PAGE> 26
employed by the firm for more than 35 years. Mr. Levy is also a director of
Mascott Corporation, a restaurant and catering company. Mr. Levy attended
Muhlenberg College and Columbia University.
SUSAN MICHAELSON is one of the co-founders of MKP, together with Hillary
Kelbick and the Company, and has been a Managing Director of MKP since its
inception in October 1994. From 1990 to 1994, Ms. Michaelson served as Senior
Vice President at Wilcox Associates. From 1986 to 1990, Ms. Michaelson was also
a Senior Vice President of the Company. Ms. Michaelson is the wife of William F.
Finley, President, Chairman of the Board and Chief Executive Officer of the
Company. Ms. Michaelson holds a Bachelor of Arts Degree from Syracuse
University.
HILLARY KELBICK is one of the co-founders of MKP, together with Susan
Michaelson and the Company, and has been a Managing Director of MKP since its
inception in October 1994. From 1982 to 1994, Ms. Kelbick served as Senior Vice
President at Wilcox Associates. Ms. Kelbick holds a Bachelor of Arts Degree from
SUNY Albany.
There are currently three members on the Company's Board of Directors.
Philip L. Hage, who served as a Director of the Company since August 1996,
resigned effective as of June 30, 1997. The Company's certificate of
incorporation and by-laws authorize the Board of Directors to fix the number of
authorized directors. The Company's by-laws also authorize the Board of
Directors to fill any vacancy on the Board of Directors. The Company's by-laws
provide that directors are to be elected annually by the shareholders and hold
office until the next annual meeting and until their respective successors are
elected and qualified. Executive officers are elected by the Board of Directors
and hold office until their respective successors are elected and qualified. The
Company has employment agreements with each of its executive officers and key
employees. Other than Mr. Finley and Ms. Michaelson who are married, there are
no other family relationships between the Company's directors, executive
officers and key personnel.
LIMITATION ON PERSONAL LIABILITY; INDEMNIFICATION
The Company's Certificate of Incorporation and By-Laws contain provisions
exculpating the Company's directors from personal liability for actions taken or
omitted to be taken by them in connection with their positions, with limited
exceptions. The Company's By-Laws also contain provisions which require the
Company to indemnify current and former officers and directors for any
judgments, fines, amounts paid in settlement or reasonable attorneys' fees
incurred in the defense of certain actions and proceedings to the fullest extent
permitted under New York law. Insofar as indemnification for liabilities arising
under the Securities Act of 1933, as amended, may be permitted to directors,
officers and controlling persons of the Company pursuant to the foregoing
provisions or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The Securities and Exchange Commission (the "Commission") has comprehensive
rules relating to the reporting of securities transactions by directors,
officers and stockholders who beneficially own more than 10% of the Company's
Common Stock (collectively, the "Reporting Persons"). These rules are complex
and difficult to interpret. Based solely on a review of Section 16 reports
received by the Company from Reporting Persons, the Company believes that no
Reporting Person has failed to file a Section 16 report on a timely basis during
the most recent fiscal year (or any prior fiscal year
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<PAGE> 27
discovered prior to the filing of this Annual Report on Form 10-KSB), other than
each of Ms. Kelbick and Ms. Michaelson (who each failed to file a Form 3 in
October 1994 and a Form 4 in October 1996), Mr. Levy (who failed to file a Form
3 in June 1994 and a Form 4 in July and October 1996), Mr. Burke (who failed to
file a Form 3 in June 1994 and a Form 4 in January 1995 and October 1996) and
Mr. Finley (who failed to file a Form 3 and failed to file a Form 4 in October
1993, December 1993, October 1995 and October 1996).
CONSULTING AGREEMENTS
In November 1996, the Company entered into a two-year, non-exclusive
advisory agreement with Van Kasper & Company ("Van Kasper"). Pursuant to the
terms of the agreement, the Company issued Van Kasper a three-year warrant to
purchase 150,000 shares of Common Stock with an exercise price of $0.50 per
share. The Company registered the shares of Common Stock underlying the warrant
under a registration statement filed by the Company which was declared effective
in February 1997. Under the agreement, Van Kasper will provide general corporate
advice to the Company, including advice in connection with developing
relationships with analysts and market-makers and advice on investor
presentations. See "Item 5 -- Market for Common Equity and Related Stockholder
Matters" and "Item 12 -- Certain Relationships and Related Transactions --
Transactions with Directors and Executive Officers."
In November 1996, the Company entered into a non-exclusive advisory
agreement with Laidlaw Equities, Inc. ("Laidlaw") which provided that Laidlaw
would render general corporate advice to the Company and proposed to act as a
placement agent in connection with potential acquisition financing. Pursuant to
the terms of the agreement, the Company issued Laidlaw a three-year warrant to
purchase 150,000 shares of Common Stock with an exercise price of $0.50 per
share. The Company registered the shares of Common Stock underlying the warrant
under a registration statement filed by the Company which was declared effective
in February 1997. During the Company's fiscal year ended September 30, 1997, the
Company advised Laidlaw that Laidlaw had abrogated the provisions of this
agreement and that the three-year warrant issued to Laidlaw referred to above
had been cancelled. See "Item 5 -- Market for Common Equity and Related
Stockholder Matters" and "Item 12 -- Certain Relationships and Related
Transactions -- Transactions with Directors and Executive Officers."
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<PAGE> 28
ITEM 10 -- EXECUTIVE COMPENSATION
The following table summarizes, for the fiscal years ended September 30,
1997, 1996 and 1995, the compensation paid by the Company to the Company's Chief
Executive Officer and to each other executive officer whose total annual salary
and bonus exceeded $100,000 for services rendered in all capacities to the
Company (the "named executive officers"). See "-- Employment Agreements."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
AWARDS
NAME AND FISCAL OTHER ANNUAL OPTIONS/
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION WARRANTS(#)
- ------------------ ------ --------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C>
William F. Finley (1) 1997 $150,000 __ $9,750(7) __
Chief Executive Officer 1996 $150,000 $ 25,000 $ 30,000(9) 200,000
1995 $125,000 __ __ 200,000
Susan Michaelson (2)(3) 1997 $160,000 $141,500 $ 10,400(8) __
Managing Director of MKP 1996 $127,000 $215,000 $ 30,000(9) 200,000(3)
1995 $ 92,000 __ $100,000 __
Hillary Kelbick(4) 1997 $160,000 $141,500 $ 10,400(8) __
Managing Director of MKP 1996 $127,000 $215,000 $ 30,000(9) 200,000(4)
1995 $ 92,000 __ $100,000 __
Sean Brennan(5) 1997 $ __ __ __ __
Member of Aspen 1996 $ 83,334 __ __ __
1995 $185,000 __ __ __
Richard Loos(6) 1997 __ __ __ __
Member Officer of Aspen 1996 $ 37,500 __ __ __
1995 $111,000 __ __ __
</TABLE>
(1) On November 11, 1993, Mr. Finley received warrants to purchase 100,000
shares of Common Stock at $0.50 per share, exercisable until August 31,
1998. On September 15, 1995, the Company issued to Mr. Finley warrants
to purchase 200,000 shares of Common Stock at $0.50 per share,
exercisable until September 15, 2010. On September 16, 1996, the
Company issued to Mr. Finley warrants to purchase 200,000 shares of
Common Stock with an exercise price of $1.00 per share, exercisable
until September 15, 2006. All of the shares of Common Stock underlying
the warrants issued to Mr. Finley were registered by the Company under
a registration statement which was declared effective in February 1997.
Effective as of January 1, 1995, the Company entered into an employment
agreement with Mr. Finley for a period of five
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<PAGE> 29
years providing for an annual salary of $125,000.00. Effective as of
July 1, 1996, the Company agreed to amend the employment agreement to
increase Mr. Finley's annual salary to $150,000.00 and to grant Mr.
Finley a bonus in the amount of $25,000. Effective as of October 1,
1997, the Company entered into a new employment agreement with Mr.
Finley for a period of three years providing for an annual salary of
$150,000. In November 1997, the Company's Board of Directors voted to
grant Mr. Finley a bonus of $100,000. As of January 5, 1998, no part of
such bonus had been paid to Mr. Finley. See "-- Employment Agreements."
(2) Susan Michaelson is the wife of William F. Finley, the Company's
President, Chief Executive Officer and Chief Financial Officer.
(3) As of October 1994, Ms. Michaelson received 100,000 shares of Common
Stock pursuant to the terms of the Company's agreement dated October
17, 1994 with Ms. Michaelson and Hillary Kelbick. On September 16,
1996, the Company issued to Ms. Michaelson warrants to purchase 200,000
shares of Common Stock with an exercise price of $1.00 per share,
exercisable until September 15, 2006. Effective as of September 11,
1997, MKP entered into a new employment agreement with Ms. Michaelson
for a period of three years providing for an annual salary of $150,000.
See "-- Employment Agreements."
(4) As of October 1994, 100,000 shares of common Stock were issued to Ms.
Kelbick pursuant to the terms of the Company's agreement dated October
17, 1994 with Susan Michaelson and Ms. Kelbick. On September 16, 1996,
the Company issued to Ms. Kelbick warrants to purchase 200,000 shares
of Common Stock with an exercise price of $1.00 per share, exercisable
until September 15, 2006. Effective as of September 11, 1997, MKP
entered into a new employment agreement with Ms. Kelbick for a period
of three years providing for an annual salary of $150,000. See
"--Employment Agreements."
(5) Mr. Brennan resigned as an officer of Aspen in July 1996 and does not
currently receive any compensation from the Company.
(6) Mr. Loos resigned as an officer of Aspen in September 1996 and does not
currently receive any compensation from the Company.
(7) For the year ended September 30, 1997, the Company contributed an
aggregate of $9,750 for such executive under its 401-K and profit
sharing plan. See "Pension Plan".
(8) For the year ended September 30, 1997, the Company contributed an
aggregate of approximately $10,400 for such executive under its 401-K
and profit sharing plan. See "Pension Plan."
(9) For the year ended September 30, 1996, the Company contributed an
aggregate of $30,000 for such executive under its non-contributing
pension and profit sharing plan. See "Pension Plan."
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<PAGE> 30
STOCK OPTION AND WARRANT GRANTS IN 1997
No options or warrants were issued by the Company to any of the "named
executive officers" of the Company during the fiscal year ended September 30,
1997.
OPTION EXERCISES AND FISCAL YEAR-END HOLDINGS
No options or warrants were exercised by any named executive officer for
the fiscal year ended September 30, 1997 except for 49,414 warrants exercised
by William F. Finley at an exercise price of $0.50 per share in November, 1996.
The following table sets forth information, as of September 30, 1997, concerning
the number of shares received upon exercise of warrants, the aggregate dollar
value received upon exercise, the number of shares issuable as to exercisable
and nonexercisable options or warrants and the value of "in the money" options
and warrants held by the Company's "named executive officers."
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUE
<TABLE>
<CAPTION>
SHARES VALUE OF UNEXERCISED
ACQUIRED NUMBER OF UNEXERCISED IN-THE-MONEY
ON VALUE OPTIONS/WARRANTS OPTIONS/WARRANTS
NAME EXERCISE REALIZED(1) AT FISCAL YEAR-END AT FISCAL YEAR-END(2)
---- -------- -----------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William F. Finley 49,414 $24,707 507,546 __ $0 __
Susan Michaelson __ __ 230,000 __ $0 __
Hillary Kelbick __ __ 200,000 __ $0 __
</TABLE>
..............................
(1) The value realized with regard to exercised warrants is based on the
Company's estimate of the fair market value of the Common Stock
underlying the warrants on the date of exercise, minus the exercise
price of the warrant.
(2) The value of exercisable options and warrants is based on the
volume-weighted average price of the Common Stock as reported on the
OTC Bulletin Board on December 30, 1997, which was $0.22, minus the
exercise price of the option or warrant, as the case may be.
COMPENSATION OF DIRECTORS
The Company has no standard arrangement relating to the compensation of its
directors. Directors who are also officers of the Company are not paid any
monetary compensation for attendance at directors' meetings or for attending or
participating in any committee meetings. Historically, directors
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<PAGE> 31
of the Company have been compensated for their services and attendance at
meetings through the grant of options and warrants to purchase shares of Common
Stock.
All directors are eligible for grants of stock options pursuant to the
Company's 1988 Incentive Stock Option Plan. As of September 30, 1997, the
Company had granted options to two of its directors (including the chief
executive officer) and two former directors under the Option Plan, representing
a total of 70,000 shares, exercisable at an average exercise price of
approximately $4.60 per share until October 1998.
In December 1994 and July 1996, Duncan Burke and Richard Levy,
respectively, received 20,000 shares of Common Stock for services rendered to
the Company. In addition, in September 1996, Messrs. Burke and Levy each
received warrants to purchase 50,000 shares of Common Stock at $1.00 per share
exercisable until September 15, 2006. In September 1996, Philip L. Hage received
warrants to purchase 25,000 shares of Common Stock at $1.00 per share,
exercisable until September 15, 2006. In November 1997, the Company issued to
each of Richard Levy and Duncan Burke warrants to purchase 50,000 shares of
Common Stock at $0.50 per share, exercisable until November 1999, together with
"piggyback" registration rights as to the shares of Common Stock underlying the
warrants. All of the warrants are immediately exercisable. See "Item 12 --
Certain Relationships and Related Transactions --Transactions with Directors and
Executive Officers."
INCENTIVE STOCK OPTION PLAN
In March 1988, the Company adopted an Incentive Stock Option Plan (the
"Option Plan") pursuant to which 140,000 shares of Common Stock have been
reserved for issuance to officers, directors and key employees of the Company.
Under the Option Plan, options are granted at 100% of fair market value on the
date of grant (or 110% of fair market value, if the grantee is the owner of 10%
or more of the Company's Common Stock as of the date of grant). As of September
30, 1997, the Company had granted options to 5 individuals to purchase a total
of 70,000 shares, exercisable at an average exercise price of approximately
$4.60 per share until October 1998.
EMPLOYMENT AGREEMENTS
On September 1, 1995, the Company entered into a five-year employment
agreement with Mr. Finley which expired on August 31, 2000. Under the agreement,
Mr. Finley's initial annual salary was $125,000, subject to increases as
determined by the Company's Board of Directors, and Mr. Finley's salary was
subsequently increased to $150,000.
Effective as of October 1, 1997, the Company entered into a new three-year
employment agreement with Mr. Finley which expires on September 30, 2000. Under
the new employment agreement, Mr. Finley's initial salary is $150,000 per annum,
subject to periodic increases as shall be determined by the Company's Board of
Directors. In the event of the termination of Mr. Finley's employment by reason
of (a) a "change in control" (as such term is defined in the employment
agreement) of the Company, (b) an uncured default by the Company under the
employment agreement, (c) a material and adverse change in Mr. Finley's
management functions, duties or responsibilities, (d) Mr. Finley's ceasing to be
a director and the Chief Executive Officer of the Company (other than by reason
of Mr. Finley's death, incapacity or resignation) or (e) an improper termination
of Mr. Finley's employment by the Company, then in addition to paying Mr.
Finley's salary and accrued benefits through the date of termination of
employment, the Company shall be obligated to pay to Mr. Finley, as severance
pay, an amount equal to 200% of Mr. Finley's annual base salary rate as of the
effective date of termination and to maintain
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<PAGE> 32
through the remaining balance of the term of the employment agreement (but not
less than two years from the date of termination of Mr. Finley's employment
agreement) all employee benefit plans and programs in which Mr. Finley was
entitled to participate. The Company agreed to pay reasonable travel and
entertainment expenses incurred by Mr. Finley on behalf of the Company and to
provide Mr. Finley with a leased automobile. If Mr. Finley does not elect not to
renew his employment agreement at the expiration of the term and the Company
does not elect to renew Mr. Finley's employment upon the expiration of the term
thereof, then Mr. Finley shall be entitled to receive a severance payment of
$100,000. Pursuant to the terms of the employment agreement, for a period of one
year after the expiration or termination of the employment agreement, Mr. Finley
may not disrupt any relationships, contractual or otherwise, between the Company
and any of its customers, clients, employees or independent contractors.
Mr. Finley's executive employment agreement does not provide for the
issuance of any Common Stock, warrants or options. On September 15, 1995, the
Company granted Mr. Finley warrants to purchase 200,000 shares of the Common
Stock with an exercise price of $0.50 per share, exercisable through September
15, 2010. Additionally, on September 16, 1996, the Company granted Mr. Finley
warrants to purchase 200,000 shares of the Common Stock with an exercise price
of $1.00 per share, exercisable through September 15, 2006.
In October 1994, MKP entered into executive employment agreements with each
of Ms. Michaelson and Ms. Kelbick for a term of three years ending on October
17, 1997. Under the terms of the agreements, the initial annual salary of Ms.
Michaelson and Ms. Kelbick was $80,000. The annual base salary payable to each
of Ms. Michaelson and Ms. Kelbick was subsequently increased to $115,000.
Effective as of September 11, 1997, MKP entered into a new three-year
employment agreement with each of Ms. Michaelson and Ms. Kelbick which expires
on September 10, 2000. Under the new agreements, the initial annual base salary
payable to each of Ms. Michaelson and Ms. Kelbick is $150,000, subject to
periodic increases as shall be determined by MKP's Board of Directors. The
employment agreements further provide for an annual incentive compensation
payment for each of Ms. Michaelson and Ms. Kelbick equal to a percentage,
determined annually by the Board of Directors (not to exceed 30% in the
aggregate) of the net income before taxes of MKP as if MKP was not a member of
the Company's consolidated group. For the year ended September 30, 1997, Ms.
Michaelson and Ms. Kelbick received an aggregate of approximately $283,000 under
the incentive program. Ms. Michaelson and Ms. Kelbick have the option to receive
all or a portion of any bonus payment by means of issuance of securities of the
Company.
If either Ms. Michaelson or Ms. Kelbick does not elect not to renew her
respective employment agreement with MKP at the expiration of the term and MKP
elects not to renew the employment agreement, the respective executive will be
entitled to receive a severance payment in the amount of $250,000. The
employment agreements provide each of Ms. Michaelson and Ms. Kelbick with a
clothing expense allowance of $10,000 for each year of the term of the agreement
and a leased automobile throughout the term. In the event of the termination of
employment of either Ms. Michaelson or Ms. Kelbick by reason of (a) a "change in
control" (as such term is defined in the employment agreement) of MKP or the
Company, (b) an uncured default by MKP under the employment agreement, (c) a
material and adverse change in the management functions, duties or
responsibilities of the employee or (d) an improper termination by MKP of
employment of the employee, then in addition to paying all salary and accrued
benefits through the date of termination of employment, MKP shall be obligated
to pay to the employee, as severance pay, an amount equal to 200% of the
employee's annual base salary rate in effect as of the date of termination and
to maintain through the remaining balance of
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<PAGE> 33
the term of the employment agreement (but not less than two years from the date
of termination of the employee's employment agreement) all employee benefit
plans and programs in which the employee was entitled to participate. "See Item
12 -- Certain Relationships and Related Transactions -- Transactions with
Directors and Executive Officers." For a period of one year after the expiration
or termination of the respective employment agreements, Ms. Michaelson and Ms.
Kelbick may not disrupt or interfere with any relationship, contractual or
otherwise, between MKP and any of its customers, clients, employees or
independent contractors.
PENSION PLAN
In September 1996, the Company established a non-contributory pension and
profit sharing plan for the benefit of its eligible full-time employees. The
plan provided for annual contributions to a trust fund, which are based upon a
percentage of qualifying employees' annual compensation. Total contributions are
limited to the maximum amount deductible for federal income tax purposes. For
the year ended September 30, 1996, the Company contributed an aggregate of
$90,000 in connection with the plan for the benefit of Mr. Finley, Ms.
Michaelson and Ms. Kelbick. This plan was terminated in March 1997.
In January, 1997, the Company established a 401(k) salary deferred benefit plan
covering substantially all employees who have met certain requirements. The plan
requires contributions by the Company equal to 50% up to a maximum of 3% of each
participant's contribution percentage. In September, 1997, the Company amended
its 401(k) plan to provide a provision for discretionary profit sharing plan
contributions. Total contributions to the plan (401(k) and profit sharing) were
$82,000 for the year ended September 30, 1997.
ITEM 11 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of January 5, 1998, certain information
regarding the beneficial ownership of Common Stock by (i) each person who is
known to the Company to be the beneficial owner of more than 5% of the Common
Stock, (ii) each director and executive officer of the Company, (iii) each of
the Company's "named executive officers" as determined in accordance with the
rules and regulations of the Commission, and (iv) all directors and executive
officers of the Company as a group. The following information is based in part
upon data furnished by the persons indicated below:
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED(1) PERCENT OF CLASS(1)
- ---------------- --------------------- -------------------
<S> <C> <C>
Robert S. Trump(2) 4,887,422 60.93%
William F. Finley(3) 837,546 9.56%
Marvin M. Reiss(4) 434,392 5.19%
Duncan G. Burke(5) 120,000 1.48%
Richard Levy(6) 120,000 1.48%
Philip L. Hage(7) 25,200 0.31%
</TABLE>
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<PAGE> 34
<TABLE>
<CAPTION>
<S> <C> <C>
Susan Michaelson(8) 330,000 4.00%
Hillary Kelbick(9) 300,000 3.65%
All directors and executive
officers as a group (5 persons) 1,377,546 14.60%
</TABLE>
..............................
(1) Based upon an aggregate of 8,021,534 shares of Common Stock outstanding
as of January 5, 1998, plus, for each listed beneficial owner, the
number of shares which such person has the right to acquire within 60
days of January 5, 1998.
(2) The address of Mr. Trump is c/o Trump Management, Inc. 2611 West Second
Street, Brooklyn, New York 11223. For further information concerning
Mr. Trump's relationships to the Company, see "Item 12 -- Certain
Relationships and Related Transactions -- Transactions with Principal
Stockholders."
(3) Includes: (i) 15,000 shares issuable upon the exercise of an option
granted pursuant to the Option Plan; (ii) 81,960 shares issuable upon
the exercise of warrants granted on September 30, 1993 in partial
consideration for the exchange of approximately $25,612 of indebtedness
owed by the Company; (iii) 10,586 shares issuable upon the exercise of
warrants granted on November 11, 1993; (iv) 10,000 shares issuable upon
the exercise of an option granted to Susan Michaelson pursuant to the
Option Plan; (v) 20,000 shares issuable upon the exercise of warrants
granted to Susan Michaelson on November 11, 1993; (vi) 100,000 shares
of Common Stock held by Susan Michaelson; (vii) 200,000 shares issuable
upon the exercise of warrants granted on September 15, 1995; (viii)
200,000 shares issuable upon the exercise of warrants granted on
September 16, 1996; and (ix) 200,000 shares issuable upon the exercise
of warrants granted to Susan Michaelson on September 16, 1996. Susan
Michaelson is the wife of Mr. Finley and a Managing Director and 10%
stockholder of MKP. Mr. Finley disclaims beneficial ownership of the
shares beneficially owned by his wife. The address of Mr. Finley is 335
Madison Avenue, New York, New York 10017.
(4) Includes: (i) 15,000 shares issuable upon the exercise of an option
granted pursuant to the Option Plan; (ii) 79,611 shares of Common Stock
held by Rebot Corporation, a private corporation whose sole stockholder
is Mr. Reiss; (iii) 239,781 shares issuable upon the exercise of
warrants granted to Rebot Corporation on September 30, 1993 in
consideration for the exchange of $74,931 of indebtedness owed by the
Company; and (iv) 100,000 shares issuable upon the exercise of warrants
granted on November 11, 1993. The address of Mr. Reiss is 5 Walden
Lane, Rye, New York 10580.
(5) Includes 50,000 shares issuable upon the exercise of warrants granted
to Mr. Burke on September 16, 1996 and 50,000 shares issuable upon the
exercise of warrants granted to Mr. Burke on December 29, 1997. The
address of Mr. Burke is c/o Burke Capital, Two Greenwich Plaza, P.O.
Box 628, Greenwich, Connecticut 06836.
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<PAGE> 35
(6) Includes 50,000 shares issuable upon the exercise of warrants granted
to Mr. Levy on September 16, 1996 and 50,000 shares issuable upon the
exercise of warrants granted to Mr. Levy on December 29, 1997. The
address of Mr. Levy is c/o Cushman & Wakefield, 100 Wall Street, New
York, New York 10005.
(7) Includes 25,000 shares issuable upon the exercise of warrants granted
to Mr. Hage on September 16, 1996. The address of Mr. Hage is c/o Van
Kasper & Company, 600 California Street, Suite 1700, San Francisco,
California 94108. Mr. Hage resigned as a director of the Company
effective as of June 30, 1997.
(8) Includes: (i) 10,000 shares issuable upon the exercise of an option
granted pursuant to the Option Plan; (ii) 20,000 shares issuable upon
the exercise of an option to purchase Common Stock granted on November
11, 1993; and (iii) 200,000 shares issuable upon the exercise of
warrants granted on September 16, 1996. Does not include any equity
securities of the Company beneficially owned by Ms. Michaelson's
husband, William F. Finley, the Company's Chairman of the Board,
President and Chief Executive Officer. Ms. Michaelson disclaims
beneficial ownership of the shares beneficially owned by her husband.
The address of Ms. Michaelson is 335 Madison Avenue, New York, New York
10017.
(9) Includes 200,000 shares issuable upon the exercise of warrants granted
to Ms. Kelbick on September 16, 1996. The address of Ms. Kelbick is 335
Madison Avenue, New York, New York 10017.
ITEM 12 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following is a discussion of certain transactions entered into by the
Company and its principal stockholders, executive officers and directors. The
Company believes that the terms of these transactions were no less favorable to
the Company than would have been obtained from non-affiliated third parties for
similar transactions at the time of such transactions. The Company's current
policy is that all transactions between the Company and its directors, officers
and principal stockholders should be on terms no less favorable to the Company
than could be obtained from unaffiliated parties.
TRANSACTIONS WITH PRINCIPAL STOCKHOLDERS
ROBERT S. TRUMP. In January 1993, Robert S. Trump (who as of January 5,
1998 beneficially owned approximately 60.93% of the Common Stock) loaned the
Company an aggregate of $125,000 in connection with the recommencement of its
operations. The loan was evidenced by a secured, exchangeable promissory note
which bore interest at the rate of 10% per annum and was due on December 31,
1995 (the "Exchangeable Note"). The indebtedness under the Exchangeable Note was
secured by a first priority security interest in the Company's accounts
receivable, contract rights and rights relating to certain computer software. In
connection with the issuance of the Exchangeable Note, Mr. Trump received
warrants to purchase 400,000 shares of Common Stock at an exercise price of
$0.3125 per share, which were exercisable until January 6, 1998.
In September 1993, the Company sold 320,000 shares of Common Stock to Mr.
Trump for an aggregate of $100,000 in cash. In connection therewith, Mr. Trump
also received warrants to purchase 320,000 shares of Common Stock, with an
exercise price of $0.50 per share, which were exercisable
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until August 31, 1998. In March 1994, the Company sold an aggregate of 133,334
shares of Common Stock to Mr. Trump for $100,000 in cash.
In July 1994, Mr. Trump loaned the Company an aggregate of $150,000
pursuant to a secured promissory note which bore interest at the rate of 10% per
annum and was due on December 31, 1997 (the "Secured Promissory Note"). The
Secured Promissory Note was cross-collateralized and cross-defaulted with the
Exchangeable Note.
In October 1994, Mr. Trump loaned the Company an aggregate of $280,000
pursuant to a secured promissory note which bore interest at the rate of 8% per
annum and was due on December 31, 1997 (the "Second Secured Promissory Note").
The net proceeds therefrom were utilized by the Company primarily for the
formation and initial operations of its 80% subsidiary, MKP. The Second Secured
Promissory Note was cross-collateralized and cross-defaulted with the
Exchangeable Note and the Secured Promissory Note.
In December 1994, Mr. Trump loaned the Company an aggregate of $150,000
pursuant to a secured promissory note which bore interest at the rate of 8% per
annum and was due on December 31, 1997 (the "Third Secured Promissory Note").
The Third Secured Promissory Note was cross-collateralized and cross-defaulted
with the $125,000 Exchangeable Note issued to Mr. Trump in January 1993, the
$150,000 Secured Promissory Note issued to Mr. Trump in July 1994 and the
$280,000 Second Secured Promissory Note issued to Mr. Trump in October 1994.
In January 1995, Mr. Trump loaned the Company an aggregate of $250,000
pursuant to a secured promissory note (the "Fourth Secured Promissory Note").
The net proceeds of the Fourth Secured Promissory Note were utilized by the
Company primarily in connection with the formation and initial operations of
Aspen. Pursuant to agreements between Mr. Trump and the Company dated as of
January 13, 1995, all accrued and unpaid interest in respect of the Exchangeable
Note and the Secured Promissory Note were added to the principal of each note
and such notes were consolidated, cross-collateralized and cross-defaulted with
the Second Secured Promissory Note, the Third Secured Promissory Note and the
Fourth Secured Promissory Note, thereby representing consolidated indebtedness
to Mr. Trump in the aggregate principal amount of $986,500 (the "Consolidated
Note"). Indebtedness under the Consolidated Note bore interest at the rate of 8%
per annum and was due and payable on December 31, 1997. Under the terms of the
Consolidated Note, the Company was entitled to receive 30% of the pre-tax net
operating income of its subsidiaries and was obligated to apply the balance of
such income on an annual basis towards the payment of accrued interest on such
indebtedness and then to reduce principal. On January 11, 1995, the Company also
agreed to extend for an additional period of three years the exchange period in
respect to the Exchangeable Note and the exercise periods for all of the
warrants held by Mr. Trump to purchase Common Stock.
In April 1995, Mr. Trump loaned the Company an aggregate of $250,000
pursuant to a secured promissory note (the "Fifth Secured Promissory Note"). The
net proceeds therefrom were utilized by the Company primarily in connection with
the further development of Aspen's operations. Pursuant to agreements between
Mr. Trump and the Company dated April 6, 1995, this note was consolidated,
cross-collateralized and cross-defaulted with the indebtedness under the
Consolidated Note and contained identical terms. During the period from March to
November 1996, all of the Company indebtedness held by Mr. Trump, including all
of the indebtedness represented by the Exchangeable Note, the Consolidated Note
and the Fifth Secured Promissory Note, was converted into Common Stock, at an
exchange rate to $1.00 per share.
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In September 1995, the Company issued to Mr. Trump warrants to purchase
1,000,000 shares of Common Stock with an exercise price of $0.50 per share,
exercisable through September 15, 2010, in consideration for, among other
things, (i) Mr. Trump's prior debt and equity investments in the Company (which
provided the Company with substantially all of the working capital required to
continue operations during the fiscal years ended September 30, 1994 and 1995);
(ii) Mr. Trump's agreement to exercise all of his remaining warrants to purchase
Common Stock under the warrant agreement dated January 7, 1993; (iii) Mr.
Trump's assistance in raising $5,000,000 in subscriptions for the international
cash management fund established by the Company's subsidiary, Aspen; and (iv)
Mr. Trump's willingness to consider future proposals by the Company to provide
additional capital.
In March 1996, Mr. Trump exercised warrants to purchase 1,000,000 shares of
Common Stock for an aggregate purchase price of $500,000. In addition, Mr. Trump
agreed to convert approximately $1,000,000 of Company indebtedness under the
Consolidated Note into 1,000,000 shares of Common Stock at a conversion price of
$1.00 per share.
In June 1996, Mr. Trump converted an additional $517,474 of Company
indebtedness into 517,474 shares of Common Stock at a conversion price of $1.00
per share. In connection with the conversion, the Company agreed with Mr. Trump
that if the Company issues additional shares of Common Stock at any time after
March 29, 1996 for less than $1.00 per share, then the conversion price
applicable to the shares issued to Mr. Trump in connection with the debt
conversion would be correspondingly decreased and the Company would issue Mr.
Trump an appropriate number of additional shares so that the total number of
shares issued in connection with this debt conversion corresponds to the
adjusted conversion price.
In November 1996, Mr. Trump exercised his right to exchange the
Exchangeable Note into 400,000 shares of Common Stock, which represents an
effective exchange rate of $0.3125 per share and converted the remaining balance
of all outstanding indebtedness of the Company which aggregated $164,614,
represented by the balance of the outstanding amount under the Consolidated Note
and other outstanding demand loans held by Mr. Trump, into 164,614 shares of
Common Stock at a conversion rate of $1.00 per share.
As of December 24, 1996, all of the warrants to purchase Common Stock held
by Mr. Trump have been exercised.
In October 1997, Mr. Trump purchased from the Company an additional 30%
equity interest in FPC Information for a purchase price of $225,000.
Accordingly, as of January 5, 1998, Mr. Trump owns a 50% equity interest in
FPC Information and the Company owns a 50% equity interest in FPC Information.
For further information concerning certain other arrangements between
the Company and its principal stockholders. See "Item 1 -- Description of
Business."
TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS
WILLIAM F. FINLEY. In November 1993, Mr. Finley, the Company's Chief
Executive Officer and President who as of January 5, 1998 may be deemed to
beneficially own approximately 9.56% of the Company's outstanding Common Stock,
received warrants to purchase 100,000 shares of Common Stock with an exercise
price of $0.50 per share, which warrants are exercisable until August 31, 1998.
In November 1995, Mr. Finley sold 40,000 of these warrants to a shareholder and
former director of the
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Company. In November 1996, Mr. Finley exercised a portion of these warrants and
received 49,414 shares of Common Stock. On September 15, 1995, the Company
issued to Mr. Finley warrants to purchase 200,000 shares of Common Stock with an
exercise price of $0.50 per share, which warrants are exercisable through
September 15, 2010, in consideration of Mr. Finley's past services performed on
behalf of the Company. On September 16, 1996, the Company issued Mr. Finley
warrants to purchase 200,000 shares of Common Stock with an exercise price of
$1.00 per share, which warrants are exercisable through September 15, 2006, in
consideration of Mr. Finley's past services performed on behalf of the Company.
All of the warrants which have been issued by the Company to Mr. Finley are
exercisable immediately.
DUNCAN G. BURKE, currently a Vice President and Director of the Company,
was a Senior Vice President of Laidlaw Holdings Asset Management, Inc. from 1992
to 1994. That firm acted as a consultant to the Company during 1994 and 1995. To
date, neither Mr. Burke nor Laidlaw Holdings Asset Management, Inc. received any
compensation from the Company for services performed other than as described in
this Annual Report on Form 10-KSB. As consideration for past services performed
by Mr. Burke on behalf of the Company, in December 1994 Mr. Burke received
20,000 shares of Common Stock, and in September 1996 Mr. Burke received warrants
to purchase 50,000 shares of Common Stock which are exercisable at $1.00 per
share for a ten-year period and in December 1997 Mr. Burke received warrants to
purchase 50,000 shares of Common Stock which are exercisable at $0.50 per share
through November 1999. The shares of Common Stock issued to Mr. Burke in
December 1994 and the shares of Common Stock underlying the warrants issued to
Mr. Burke in September 1996 were registered by the Company under a registration
statement which was declared effective in February 1997. The shares of Common
Stock underlying the warrants issued to Mr. Burke in December 1997 are entitled
to "piggyback" registration rights. All of these warrants are immediately
exercisable. Mr. Burke was also a Vice President of Laidlaw Equities, Inc.
during 1991 and 1992. See "Item 9 -- Directors, Executive Officers, Promoters
and Control Persons; Compliance with Section 16(a) of the Exchange Act --
Consulting Agreements."
RICHARD LEVY, currently the Secretary and a Director of the Company, is a
Senior Director at Cushman & Wakefield, which firm has acted as a real estate
broker with regard to the Company's recent lease of a portion of the 8th floor
at 335 Madison Avenue, New York, New York in October 1996. The Company is not
obligated to pay any commissions to Mr. Levy in connection with the lease.
However, Cushman & Wakefield did receive brokerage commissions from the lessor
in connection with the consummation of the lease with the Company. As
consideration for past services performed by Mr. Levy on behalf of the Company,
in July 1996, Mr. Levy received 20,000 shares of Common Stock, in September
1996, Mr. Levy received warrants to purchase 50,000 shares of Common Stock
exercisable at $1.00 per share for a ten-year period and in December 1997 Mr.
Levy received warrants to purchase 50,000 shares of Common Stock which are
exercisable at $0.50 per share through November 1999. The shares of Common Stock
issued to Mr. Levy in July 1996 and the shares of Common Stock underlying the
warrants issued to Mr. Levy in September 1996 were registered by the Company
under a registration statement which was declared effective in February 1997.
The shares of Common Stock underlying the warrants issued to Mr. Levy in
December 1997 are entitled to "piggyback" registration rights. All of these
warrants are exercisable immediately.
PHILIP L. HAGE is a former Director of the Company and is currently a Vice
President of Van Kasper & Company. As consideration for past services performed
by Mr. Hage on behalf of the Company, in September 1996, Mr. Hage received
warrants to purchase 25,000 shares of Common Stock exercisable at $1.00 per
share for a ten-year period. These warrants are exercisable immediately. Van
Kasper provides advisory services to the Company pursuant to the terms of a
two-year, non-exclusive
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<PAGE> 39
advisory agreement. Mr. Hage resigned as a director of the Company effective as
of June 30, 1997. See "Item 9 -- Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a) of the Exchange Act -- Consulting
Agreements."
SUSAN MICHAELSON is the President and Treasurer and a Managing Director of
the Company's subsidiary, MKP. As of October 1994, Ms. Michaelson received
100,000 shares of Common Stock pursuant to the terms of the Managing Director's
Agreement dated October 18, 1994 by and among the Company, Ms. Michaelson and
MKP. On September 16, 1996, Ms. Michaelson received warrants to purchase 200,000
shares of Common Stock at an exercise price of $1.00 per share for a ten-year
period, for services previously rendered to the Company.
HILLARY KELBICK is the Vice President and Secretary and a Managing Director
of the Company's subsidiary, MKP. As of October 1994, Ms. Kelbick received
100,000 shares of Common Stock pursuant to the terms of the Managing Director's
Agreement dated October 18, 1994 by and among the Company, Ms. Kelbick and MKP.
On September 16, 1996, Ms. Kelbick received warrants to purchase 200,000 shares
of Common Stock at an exercise price of $1.00 per share for a ten-year period,
for services previously rendered to the Company.
For further information concerning employment agreements and certain
other arrangements between the Company and its directors and executive officers,
see "Item 10 -- Executive Compensation."
ITEM 13 -- EXHIBITS AND REPORTS ON FORM 8-K
(a) The Company's consolidated financial statements that are listed in
Item 7 are set forth at the end of this Annual Report on Form 10-KSB.
(c) The following exhibits are included herewith unless otherwise
indicated:
3.1 Certificate of Incorporation dated August 9, 1984
(incorporated by reference to Exhibit 3.1 to Registration
Statement on Form S-8, No. 33-7778).
3.2 Amendment to Certificate of Incorporation dated August 29,
1984 (incorporated by reference to Exhibit (i) to Registrant's
Quarterly Report on Form 10-0 for the period ended March 31,
1988).
3.3 Amendment to Certificate of Incorporation dated July 1,
1986 (incorporated by reference to Exhibit 3.3 to the
Company's Report on Form 10-KSB for the Company's fiscal year
ended September 30, 1996).
3.4 Amendment to Certificate of Incorporation dated March 14,
1988 (incorporated by reference to Exhibit 3.4 to the
Company's Report on Form 10-KSB for the Company's fiscal year
ended September 30, 1996).
3.5 Amendment to Certificate of Incorporation dated September 13,
1996 (incorporated by reference to Exhibit 3.5 to the
Company's Report on Form 10-KSB for the Company's fiscal
year ended September 30, 1996).
3.6 By-laws (incorporated by reference to Exhibit 3.2 to
Registration Statement on Form S- 18, No. 33-7778).
3.7 Amendment to By-Laws dated July 1995 (incorporated
by reference to Exhibit 3.7 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1996).
4.1 Specimen Certificate of Common Stock (incorporated
by reference to Exhibit 4.1 to the Company's Report on
Form 10-KSB for the Company's fiscal year ended September 30,
1996).
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<PAGE> 40
4.2 Incentive Stock Option Plan (incorporated by reference to
Exhibit 4.7 to Registration Statement on Form S-1, No.
33-20886).
10.1 Agreement between Marine Midland Bank, N.A. and William F.
Finley (incorporated by reference to Exhibit 10.12 to
Registration Statement on Form S-18, No. 33-7778).
10.2 Form of Indemnification Agreement between Registrant and its
Officers and Directors (incorporated by reference to Exhibit
10.35 to Registration Statement on Form S-1, No.
33-20886).
10.3 Promissory Note due on May 1, 1989 in the principal amount of
$50,000 executed by the Registrant in favor of Marvin M. Reiss
(incorporated by reference to Exhibit 10.41 to Amendment No. 2
to Registration Statement on Form S-1, No. 33-20886).
10.4 Promissory Note due on November 1, 1989 in the principal
amount of $50,000 executed by the Registrant in favor of
William F. Finley (incorporated by reference to Exhibit 10.4
to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1993).
10.5 Promissory Note due on November 1, 1989 in the principal
amount of $50,000 executed by the Registrant in favor of
Marvin M. Reiss (incorporated by reference to Exhibit 10.5 to
the Company's Report on Form 10-KSB for the Company's fiscal
year ended September 30, 1993).
10.6 Form of Subscription Agreement dated as of June 23, 1989
between the Registrant and Julius London (incorporated by
reference to Exhibit 10.6 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1993).
10.7 Form of Subscription Agreement dated as of June 23, 1989
between the Registrant and Marie Monell (incorporated by
reference to Exhibit 10.7 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1993).
10.8 Promissory Note due on November 1, 1989 in the principal
amount of $12,500 executed by the Registrant in favor of Paul
M. Diamond (incorporated by reference to Exhibit 10.8 to the
Company's Report on Form 10-KSB for the Company's fiscal year
ended September 30, 1993).
10.9 Promissory Note due on November 1, 1989 in the principal
amount of $10,000 executed by the Registrant in favor of Paul
M. Diamond (incorporated by reference to Exhibit 10.9 to the
Company's Report on Form 10-KSB for the Company's fiscal year
ended September 30, 1993).
10.10 Promissory Note due on November 1, 1989 in the principal
amount of $2,500 executed by the Registrant in favor of Paul
M. Diamond (incorporated by reference to Exhibit 10.10 to the
Company's Report on Form 10-KSB for the Company's fiscal year
ended September 30, 1993).
10.11 Promissory Note due on November 1, 1989 in the principal
amount of $30,000 executed by the Registrant in favor of
Marvin M. Reiss (incorporated by reference to Exhibit
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<PAGE> 41
10.11 to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1993),
10.12 Promissory Note due on November 1, 1989 in the principal
amount of $20,000 executed by the Registrant in favor of
Marvin M. Reiss (incorporated by reference to Exhibit 10.12 to
the Company's Report on Form 10-KSB for the Company's fiscal
year ended September 30, 1993).
10.13 Promissory Note due on November 1, 1989 in the principal
amount of $10,000 executed by the Registrant in favor of
Marvin M. Reiss (incorporated by reference to Exhibit 10.13 to
the Company's Report on Form 10-KSB for the Company's fiscal
year ended September 30, 1993).
10.14 Promissory Note due on November 1, 1989 in the principal
amount of $15,000 executed by the Registrant in favor of
Marvin M. Reiss (incorporated by reference to Exhibit 10.14 to
the Company's Report on Form 10-KSB for the Company's fiscal
year ended September 30, 1993).
10.15 Demand Promissory Note in the principal amount of $5,000
executed by the Registrant in favor of Marvin M. Reiss
(incorporated by reference to Exhibit 10.15 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1993).
10.16 Form of Exchangeable Note due on December 31, 1995 in the
principal amount of $125,000 executed by the Registrant in
favor of Robert S. Trump (incorporated by reference to Exhibit
10.16 to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1993).
10.17 Security Agreement dated as of January 7, 1993 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.17 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.18 Letter Agreement dated January 7, 1993 between the Registrant
and Robert S. Trump (incorporated by reference to Exhibit
10.18 to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1993).
10.19 Warrant Agreement dated as of January 7, 1993 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.19 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.20 Subscription Agreement dated as of June 1, 1993 between the
Registrant and Henry T. Doherty (incorporated by reference to
Exhibit 10.20 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.21 Subscription Agreement dated as of June 1, 1993 between the
Registrant and Nick Varsames (incorporated by reference to
Exhibit 10.21 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
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<PAGE> 42
10.22 Letter Agreement dated September 1, 1993 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.22 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.23 Warrant Agreement dated as of September 1, 1993 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.23 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.24 Form of Subscription Agreement dated September 22, 1993
between the Registrant and Henry T. Doherty (incorporated by
reference to Exhibit 10.24 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1993).
10.25 Term Note in the principal amount of $112,397.27 executed by
the Registrant in favor of The Rebot Corporation (incorporated
by reference to Exhibit 10.25 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1993).
10.26 Form of Warrant dated as of September 30, 1993 between the
Registrant and Rebot Corporation (incorporated by reference to
Exhibit 10.26 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.27 Term Note in the principal amount of $38,418.40 executed by
the Registrant in favor of William F. Finley (incorporated by
reference to Exhibit 10.27 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1993).
10.28 Form of Warrant dated as of September 30, 1993 between the
Registrant and William F. Finley (incorporated by reference to
Exhibit 10.28 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.29 Letter Agreement dated September 30, 1993 between the
Registrant and Paul M. Diamond (incorporated by reference to
Exhibit 10.29 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.30 Form of Warrant dated as of September 30, 1993 between the
Registrant and Paul M. Diamond (incorporated by reference to
Exhibit 10.30 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.31 Form of Warrant dated as of November 11, 1993 between the
Registrant and Paul M. Diamond (incorporated by reference to
Exhibit 10.31 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.32 Form of Warrant dated as of November 11, 1993 between the
Registrant and William F. Finley (incorporated by reference to
Exhibit 10.32 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.33 Form of Warrant dated as of November 11, 1993 between the
Registrant and Marvin M. Reiss (incorporated by reference to
Exhibit 10.33 to the Company's Report on Form 10- KSB for the
Company's fiscal year ended September 30, 1993).
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10.34 Form of Warrant dated as of November 11, 1993 between the
Registrant and Alan M. Swiedler (incorporated by reference to
Exhibit 10.34 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.35 Form of Warrant dated as of November 11, 1993 between the
Registrant and Susan M. Michaelson (incorporated by reference
to Exhibit 10.35 to the Company's Report on Form 10-KSB for
the Company's fiscal year ended September 30, 1993).
10.36 Form of Warrant dated as of November 11, 1993 between the
Registrant and Leonard Gartner (incorporated by reference to
Exhibit 10.36 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.37 Form of Warrant dated as of November 11, 1993 between the
Registrant and Ted Prince (incorporated by reference to
Exhibit 10.37 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.38 Form of Subscription Agreement dated November 17, 1993 between
the Registrant and Henry T. Doherty (incorporated by reference
to Exhibit 10.38 to the Company's Report on Form 10-KSB for
the Company's fiscal year ended September 30, 1993).
10.39 Form of Subscription Agreement dated February 28, 1994 between
the Registrant and Robert S. Trump (incorporated by reference
to Exhibit 10.39 to the Company's Report on Form 10-KSB for
the Company's fiscal year ended September 36, 1993).
10.40 Letter Agreement dated November 24, 1992 between the
Registrant and Management Technologies, Incorporated
(incorporated by reference to Exhibit 10.40 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1993).
10.41 Agreement dated April 29, 1994 between the Registrant and New
Paradigm Software Corporation (incorporated by reference to
the Registrant's Report on Form 10-QSB for the Quarter Ended
March 31, 1994).
10.42 Occupancy Agreement dated October 10, 1994 between the
Registrant and New Paradigm Software Corp. (incorporated by
reference to Exhibit 10.42 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1994).
10.43 Letter agreement dated October 10, 1994 between the Registrant
and New Paradigm Software Corp. (incorporated by reference to
Exhibit 10.43 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1994).
10.44 Letter agreement dated August 10, 1994 between the Registrant
and Management Technologies, Inc. concerning the conversion of
the MARS-TM- product to Windows IBM (incorporated by reference
to Exhibit 10.44 to the Company's Report on Form 10- KSB for
the Company's fiscal year ended September 30, 1994).
10.45 $150,000 Secured Promissory Note dated July 21, 1994 issued by
the Registrant in favor of Robert S. Trump (incorporated by
reference to Exhibit 10.45 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1994).
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10.46 Letter agreement dated July 21, 1994 between the Registrant
and Robert S. Trump concerning $125,000 Exchangeable Note
dated January 7, 1993 (incorporated by reference to Exhibit
10.46 to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1994).
10.47 $280,000 Secured Promissory Note dated October 17, 1994 issued
by the Registrant in favor of Robert S. Trump (incorporated by
reference to Exhibit 10.47 to the Company's Report, on Form
10-KSB for the Company's fiscal year ended September 30,
1994).
10.48 $150,000 Secured Promissory Note dated December 13, 1994
issued by the Registrant in favor of Robert S. Trump
(incorporated by reference to Exhibit 10.48 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1994).
10.49 $149,791.67 Amended and Restated Exchangeable Note dated
January 1, 1995 issued by the Registrant in favor of Robert S.
Trump (incorporated by reference to Exhibit 10.49 to the
Company's Report on Form 10-KSB for the Company's fiscal year
ended September 30, 1994).
10.50 $156,708.37 Amended and Restated Secured Promissory Note dated
January 1, 1995 issued by the Registrant in favor of Robert S.
Trump (incorporated by reference to Exhibit 10.50 to the
Company's Report on Form 10-KSB for the Company's fiscal year
ended September 30, 1994).
10.51 $250,000 Secured Promissory Note dated January 11, 1995 issued
by the Registrant in favor of Robert S. Trump (incorporated by
reference to Exhibit 10.51 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1994).
10.52 Letter agreement dated December 29, 1994 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.52 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1994).
10.53 Letter agreement dated January 13, 1995 between the Registrant
and Robert S. Trump (incorporated by reference to Exhibit
10.53 to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1994).
10.54 Letter agreement dated January 13, 1995 between the Registrant
and Robert S. Trump (incorporated by reference to Exhibit
10.54 to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1994).
10.55 Letter of Intent dated October 17, 1994 by and among the
Registrant, Hillary Kelbick and Susan Michaelson concerning
Michaelson Kelbick Partners Inc. (then known as FPC Consulting
Corp.) (incorporated by reference to Exhibit 10.55 to the
Company's Report on Form 10-KSB for the Company's fiscal year
ended September 30, 1994).
10.56 Managing Director's Agreement dated October 17, 1994 by and
among Michaelson Kelbick Partners Inc. (then known as FPC
Consulting Corp.), Susan Michaelson and the Registrant
(incorporated by reference to Exhibit 10.56 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1994).
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10.57 Managing Director's Agreement dated October 17, 1994 by and
among Michaelson Kelbick Partners Inc. (then known as FPC
Consulting Corp.), Hillary Kelbick and the Registrant
(incorporated by reference to Exhibit 10.57 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1994).
10.58 Shareholders Agreement dated as of January 5, 1995 by and
among the Registrant, Aspen Capital Management Corp. (then
known as FPC Funds Corp.), Richard J. Loos and Sean P. Brennan
(incorporated by reference to Exhibit 10.58 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1994).
10.59 Executive Employment Agreement dated January 5, 1995 between
Aspen Capital Management Corp. (then known as FPC Funds
Corp.), the Registrant and Richard J. Loos (incorporated by
reference to Exhibit 10.59 to the Company's Report on Form 10-
KSB for the Company's fiscal year ended September 30, 1994).
10.60 Executive Employment Agreement dated January 5, 1995 between
Aspen Capital Management Corp. (then known as FPC Funds
Corp.), the Registrant and Sean P. Brennan (incorporated by
reference to Exhibit 10.60 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1994).
10.61 $250,000 Secured Promissory Note dated April 6, 1995 issued by
the Registrant in favor of Robert S. Trump (incorporated by
reference to Exhibit 10.14 to Report of Form 10- QSB for
fiscal quarter ended March 31, 1995).
10.62 Letter agreement dated May 3, 1995 between the Registrant and
New Paradigm Software Corp. (incorporated by reference to
Exhibit 10.15 to Report on Form 10-QSB for fiscal quarter
ended March 31, 1995).
10.63 Agreement dated July 28, 1995 by and among the Company, Scott
Rhodes, Scott Rhodes d/b/a "Metamorphic Computing", Scott
Rhodes d/b/a "Metamorphic Systems", Scott Rhodes d/b/a "MCC",
Scott Rhodes d/b/a "Metamorphic Computing Corp." and
Metamorphic Computing Corp. (incorporated by reference to
Exhibit to Report on Form 10-KSB for fiscal year ended
September 30, 1995).
10.64 Form of Warrant dated as of September 15, 1995 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.64 to Report on Form 10-KSB for fiscal year ended
September 30, 1995).
10.65 Form of Warrant dated as of September 15, 1995 between the
Registrant and William F. Finley (incorporated by reference to
Exhibit 10.65 to Report on Form 10-KSB for fiscal year ended
September 30, 1995).
10.66 Letter dated March 29, 1996 from Robert S. Trump regarding
conversion of debt into equity (incorporated by reference to
Exhibit 10.66 to Report on Form 10-KSB for fiscal year ended
September 30, 1996).
10.67 Letter dated June 20, 1996 from Robert S. Trump regarding
conversion of debt into equity (incorporated by reference to
Exhibit 10.67 to Report on Form 10-KSB for fiscal year ended
September 30, 1996).
-42-
<PAGE> 46
10.68 General Form of Subscription Agreement used in private
placements in 1996 (incorporated by reference to Exhibit 10.68
to Report on Form 10-KSB for fiscal year ended September 30,
1996).
10.69 Form of Warrant Agreement for Warrants issued in September
1996 (incorporated by reference to Exhibit 10.69 to Report on
Form 10-KSB for fiscal year ended September 30, 1996).
10.70 Letter agreement dated November 12, 1996 with Robert S. Trump
regarding exercise of Restated Exchangeable Note dated January
1, 1995 and conversion of debt into equity (incorporated by
reference to Exhibit 10.70 to Report on Form 10-KSB for fiscal
year ended September 30, 1996).
10.71 Executive Employment Agreement dated as of September 11, 1997
between the Registrant and William F. Finley.
10.72 Managing Director's Agreement dated as of September 11, 1997
between the Registrant's subsidiary, MKP, and Susan
Michaelson.
10.73 Managing Director's Agreement dated as of September 11, 1997
between the Registrant's subsidiary, MKP, and Hillary Kelbick.
10.74 Form of Warrant dated as of December 29, 1997 issued to Duncan
Burke.
10.75 Form of Warrant dated as of December 29, 1997 issued to
Richard Levy.
10.76 Stock Purchase Agreement dated as of October 1, 1997 by and
between the Company and Robert S. Trump.
21.1 Subsidiaries of Registrant.
27.1 Financial Data Schedule.
-43-
<PAGE> 47
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Dated: January 12, 1998
FINANCIAL PERFORMANCE CORPORATION
By: /s/ WILLIAM F. FINLEY
---------------------------
William F. Finley
Chief Executive Officer
and President
In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ WILLIAM F. FINLEY Chief Executive Officer and President; January 12, 1998
- ---------------------------
William F. Finley (Principal Executive Officer and Principal
Financial and Accounting Officer)
/s/ RICHARD LEVY Secretary and Director January 12, 1998
- -----------------------------
Richard Levy
/s/ DUNCAN G. BURKE Vice President and Director January 12, 1998
- -------------------------
Duncan G. Burke
</TABLE>
-44-
<PAGE> 48
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
ANNUAL REPORT ON FORM 10-KSB
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-2
CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1997 AND 1996 F-3
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR F-4
THE YEARS ENDED SEPTEMBER 30, 1997 AND 1996
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED F-5
SEPTEMBER 30, 1997 AND 1996
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED F-6
SEPTEMBER 30, 1997 AND 1996
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7
F-1
<PAGE> 49
[GOLDSTEIN AND MORRIS LETTERHEAD]
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
Financial Performance Corporation and Subsidiaries
New York, New York
We have audited the accompanying consolidated balance sheet of Financial
Performance Corporation and Subsidiaries as of September 30, 1997 and 1996 and
the related consolidated statements of changes in stockholders' equity,
operations and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Financial
Performance Corporation and Subsidiaries as of September 30, 1997 and 1996 and
the results of its consolidated operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
/s/Goldstein and Morris
New York, New York
January 8, 1998
F-2
<PAGE> 50
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
ASSETS
1997 1996
----------- -----------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 1,139,974 $ 1,972,056
Accounts receivable 1,645,918 902,516
Prepaid expenses and other current assets 69,337 57,340
----------- -----------
Total current assets 2,855,229 2,931,912
Computer equipment, net of accumulated depreciation
of $96,505 and $46,193 (Note B (7)) 172,242 111,852
Software development costs (Note B (3)) 574,720 452,299
Other assets 307,918 264,368
----------- -----------
$ 3,910,109 $ 3,760,431
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 1,733,648 $ 1,362,571
Current portion of long-term debt (Note D) -- 7,520
Short-term borrowings (Note C) -- 113,000
----------- -----------
Total current liabilities 1,733,648 1,483,091
----------- -----------
Long-term debt, net of current maturities (Note D) -- 168,095
----------- -----------
Minority interest in consolidated subsidiaries 423,046 256,046
----------- -----------
Stockholders' equity (Note I)
Common stock - authorized 50,000,000 shares
of $.01 par value per share: issued and
outstanding 8,021,534 as of September 30, 1997 and
7,192,562 as of September 30, 1996 80,215 71,926
Additional paid in capital 7,480,761 7,043,986
Accumulated (deficit) (5,807,561) (5,262,713)
----------- -----------
Total stockholders' equity 1,753,415 1,853,199
----------- -----------
$ 3,910,109 $ 3,760,431
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 51
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
Common Stock Additional
--------------------- Paid In
Shares Par Value Capital Deficit Total
--------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE -
SEPTEMBER 30, 1995 3,500,617 $35,006 $4,142,732 $(5,027,664) $ (849,926)
Issuance of common
shares in private
placement, net of
costs 879,500 8,795 691,992 -- 700,787
Issuance of common
shares for
compensation and
services 294,971 2,950 216,963 -- 219,913
Issuance of common
shares on exercise
of warrants 1,000,000 10,000 490,000 -- 500,000
Issuance of common
shares on
conversion of
convertible note
and short-term debt 1,517,474 15,175 1,502,299 -- 1,517,474
Net (loss) -- -- -- (235,049) (235,049)
--------- ------- ---------- ----------- -----------
BALANCE -
SEPTEMBER 30, 1996 7,192,562 71,926 7,043,986 (5,262,713) 1,853,199
Issuance of common
shares on exercise of
warrants 49,414 494 24,213 -- 24,707
Issuance of shares in
private placement,
net of costs 198,942 1,989 166,881 -- 168,870
Issuance of common
shares on conversion
of convertible note
and short-term debt 564,614 5,646 234,341 -- 239,987
Sale of common shares 16,002 160 11,340 -- 11,500
Net (loss) -- -- -- (544,848) (544,848)
--------- ------- ---------- ----------- -----------
BALANCE -
SEPTEMBER 30, 1997 8,021,534 $80,215 $7,480,761 $(5,807,561) $ 1,753,415
========= ======= ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 52
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Revenues $ 7,785,250 $ 8,784,137
----------- -----------
Costs and expenses
Cost of revenues 6,482,542 7,271,114
Salaries and related expenses 605,864 525,677
Selling, general and administrative 1,265,803 709,118
----------- -----------
8,354,209 8,505,909
----------- -----------
Operating income (loss) (568,959) 278,228
----------- -----------
Other income (expense):
Interest income 49,489 13,081
Interest expense (2,981) (89,424)
Minority interest in loss (income) of
consolidated subsidiaries 3,000 (101,000)
----------- -----------
49,508 (177,343)
----------- -----------
Income (loss) from continuing operations
before income taxes (519,451) 100,885
Income taxes 25,397 116,062
----------- -----------
Income (loss) from continuing
operations (544,848) (15,177)
Loss from discontinued operations (Note L) -- (219,872)
----------- -----------
Net income (loss) $ (544,848) $ (235,049)
=========== ===========
Per share data:
Net (loss) from continuing operations $ (.07) $ (.003)
=========== ===========
Net (loss) $ (.07) $ (.05)
=========== ===========
Weighted average number of common shares
outstanding 7,878,401 4,899,023
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 53
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
Cash flows provided by operating activities:
<S> <C> <C>
Net (loss) $ (544,848) $ (235,049)
Adjustments to reconcile net (loss) to net cash used for
operating activities:
Depreciation and amortization 175,288 80,063
Minority interest in (loss) and income of
consolidated subsidiaries (3,000) 101,000
Issuance of stock for compensation -- 91,309
Changes in operating assets and liabilities:
Increase in accounts receivable (743,402) (675,129)
Increase in prepaid expenses
and other current assets (11,997) (20,042)
Decrease (Increase) in other assets (43,550) (116,318)
Increase in accounts payable 371,077 1,036,456
----------- -----------
Net cash provided by (used for)
operating activities (800,432) 262,290
----------- -----------
Cash flows from investing activities:
Purchase of equipment (175,331) (67,909)
Software development costs (231,396) (252,167)
----------- -----------
Net cash used for investing activities (406,727) (320,076)
----------- -----------
Cash flows from financing activities:
Repayments on notes payable to stockholders -- (37,174)
Proceeds from sale of common shares and
exercise of warrants, net of costs 205,077 857,952
Proceeds from long-term borrowings -- 72,309
Proceeds from short-term borrowings -- 788,000
Subsidiary company stock issued to minority stockholder 170,000 --
----------- -----------
Net cash provided by financing activities 375,077 1,681,087
----------- -----------
Net increase (decrease) in cash (832,082) 1,623,301
Cash, beginning of year 1,972,056 348,755
----------- -----------
Cash, end of year $ 1,139,974 $ 1,972,056
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ -- $ 1,750
=========== ===========
Income taxes $ 116,062 $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 54
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ORGANIZATION AND BUSINESS
Financial Performance Corporation (the "Company") through its subsidiaries
currently markets merger communications services and computer software to the
financial services industry. The Company was incorporated in New York on August
14, 1984. The Company ceased operations from February 1990 through November
1992.
During the fiscal year ended September 30, 1995, the Company established
three eighty percent owned subsidiaries, Michaelson Kelbick Partners Inc.
("MKP"), FPC Information Corp. ("FPC Information") and Aspen Capital Management,
LLC ("Aspen").
MKP was formed and commenced operations in October 1994. MKP is engaged in
providing specialized merger communications and marketing services to the
financial services industry (see Note B (1)).
FPC Information was formed in November 1994 for the purpose of marketing the
Company's software products.
Aspen was formed in January 1995 as an international sponsor of cash
management funds and planned to engage in the development, investment management
and administration of such funds. Aspen, which was in the development stage,
ceased operations in September 1996 (see Note L).
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) Principles of Consolidation
The consolidated financial statements include the accounts of
Financial Performance Corporation and Subsidiaries (its three eighty percent
owned subsidiaries). All significant intercompany accounts and transactions have
been eliminated.
Condensed financial information of its eighty percent owned
subsidiary, MKP, excluding intercompany eliminations, as of September 30, 1997
and 1996 and for the years then ended, is as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Cash $1,091,000 $1,685,000
Accounts receivable 1,646,000 903,000
Other assets 47,000 14,000
Accounts payable 1,435,000 1,705,000
Revenues 7,785,000 8,784,000
Operating costs 7,167,000 8,178,000
Net income 642,000 504,000
</TABLE>
F-7
<PAGE> 55
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(1) Principles of Consolidation (continued)
Condensed financial information for the Company's other two eighty
percent subsidiaries, Aspen Capital Management, LLC and FPC Information Corp.,
have not been separately disclosed. These entities had no revenues and their
assets and liabilities are immaterial.
Aspen, whose operations commenced in March 1995, suspended its
operations in September 1996 (see Note L). Aspen had no revenues and incurred
losses of $219,872 for the year ended September 30, 1996. FPC Information Corp.
had no revenues and incurred losses of $340,540 and $428,245 for the years ended
September 30, 1997 and 1996, respectively.
(2) Revenue recognition
Revenue from software products is recognized upon delivery to the
customer, provided that no significant vendor obligations remain, and collection
of the resulting receivable is deemed probable.
(3) Software Development Costs and Amortization
Costs associated with software development subsequent to the
establishment of technological feasibility, including enhancements to software
products, are capitalized and amortized as required by Statement of Financial
Accounting Standards No. 86. Costs incurred prior to achieving technological
feasibility are expensed as incurred and classified as research and development
costs. There were no research and development costs incurred for the years ended
September 30, 1997 and 1996.
Amortization of capitalized software development costs is generally
provided on a product-by-product basis at the greater of the amount computed by
using the ratio that current gross revenue bears to the total current and
anticipated gross revenue of the product or on the straight-line method over the
sixty-month estimated useful life of the product commencing when the product is
available for general release to customers.
Software development costs are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Balance - beginning of year $ 452,299 $ 238,289
Additions 231,396 252,166
Amortization (108,975) (38,156)
--------- ---------
Balance - end of year $ 574,720 $ 452,299
========= =========
</TABLE>
F-8
<PAGE> 56
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(4) Income (loss) per common share
Income (loss) per common share is computed using the weighted average
number of common shares outstanding for each period adjusted for incremental
shares assumed issued for common stock equivalents using the treasury stock
method, provided that the effect is not antidilutive.
(5) Cash and cash equivalents
The Company considers all highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents.
(6) 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 the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
(7) Depreciation and amortization
Computer equipment is stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets.
Amortization of an intangible asset, a customer list of $164,000,
included on the balance sheet under the caption, other assets, is being
amortized on the straight line basis, over ten years.
(8) Income Taxes
Income taxes are computed in accordance with the provisions of
Financial Accounting Standards Board Statement No. 109, "Accounting for Income
Taxes" ("SFAS 109"), which requires, among other things, a liability approach to
calculating deferred income taxes. SFAS 109 requires a company to recognize
deferred tax liabilities and assets for the expected future tax consequences of
events that have been recognized in a company's financial statements or tax
returns. Under this method, deferred tax liabilities and assets are determined
based on the difference between the financial statement carrying amounts and tax
basis of assets and liabilities using enacted tax rates in effect in the years
in which the differences are expected to reverse.
F-9
<PAGE> 57
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(8) Income taxes (continued)
At September 30, 1997, the Company had net operating loss
carryforwards of approximately $1,150,000, which would expire by 2012. Certain
provisions of the tax law may limit the net operating loss carryforwards
available for use in any given year in the event of a significant change in
ownership interest. At September 30, 1997, the Company had a deferred tax asset
amounting to approximately $460,000. The deferred tax asset consisted primarily
of net operating loss carryforwards and has been fully offset by a valuation
allowance of the same amount.
The income tax expense for the years ended September 30, 1997 and
1996 represents state and local income taxes on the income of MKP.
NOTE C - SHORT-TERM BORROWINGS
During the fiscal year ended September 30, 1996, $675,000 of short-term
financing was advanced to the Company by a principal shareholder. These advances
plus prior short-term borrowings which aggregated $125,000 at December 31, 1995
totaled $800,000. This aggregate amount ($800,000) was converted into 800,000
shares of the Company's common stock on March 29, 1996 and June 20, 1996.
Subsequent to the conversion, an additional $113,000 was advanced to the Company
by the same principal shareholder. In November 1996, the short-term debt of
$113,000 was converted into 113,000 shares of the Company's common stock, at a
conversion price of $1.00 per share.
NOTE D - LONG-TERM DEBT
Long-term debt as of September 30, 1997 and 1996 consists of the
following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Note payable, stockholders, matured on
October 1, 1996 and required monthly
payments of $3,575 including interest at
9% per annum $ -- $ 7,520
Amended and restated secured convertible note
payable to a principal shareholder, matures on
December 31, 1997 with accrued interest from
January 1, 1995 at 8% per annum, see Note D (1)
and (2) -- 168,095
-------- --------
-- 175,615
Less: current portion due within one year -- 7,520
-------- --------
$ -- $168,095
======== ========
</TABLE>
F-10
<PAGE> 58
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE D - LONG-TERM DEBT - (Continued)
(1) The original principal amount of the note was converted in November 1996
into 400,000 shares of the Company's common stock.
(2) Until such time as the convertible note was paid, the Company was obligated
to cause an amount equal to 30% of the pre-tax income of all of the operating
income of the Company and its subsidiaries to be paid to the holder of the note
annually in arrears, on or before the 60th day following the end of the
Company's fiscal year commencing with the fiscal year ending September 30, 1995.
Such payments were to be applied first to accrued interest with the balance
applied to principal. The note was secured by the Company's accounts receivable,
contract rights, patents, trademarks and any other rights in computer software.
In November 1996, the outstanding principal amount due under this note
($125,000), was converted into 400,000 shares of the Company's common stock at
the effective exchange rate of $0.3125 per share set forth in the convertible
note. At such time, the holder of the convertible note agreed with the Company
to convert the then current remaining principal balance and accrued interest in
respect of the convertible note ($47,154) together with the current principal
balance and accrued interest thereon in respect of all other indebtedness of the
Company then held by the holder of the consolidated note ($117,460) into an
aggregate of $164,614 additional shares of the Company's common stock of the
conversion rate of $1.00 per share. The conversion rate of $1.00 per share
represented the Company's estimate of the then current fair market value of such
shares, as reflected by the most recently effectuated private placements of the
Company's common stock. Accordingly, the Company's obligations under the note
and the security interests granted as collateral therein are no longer in
effect.
NOTE E - SIGNIFICANT CUSTOMERS
For the year ended September 30, 1997 two customers of the Company's
subsidiary, MKP, accounted for 72% of the Company's consolidated revenues in the
following respective percentages:
<TABLE>
<CAPTION>
<S> <C> <C>
Customer A 56%
Customer B 16%
--
72%
==
</TABLE>
The total accounts receivable from these customers at September 30, 1997
amounted to 56% of the total accounts receivable balance.
F-11
<PAGE> 59
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE F - WARRANTS TO PURCHASE COMMON STOCK
At September 30, 1997, the Company had outstanding warrants as follows:
<TABLE>
<CAPTION>
Number of Exercise Expiration
Shares Price Date
--------- -------- ------------------
<S> <C> <C>
330,586 $ .50 August 31, 1998
427,063 .50 September 30, 1998
200,000 .50 September 15, 2010
725,000 1.00 September 15, 2006
150,000 .50 November 30, 1999
20,000 1.00 September 16, 2006
</TABLE>
In December, 1997, the Company issued 100,000 warrants to purchase 100,000
shares of the Company's common stock at an exercise price of $.50 per share with
an expiration date of November 30, 1999 to members of the Board of Directors.
NOTE G - INCENTIVE STOCK OPTION PLAN
In March 1988, the Company adopted a stock option plan. The plan provides
for the granting of options to purchase up to 140,000 shares of common stock to
key employees, officers and directors at an exercise price equal to fair market
value at the date of grant. The right to exercise options granted under the plan
commences one year from the date of the grant and such options are exercisable
in increments of 25% each year provided employment with the Company is
continuous.
Outstanding options granted pursuant to the stock option plan, as of
September 30, 1997, are as follows:
<TABLE>
<CAPTION>
Number of Exercise Exercisable at
Shares Price September 30, 1997
-------- -------- -------------------
<S> <C> <C>
40,000 $ .4375 40,000
30,000 4.8125 30,000
</TABLE>
F-12
<PAGE> 60
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE H -EMPLOYEE BENEFIT PLANS
In September 1996, the Company established a non-contributory pension and
profit sharing plan for the benefit of eligible full-time employees. The plan
provides for annual contributions to a trust fund, which are based upon a
percentage of qualifying employees' annual compensation. Total contributions are
limited to the maximum amount deductible for federal income tax purposes. The
Company contributed $90,000 for the year ended September 30, 1996.
The plan was terminated in March, 1997.
In January, 1997, the Company established a 401(k) salary deferred benefit plan
covering substantially all employees who have met certain requirements. The plan
requires Company contributions equal to 50% to a maximum of 3% of each
participant's contribution percentage.
In September, 1997, the Company amended its 401(k) plan to provide a provision
for discretionary profit sharing plan contributions. Total contributions to the
plan (401(k) and profit sharing) were $82,000 for the year ended September 30,
1997.
NOTE I - STOCKHOLDERS' EQUITY
In September 1996, the Company effectuated a one-for-five reverse stock
split of its common stock. All share and price per share information in the
consolidated financial statements and related notes have been adjusted to give
retroactive effect for this reverse stock split.
NOTE J - COMMITMENTS
The Company has commitments under non-cancelable operating leases for office
space and equipment, which expire on October 31, 2006 and September 30, 2000,
respectively. The office lease includes provisions requiring the Company to pay
a proportionate share of increases in real estate taxes and operating expenses
over base period amounts.
Minimum payments for the leased properties for subsequent years are as
follows:
<TABLE>
<CAPTION>
Years Ending
September 30,
-------------
<S> <C>
1998 $ 281,000
1999 281,000
2000 281,000
2001 374,000
2002 415,000
Thereafter 1,711,000
---------
$3,343,000
==========
</TABLE>
Rent and equipment leasing expense for the years ended September 30, 1997 and
1996 was $347,000 and $112,000 respectively.
F-13
<PAGE> 61
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE K - EMPLOYMENT AGREEMENTS
On September 1, 1995, the Company entered into a five year employment
agreement with Mr. Finley which expired on August 31, 2000. Under the agreement,
Mr. Finley's initial annual salary was $125,000, subject to increases as
determined by the Company's Board of Directors, and Mr. Finley's salary was
subsequently increased to $150,000.
Effective as of October 1, 1997, the Company entered into a new three year
employment agreement with Mr. Finley which expires on September 30, 2000. Under
the new employment agreement, Mr. Finley's initial salary is $150,000 per annum,
subject to periodic increases as shall be determined by the Company's Board of
Directors. In the event of the termination of Mr. Finley's employment by reason
of a "change in control" (as such term is defined in the employment agreement)
of the Company or certain other events, then in addition to paying Mr. Finley's
salary and accrued benefits through the date of termination of employment, the
Company shall be obligated to pay to Mr. Finley, as severance pay, an amount
equal to 200% of Mr. Finley's annual base salary rate as of the effective date
of termination and to maintain through the remaining balance of the term of the
employment agreement (but not less than two years from the date of termination
of Mr. Finley's employment agreement) all employee benefit plans and programs in
which Mr. Finley was entitled to participate. The Company agreed to pay
reasonable travel and entertainment expenses incurred by Mr. Finley on behalf of
the Company and to provide Mr. Finley with a leased automobile. If Mr. Finley
does not elect not to renew his employment agreement at the expiration of the
term and the Company does not elect to renew Mr. Finley's employment upon the
expiration of the term thereof, then Mr. Finley shall be entitled to receive a
severance payment of $100,000.
In October, 1994, MKP entered into executive employment agreements with each
of Ms. Michaelson and Ms. Kelbick for a term of three years ending October 17,
1997. Under the terms of the agreements, the initial annual salary of Ms.
Michaelson and Ms. Kelbick was $80,000. The annual base salary payable to each
of Ms. Michaelson and Ms. Kelbick was subsequently increased to $115,000.
Effective as of September 11, 1997, MKP entered into a new three year employment
agreement with each of Ms. Michaelson and Ms. Kelbick which expires on September
10, 2000. Under the new agreements, the initial annual base salary payable to
each of Ms. Michaelson and Ms. Kelbick is $150,000, subject to periodic
increases as shall be determined by MKP's Board of Directors. The employment
agreements further provide for an annual incentive compensation payment for each
of Ms. Michaelson and Ms. Kelbick equal to a percentage not to exceed 30%,
determined annually by the Board of Directors, (such percentage initially
established at 30%) of the net income before taxes of MKP as if MKP was not a
member of the Company's consolidated group. Ms. Michaelson and Ms. Kelbick have
the option to take all or a portion of the bonus in the Company's securities.
If either Ms. Michaelson or Ms. Kelbick does not elect to renew her
respective employment agreement with MKP at the expiration of the term and MKP
elects not to renew the employment agreement, the respective executive will be
entitled to receive a severance payment in the amount of $250,000. The
employment agreements provide each of Ms. Michaelson and Ms. Kelbick with a
clothing expense allowance
F-14
<PAGE> 62
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE K - EMPLOYMENT AGREEMENTS (Continued)
of $10,000 for each year of the term of the agreement and a leased automobile
throughout the term. In the event of the termination of employment of either Ms.
Michaelson or Ms. Kelbick by reason of a "change in control" (as such term is
defined in the employment agreement) of MKP or the Company, or certain other
events, then in addition to paying all salary and accrued benefits through the
date of termination of employment, MKP shall be obligated to pay to the
employee, as severance pay, an amount equal to 200% of the employee's annual
base salary rate in effect as of the date of termination and to maintain through
the remaining balance of the term of the employment agreement (but not less than
two years from the date of termination of the employee's employment agreement)
all employee benefit plans and programs in which the employee was entitled to
participate. The Company has issued 20 shares of MKP and 200,000 shares of the
Company, in the aggregate, to Ms. Michaelson and Ms. Kelbick.
NOTE L - DISCONTINUED OPERATIONS
Effective September 1996, the Company elected to suspend operations of
Aspen. Accordingly, Aspen, which was in the development stage, was reported as a
discontinued operation at September 30, 1996. The net assets and liabilities
relating to the disposal of the discontinued operation is immaterial. Aspen had
no revenues and incurred losses of $219,872 for the year ended September 30,
1996.
NOTE M - RESTRICTED CASH AND CONTINGENCIES
At September 30, 1997 $160,000 was invested in a Certificate of Deposit and
is pledged as security for a letter of credit issued in connection with the
lease for office space (see Note J). The $160,000 Certificate of Deposit is
included on the balance sheet under the caption, other assets. This exceeds the
federally insured limit.
NOTE N - SUBSEQUENT EVENT
In October 1997, the Company's investment in FPC Information Corp., a
subsidiary, was reduced from eighty percent to fifty percent, as a result of a
$170,000 additional investment by the minority shareholder. The Company has the
option to repurchase a thirty percent equity interest in FPC Information Corp.
exercisable at any time prior to September 30, 1999 at the fair market value of
such interest, but in no event less than $225,000.
NOTE O - CONCENTRATION OF CREDIT RISK
The Company maintains it's cash in bank deposit accounts at one financial
institution. The balance at times, may exceed federally insured limits. At
September 30, 1997 and 1996, the Company exceeded the insured limit by
approximately $1,000,000 and $1,801,000, respectively.
F-15
<PAGE> 63
EXHIBIT INDEX
3.1 Certificate of Incorporation dated August 9, 1984
(incorporated by reference to Exhibit 3.1 to Registration
Statement on Form S-8, No. 33-7778).
3.2 Amendment to Certificate of Incorporation dated August 29,
1984 (incorporated by reference to Exhibit (i) to Registrant's
Quarterly Report on Form 10-0 for the period ended March 31,
1988).
3.3 Amendment to Certificate of Incorporation dated July 1,
1986 (incorporated by reference to Exhibit 3.3 to the
Company's Report on Form 10-KSB for the Company's fiscal year
ended September 30, 1996).
3.4 Amendment to Certificate of Incorporation dated March 14,
1988 (incorporated by reference to Exhibit 3.4 to the
Company's Report on Form 10-KSB for the Company's fiscal year
ended September 30, 1996).
3.5 Amendment to Certificate of Incorporation dated September 13,
1996 (incorporated by reference to Exhibit 3.5 to the
Company's Report on Form 10-KSB for the Company's fiscal
year ended September 30, 1996).
3.6 By-laws (incorporated by reference to Exhibit 3.2 to
Registration Statement on Form S- 18, No. 33-7778).
3.7 Amendment to By-Laws dated July 1995 (incorporated
by reference to Exhibit 3.7 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1996).
4.1 Specimen Certificate of Common Stock (incorporated
by reference to Exhibit 4.1 to the Company's Report on
Form 10-KSB for the Company's fiscal year ended September 30,
1996).
<PAGE> 64
4.2 Incentive Stock Option Plan (incorporated by reference to
Exhibit 4.7 to Registration Statement on Form S-1, No.
33-20886).
10.1 Agreement between Marine Midland Bank, N.A. and William F.
Finley (incorporated by reference to Exhibit 10.12 to
Registration Statement on Form S-18, No. 33-7778).
10.2 Form of Indemnification Agreement between Registrant and its
Officers and Directors (incorporated by reference to Exhibit
10.35 to Registration Statement on Form S-1, No.
33-20886).
10.3 Promissory Note due on May 1, 1989 in the principal amount of
$50,000 executed by the Registrant in favor of Marvin M. Reiss
(incorporated by reference to Exhibit 10.41 to Amendment No. 2
to Registration Statement on Form S-1, No. 33-20886).
10.4 Promissory Note due on November 1, 1989 in the principal
amount of $50,000 executed by the Registrant in favor of
William F. Finley (incorporated by reference to Exhibit 10.4
to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1993).
10.5 Promissory Note due on November 1, 1989 in the principal
amount of $50,000 executed by the Registrant in favor of
Marvin M. Reiss (incorporated by reference to Exhibit 10.5 to
the Company's Report on Form 10-KSB for the Company's fiscal
year ended September 30, 1993).
10.6 Form of Subscription Agreement dated as of June 23, 1989
between the Registrant and Julius London (incorporated by
reference to Exhibit 10.6 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1993).
10.7 Form of Subscription Agreement dated as of June 23, 1989
between the Registrant and Marie Monell (incorporated by
reference to Exhibit 10.7 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1993).
10.8 Promissory Note due on November 1, 1989 in the principal
amount of $12,500 executed by the Registrant in favor of Paul
M. Diamond (incorporated by reference to Exhibit 10.8 to the
Company's Report on Form 10-KSB for the Company's fiscal year
ended September 30, 1993).
10.9 Promissory Note due on November 1, 1989 in the principal
amount of $10,000 executed by the Registrant in favor of Paul
M. Diamond (incorporated by reference to Exhibit 10.9 to the
Company's Report on Form 10-KSB for the Company's fiscal year
ended September 30, 1993).
10.10 Promissory Note due on November 1, 1989 in the principal
amount of $2,500 executed by the Registrant in favor of Paul
M. Diamond (incorporated by reference to Exhibit 10.10 to the
Company's Report on Form 10-KSB for the Company's fiscal year
ended September 30, 1993).
10.11 Promissory Note due on November 1, 1989 in the principal
amount of $30,000 executed by the Registrant in favor of
Marvin M. Reiss (incorporated by reference to Exhibit
<PAGE> 65
10.11 to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1993),
10.12 Promissory Note due on November 1, 1989 in the principal
amount of $20,000 executed by the Registrant in favor of
Marvin M. Reiss (incorporated by reference to Exhibit 10.12 to
the Company's Report on Form 10-KSB for the Company's fiscal
year ended September 30, 1993).
10.13 Promissory Note due on November 1, 1989 in the principal
amount of $10,000 executed by the Registrant in favor of
Marvin M. Reiss (incorporated by reference to Exhibit 10.13 to
the Company's Report on Form 10-KSB for the Company's fiscal
year ended September 30, 1993).
10.14 Promissory Note due on November 1, 1989 in the principal
amount of $15,000 executed by the Registrant in favor of
Marvin M. Reiss (incorporated by reference to Exhibit 10.14 to
the Company's Report on Form 10-KSB for the Company's fiscal
year ended September 30, 1993).
10.15 Demand Promissory Note in the principal amount of $5,000
executed by the Registrant in favor of Marvin M. Reiss
(incorporated by reference to Exhibit 10.15 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1993).
10.16 Form of Exchangeable Note due on December 31, 1995 in the
principal amount of $125,000 executed by the Registrant in
favor of Robert S. Trump (incorporated by reference to Exhibit
10.16 to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1993).
10.17 Security Agreement dated as of January 7, 1993 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.17 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.18 Letter Agreement dated January 7, 1993 between the Registrant
and Robert S. Trump (incorporated by reference to Exhibit
10.18 to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1993).
10.19 Warrant Agreement dated as of January 7, 1993 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.19 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.20 Subscription Agreement dated as of June 1, 1993 between the
Registrant and Henry T. Doherty (incorporated by reference to
Exhibit 10.20 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.21 Subscription Agreement dated as of June 1, 1993 between the
Registrant and Nick Varsames (incorporated by reference to
Exhibit 10.21 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
<PAGE> 66
10.22 Letter Agreement dated September 1, 1993 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.22 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.23 Warrant Agreement dated as of September 1, 1993 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.23 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.24 Form of Subscription Agreement dated September 22, 1993
between the Registrant and Henry T. Doherty (incorporated by
reference to Exhibit 10.24 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1993).
10.25 Term Note in the principal amount of $112,397.27 executed by
the Registrant in favor of The Rebot Corporation (incorporated
by reference to Exhibit 10.25 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1993).
10.26 Form of Warrant dated as of September 30, 1993 between the
Registrant and Rebot Corporation (incorporated by reference to
Exhibit 10.26 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.27 Term Note in the principal amount of $38,418.40 executed by
the Registrant in favor of William F. Finley (incorporated by
reference to Exhibit 10.27 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1993).
10.28 Form of Warrant dated as of September 30, 1993 between the
Registrant and William F. Finley (incorporated by reference to
Exhibit 10.28 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.29 Letter Agreement dated September 30, 1993 between the
Registrant and Paul M. Diamond (incorporated by reference to
Exhibit 10.29 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.30 Form of Warrant dated as of September 30, 1993 between the
Registrant and Paul M. Diamond (incorporated by reference to
Exhibit 10.30 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.31 Form of Warrant dated as of November 11, 1993 between the
Registrant and Paul M. Diamond (incorporated by reference to
Exhibit 10.31 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.32 Form of Warrant dated as of November 11, 1993 between the
Registrant and William F. Finley (incorporated by reference to
Exhibit 10.32 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.33 Form of Warrant dated as of November 11, 1993 between the
Registrant and Marvin M. Reiss (incorporated by reference to
Exhibit 10.33 to the Company's Report on Form 10- KSB for the
Company's fiscal year ended September 30, 1993).
<PAGE> 67
10.34 Form of Warrant dated as of November 11, 1993 between the
Registrant and Alan M. Swiedler (incorporated by reference to
Exhibit 10.34 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.35 Form of Warrant dated as of November 11, 1993 between the
Registrant and Susan M. Michaelson (incorporated by reference
to Exhibit 10.35 to the Company's Report on Form 10-KSB for
the Company's fiscal year ended September 30, 1993).
10.36 Form of Warrant dated as of November 11, 1993 between the
Registrant and Leonard Gartner (incorporated by reference to
Exhibit 10.36 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.37 Form of Warrant dated as of November 11, 1993 between the
Registrant and Ted Prince (incorporated by reference to
Exhibit 10.37 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.38 Form of Subscription Agreement dated November 17, 1993 between
the Registrant and Henry T. Doherty (incorporated by reference
to Exhibit 10.38 to the Company's Report on Form 10-KSB for
the Company's fiscal year ended September 30, 1993).
10.39 Form of Subscription Agreement dated February 28, 1994 between
the Registrant and Robert S. Trump (incorporated by reference
to Exhibit 10.39 to the Company's Report on Form 10-KSB for
the Company's fiscal year ended September 36, 1993).
10.40 Letter Agreement dated November 24, 1992 between the
Registrant and Management Technologies, Incorporated
(incorporated by reference to Exhibit 10.40 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1993).
10.41 Agreement dated April 29, 1994 between the Registrant and New
Paradigm Software Corporation (incorporated by reference to
the Registrant's Report on Form 10-QSB for the Quarter Ended
March 31, 1994).
10.42 Occupancy Agreement dated October 10, 1994 between the
Registrant and New Paradigm Software Corp. (incorporated by
reference to Exhibit 10.42 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1994).
10.43 Letter agreement dated October 10, 1994 between the Registrant
and New Paradigm Software Corp. (incorporated by reference to
Exhibit 10.43 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1994).
10.44 Letter agreement dated August 10, 1994 between the Registrant
and Management Technologies, Inc. concerning the conversion of
the MARS-TM- product to Windows IBM (incorporated by reference
to Exhibit 10.44 to the Company's Report on Form 10- KSB for
the Company's fiscal year ended September 30, 1994).
10.45 $150,000 Secured Promissory Note dated July 21, 1994 issued by
the Registrant in favor of Robert S. Trump (incorporated by
reference to Exhibit 10.45 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1994).
<PAGE> 68
10.46 Letter agreement dated July 21, 1994 between the Registrant
and Robert S. Trump concerning $125,000 Exchangeable Note
dated January 7, 1993 (incorporated by reference to Exhibit
10.46 to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1994).
10.47 $280,000 Secured Promissory Note dated October 17, 1994 issued
by the Registrant in favor of Robert S. Trump (incorporated by
reference to Exhibit 10.47 to the Company's Report, on Form
10-KSB for the Company's fiscal year ended September 30,
1994).
10.48 $150,000 Secured Promissory Note dated December 13, 1994
issued by the Registrant in favor of Robert S. Trump
(incorporated by reference to Exhibit 10.48 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1994).
10.49 $149,791.67 Amended and Restated Exchangeable Note dated
January 1, 1995 issued by the Registrant in favor of Robert S.
Trump (incorporated by reference to Exhibit 10.49 to the
Company's Report on Form 10-KSB for the Company's fiscal year
ended September 30, 1994).
10.50 $156,708.37 Amended and Restated Secured Promissory Note dated
January 1, 1995 issued by the Registrant in favor of Robert S.
Trump (incorporated by reference to Exhibit 10.50 to the
Company's Report on Form 10-KSB for the Company's fiscal year
ended September 30, 1994).
10.51 $250,000 Secured Promissory Note dated January 11, 1995 issued
by the Registrant in favor of Robert S. Trump (incorporated by
reference to Exhibit 10.51 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1994).
10.52 Letter agreement dated December 29, 1994 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.52 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1994).
10.53 Letter agreement dated January 13, 1995 between the Registrant
and Robert S. Trump (incorporated by reference to Exhibit
10.53 to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1994).
10.54 Letter agreement dated January 13, 1995 between the Registrant
and Robert S. Trump (incorporated by reference to Exhibit
10.54 to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1994).
10.55 Letter of Intent dated October 17, 1994 by and among the
Registrant, Hillary Kelbick and Susan Michaelson concerning
Michaelson Kelbick Partners Inc. (then known as FPC Consulting
Corp.) (incorporated by reference to Exhibit 10.55 to the
Company's Report on Form 10-KSB for the Company's fiscal year
ended September 30, 1994).
10.56 Managing Director's Agreement dated October 17, 1994 by and
among Michaelson Kelbick Partners Inc. (then known as FPC
Consulting Corp.), Susan Michaelson and the Registrant
(incorporated by reference to Exhibit 10.56 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1994).
<PAGE> 69
10.57 Managing Director's Agreement dated October 17, 1994 by and
among Michaelson Kelbick Partners Inc. (then known as FPC
Consulting Corp.), Hillary Kelbick and the Registrant
(incorporated by reference to Exhibit 10.57 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1994).
10.58 Shareholders Agreement dated as of January 5, 1995 by and
among the Registrant, Aspen Capital Management Corp. (then
known as FPC Funds Corp.), Richard J. Loos and Sean P. Brennan
(incorporated by reference to Exhibit 10.58 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1994).
10.59 Executive Employment Agreement dated January 5, 1995 between
Aspen Capital Management Corp. (then known as FPC Funds
Corp.), the Registrant and Richard J. Loos (incorporated by
reference to Exhibit 10.59 to the Company's Report on Form 10-
KSB for the Company's fiscal year ended September 30, 1994).
10.60 Executive Employment Agreement dated January 5, 1995 between
Aspen Capital Management Corp. (then known as FPC Funds
Corp.), the Registrant and Sean P. Brennan (incorporated by
reference to Exhibit 10.60 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1994).
10.61 $250,000 Secured Promissory Note dated April 6, 1995 issued by
the Registrant in favor of Robert S. Trump (incorporated by
reference to Exhibit 10.14 to Report of Form 10- QSB for
fiscal quarter ended March 31, 1995).
10.62 Letter agreement dated May 3, 1995 between the Registrant and
New Paradigm Software Corp. (incorporated by reference to
Exhibit 10.15 to Report on Form 10-QSB for fiscal quarter
ended March 31, 1995).
10.63 Agreement dated July 28, 1995 by and among the Company, Scott
Rhodes, Scott Rhodes d/b/a "Metamorphic Computing", Scott
Rhodes d/b/a "Metamorphic Systems", Scott Rhodes d/b/a "MCC",
Scott Rhodes d/b/a "Metamorphic Computing Corp." and
Metamorphic Computing Corp. (incorporated by reference to
Exhibit to Report on Form 10-KSB for fiscal year ended
September 30, 1995).
10.64 Form of Warrant dated as of September 15, 1995 between the
Registrant and Robert S. Trump (incorporated by reference to
Exhibit 10.64 to Report on Form 10-KSB for fiscal year ended
September 30, 1995).
10.65 Form of Warrant dated as of September 15, 1995 between the
Registrant and William F. Finley (incorporated by reference to
Exhibit 10.65 to Report on Form 10-KSB for fiscal year ended
September 30, 1995).
10.66 Letter dated March 29, 1996 from Robert S. Trump regarding
conversion of debt into equity (incorporated by reference to
Exhibit 10.66 to Report on Form 10-KSB for fiscal year ended
September 30, 1996).
10.67 Letter dated June 20, 1996 from Robert S. Trump regarding
conversion of debt into equity (incorporated by reference to
Exhibit 10.67 to Report on Form 10-KSB for fiscal year ended
September 30, 1996).
<PAGE> 70
10.68 General Form of Subscription Agreement used in private
placements in 1996 (incorporated by reference to Exhibit 10.68
to Report on Form 10-KSB for fiscal year ended September 30,
1996).
10.69 Form of Warrant Agreement for Warrants issued in September
1996 (incorporated by reference to Exhibit 10.69 to Report on
Form 10-KSB for fiscal year ended September 30, 1996).
10.70 Letter agreement dated November 12, 1996 with Robert S. Trump
regarding exercise of Restated Exchangeable Note dated January
1, 1995 and conversion of debt into equity (incorporated by
reference to Exhibit 10.70 to Report on Form 10-KSB for fiscal
year ended September 30, 1996).
10.71 Executive Employment Agreement dated as of September 11, 1997
between the Registrant and William F. Finley.
10.72 Managing Director's Agreement dated as of September 11, 1997
between the Registrant's subsidiary, MKP, and Susan
Michaelson.
10.73 Managing Director's Agreement dated as of September 11, 1997
between the Registrant's subsidiary, MKP, and Hillary Kelbick.
10.74 Form of Warrant dated as of December 29, 1997 issued to Duncan
Burke.
10.75 Form of Warrant dated as of December 29, 1997 issued to
Richard Levy.
10.76 Stock Purchase Agreement dated as of October 1, 1997 by and
between the Company and Robert S. Trump.
21.1 Subsidiaries of Registrant.
27.1 Financial Data Schedule.
<PAGE> 1
EXECUTIVE EMPLOYMENT AGREEMENT
Agreement made as of September __, 1997, by and between Financial Performance
Corporation, a New York corporation with offices at 335 Madison Avenue, 8th
Floor, New York, New York ("FPC"), FPC Information Corp., a New York corporation
with offices at 335 Madison Avenue, 8th Floor, New York, New York ("FPC
Information Corp.") and William F. Finley, an individual residing at 684 Hill
Farm Road, Fairfield, Connecticut 06430 ("Finley"). FPC and FPC Information
Corp. are hereinafter jointly and severally referred to as the "Corporation".
W I T N E S S E T H:
Whereas, the Corporation desires to continue to engage the services of Finley as
Chairman, President, Chief Executive Officer and Principal Financial Officer of
the Corporation; and
Whereas, Finley is willing to continue such employment by the Corporation on the
terms and conditions set forth herein.
Now, therefore, in consideration of the premises, the mutual covenants
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Employment. The Corporation hereby employs Finley and Finley hereby accepts
such employment upon the terms and conditions hereinafter set forth.
2. Term. (a) The term of this agreement is three (3) years, commencing on
October 1, 1997 and ending on September 30, 2000 (the "Initial Term"), unless
earlier terminated by the Corporation or by Finley in accordance with the
provisions hereof. This agreement shall be automatically renewed for periods of
one (1) year each (the "Renewal Term") unless either party shall give the other
notice of his or its desire to terminate this agreement no later than on the
June 1st immediately preceding the expiration of the then current term, in which
event Finley's employment shall terminate at the end of the Initial Term or the
applicable Renewal Term, as the case may be. The Initial Term and the Renewal
Term are hereinafter collectively referred to as the Term. If Finley has not
given notice to the Corporation on or before June 1, 2000 that he elects not to
renew this agreement at the expiration of the Term and the Corporation gives
notice to Finley that it elects not to renew this agreement at the expiration of
the Term, then and only in such event, in addition to and without limitation of
any other compensation, severance payments or benefits which may be or become
due from the Corporation to Finley pursuant to this agreement, the Corporation
shall pay to Finley within ten (10) days following the expiration of the Term, a
severance payment in the amount of One Hundred Thousand ($100,000.00) Dollars.
<PAGE> 2
(b) Notwithstanding the provisions of subsection 2(a) above
and without limitation of the provisions of Section 7 below, Finley shall have
the right to terminate this agreement for other than Good Reason (as defined in
Section 7 below) effective as of September 30, 1999 upon giving the Corporation
not less than ninety (90) days prior written notice of termination. If Finley
shall elect to terminate this agreement pursuant to the provisions of this
subsection 2(b), then Finley shall be entitled to receive all salary and other
employment benefits through the effective date of termination.
3. Duties. Finley is engaged for the term hereof as President, Chief Executive
Officer and Principal Financial Officer of the Corporation and shall perform and
discharge well and faithfully the duties which may be undertaken by Finley in
such capacity from time to time, such duties to be substantially similar to the
duties hereto undertaken by Finley as President, Chief Executive Officer and
Principal Financial Officer of the Corporation. The duties of Finley shall
include managing the Corporation's day-to-day operations, including, without
limitation, hiring, training, supervising and terminating employees, determining
employee compensation (including incentives) and employment policy, including
assignment of employees' duties and how same are to be performed, all aspects of
client relationships, maintaining the Corporation's books and records, serving
as a member of the Board of Directors and any other duties as may be determined
by the Board of Directors; it being the intent of the parties that Finley shall
exercise full management control of the day-to-day operations of the Corporation
for so long as Finley is employed by the Corporation.
4. Extent of Services. During the period in which Finley is employed by the
Corporation, Finley shall devote Finley's entire active business time, best
efforts, attention, skill and energies to the business of the Corporation and
shall not during such period be engaged in any other business activity pursued
for gain, profit or other pecuniary advantage; but this shall not be construed
as preventing Finley from investing Finley's personal assets in businesses which
do not compete with the Corporation in such form or manner as will not require
any active business services on the part of Finley in the operation of the
affairs of the companies in which such investments are made and in which
Finley's participation is solely that of a passive investor.
5. Compensation. For all services rendered by Finley pursuant to this agreement,
the Corporation shall pay Finley an annual salary of One Hundred Fifty Thousand
($150,000.00) Dollars, payable twice monthly on the 15th and 30th of each month,
in arrears. Such salary shall be subject to periodic increases as shall be
determined by the Board of Directors of the Corporation.
6. Benefits. (a) Finley shall be entitled to four (4) weeks vacation during each
one (1) year of Finley's employment pursuant to this agreement, during which
Finley's salary shall be paid in full. Finley shall be entitled to reimbursement
of reasonable out-of-pocket business expenses incurred on behalf of the
Corporation, provided that such expenses are reasonably necessary and are
properly documented. Finley shall be entitled to privileges under any
retirement, pension, long-term or short-term disability insurance plan which may
hereafter be adopted by the Corporation for the benefit of its employees. The
Corporation
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<PAGE> 3
shall provide Finley with and shall pay all premiums for family coverage under a
group health insurance plan. The Corporation shall also provide Finley with a
leased automobile of Finley's choice throughout the term of this agreement,
including payment or reimbursement for all insurance, maintenance and repair
costs. The Corporation shall register, at the Corporation's sole cost and
expense, all of the shares of stock of the Corporation now or hereafter owned by
Finley at such time as the Corporation may elect to file a registration
statement covering shares of stock of the Corporation.
(b) The Corporation shall obtain and pay all premiums for a
term life insurance policy covering Finley's life. Such policy shall be in an
amount of not less than $250,000.00 and not more than $500,000.00, as shall be
determined by the Corporation's Board of Directors. The Corporation shall be the
owner of the policy and Finley (or Finley's designee(s)) shall be the
beneficiary of such policy.
7. (a) The Corporation may, at its election in accordance with the procedures
more particularly set forth below, terminate this agreement for cause. For
purposes of this agreement, "cause" shall include, without limitation, the
following: (i) a material breach by Finley of any term of this agreement that
has not been cured within thirty (30) days of receipt by Finley of written
notice; (ii) a continued failure of Finley after thirty (30) days notice of a
prior failure to devote Finley's full active business time (as more particularly
described in Section 4 above) to the performance of Finley's duties hereunder;
(iii) an act of willful misconduct causing injury to another person or
substantial damage to the reputation or property of the Corporation, any of the
Corporation's affiliates or any of the Corporation's customers including,
without limitation, any oral or written material misrepresentation relating to
the Corporation or any of its customers which causes substantial damage to the
reputation of the Corporation; (iv) an act of dishonesty, moral turpitude or
conviction of a felony; and (v) substantial, continuing and willful improper
performance or non-performance of any of Finley's material duties hereunder
after thirty (30) days written notice to cure as aforesaid. For purposes of this
subsection (a), no act, or failure to act, on Finley's part shall be considered
"willful" unless done, or omitted to be done, by him not in good faith or
without reasonable belief that his action or omission was in the best interests
of the Corporation. Notwithstanding the foregoing, Finley shall not be deemed to
have been terminated for cause without (i) thirty (30) days' notice to Finley
setting forth the reasons for the Corporation's intention to terminate for cause
as set forth above in this subsection (a), (ii) an opportunity for Finley,
together with his counsel, to be heard before the Corporation's board of
directors, and (iii) delivery to Finley of a Notice of Termination as defined in
subsection (d) below from an executive officer of the Corporation finding that,
in the good faith opinion of the Board of Directors of FPC, Finley was guilty of
conduct set forth or described above in justifying the Corporation's termination
of Finley's employment for cause and specifying the particulars thereof in
detail.
(b) Finley may terminate his employment under this agreement for Good
Reason (as hereinafter defined). For purposes of this agreement, "Good Reason"
shall mean (i) a change in control of FPC (as defined below) which shall have
been in effect for a period of at least ninety (90) consecutive days; provided,
however, that Finley shall be unable to work
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harmoniously and effectively with the personnel constituting the new management
of FPC, (ii) a failure by the Corporation to comply with any material provision
of this agreement, which noncompliance shall have a material adverse effect upon
Finley and which shall not have been cured within thirty (30) days after notice
of such noncompliance has been given by Finley to the Corporation pursuant to
this agreement, (iii) if Finley's management functions, duties or
responsibilities or any other material aspect of Finley's employment shall have
been materially and adversely changed by the Corporation for a period in excess
of thirty (30) consecutive days notwithstanding Finley's written objection
thereto, (iv) if Finley shall cease to be chairman of the board of the directors
and the chief executive officer of FPC (other than by reason of death,
incapacity or resignation) or (v) any purported termination of Finley's
employment which is not effected pursuant to a Notice of Termination satisfying
the requirements of subsection (d) below (and for purposes of this agreement no
such purported termination shall be effective).
(c) For the purpose of this agreement, a "Change of Control" shall be
deemed to have taken place if: (i) a third person, including a "group" as such
term is defined in Section 13(d)(3) of the Securities Exchange Act of 1934,
becomes (other than as a result of a purchase from FPC) the beneficial owner of
shares of FPC having more than thirty (30%) percent of the total number of votes
that may be cast for the election of directors of FPC and such beneficial
ownership continues for thirty (30) consecutive days, or (ii) as a result of, or
in connection with, any cash tender or exchange offer, merger or other business
combination of the foregoing transactions relating to FPC (hereinafter referred
to as a "Transaction") the persons who were directors of FPC before the
Transaction shall cease for any reason to constitute at least a majority of the
Board of Directors of FPC, or any successor(s) of FPC.
(d) Any termination of Finley's employment by the Corporation or by
Finley (other than termination by reason of Finley's death or disability as set
forth in Section 14 below) shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Finley's employment under the provision so indicated.
(e) "Date of Termination" shall mean (i) if Finley's employment is
terminated by his death, the date of his death, (ii) if Finley's employment is
terminated pursuant to subsection 2(b) or subsection 7(c) above, the date
specified in the Notice of Termination, and (iii) if Finley's employment is
terminated for any other reason, the date on which a Notice of Termination is
given; provided that if within thirty (30) days after any Notice of Termination
is given the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, the Date of Termination shall
be the date on which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding and final arbitration award or by a final
judgment, order or decree of a court of competent jurisdiction (the time for
appeal therefrom having expired and no appeal having been perfected).
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<PAGE> 5
8. Compensation Upon Termination or During Disability.
(a) During any period that Finley fails to perform his duties hereunder
as a result of incapacity due to physical or mental illness ("disability
period"), Finley shall continue to receive his full salary at the rate then in
effect for such period until his employment is terminated pursuant to Section 7
above, provided that payments so made to Finley during the disability period
shall be reduced by the sum of the amounts, if any, payable to Finley at or
prior to the time of any such payment under disability benefit plans of the
Corporation and which were not previously applied to reduce any such payment.
(b) If Finley's employment is terminated by his death, the Corporation
shall pay to Finley's spouse, or if he leaves no spouse, to his estate, within
thirty (30) days of Finley's death, all salary and employment benefits due to
Finley accrued through the date of his death.
(c) If Finley's employment shall be terminated for cause, the
Corporation shall pay Finley his full salary through the Date of Termination at
the rate in effect at the time Notice of Termination is given and the
Corporation shall have no further obligations to Finley under or pursuant to
this Agreement.
(d) If (i) in breach of this agreement, the Corporation shall terminate
Finley's employment other than pursuant to subsection 7 (a) above (termination
for cause) or Section 14 below (termination by reason of death or disability)(it
being understood that a purported termination by the Corporation pursuant to
subsection 7 (a) above or Section 14 below which is disputed and finally
determined not to have been proper shall be deemed a termination by the
Corporation in breach of this agreement) or (ii) Finley shall terminate his
employment for Good Reason, then
(I) the Corporation shall pay Finley his full salary through
the Date of Termination at the rate in effect at the time the Notice of
Termination is given;
(II) in lieu of any further salary payments to Finley for
periods subsequent to the Date of Termination, the Corporation shall pay to
Finley, as severance pay (and not as a penalty to the Corporation), an amount
equal to the product of (A) Finley's annual base salary rate in effect as of the
Date of Termination, multiplied by (B) the number two (2), such payment to be
made (X) if resulting from a termination based on a change of control of the
Corporation, in a lump sum on or before the thirtieth (30th) day following the
Date of Termination, or (Y) if resulting from any other cause, in substantially
equal semimonthly installments on the fifteenth and last days of each month
commencing with the month in which the Date of Termination occurs and continuing
for forty-eight (48) consecutive semimonthly payment dates (including the first
such date as aforesaid), without interest; and
(III) if termination of Finley's employment arises out of a
breach by the Corporation of this agreement, the Corporation shall pay all other
damages to which Finley may be entitled as a result of such breach, including
damages for any and all loss of benefits
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to Finley under the Corporation's employee benefit plans which Finley would have
received if the Company had not breached this agreement and had Finley's
employment continued for the full term provided in Section 2 hereof.
(e) Unless Finley's employment is terminated by the Corporation for
cause, the Corporation shall maintain in full force and effect, for the
continued benefit of Finley for the greater of the number of years (including
partial years) remaining in the term of employment hereunder or the number two
(2), all employee benefit plans and programs in which Finley was entitled to
participate immediately prior to the Date of Termination, provided that Finleys
continued participation is possible under the general terms and provisions of
such plans and programs. In the event that Finley's participation in any such
plan or program is barred, the Corporation shall arrange to provide Finley with
benefits substantially similar to those which Finley would otherwise have been
entitled to receive under such plans and programs from which his continued
participation is barred.
(f) The Corporation may withhold from any payments or other benefits
payable to Finley pursuant to this Section 8 or any other provision of this
agreement all federal, state, city or other taxes as shall be required pursuant
to any law, government regulation or ruling.
9. Disclosure of Information. Finley recognizes and acknowledges that the trade
secrets and know how of FPC and its subsidiaries as they may exist from time to
time are a valuable, special and unique asset of the businesses of such
companies, access to and knowledge of which are essential to the performance of
Finley's duties hereunder. For the purposes of this agreement, Confidential
Information includes any and all information disclosed or made available to
Finley in consequence of or through his employment by the Corporation and not
generally known in the industries in which FPC and its subsidiaries or any of
the customers of FPC and its subsidiaries is or may be engaged, or which is
beneficial to FPC or its subsidiaries, or any of the customers of FPC or its
subsidiaries, in the promotion or operation of their respective businesses, (ii)
relating to the business, business practices, operation, affairs, practices,
procedures, policies or methods of FPC or its subsidiaries, (iii) customer
lists, (iv) marketing information and (v) training materials. Since the services
of Finley are unique, extraordinary and of a specialized character which will
require Finley to handle Confidential Information of FPC and FPC's subsidiaries
and of such companies' suppliers and customers, Finley shall not, at any time
during the term of this agreement or thereafter, make use of any Confidential
Information for the benefit of any person or entity (other than FPC or its
subsidiaries) nor shall Finley disclose any Confidential Information to any
person or entity for any reason or purpose whatsoever.
10. Covenants Not to Interfere. Finley, either as a proprietor, partner,
employee, agent, consultant, director, officer, controlling stockholder or in
any other capacity or manner whatsoever, for a period of one (1) year after the
date of expiration or other termination of this agreement, shall not interfere
with, disrupt or attempt to disrupt the relationship, contractual or otherwise,
between FPC and/or any of its subsidiaries and any customer, client, employee or
independent contractor of FPC and/or any of its subsidiaries. However, subject
to the foregoing provisions of this Section 10, it is understood that Finley
may, in
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good faith, contact all customers and clients of FPC and/or any of its
subsidiaries originated by or otherwise brought to FPC and/or any of its
subsidiaries by Finley during the term of Finley's employment by the Corporation
in connection with establishing any other business enterprises subsequent to the
expiration or termination of this agreement.
11. Return of Documents. Upon termination of employment with the Corporation,
Finley shall promptly return to the Corporation all documents, notes, records
and other materials of FPC and/or any of its subsidiaries in Finley's
possession, whether prepared by Finley or others. However, Finley shall be
entitled to retain copies of all such documents, notes, records and other
materials and may use same subject only to Finley's covenants set forth in
Section 9 ("Disclosure of Information") and Section 10 ("Covenants Not to
Interfere").
12. Enforcement of Non-Disclosure and Non-Solicitation Provisions. It is the
desire and intent of the parties that the provisions of Sections 9, 10 and 11
shall be enforced to the fullest extent permissible under the laws and public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any portion or portions of such Sections 9, 10 or 11 shall be
adjudicated to be invalid or unenforceable, such Sections shall be deemed
amended to delete therefrom the portion or portions thus adjudicated to be
invalid or unenforceable, such deletion to apply only with respect to the
operation of such Sections in the particular jurisdiction in which such
adjudication is made. The provisions of Sections 9, 10, 11 and 13 shall survive
the expiration or earlier termination of this agreement.
13. Injunctive Relief. If there is a breach or threatened breach of any of the
provisions of Sections 9, 10 or 11 of this agreement, the Corporation shall be
entitled to an injunction restraining Finley from such breach. Nothing herein
shall be construed as prohibiting the Corporation from pursuing any other
remedies for such breach or threatened breach.
14. Disability/Death. Finley's employment under this agreement shall terminate
upon the death or, at the election of the Corporation, the physical or mental
disability of Finley. For purposes of this agreement, Finley shall be deemed to
be disabled if he is unable to perform his services for twelve (12) consecutive
months. If the Corporation elects to terminate this agreement pursuant to this
Section 14, the Corporation shall notify Finley of the Corporation's decision to
terminate Finley's employment hereunder by means of a Notice of Termination
pursuant to the provisions of subsection (d) of Section 7 above. From and after
such termination of employment of Finley pursuant to this Section 14, Finley's
compensation and rights thereto and all of Finley's other rights under this
agreement shall terminate.
15. Notices. Any notice required or permitted to be given under this agreement
shall be sufficient if in writing and if sent by certified mail, return receipt
requested, to Finley's mailing address set forth above, or by personal delivery
to Finley, in the case of Finley, or to its office address set forth above, in
the case of the Corporation, with a copy sent in like manner to Kaufman Friedman
Plotnicki & Grun, LLP, 300 East 42nd Street, New York, New York 10017,
Attention: Gary S. Friedman, Esq. Notices shall be deemed given two (2) business
days after mailing, or on the date personal delivery is effected, as the case
may be.
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16. Waiver of Breach. The waiver by a party of a breach of any provision of this
agreement by another party shall not operate or be construed as a waiver of any
subsequent or other breach by such other party. Any waiver must be in writing.
17. Entire Agreement. This instrument contains the entire agreement of the
parties. It may not be waived, changed, modified or extended orally but only by
an agreement in writing signed by the party against whom enforcement of any
waiver, change, modification or extension is sought.
18. Applicable Law. This agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the application of conflict of laws.
19. Severability. If any provision of this agreement is found to be void or
unenforceable by a court of competent jurisdiction, the remaining provisions of
this agreement shall nevertheless be binding upon the Corporation and Finley
with the same effect as though the void or unenforceable provision had been
severed and deleted.
20. Conflict. If any provision of this agreement is found to be in conflict with
any provision of any other agreement to which the Corporation and Finley are
parties, the provision of such other agreement shall control.
21. Arbitration. If any dispute shall arise between the Corporation and Finley
with regard to this agreement, such dispute shall be promptly submitted to and
decided by arbitration by the American Arbitration Association in the City and
County of New York in accordance with the Expedited Procedures of the Commercial
Arbitration Rules of the American Arbitration Association. The award rendered by
the arbitrators shall be final, shall include an award of reasonable legal fees
and costs to the prevailing party as determined by the arbitrator(s) and
judgment may be entered upon the award in accordance with applicable law in any
court having jurisdiction.
22. Prior Executive Employment Agreement. Notwithstanding anything herein
contained to the contrary, the prior Executive Employment Agreement between the
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Corporation and Finley dated as of September 1, 1995 is hereby deemed terminated
and is superseded in all respects by this agreement.
In witness whereof, the parties hereto have caused this agreement to be duly
executed as of the day and year first above written.
Financial Performance Corporation
By:/s/_____________________________________
Richard Levy, Secretary
FPC Information Corp.
By:/s/_____________________________________
Richard Levy, Secretary
/s/_____________________________________
William F. Finley, individually
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<PAGE> 1
MANAGING DIRECTOR'S AGREEMENT
Agreement made as of September 11, 1997, by and between Michaelson Kelbick
Partners Inc., a New York corporation with offices at 335 Madison Avenue, 8th
Floor, New York, New York 10017(the "Corporation") and Susan Michaelson,
residing at 684 Hill Farm Road, Fairfield, Connecticut 06430 ("Susan").
W I T N E S S E T H:
Whereas, the Corporation desires to continue to engage the services of Susan as
a Managing Director of the Corporation for a three (3) year period commencing on
September 11, 1997 (the "Term"); and
Whereas, Susan is willing to continue such employment by the Corporation for the
Term on the terms and conditions set forth herein.
Now, therefore, in consideration of the premises, the mutual covenants
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Employment. The Corporation hereby continues its employment of Susan for the
Term and Susan hereby accepts such employment upon the terms and conditions
hereinafter set forth.
2. Term. The Term of this agreement is three (3) years, commencing on September
11, 1997 and ending on September 10, 2000, unless earlier terminated by the
Corporation or by Susan in accordance with the provisions hereof. This agreement
shall be automatically renewed for periods of one (1) year each (the "Renewal
Term") unless either party shall give the other notice of her or its desire to
terminate this agreement no later than on the June 1st immediately preceding the
expiration of the then current term, in which event Susan's employment shall
terminate at the end of the Term or the applicable Renewal Term, as the case may
be. The Term and the Renewal Term are hereinafter collectively referred to as
the Term. If Susan has not given notice to the Corporation on or before June 1,
2000 that she elects not to renew this agreement at the expiration of the Term
and the Corporation gives notice to Susan that it elects not to renew this
agreement at the expiration of the Term, then and only in such event, in
addition to and without limitation of any other compensation, severance payments
or benefits which may be or become due from the Corporation to Susan pursuant to
this agreement, the Corporation shall pay to Susan within ten (10) days
following the expiration of the Term, a severance payment in the amount of Two
Hundred Fifty Thousand ($250,000.00) Dollars.
<PAGE> 2
3. Duties. Susan is engaged for the term hereof as a Managing Director of the
Corporation and shall perform and discharge well and faithfully the duties which
may be undertaken by Susan in such capacity from time to time, such duties to be
substantially similar to the duties heretofore undertaken by Susan as a Managing
Director of the Corporation. The duties of Susan shall include jointly managing
with Hillary Kelbick or her successor ("Hillary"), the Corporation's day-to-day
operations, including, without limitation, hiring, training, supervising and
terminating employees, determining employee compensation (including incentives)
and employment policy, including assignment of employees' duties and how same
are to be performed, all aspects of client relationships, and maintaining the
Corporation's books and records, serving as a member of the Board of Directors
and any other duties as may be determined by the Board of Directors; it being
the intent of the parties that Susan and Hillary shall together exercise full
management control of the day-to-day operations of the Corporation for so long
as both Susan and Hillary are employed by the Corporation.
4. Extent of Services. During the period in which Susan is employed by the
Corporation, Susan shall devote Susan's entire active business time, best
efforts, attention, skill and energies to the business of the Corporation and
shall not during such period be engaged in any other business activity pursued
for gain, profit or other pecuniary advantage; but this shall not be construed
as preventing Susan from investing Susan's personal assets in businesses which
do not compete with the Corporation in such form or manner as will not require
any active business services on the part of Susan in the operation of the
affairs of the companies in which such investments are made and in which Susan's
participation is solely that of a passive investor.
5. Compensation.
(a) For all services rendered by Susan pursuant to this agreement, the
Corporation shall pay Susan an annual salary of One Hundred Fifty Thousand
($150,000.00) Dollars, payable bi-weekly, in arrears. Such salary shall be
subject to periodic increases as shall be determined by the Board of Directors
of the Corporation.
(b) Susan shall be eligible to participate in the Corporation's annual
incentive compensation pool (the "Bonus Pool") in an amount to be determined
annually by the Corporation's Board of Directors based upon the joint
recommendation of Susan and Hillary. The portion of the Bonus Pool to which
Susan shall become entitled for any fiscal year of the Corporation is
hereinafter referred to as "Susan's Annual Bonus". For any fiscal year of the
Corporation, the Bonus Pool shall not exceed in the aggregate an amount equal to
thirty (30%) percent of the Corporation's annual net profits before taxes
determined by the Corporation's outside accounting firm, subject to review and
approval by the accounting firm which prepares the consolidated financial
statements for all of the companies affiliated with FPC, in accordance with
generally accepted accounting principles, consistently applied, as if the
Corporation were not a member of an affiliated
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<PAGE> 3
group of corporations. Susan's Annual Bonus shall be payable in cash or, if
agreed to by Susan, the Board of Directors of the Corporation and the Board of
Directors of Financial Performance Corporation ("FPC"), such amount may be
payable, in whole or in part, in options or warrants to acquire common stock or
other securities of FPC (hereinafter, the "Bonus Securities") which shall have
typical "piggy-back" registration rights and which shall contain such other
terms and conditions, including, without limitation, term, exercise price and
number of securities issued, as the Board of Directors of the Corporation and
FPC shall jointly reasonably determine represents equivalent value to the cash
bonus or portion thereof which would otherwise be payable to Susan. Further,
during the six (6) month period commencing on the date of issuance of the Bonus
Securities (hereinafter, the "Sales Period") FPC shall use its reasonable
efforts together with the investment banking firms then providing financial
services to FPC, to the extent reasonably practicable and appropriate, to assist
Susan in arranging for the exercise and sale of the Bonus Securities. The term
"Bonus Securities", as used herein, shall mean and include all options,
warrants, common stock or other securities of FPC issued to Susan in full or
partial payment of Susan's Annual Bonus and, in the case of derivative
securities such as options and warrants, all of the common stock underlying such
derivative securities. The "piggy-back" registration rights referred to above
shall apply to all common stock underlying any derivative securities and shall
obligate FPC to register such stock at such time as FPC registers other common
stock in connection with a public offering of securities, at FPC's sole cost and
expense.
(c) If (i) Susan shall exercise and sell all of the Bonus Securities
during the Sales Period and (ii) the aggregate gross sales price received by
Susan for the sale of the Bonus Securities less the aggregate amount of all
warrant or option exercise consideration in respect of the Bonus Securities paid
by Susan to FPC during the Sales Period (hereinafter, the "Gross Sales
Proceeds") shall be less than the agreed-upon equivalent cash value of Susan's
Bonus which shall have been paid by issuance of the Bonus Securities as set
forth in subsection (b) above (hereinafter, the "Equivalent Cash Value"), then
within thirty (30) days after the Corporation's receipt from Susan of notice
thereof setting forth, in reasonable detail, the calculation of such difference
together with copies of all pertinent supporting documentation relating thereto,
the Corporation shall pay to Susan, in cash, an amount (hereinafter, the
"Shortfall") equal to the difference between the Equivalent Cash Value and the
Gross Sales Proceeds. The Corporation shall not be obligated to make payment of
the Shortfall to Susan unless all of the Bonus Securities are exercised and sold
by Susan prior to the expiration of the Sales Period.
6. Benefits. Susan shall be entitled to four (4) weeks vacation for each one (1)
year of Susan's employment pursuant to this agreement, during which Susan's
salary shall be paid in full. Susan shall be entitled to reimbursement of
reasonable out-of-pocket business expenses incurred on behalf of the
Corporation, provided that such expenses are reasonably necessary and are
properly documented. Susan shall be entitled to privileges under any retirement,
pension, long-term or short-term disability insurance plan which may hereafter
be adopted by the Corporation for the benefit of its employees. The
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Corporation agrees to provide Susan with and shall pay all premiums for family
coverage under a group health insurance plan reasonably comparable to the
coverage currently provided to Susan by the Corporation, to the extent same is
reasonably obtainable by the Corporation. The Corporation shall also provide
Susan with (i) a clothing expense allowance in the amount of ten thousand and
00/100 ($10,000.00) dollars for each year of the term of this agreement and (ii)
a leased automobile of Susan's choice throughout the term of this agreement.
7. Termination.
(a) The Corporation may, at its election in accordance with the
procedures more particularly set forth below, terminate this agreement for
cause. For purposes of this agreement, "cause" shall include, without
limitation, the following: (i) a material breach by Susan of any term of this
agreement; (ii) a continued failure of Susan after notice of a prior failure to
devote Susan's full active business time (as more particularly described in
Section 4 above) to the performance of Susan's duties hereunder; (iii) an act of
willful misconduct causing injury to another person or substantial damage to the
reputation or property of the Corporation, any of the Corporation's affiliates
or any of the Corporation's customers including, without limitation, any oral or
written misrepresentation relating to the Corporation or any of its customers;
(iv) an act of dishonesty, moral turpitude or conviction of a felony; and (v)
substantial, continuing and willful improper performance or non-performance of
any of Susan's material duties hereunder. For purposes of this subsection (a),
no act, or failure to act, on Susan's part shall be considered "willful" unless
done, or omitted to be done, by her not in good faith or without reasonable
belief that her action or omission was in the best interests of the Corporation.
Notwithstanding the foregoing, Susan shall not be deemed to have been terminated
for cause without (i) reasonable notice to Susan setting forth the reasons for
the Corporation's intention to terminate for cause, (ii) an opportunity for
Susan, together with her counsel, to be heard before the Corporation's board of
directors, and (iii) delivery to Susan of a Notice of Termination as defined in
subsection(d) below from an executive officer of the Corporation finding that in
the good faith opinion of the Corporation's Board of Directors or in the good
faith opinion of the Board of Directors of FPC, Susan was guilty of conduct set
forth or described above in justifying the Corporation's termination of Susan's
employment for cause and specifying the particulars thereof in detail.
(b) Susan may terminate her employment under this agreement for Good
Reason (as hereinafter defined). For purposes of this agreement, "Good Reason"
shall mean (i) a change in control of the Corporation (as defined below) which
shall have been in effect for a period of at least ninety (90) consecutive days;
provided, however, that Susan shall be unable to work harmoniously and
effectively with the personnel constituting the new management of the
Corporation, (ii) a failure by the Corporation to comply with any material
provision of this agreement which noncompliance shall have a material adverse
effect upon Susan and which shall not have been cured within thirty (30)
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<PAGE> 5
days after notice of such noncompliance has been given by Susan to the
Corporation pursuant to this agreement, (iii) if Susan's management functions,
duties or responsibilities or any other material aspect of Susan's employment
shall have been materially and adversely changed by the Corporation for a period
in excess of thirty (30) consecutive days notwithstanding Susan's written
objection thereto or (iv) any purported termination of Susan's employment which
is not effected pursuant to a Notice of Termination satisfying the requirements
of subsection (d) below (and for purposes of this agreement no such purported
termination shall be effective).
(c) For the purpose of this agreement, a "Change of Control" shall be
deemed to have taken place if: (i) a third person, including a "group" as such
term is defined in Section 13(d)(3) of the Securities Exchange Act of 1934,
becomes (other than as a result of a purchase from the Corporation) the
beneficial owner of shares of the Corporation or of FPC having more than thirty
(30%) percent of the total number of votes that may be cast for the election of
directors of the Corporation or of FPC and such beneficial ownership continues
for thirty (30) consecutive days, or (ii) as a result of, or in connection with,
any cash tender or exchange offer, merger or other business combination of the
foregoing transactions relating to the Corporation or to FPC (hereinafter
referred to as a "Transaction") the persons who were directors of the
Corporation or of FPC before the Transaction shall cease for any reason to
constitute at least a majority of the Board of Directors of the Corporation or
of FPC, as the case may be, or any successor(s) of either of such entities.
(d) Any termination of Susan's employment by the Corporation or by
Susan (other than termination by reason of Susan's death or disability as set
forth in Section 14 below) shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Susan's employment under the provision so indicated.
(e) "Date of Termination" shall mean (i) if Susan's employment is
terminated by her death, the date of her death, (ii) if Susan's employment is
terminated pursuant to subsection (c) above, the date specified in the Notice of
Termination, and (iii) if Susan's employment is terminated for any other reason,
the date on which a Notice of Termination is given; provided that if within
thirty (30) days after any Notice of Termination is given the party receiving
such Notice of Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date on which
the dispute is finally determined, either by mutual written agreement of the
parties, by a binding and final arbitration award or by a final judgment, order
or decree of a court of competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected).
8. Compensation Upon Termination or During Disability.
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<PAGE> 6
(a) During any period that Susan fails to perform her duties hereunder
as a result of incapacity due to physical or mental illness ("disability
period"), Susan shall continue to receive her full salary at the rate then in
effect for such period until her employment is terminated pursuant to Section 7
above, provided that payments so made to Susan during the disability period
shall be reduced by the sum of the amounts, if any, payable to Susan at or prior
to the time of any such payment under disability benefit plans of the
Corporation and which were not previously applied to reduce any such payment.
(b) If Susan's employment is terminated by her death, the Corporation
shall pay to Susan's spouse, or if she leaves no spouse, to her estate, within
thirty (30) days of Susan's death, all salary and employment benefits due to
Susan accrued through the date of her death.
(c) If Susan's employment shall be terminated for cause, the
Corporation shall pay Susan her full salary through the Date of Termination at
the rate in effect at the time Notice of Termination is given and the
Corporation shall have no further obligations to Susan under or pursuant to this
Agreement.
(d) If (i) in breach of this agreement, the Corporation shall terminate
Susan's employment other than pursuant to subsection 7(a) above (termination for
cause) or Section 14 below (termination by reason of death or disability)(it
being understood that a purported termination by the Corporation pursuant to
subsection 7(a) above or Section 14 below which is disputed and finally
determined not to have been proper shall be deemed a termination by the
Corporation in breach of this agreement) or (ii) Susan shall terminate her
employment for Good Reason, then
(I) the Corporation shall pay Susan her full salary through
the Date of Termination at the rate in effect at the time the Notice of
Termination is given;
(II) in lieu of any further salary payments to Susan for
periods subsequent to the Date of Termination, the Corporation shall pay to
Susan, as severance pay (and not as a penalty to the Corporation), an amount
equal to the product of (A) Susan's annual base salary rate in effect as of the
Date of Termination, multiplied by (B) the number two (2), such payment to be
made (X) if resulting from a termination based on a change of control of the
Corporation, in a lump sum on or before the thirtieth (30th) day following the
Date of Termination, or (Y) if resulting from any other cause, in substantially
equal semimonthly installments on the fifteenth and last days of each month
commencing with the month in which the Date of Termination occurs and continuing
for forty-eight (48) consecutive semimonthly payment dates (including the first
such date as aforesaid), without interest; and
(III) if termination of Susan's employment arises out of a
breach by the Corporation of this agreement, the Corporation shall pay all other
damages to which Susan may be entitled as a result of such breach, including
damages for any and all loss of
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benefits to Susan under the Corporation's employee benefit plans (other than the
Corporation's Bonus Compensation Plan) which Susan would have received if the
Company had not breached this agreement and had Susan's employment continued for
the full term provided in Section 2 hereof.
(e) Unless Susan's employment is terminated by the Corporation for
cause, the Corporation shall maintain in full force and effect, for the
continued benefit of Susan for the greater of the number of years (including
partial years) remaining in the term of employment hereunder or the number two
(2), all employee benefit plans and programs in which Susan was entitled to
participate immediately prior to the Date of Termination, provided that Susan's
continued participation is possible under the general terms and provisions of
such plans and programs. In the event that Susan's participation in any such
plan or program is barred, the Corporation shall arrange to provide Susan with
benefits substantially similar to those which Susan would otherwise have been
entitled to receive under such plans and programs from which her continued
participation is barred.
(f) The Corporation may withhold from any payments or other benefits
payable to Susan pursuant to this Section 8 or any other provision of this
agreement all federal, state, city or other taxes as shall be required pursuant
to any law, government regulation or ruling.
9. Disclosure of Information. Susan recognizes and acknowledges that the
Corporation's trade secrets and know-how as they may exist from time to time are
a valuable, special and unique asset of the Corporation's business, access to
and knowledge of which are essential to the performance of Susan's duties
hereunder. For the purposes of this agreement, Confidential Information includes
any and all information (i) disclosed or made available to Susan or known by
Susan in consequence of or through the employment of Susan by the Corporation
and not generally known in the industry in which the Corporation or any of the
Corporation's customers is or may be engaged, or which is beneficial to the
Corporation, or any of the Corporation's customers in the promotion or operation
of their respective businesses, (ii) relating to the business, business
practices, operation, affairs, practices, procedures, policies or methods of the
Corporation, (iii) customer lists, (iv) marketing information and (v) training
materials. Since the services of Susan are unique, extraordinary and of a
specialized character which will require Susan to handle Confidential
Information of the Corporation and of the Corporation's suppliers and customers,
Susan shall not, at any time during the term of this agreement or thereafter,
make use of any Confidential Information for the benefit of any person or entity
(other than the Corporation) nor shall Susan disclose any Confidential
Information to any person or entity for any reason or purpose whatsoever.
10. Covenants Not to Solicit. Susan, either as a proprietor, partner, employee,
agent, consultant, director, officer, controlling stockholder or in any other
capacity or manner whatsoever, for a period of one (1) year after the date of
expiration or other termination of this agreement, shall not interfere with,
disrupt or attempt to disrupt the relationship,
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<PAGE> 8
contractual or otherwise, between the Corporation and any customer, client,
employee or independent contractor of the Corporation or solicit or provide
services to, as the case may be, any accounts, clients or customers of the
Corporation (or any accounts, clients or customers which were contacted or
solicited by the Corporation during the term of this Agreement) with whom Susan
had any direct or indirect contact during her employment hereunder.
11. Return of Documents. Upon termination of employment with the Corporation,
Susan shall promptly return to the Corporation all documents, notes, records and
other materials of the Corporation in Susan's possession, whether prepared by
Susan or others, including, without limitation all materials and information
stored on computer disk or other electronic media.
12. Enforcement of Non-Disclosure and Non-Solicitation Provisions. It is the
desire and intent of the parties that the provisions of Sections 9, 10 and 11
shall be enforced to the fullest extent permissible under the laws and public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any portion or portions of such Sections 9, 10 or 11 shall be
adjudicated to be invalid or unenforceable, such Sections shall be deemed
amended to delete therefrom the portion or portions thus adjudicated to be
invalid or unenforceable, such deletion to apply only with respect to the
operation of such Sections in the particular jurisdiction in which such
adjudication is made. The provisions of Sections 9, 10, 11 and 13 shall survive
the expiration or earlier termination of this agreement.
13. Injunctive Relief. If there is a breach or threatened breach of any of the
provisions of Sections 9, 10 or 11 of this agreement, the Corporation shall be
entitled to an injunction restraining Susan from such breach. Nothing herein
shall be construed as prohibiting the Corporation from pursuing any other
remedies for such breach or threatened breach.
14. Disability/Death. Susan's employment under this agreement shall terminate
upon the death or, at the election of the Corporation, the physical or mental
disability of Susan. For purposes of this agreement, Susan shall be deemed to be
disabled if she is unable to perform her services for twelve (12) consecutive
months. If the Corporation elects to terminate this agreement pursuant to this
Section 14, the Corporation shall notify Susan of the Corporation's decision to
terminate Susan's employment hereunder by means of a Notice of Termination
pursuant to the provisions of subsection (d) of Section 7 above. From and after
such termination of employment of Susan pursuant to this Section 14, Susan's
compensation and rights thereto and all of Susan's other rights under this
agreement shall terminate.
15. Notices. Any notice required or permitted to be given under this agreement
shall be sufficient if in writing and if sent by certified mail, return receipt
requested, to Susan's mailing address set forth above, or by personal delivery
to Susan, in the case of Susan, or
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<PAGE> 9
to its office address set forth above, in the case of the Corporation, with a
copy sent in like manner to Kaufman Friedman Plotnicki & Grun, LLP, 300 East
42nd Street, New York, New York 10017 Attention: Gary S. Friedman, Esq. Notices
shall be deemed given two (2) business days after mailing, or on the date
personal delivery is effected, as the case may be.
16. Waiver of Breach. The waiver by any party of a breach of any provision of
this agreement by the other party shall not operate or be construed as a waiver
of any subsequent or other breach by the other party. Any waiver must be in
writing.
17. Entire Agreement. This instrument contains the entire agreement of the
parties. It may not be waived, changed, modified or extended orally but only by
an agreement in writing signed by the party against whom enforcement of any
waiver, change, modification or extension is sought.
18. Applicable Law. This agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the application of conflict of laws.
19. Severability. If any provision of this agreement is found to be void or
unenforceable by a court of competent jurisdiction, the remaining provisions of
this agreement shall nevertheless be binding upon the Corporation and Susan with
the same effect as though the void or unenforceable provision had been severed
and deleted.
20. Conflict. If any provision of this agreement is found to be in conflict with
any provision of any other agreement to which the Corporation and Susan are
parties, the provision of such other agreement shall control.
21. Arbitration. If any dispute shall arise between the Corporation and Susan
with regard to this agreement, such dispute shall be promptly submitted to and
decided by arbitration by the American Arbitration Association in the City and
County of New York in accordance with the Expedited Procedures of the Commercial
Arbitration Rules of the American Arbitration Association. The award rendered by
the arbitrators shall be final, shall include an award of reasonable legal fees
and costs to the prevailing party as determined by the arbitrator(s) and
judgment may be entered upon the award in accordance with applicable law in any
court having jurisdiction.
22. Prior Managing Director's Agreement. Notwithstanding anything herein
contained to the contrary, the prior Managing Director's Agreement between the
Corporation and Susan dated as of October 17, 1994 is hereby deemed terminated
and is superseded in all respects by this agreement.
In witness whereof, the parties hereto have caused this agreement to be duly
executed as of the day and year first above written.
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<PAGE> 10
Corporation:
Michaelson Kelbick Partners Inc.
By:/s/____________________________________
Hillary Kelbick
Managing Director
Managing Director:
/s/_______________________________________
Susan Michaelson
The provisions of Sections 5(b) and 5(c) relating to the possible issuance of
Bonus Securities are hereby consented to:
Financial Performance Corporation
By:/s/_____________________________
William F. Finley, President
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<PAGE> 1
MANAGING DIRECTOR'S AGREEMENT
Agreement made as of September 11, 1997, by and between Michaelson Kelbick
Partners Inc., a New York corporation with offices at 335 Madison Avenue, 8th
Floor, New York, New York 10017(the "Corporation") and Hillary Kelbick, residing
at 105 Wood Terrace, Leonia, New Jersey 07605("Hillary").
W I T N E S S E T H:
Whereas, the Corporation desires to continue to engage the services of Hillary
as a Managing Director of the Corporation for a three (3) year period commencing
on September 11, 1997 (the "Term"); and
Whereas, Hillary is willing to continue such employment by the Corporation for
the Term on the terms and conditions set forth herein.
Now, therefore, in consideration of the premises, the mutual covenants
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Employment. The Corporation hereby continues its employment of Hillary for
the Term and Hillary hereby accepts such employment upon the terms and
conditions hereinafter set forth.
2. Term. The Term of this agreement is three (3) years, commencing on September
11, 1997 and ending on September 10, 2000, unless earlier terminated by the
Corporation or by Hillary in accordance with the provisions hereof. This
agreement shall be automatically renewed for periods of one (1) year each (the
"Renewal Term") unless either party shall give the other notice of her or its
desire to terminate this agreement no later than on the June 1st immediately
preceding the expiration of the then current term, in which event Hillary's
employment shall terminate at the end of the Term or the applicable Renewal
Term, as the case may be. The Term and the Renewal Term are hereinafter
collectively referred to as the Term. If Hillary has not given notice to the
Corporation on or before June 1, 2000 that she elects not to renew this
agreement at the expiration of the Term and the Corporation gives notice to
Hillary that it elects not to renew this agreement at the expiration of the
Term, then and only in such event, in addition to and without limitation of any
other compensation, severance payments or benefits which may be or become due
from the Corporation to Hillary pursuant to this agreement, the Corporation
shall pay to Hillary within ten (10) days following the expiration of the Term,
a severance payment in the amount of Two Hundred Fifty Thousand ($250,000.00)
Dollars.
<PAGE> 2
3. Duties. Hillary is engaged for the term hereof as a Managing Director of the
Corporation and shall perform and discharge well and faithfully the duties which
may be undertaken by Hillary in such capacity from time to time, such duties to
be substantially similar to the duties heretofore undertaken by Hillary as a
Managing Director of the Corporation. The duties of Hillary shall include
jointly managing with Susan Michaelson or her successor ("Susan"), the
Corporation's day-to-day operations, including, without limitation, hiring,
training, supervising and terminating employees, determining employee
compensation (including incentives) and employment policy, including assignment
of employees' duties and how same are to be performed, all aspects of client
relationships, and maintaining the Corporation's books and records, serving as a
member of the Board of Directors and any other duties as may be determined by
the Board of Directors; it being the intent of the parties that Hillary and
Susan shall together exercise full management control of the day-to-day
operations of the Corporation for so long as both Hillary and Susan are employed
by the Corporation.
4. Extent of Services. During the period in which Hillary is employed by the
Corporation, Hillary shall devote Hillary's entire active business time, best
efforts, attention, skill and energies to the business of the Corporation and
shall not during such period be engaged in any other business activity pursued
for gain, profit or other pecuniary advantage; but this shall not be construed
as preventing Hillary from investing Hillary's personal assets in businesses
which do not compete with the Corporation in such form or manner as will not
require any active business services on the part of Hillary in the operation of
the affairs of the companies in which such investments are made and in which
Hillary's participation is solely that of a passive investor.
5. Compensation.
(a) For all services rendered by Hillary pursuant to this agreement,
the Corporation shall pay Hillary an annual salary of One Hundred Fifty Thousand
($150,000.00) Dollars, payable bi-weekly, in arrears. Such salary shall be
subject to periodic increases as shall be determined by the Board of Directors
of the Corporation.
(b) Hillary shall be eligible to participate in the Corporation's
annual incentive compensation pool (the "Bonus Pool") in an amount to be
determined annually by the Corporation's Board of Directors based upon the joint
recommendation of Hillary and Susan. The portion of the Bonus Pool to which
Hillary shall become entitled for any fiscal year of the Corporation is
hereinafter referred to as "Hillary's Annual Bonus". For any fiscal year of the
Corporation, the Bonus Pool shall not exceed in the aggregate an amount equal to
thirty (30%) percent of the Corporation's annual net profits before taxes
determined by the Corporation's outside accounting firm, subject to review and
approval by the accounting firm which prepares the consolidated financial
statements for all of the companies affiliated with FPC, in accordance with
generally accepted accounting principles, consistently applied, as if the
Corporation were not a member of an affiliated
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<PAGE> 3
group of corporations. Hillary's Annual Bonus shall be payable in cash or, if
agreed to by Hillary, the Board of Directors of the Corporation and the Board of
Directors of Financial Performance Corporation ("FPC"), such amount may be
payable, in whole or in part, in options or warrants to acquire common stock or
other securities of FPC (hereinafter, the "Bonus Securities") which shall have
typical "piggy-back" registration rights and which shall contain such other
terms and conditions, including, without limitation, term, exercise price and
number of securities issued, as the Board of Directors of the Corporation and
FPC shall jointly reasonably determine represents equivalent value to the cash
bonus or portion thereof which would otherwise be payable to Hillary. Further,
during the six (6) month period commencing on the date of issuance of the Bonus
Securities (hereinafter, the "Sales Period") FPC shall use its reasonable
efforts together with the investment banking firms then providing financial
services to FPC, to the extent reasonably practicable and appropriate, to assist
Hillary in arranging for the exercise and sale of the Bonus Securities. The term
"Bonus Securities", as used herein, shall mean and include all options,
warrants, common stock or other securities of FPC issued to Hillary in full or
partial payment of Hillary's Annual Bonus and, in the case of derivative
securities such as options and warrants, all of the common stock underlying such
derivative securities. The "piggy-back" registration rights referred to above
shall apply to all common stock underlying any derivative securities and shall
obligate FPC to register such stock at such time as FPC registers other common
stock in connection with a public offering of securities, at FPC's sole cost and
expense.
(c) If (i) Hillary shall exercise and sell all of the Bonus Securities
during the Sales Period and (ii) the aggregate gross sales price received by
Hillary for the sale of the Bonus Securities less the aggregate amount of all
warrant or option exercise consideration in respect of the Bonus Securities paid
by Hillary to FPC during the Sales Period (hereinafter, the "Gross Sales
Proceeds") shall be less than the agreed-upon equivalent cash value of Hillary's
Bonus which shall have been paid by issuance of the Bonus Securities as set
forth in subsection (b) above (hereinafter, the "Equivalent Cash Value"), then
within thirty (30) days after the Corporation's receipt from Hillary of notice
thereof setting forth, in reasonable detail, the calculation of such difference
together with copies of all pertinent supporting documentation relating thereto,
the Corporation shall pay to Hillary, in cash, an amount (hereinafter, the
"Shortfall") equal to the difference between the Equivalent Cash Value and the
Gross Sales Proceeds. The Corporation shall not be obligated to make payment of
the Shortfall to Hillary unless all of the Bonus Securities are exercised and
sold by Hillary prior to the expiration of the Sales Period.
6. Benefits. Hillary shall be entitled to four (4) weeks vacation for each one
(1) year of Hillary's employment pursuant to this agreement, during which
Hillary's salary shall be paid in full. Hillary shall be entitled to
reimbursement of reasonable out-of-pocket business expenses incurred on behalf
of the Corporation, provided that such expenses are reasonably necessary and are
properly documented. Hillary shall be entitled to privileges under any
retirement, pension, long-term or short-term disability insurance plan which may
hereafter be adopted by the Corporation for the benefit of its employees. The
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<PAGE> 4
Corporation agrees to provide Hillary with and shall pay all premiums for family
coverage under a group health insurance plan reasonably comparable to the
coverage currently provided to Hillary by the Corporation, to the extent same is
reasonably obtainable by the Corporation. The Corporation shall also provide
Hillary with (i) a clothing expense allowance in the amount of ten thousand and
00/100 ($10,000.00) dollars for each year of the term of this agreement and (ii)
a leased automobile of Hillary's choice throughout the term of this agreement.
7. Termination.
(a) The Corporation may, at its election in accordance with the
procedures more particularly set forth below, terminate this agreement for
cause. For purposes of this agreement, "cause" shall include, without
limitation, the following: (i) a material breach by Hillary of any term of this
agreement; (ii) a continued failure of Hillary after notice of a prior failure
to devote Hillary's full active business time (as more particularly described in
Section 4 above) to the performance of Hillary's duties hereunder; (iii) an act
of willful misconduct causing injury to another person or substantial damage to
the reputation or property of the Corporation, any of the Corporation's
affiliates or any of the Corporation's customers including, without limitation,
any oral or written misrepresentation relating to the Corporation or any of its
customers; (iv) an act of dishonesty, moral turpitude or conviction of a felony;
and (v) substantial, continuing and willful improper performance or
non-performance of any of Hillary's material duties hereunder. For purposes of
this subsection (a), no act, or failure to act, on Hillary's part shall be
considered "willful" unless done, or omitted to be done, by her not in good
faith or without reasonable belief that her action or omission was in the best
interests of the Corporation. Notwithstanding the foregoing, Hillary shall not
be deemed to have been terminated for cause without (i) reasonable notice to
Hillary setting forth the reasons for the Corporation's intention to terminate
for cause, (ii) an opportunity for Hillary, together with her counsel, to be
heard before the Corporation's board of directors, and (iii) delivery to Hillary
of a Notice of Termination as defined in subsection(d) below from an executive
officer of the Corporation finding that in the good faith opinion of the
Corporation's Board of Directors or in the good faith opinion of the Board of
Directors of FPC, Hillary was guilty of conduct set forth or described above in
justifying the Corporation's termination of Hillary's employment for cause and
specifying the particulars thereof in detail.
(b) Hillary may terminate her employment under this agreement for Good
Reason (as hereinafter defined). For purposes of this agreement, "Good Reason"
shall mean (i) a change in control of the Corporation (as defined below) which
shall have been in effect for a period of at least ninety (90) consecutive days;
provided, however, that Hillary shall be unable to work harmoniously and
effectively with the personnel constituting the new management of the
Corporation, (ii) a failure by the Corporation to comply with any material
provision of this agreement which noncompliance shall have a material adverse
effect upon Hillary and which shall not have been cured within thirty
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<PAGE> 5
(30) days after notice of such noncompliance has been given by Hillary to the
Corporation pursuant to this agreement, (iii) if Hillary's management functions,
duties or responsibilities or any other material aspect of Hillary's employment
shall have been materially and adversely changed by the Corporation for a period
in excess of thirty (30) consecutive days notwithstanding Hillary's written
objection thereto or (iv) any purported termination of Hillary's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of subsection (d) below (and for purposes of this agreement no such
purported termination shall be effective).
(c) For the purpose of this agreement, a "Change of Control" shall be
deemed to have taken place if: (i) a third person, including a "group" as such
term is defined in Section 13(d)(3) of the Securities Exchange Act of 1934,
becomes (other than as a result of a purchase from the Corporation) the
beneficial owner of shares of the Corporation or of FPC having more than thirty
(30%) percent of the total number of votes that may be cast for the election of
directors of the Corporation or of FPC and such beneficial ownership continues
for thirty (30) consecutive days, or (ii) as a result of, or in connection with,
any cash tender or exchange offer, merger or other business combination of the
foregoing transactions relating to the Corporation or to FPC (hereinafter
referred to as a "Transaction") the persons who were directors of the
Corporation or of FPC before the Transaction shall cease for any reason to
constitute at least a majority of the Board of Directors of the Corporation or
of FPC, as the case may be, or any successor(s) of either of such entities.
(d) Any termination of Hillary's employment by the Corporation or by
Hillary (other than termination by reason of Hillary's death or disability as
set forth in Section 14 below) shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Hillary's employment under the provision so indicated.
(e) "Date of Termination" shall mean (i) if Hillary's employment is
terminated by her death, the date of her death, (ii) if Hillary's employment is
terminated pursuant to subsection (c) above, the date specified in the Notice of
Termination, and (iii) if Hillary's employment is terminated for any other
reason, the date on which a Notice of Termination is given; provided that if
within thirty (30) days after any Notice of Termination is given the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally determined, either by mutual written agreement of
the parties, by a binding and final arbitration award or by a final judgment,
order or decree of a court of competent jurisdiction (the time for appeal
therefrom having expired and no appeal having been perfected).
8. Compensation Upon Termination or During Disability.
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<PAGE> 6
(a) During any period that Hillary fails to perform her duties
hereunder as a result of incapacity due to physical or mental illness
("disability period"), Hillary shall continue to receive her full salary at the
rate then in effect for such period until her employment is terminated pursuant
to Section 7 above, provided that payments so made to Hillary during the
disability period shall be reduced by the sum of the amounts, if any, payable to
Hillary at or prior to the time of any such payment under disability benefit
plans of the Corporation and which were not previously applied to reduce any
such payment.
(b) If Hillary's employment is terminated by her death, the Corporation
shall pay to Hillary's spouse, or if she leaves no spouse, to her estate, within
thirty (30) days of Hillary's death, all salary and employment benefits due to
Hillary accrued through the date of her death.
(c) If Hillary's employment shall be terminated for cause, the
Corporation shall pay Hillary her full salary through the Date of Termination at
the rate in effect at the time Notice of Termination is given and the
Corporation shall have no further obligations to Hillary under or pursuant to
this Agreement.
(d) If (i) in breach of this agreement, the Corporation shall terminate
Hillary's employment other than pursuant to subsection 7(a) above (termination
for cause) or Section 14 below (termination by reason of death or disability)(it
being understood that a purported termination by the Corporation pursuant to
subsection 7(a) above or Section 14 below which is disputed and finally
determined not to have been proper shall be deemed a termination by the
Corporation in breach of this agreement) or (ii) Hillary shall terminate her
employment for Good Reason, then
(I) the Corporation shall pay Hillary her full salary through
the Date of Termination at the rate in effect at the time the Notice of
Termination is given;
(II) in lieu of any further salary payments to Hillary for
periods subsequent to the Date of Termination, the Corporation shall pay to
Hillary, as severance pay (and not as a penalty to the Corporation), an amount
equal to the product of (A) Hillary's annual base salary rate in effect as of
the Date of Termination, multiplied by (B) the number two (2), such payment to
be made (X) if resulting from a termination based on a change of control of the
Corporation, in a lump sum on or before the thirtieth (30th) day following the
Date of Termination, or (Y) if resulting from any other cause, in substantially
equal semimonthly installments on the fifteenth and last days of each month
commencing with the month in which the Date of Termination occurs and continuing
for forty-eight (48) consecutive semimonthly payment dates (including the first
such date as aforesaid), without interest; and
(III) if termination of Hillary's employment arises out of a
breach by the Corporation of this agreement, the Corporation shall pay all other
damages to which
-6-
<PAGE> 7
Hillary may be entitled as a result of such breach, including damages for any
and all loss of benefits to Hillary under the Corporation's employee benefit
plans (other than the Corporation's Bonus Compensation Plan) which Hillary would
have received if the Company had not breached this agreement and had Hillary's
employment continued for the full term provided in Section 2 hereof.
(e) Unless Hillary's employment is terminated by the Corporation for
cause, the Corporation shall maintain in full force and effect, for the
continued benefit of Hillary for the greater of the number of years (including
partial years) remaining in the term of employment hereunder or the number two
(2), all employee benefit plans and programs in which Hillary was entitled to
participate immediately prior to the Date of Termination, provided that
Hillary's continued participation is possible under the general terms and
provisions of such plans and programs. In the event that Hillary's participation
in any such plan or program is barred, the Corporation shall arrange to provide
Hillary with benefits substantially similar to those which Hillary would
otherwise have been entitled to receive under such plans and programs from which
her continued participation is barred.
(f) The Corporation may withhold from any payments or other benefits
payable to Hillary pursuant to this Section 8 or any other provision of this
agreement all federal, state, city or other taxes as shall be required pursuant
to any law, government regulation or ruling.
9. Disclosure of Information. Hillary recognizes and acknowledges that the
Corporation's trade secrets and know-how as they may exist from time to time are
a valuable, special and unique asset of the Corporation's business, access to
and knowledge of which are essential to the performance of Hillary's duties
hereunder. For the purposes of this agreement, Confidential Information includes
any and all information (i) disclosed or made available to Hillary or known by
Hillary in consequence of or through the employment of Hillary by the
Corporation and not generally known in the industry in which the Corporation or
any of the Corporation's customers is or may be engaged, or which is beneficial
to the Corporation, or any of the Corporation's customers in the promotion or
operation of their respective businesses, (ii) relating to the business,
business practices, operation, affairs, practices, procedures, policies or
methods of the Corporation, (iii) customer lists, (iv) marketing information and
(v) training materials. Since the services of Hillary are unique, extraordinary
and of a specialized character which will require Hillary to handle Confidential
Information of the Corporation and of the Corporation's suppliers and customers,
Hillary shall not, at any time during the term of this agreement or thereafter,
make use of any Confidential Information for the benefit of any person or entity
(other than the Corporation) nor shall Hillary disclose any Confidential
Information to any person or entity for any reason or purpose whatsoever.
10. Covenants Not to Solicit. Hillary, either as a proprietor, partner,
employee, agent, consultant, director, officer, controlling stockholder or in
any other capacity or manner whatsoever, for a period of one (1) year after the
date of expiration or other termination of
-7-
<PAGE> 8
this agreement, shall not interfere with, disrupt or attempt to disrupt the
relationship, contractual or otherwise, between the Corporation and any
customer, client, employee or independent contractor of the Corporation or
solicit or provide services to, as the case may be, any accounts, clients or
customers of the Corporation (or any accounts, clients or customers which were
contacted or solicited by the Corporation during the term of this Agreement)
with whom Hillary had any direct or indirect contact during her employment
hereunder.
11. Return of Documents. Upon termination of employment with the Corporation,
Hillary shall promptly return to the Corporation all documents, notes, records
and other materials of the Corporation in Hillary's possession, whether prepared
by Hillary or others, including, without limitation all materials and
information stored on computer disk or other electronic media.
12. Enforcement of Non-Disclosure and Non-Solicitation Provisions. It is the
desire and intent of the parties that the provisions of Sections 9, 10 and 11
shall be enforced to the fullest extent permissible under the laws and public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any portion or portions of such Sections 9, 10 or 11 shall be
adjudicated to be invalid or unenforceable, such Sections shall be deemed
amended to delete therefrom the portion or portions thus adjudicated to be
invalid or unenforceable, such deletion to apply only with respect to the
operation of such Sections in the particular jurisdiction in which such
adjudication is made. The provisions of Sections 9, 10, 11 and 13 shall survive
the expiration or earlier termination of this agreement.
13. Injunctive Relief. If there is a breach or threatened breach of any of the
provisions of Sections 9, 10 or 11 of this agreement, the Corporation shall be
entitled to an injunction restraining Hillary from such breach. Nothing herein
shall be construed as prohibiting the Corporation from pursuing any other
remedies for such breach or threatened breach.
14. Disability/Death. Hillary's employment under this agreement shall terminate
upon the death or, at the election of the Corporation, the physical or mental
disability of Hillary. For purposes of this agreement, Hillary shall be deemed
to be disabled if she is unable to perform her services for twelve (12)
consecutive months. If the Corporation elects to terminate this agreement
pursuant to this Section 14, the Corporation shall notify Hillary of the
Corporation's decision to terminate Hillary's employment hereunder by means of a
Notice of Termination pursuant to the provisions of subsection (d) of Section 7
above. From and after such termination of employment of Hillary pursuant to this
Section 14, Hillary's compensation and rights thereto and all of Hillary's other
rights under this agreement shall terminate.
15. Notices. Any notice required or permitted to be given under this agreement
shall be sufficient if in writing and if sent by certified mail, return receipt
requested, to
-8-
<PAGE> 9
Hillary's mailing address set forth above, or by personal delivery to Hillary,
in the case of Hillary, with a copy sent in like manner to Bruce Wexler, Esq.,
Loeb & Loeb, 345 Park Avenue, New York, New York, or to its office address set
forth above, in the case of the Corporation, with a copy sent in like manner to
Kaufman Friedman Plotnicki & Grun, LLP, 300 East 42nd Street, New York, New York
10017 Attention: Gary S. Friedman, Esq. Notices shall be deemed given two (2)
business days after mailing, or on the date personal delivery is effected, as
the case may be.
16. Waiver of Breach. The waiver by any party of a breach of any provision of
this agreement by the other party shall not operate or be construed as a waiver
of any subsequent or other breach by the other party. Any waiver must be in
writing.
17. Entire Agreement. This instrument contains the entire agreement of the
parties. It may not be waived, changed, modified or extended orally but only by
an agreement in writing signed by the party against whom enforcement of any
waiver, change, modification or extension is sought.
18. Applicable Law. This agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the application of conflict of laws.
19. Severability. If any provision of this agreement is found to be void or
unenforceable by a court of competent jurisdiction, the remaining provisions of
this agreement shall nevertheless be binding upon the Corporation and Hillary
with the same effect as though the void or unenforceable provision had been
severed and deleted.
20. Conflict. If any provision of this agreement is found to be in conflict with
any provision of any other agreement to which the Corporation and Hillary are
parties, the provision of such other agreement shall control.
21. Arbitration. If any dispute shall arise between the Corporation and Hillary
with regard to this agreement, such dispute shall be promptly submitted to and
decided by arbitration by the American Arbitration Association in the City and
County of New York in accordance with the Expedited Procedures of the Commercial
Arbitration Rules of the American Arbitration Association. The award rendered by
the arbitrators shall be final, shall include an award of reasonable legal fees
and costs to the prevailing party as determined by the arbitrator(s) and
judgment may be entered upon the award in accordance with applicable law in any
court having jurisdiction.
22. Prior Managing Director's Agreement. Notwithstanding anything herein
contained to the contrary, the prior Managing Director's Agreement between the
Corporation and Hillary dated as of October 17, 1994 is hereby deemed terminated
and is superseded in all respects by this agreement.
-9-
<PAGE> 10
In witness whereof, the parties hereto have caused this agreement to be duly
executed as of the day and year first above written.
Corporation:
Michaelson Kelbick Partners Inc.
By:/s/________________________________
Susan Michaelson,
Managing Director
Managing Director:
/s/___________________________________
Hillary Kelbick
The provisions of Sections 5(b) and 5(c) relating to the possible issuance of
Bonus Securities are hereby consented to:
Financial Performance Corporation
By:/s/____________________________
William F. Finley, President
-10-
<PAGE> 1
THE NUMBER OF SHARES AND EXERCISE PRICE REFERRED TO IN THIS WARRANT
CERTIFICATE ARE THOSE IN EFFECT SUBSEQUENT TO THE COMPANY'S
ONE-FOR-FIVE REVERSE STOCK SPLIT EFFECTIVE AS OF SEPTEMBER 23, 1996.
THIS WARRANT AND THE SECURITIES WHICH MAY BE ISSUED UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, BY REASON OF
SPECIFIC EXEMPTIONS THEREUNDER, AND CANNOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS SUBSEQUENTLY
REGISTERED THEREUNDER OR UNLESS APPLICABLE EXEMPTIONS THEREFROM ARE
AVAILABLE.
WARRANT
FOR THE PURCHASE OF FIFTY THOUSAND
(50,000) SHARES OF COMMON STOCK, PAR VALUE
$0.01 PER SHARE (CUSIP NO. 317630 30 9), OF
FINANCIAL PERFORMANCE CORPORATION
Incorporated under the laws of the State of New York
VOID AFTER NOVEMBER 30, 1999
This is to certify that, for value received, Duncan G. Burke, or his assigns
(the "Warrant Holder"), is entitled to purchase at any time during the period
commencing as of December 29, 1997 and ending on or before November 30,1999
("Exercise Period"), fifty thousand (50,000) shares of the Common Stock, par
value $0.01 per share (CUSIP No. 317630 30 9), of Financial Performance
Corporation (the "Corporation") from the Corporation at a purchase price of
fifty cents ($0.50) per share, and to receive a certificate or certificates for
the shares of Common Stock purchased upon presentation and surrender to the
Corporation at the office of the Corporation or at the offices of Corporation's
warrant agent, if any, or its successor as warrant agent, of this Warrant with
the exercise form annexed hereto as Exhibit "1" duly completed and executed, and
accompanied by payment of the purchase price of each share purchased either in
cash or by certified or bank cashier's check payable to the direct order of the
Corporation.
This Warrant may be exercised at any time and from time to time during the
Exercise Period by the registered owner or owners hereof in whole, or in part,
for not less than one (1) full share of Common Stock of the Corporation. If this
Warrant is exercised at any time for less than the maximum number of shares of
Common Stock purchasable upon the exercise hereof, the Corporation shall issue
to the registered owner or owners of this Warrant a new warrant of like tenor
and date representing the number of shares of Common Stock equal to the
difference between the number of shares purchasable upon full exercise of this
Warrant and the number of shares that were purchased upon exercise
<PAGE> 2
of this Warrant. No fractional shares of Common Stock will be issued upon the
exercise of rights to purchase hereunder.
The Corporation covenants and agrees that all shares that may be issued upon
exercise of this Warrant shall, upon issuance, be duly and validly issued, fully
paid and non-assessable, and free of all taxes, liens and charges with respect
to the purchase and the issuance of the shares.
The aggregate number of shares of Common Stock of the Corporation that the
Warrant Holder is entitled to receive upon exercise of this Warrant is fifty
thousand (50,000) shares. The Corporation shall at all times reserve from its
authorized and unissued Common Stock and hold available a sufficient number of
shares of Common Stock to cover the number of shares issuable upon exercise of
this Warrant.
This Warrant is assignable and transferable by delivery, in whole or in part, to
an "Accredited Investor" (as such term is defined in the Securities Act of 1933,
as amended, and the Rules promulgated thereunder), in accordance with the
provisions of the Warrant Agreement referred to below. This Warrant is
transferable in whole or in part on the books of the Corporation by the record
holder hereof in person or by duly authorized attorney upon surrender hereof,
properly endorsed, at the office of the Corporation, or at the office of the
Corporation's warrant agent, if any, in the City of New York and State of New
York, accompanied by a form substantially in the form of the assignment form
annexed hereto as Exhibit "2" duly completed and executed. Every holder of this
Warrant, by taking and holding the same, consents and agrees that title to this
Warrant (together with all rights represented hereby) is assignable and
transferable with the same effect as in the case of a negotiable instrument if
endorsed to a specified person and delivery is made to such person, and that if
endorsed in blank the holder hereof may be treated by the Corporation and all
other persons dealing with this Warrant as the absolute owner hereof for any
purpose, and as the person entitled to exercise this Warrant or to the transfer
thereof on said books, but until such transfer on such books, the Corporation
may treat the record holder as the owner hereof for the purpose of determining
the person entitled to any rights or any notice pursuant to the terms hereof or
for any other purpose.
This Warrant is issued under and in accordance with that certain Warrant
Agreement dated as of September 16, 1996 and is subject to the terms and
provisions contained therein, as to all of which terms and conditions the
Corporation and the Warrant Holder are bound. Copies of the Warrant Agreement
are on file at the office of the Corporation.
This Warrant will be void unless exercised by 5:00 P.M. Eastern Standard Time on
November 30,1999. If such date shall in the State of New York be a holiday or a
day on which banks are authorized to close, then the Warrant may be exercised on
the next following day which in the State of New York is not a holiday or a day
on which banks are authorized to close.
2
<PAGE> 3
This Warrant may not be redeemed by the Corporation at any time.
In witness whereof, the Corporation has caused this Warrant to be duly executed,
by two of its officers duly authorized, as of the 29th day of December, 1997.
Financial Performance Corporation
By:/s/___________________________
William F. Finley
Its: President
By:/s/___________________________
Richard Levy
Its: Secretary
Exhibit 1 - Warrant Exercise Form
Exhibit 2 - Warrant Transfer or Assignment Form
3
<PAGE> 4
EXHIBIT "1"
EXERCISE FORM
The undersigned hereby: (1) subscribes for and offers to purchase ___________
shares of Common Stock of Financial Performance Corporation, par value $0.01 per
share (CUSIP No. 317630 30 9), pursuant to the Warrant to which this exhibit is
attached; (2) encloses payment of $________________ for these shares at a price
of fifty cents ($0.50) per share; and (3) requests that a certificate for the
shares be issued in the name of the undersigned or such other name as may be
designated in writing by the undersigned and delivered to the undersigned at the
address specified below.
Date: _____________________
(Please sign exactly as your
name appears on the Warrant)
______________________________________
______________________________________
______________________________________
(Address of warrant holder)
Warrant holder's social security number
______________________________________
4
<PAGE> 5
EXHIBIT "2"
TRANSFER OR ASSIGNMENT FORM
To be Completed and Executed by the Registered Owner
in Order to Transfer or Assign Warrants
FOR VALUE RECEIVED, ________________________________ hereby sells, assigns
and transfers unto
Name: _____________________________________________
Address: __________________________________________
Social Security No.:_______________________________
this Warrant and hereby irrevocably appoints ___________________________________
attorney with full power of substitution to transfer this Warrant Certificate on
the books of Financial Performance Corporation.
Date: ______________, _____ x_________________________________
5
<PAGE> 1
THE NUMBER OF SHARES AND EXERCISE PRICE REFERRED TO IN THIS WARRANT
CERTIFICATE ARE THOSE IN EFFECT SUBSEQUENT TO THE COMPANY'S
ONE-FOR-FIVE REVERSE STOCK SPLIT EFFECTIVE AS OF SEPTEMBER 23, 1996.
THIS WARRANT AND THE SECURITIES WHICH MAY BE ISSUED UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, BY REASON OF
SPECIFIC EXEMPTIONS THEREUNDER, AND CANNOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS SUBSEQUENTLY
REGISTERED THEREUNDER OR UNLESS APPLICABLE EXEMPTIONS THEREFROM ARE
AVAILABLE.
WARRANT
FOR THE PURCHASE OF FIFTY THOUSAND
(50,000) SHARES OF COMMON STOCK, PAR VALUE
$0.01 PER SHARE (CUSIP NO. 317630 30 9), OF
FINANCIAL PERFORMANCE CORPORATION
Incorporated under the laws of the State of New York
VOID AFTER NOVEMBER 30, 1999
This is to certify that, for value received, Richard Levy , or his assigns (the
"Warrant Holder"), is entitled to purchase at any time during the period
commencing as of December 29, 1997 and ending on or before November 30,1999
("Exercise Period"), fifty thousand (50,000) shares of the Common Stock, par
value $0.01 per share (CUSIP No. 317630 30 9), of Financial Performance
Corporation (the "Corporation") from the Corporation at a purchase price of
fifty cents ($0.50) per share, and to receive a certificate or certificates for
the shares of Common Stock purchased upon presentation and surrender to the
Corporation at the office of the Corporation or at the offices of Corporation's
warrant agent, if any, or its successor as warrant agent, of this Warrant with
the exercise form annexed hereto as Exhibit "1" duly completed and executed, and
accompanied by payment of the purchase price of each share purchased either in
cash or by certified or bank cashier's check payable to the direct order of the
Corporation.
This Warrant may be exercised at any time and from time to time during the
Exercise Period by the registered owner or owners hereof in whole, or in part,
for not less than one (1) full share of Common Stock of the Corporation. If this
Warrant is exercised at any time for less than the maximum number of shares of
Common Stock purchasable upon the exercise hereof, the Corporation shall issue
to the registered owner or owners of this Warrant a new warrant of like tenor
and date representing the number of shares of Common Stock equal to the
difference between the number of shares purchasable upon full exercise of this
Warrant and the number of shares that were purchased upon exercise
<PAGE> 2
of this Warrant. No fractional shares of Common Stock will be issued upon the
exercise of rights to purchase hereunder.
The Corporation covenants and agrees that all shares that may be issued upon
exercise of this Warrant shall, upon issuance, be duly and validly issued, fully
paid and non-assessable, and free of all taxes, liens and charges with respect
to the purchase and the issuance of the shares.
The aggregate number of shares of Common Stock of the Corporation that the
Warrant Holder is entitled to receive upon exercise of this Warrant is fifty
thousand (50,000) shares. The Corporation shall at all times reserve from its
authorized and unissued Common Stock and hold available a sufficient number of
shares of Common Stock to cover the number of shares issuable upon exercise of
this Warrant.
This Warrant is assignable and transferable by delivery, in whole or in part, to
an "Accredited Investor" (as such term is defined in the Securities Act of 1933,
as amended, and the Rules promulgated thereunder), in accordance with the
provisions of the Warrant Agreement referred to below. This Warrant is
transferable in whole or in part on the books of the Corporation by the record
holder hereof in person or by duly authorized attorney upon surrender hereof,
properly endorsed, at the office of the Corporation, or at the office of the
Corporation's warrant agent, if any, in the City of New York and State of New
York, accompanied by a form substantially in the form of the assignment form
annexed hereto as Exhibit "2" duly completed and executed. Every holder of this
Warrant, by taking and holding the same, consents and agrees that title to this
Warrant (together with all rights represented hereby) is assignable and
transferable with the same effect as in the case of a negotiable instrument if
endorsed to a specified person and delivery is made to such person, and that if
endorsed in blank the holder hereof may be treated by the Corporation and all
other persons dealing with this Warrant as the absolute owner hereof for any
purpose, and as the person entitled to exercise this Warrant or to the transfer
thereof on said books, but until such transfer on such books, the Corporation
may treat the record holder as the owner hereof for the purpose of determining
the person entitled to any rights or any notice pursuant to the terms hereof or
for any other purpose.
This Warrant is issued under and in accordance with that certain Warrant
Agreement dated as of September 16, 1996 and is subject to the terms and
provisions contained therein, as to all of which terms and conditions the
Corporation and the Warrant Holder are bound. Copies of the Warrant Agreement
are on file at the office of the Corporation.
This Warrant will be void unless exercised by 5:00 P.M. Eastern Standard Time on
November 30,1999. If such date shall in the State of New York be a holiday or a
day on which banks are authorized to close, then the Warrant may be exercised on
the next following day which in the State of New York is not a holiday or a day
on which banks are authorized to close.
2
<PAGE> 3
This Warrant may not be redeemed by the Corporation at any time.
In witness whereof, the Corporation has caused this Warrant to be duly executed,
by two of its officers duly authorized, as of the 29th day of December, 1997.
Financial Performance Corporation
By:/s/________________________________
William F. Finley
Its: President
By:/s/________________________________
Richard Levy
Its: Secretary
Exhibit 1 - Warrant Exercise Form
Exhibit 2 - Warrant Transfer or Assignment Form
3
<PAGE> 4
EXHIBIT "1"
EXERCISE FORM
The undersigned hereby: (1) subscribes for and offers to purchase ___________
shares of Common Stock of Financial Performance Corporation, par value $0.01 per
share (CUSIP No. 317630 30 9), pursuant to the Warrant to which this exhibit is
attached; (2) encloses payment of $________________ for these shares at a price
of fifty cents ($0.50) per share; and (3) requests that a certificate for the
shares be issued in the name of the undersigned or such other name as may be
designated in writing by the undersigned and delivered to the undersigned at the
address specified below.
Date: _____________________
(Please sign exactly as your
name appears on the Warrant)
________________________________________
________________________________________
________________________________________
(Address of warrant holder)
Warrant holder's social security number
________________________________________
4
<PAGE> 5
EXHIBIT "2"
TRANSFER OR ASSIGNMENT FORM
To be Completed and Executed by the Registered Owner
in Order to Transfer or Assign Warrants
FOR VALUE RECEIVED, ________________________________ hereby sells, assigns
and transfers unto
Name: _____________________________________________
Address: __________________________________________
Social Security No.:_______________________________
this Warrant and hereby irrevocably appoints ___________________________________
attorney with full power of substitution to transfer this Warrant Certificate on
the books of Financial Performance Corporation.
Date: ______________, _____ x_________________________________
5
<PAGE> 1
STOCK PURCHASE AGREEMENT
Agreement dated as of October 1, 1997, by and between Financial Performance
Corporation, with an address at 335 Madison Avenue, New York, New York
("Seller"), and Robert S. Trump, with an address at 167 East 61st Street, New
York, New York ("Purchaser").
W I T N E S S E T H:
Whereas, Seller desires to sell and transfer to Purchaser, and Purchaser desires
to purchase and acquire from Seller, thirty (30) shares of the common stock, no
par value per share, (the "Shares") of FPC Information Corp. (the "Company"),
upon and subject to the terms and conditions hereinafter set forth.
Now, therefore, in consideration of the premises, the mutual covenants,
conditions, representations and promises contained herein, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Sale and Purchase of Stock. Subject to and in accordance with all of the
terms, conditions and representations set forth in this Agreement, Seller hereby
agrees to sell the Shares to Purchaser, and Purchaser hereby agrees to purchase
the Shares from Seller, for the purchase price of seven thousand five hundred
and 00/100 ($7,500.00) dollars per share, for an aggregate purchase price of two
hundred twenty-five thousand and 00/100 ($225,000.00) dollars (the "Purchase
Price").
2. Closing. The closing of the transaction contemplated by this Agreement shall
take place concurrently with the execution and delivery of this Agreement by
both of the parties hereto at the offices of the Company's attorneys, Kaufman
Friedman Plotnicki & Grun, LLP, 300 East 42nd Street, New York, New York 10017.
At the closing, Seller shall deliver to Purchaser the certificates representing
all of the Shares, together with a separate stock power in favor of Purchaser
signed by Seller.
3. Payment of Purchase Price. The Purchase Price shall be payable to Seller on
the date of closing by Purchaser's check made payable to the order of Seller.
4. Covenants and Representations of Seller. As a material inducement to
Purchaser to enter into and perform under this Agreement, Seller hereby
covenants, warrants and represents to Purchaser as follows:
<PAGE> 2
4.1. Seller is duly organized, validly existing and in good standing in
the jurisdiction of its incorporation with all requisite power and authority to
own, lease, license and use its properties and assets and to carry on the
business in which it is now engaged;
4.2. Seller has all requisite power and authority to issue, execute,
deliver and perform its obligations under and pursuant to this Agreement. All
necessary corporate proceedings of Seller have been duly taken to authorize the
execution, delivery, and performance of this Agreement. This Agreement has been
duly authorized, executed and delivered by Seller and constitutes the legal,
valid, and binding obligation of Seller.
4.3. The sale and transfer of the Shares by Seller to Purchaser
pursuant to this Agreement are in conformity with the requirements of Section
4(2) of the Securities Act of 1933, as amended, and all applicable state
securities laws, as a private offering;
4.4. The Shares are, and are hereby sold, transferred and conveyed to
Purchaser, free and clear of any and all liens, claims, encumbrances, pledges,
charges, levies, adverse interests, restraining orders, injunctions,
restrictions, agreements and trusts of any nature whatsoever;
4.5. The execution, delivery and performance of this Agreement by
Seller does not and will not conflict with, violate or result in the breach of
any terms and conditions of, or constitute a default under, the certificate of
incorporation or by-laws of Seller or any contract, agreement, commitment,
indenture, mortgage, note, license, lease or other document to which Seller is a
party or by which Seller is bound;
4.6. There is no litigation, arbitration, claim, governmental or other
proceeding or investigation pending or threatened with respect to the Shares;
4.7. No consent, authorization, approval, order, license, certificate
or permit of or from or declaration or filing with any federal, state, local or
other governmental authority or any court or other tribunal is required by
Seller for the execution, delivery or performance of this Agreement by Seller.
The execution, delivery and performance of this Agreement by Seller will not (a)
violate, result in a breach of, conflict with, or entitle any party to terminate
or call a default under, any term of any agreement to which Seller is a party or
by which Seller is bound or (b) violate, result in a breach of or conflict with
any law, rule, regulation, order, judgment or decree binding on Seller;
4.8. At or after the closing, upon request of Purchaser, Seller shall
deliver to Purchaser, in addition to the documents and instruments specifically
referred to in this Agreement, such other and further documents and instruments
as may be reasonably requested by Purchaser in order to effectuate the transfer
to Purchaser of record title to the Shares on the books and records of the
Company; and
2
<PAGE> 3
4.9. No representation or warranty by Seller in this Agreement
contains, or on the date of closing will contain, any untrue statement of
material fact or omits, or on the closing date will omit, any material fact
necessary to make the statements made not misleading.
5. Representations of Purchaser.
5.1. Purchaser is acquiring the Shares for Purchaser's own account (and
not for the account of others) for investment and not with a view to the
distribution or resale thereof;
5.2. By virtue of Purchaser's position, Purchaser has access to the
same kind of information which would be available in a registration statement
filed under the Securities Act of 1933;
5.3. Purchaser is a sophisticated investor; and
5.4. Purchaser may not sell or otherwise dispose of the Shares in the
absence of either a registration statement under the Securities Act of 1933 or
an exemption from the registration provisions of said Act.
6. Brokerage or Finder's Fees. If any person shall assert a claim to a fee,
commission, or other compensation against either party (the "Indemnitee") on
account of alleged employment as a broker or finder, or alleged performance of
services as a broker or finder, in connection with or as a result of any of the
transactions contemplated by this Agreement and arising from the acts of the
other party, such other party (the "Indemnitor") shall indemnify and hold
harmless the Indemnitee against and in respect of any and all claims, suits,
actions, proceedings, investigations, judgments, deficiencies, damages,
settlements, liabilities, and reasonable legal and other expenses as and when
incurred arising out of or based upon such claim by such person, and the
Indemnitor shall at his or its sole cost and expense defend any and all suits,
actions, proceedings or investigations involving such claim that may at any time
be brought against the Indemnitee and satisfy promptly any settlement or
judgment arising therefrom.
7. Seller's Option to Repurchase Shares.
7.1. During the two (2) year period commencing on October 1, 1997
through and including September 30, 1999 (hereinafter, the "Option Period"),
Seller shall have the option (the "Purchase Option") to re-purchase the Shares
from Purchaser. The Purchase Option must be exercised in whole, and not in part.
7.2. The purchase price for the Shares shall be the fair market value
thereof as of the date Seller shall exercise the Purchase Option, as determined
pursuant to the provisions of Section 7.2 below. However, in no event shall the
purchase price be less
3
<PAGE> 4
than two hundred twenty-five thousand and 00/100 ($225,000.00) dollars. The
purchase price determined pursuant to this Section 7.2 shall be final,
conclusive and binding upon the parties hereto.
7.3. The Purchase Option shall be exercised by Seller giving notice of
exercise to Purchaser at any time during the Option Period, together with a
certified or official bank check payable to the direct order of Purchaser in the
amount of the purchase price.
7.4. All of the costs and expenses arising out of the exercise of the
Purchase Option by Seller and the closing thereof, including, without
limitation, all attorneys' fees and transfer taxes, shall be borne by Seller and
shall be paid in full at closing. The Shares shall be transferred by Purchaser
to Seller free and clear of all liens, claims, security interests, encumbrances
and adverse interests.
7.5. The fair market value of the Shares subject to the Purchase Option
shall be mutually determined by two investment banking firms with experience
relating to the business of the Company. One such firm shall be designated by
Seller and the other firm shall be designated by Purchaser. If the two
investment banking firms shall be unable to agree upon a determination of such
fair market value within thirty (30) days after such designation, then such
firms shall mutually select a third independent investment banking firm with
similar experience to make such determination. The fair market value of the
Shares subject to the Purchase Option as determined pursuant to this Section
7.5, shall be final, conclusive and binding upon all parties hereto, including
the legal representative(s) of any deceased party.
8. Miscellaneous.
8.1. Subject to the terms and conditions herein provided, each of the
parties shall use such party's reasonable efforts to take, or cause to be taken,
such actions, to execute and deliver, or cause to be executed and delivered,
such additional documents and instruments and to do, or cause to be done, all
things necessary, proper or advisable under the provisions of this Agreement and
under applicable law, to consummate and make effective the transactions
contemplated by this Agreement.
8.2. Each of the parties shall be indemnified, reimbursed and held
harmless by the other party from and against any and all claims, demands,
actions, causes of action, damages, losses, costs, liabilities and expenses
(including, without limitation, the disbursements, expenses and reasonable fees
of the attorneys for the indemnified party) that may be imposed upon, incurred
by or asserted against such indemnified party resulting from, arising out of or
related to: (i) any materially false or misleading representation or warranty of
the other party under this Agreement; (ii) any material inaccuracy in or
material omission from any representation or warranty of the other party
contained in this Agreement; or (iii) any default of any covenant or agreement
of the other party under this Agreement.
4
<PAGE> 5
8.3. All notices, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given if and when delivered
personally with receipt of delivery acknowledged or three (3) business days
after being properly mailed by certified mail, return receipt requested, postage
prepaid.
8.4. This Agreement contains the entire understanding of the parties
and supersedes all prior agreements and understandings relating to the subject
matter hereof and shall not be amended except by a written instrument signed by
both of the parties.
8.5. The validity and construction of this Agreement shall be governed
by the internal laws of the State of New York.
8.6. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, successors and legal
representatives.
8.7. This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
8.8. Any waiver by any party of a breach of any term of this Agreement
shall not operate as or be construed to be a waiver of any other breach of that
term or of any breach of any other term of this Agreement. The failure of a
party to insist upon strict adherence to any term of this Agreement on one or
more occasions will not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Agreement. Any waiver must be in writing.
8.9. Notwithstanding any rule of law or custom to the contrary, no
provision of this Agreement shall be construed or interpreted in favor of or
against either party hereto merely by reason of such party having caused this
Agreement to be prepared.
8.10. If any words or phrases in this Agreement shall have been
stricken out or otherwise eliminated, whether or not any other words or phrases
have been added, this Agreement shall be construed as if the words or phrases so
stricken out or otherwise eliminated were never included in this Agreement and
no implication or inference shall be drawn from the fact that said words or
phrases were so stricken out or otherwise eliminated.
8.11. The terms, covenants, representations and warranties set forth in
paragraphs 4, 5, 6, 7 and 8 of this Agreement shall survive the execution and
delivery of this Agreement and the closing hereunder.
8.12. All terms and words used in this Agreement, regardless of the
number or gender in which they are used, shall be deemed to include any other
number and any other gender as the context may require.
5
<PAGE> 6
8.13. A facsimile signature by a party on this Agreement shall be
deemed to be an original signature of such party for all purposes.
In witness whereof, the parties hereby have executed this Agreement as of the
date first hereinabove set forth.
Witness: Seller: Financial Performance Corporation
________________________ By:/s/____________________________________
William F. Finley, President
Witness: Purchaser:
________________________ /s/_______________________________________
Robert S. Trump
6
<PAGE> 1
EXHIBIT 21.1
MICHAELSON KELBICK PARTNERS INC.
FPC INFORMATION CORP.
ASPEN CAPITAL MANAGEMENT, LLC
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<CASH> 1,139,974
<SECURITIES> 0
<RECEIVABLES> 1,645,918
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,855,229
<PP&E> 952,442
<DEPRECIATION> 205,480
<TOTAL-ASSETS> 3,910,109
<CURRENT-LIABILITIES> 1,733,648
<BONDS> 0
0
0
<COMMON> 80,215
<OTHER-SE> 1,673,200
<TOTAL-LIABILITY-AND-EQUITY> 3,910,109
<SALES> 7,785,250
<TOTAL-REVENUES> 7,834,739
<CGS> 6,482,542
<TOTAL-COSTS> 6,482,542
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,981
<INCOME-PRETAX> (519,451)
<INCOME-TAX> 25,397
<INCOME-CONTINUING> (544,848)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (544,848)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
