U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
X Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended June 30, 1997.
Transition report under Section 13 or 15(d) of the Exchange Act for the
__ transition period from __ to __
Commission file number: 0-17419
MENTORTECH INC.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 13-3260705
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(State of Incorporation) (I.R.S. Employer Identification No.)
462 Seventh Avenue, New York, New York 10018
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(Address of Principal Executive Offices)
(212) 736-5870
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(Issuer's Telephone Number, Including Area Code)
PC ETCETERA, INC.
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(Former Name, Former Address and Former Fiscal
Year, if Changed Since Last Report)
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__
APPLICABLE ONLY TO CORPORATE ISSUERS
As of August 8, 1997, the Issuer had 21,238,495 shares of Common Stock, par
value $.01, outstanding.
Transitional Small Business Disclosure Format (check one): Yes__ No X
<PAGE>
MENTORTECH INC.
Form 10-QSB
INDEX
Page
----
Consolidated Balance Sheets at June 30, 1997 and December 31, 1996............3
Consolidated Statements of Operations for the Three and Six Months
Ended June 30, 1997 and 1996.........................................5
Consolidated Statement of Cash Flows for the Six Months
Ended June 30, 1997 and 1996.........................................6
Notes to Consolidated Financial Statements....................................8
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................10
Exhibits and Reports on Form 8-K.............................................16
Signatures...................................................................18
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<PAGE>
MENTORTECH INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
JUNE 30, DECEMBER 31,
1997 1996
---- ----
(Unaudited)
ASSETS:
Current Assets:
- ---------------
Cash and cash equivalents $ 121 $ 283
Accounts receivable 3,494 2,279
Prepaid expenses 151 326
Inventory 26 91
------- -----
Total current assets 3,792 2,979
------- -----
Property and Equipment:
- -----------------------
Property and equipment 3,600 2,227
Accumulated depreciation and amortization (1,378) (587)
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Total property and equipment 2,222 1,640
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Other Assets:
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Other assets, net 479 362
Investment in affiliate -- 178
Goodwill (net of accumulated amortization
of $279 in 1997 and $211 in 1996) 4,937 1,811
----- -----
TOTAL ASSETS $11,430 $ 6,970
======= =======
See accompanying notes to consolidated financial statements.
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<PAGE>
MENTORTECH INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
(In thousands)
JUNE 30, DECEMBER 31,
1997 1996
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(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
Current Liabilities:
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Accounts payable and accrued expenses $ 2,931 $ 1,495
Deferred revenue 1,666 1,624
Loans payable - others - current portion 531 --
Loans payable - affiliate - current portion 546 1,478
Capital equipment obligations 21 --
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Total current liabilities 5,695 4,597
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Other Liabilities:
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Loans payable affiliates (shareholders) 600 2,665
Other liabilities 538 455
--- ---
Total liabilities 6,833 7,717
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Stockholders' Equity (Deficiency):
- ----------------------------------
Common stock 150 150
Preferred stock 1 --
Additional paid in capital - common stock 5,559 --
Accumulated deficit (902) (920)
Cumulative foreign currency
translation adjustment (211) 23
---- --
Total Stockholders' Equity (Deficiency) 4,597 (747)
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $11,430 $6,970
======= ======
See accompanying notes to consolidated financial statements.
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<PAGE>
MENTORTECH INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ -------------------------
1996 1997 1996 1997
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Revenues $ 2,100 $4,420 $ 4,209 $8,687
Cost of revenues 1,152 2,746 2,224 5,375
----- ----- ----- -----
Gross profit 948 1,674 1,985 3,312
Selling and marketing 284 686 556 1,205
General and administrative 641 800 1,231 1,789
Research and development 102 127 102 230
--- --- --- ---
Operating income (loss) (79) 61 96 88
--- --- --- ---
Equity in earnings of affiliate 24 -- 32 --
Gain on sale of subsidiary 16 27
Financial expense, net (169) (69) (307) (97)
----- ---- ----- ----
Net income (loss) $ (224) $ 8 $ (179) $ 18
======= ====== ======= ======
Net income (loss) per share $(0.015) $0.000 $(0.012) $0.001
======= ====== ======= ======
Weighted average number of shares 15,000 15,000 15,000 12,092
====== ====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
MENTORTECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30
-------
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) for the period $ 18 $ (179)
Adjustments to reconcile net income (loss)
to net cash (used in) provided by operating activities
Depreciation and amortization 366 230
Capital gain (2) --
Equity in earnings of affiliate -- (38)
Increase in accrued severance pay, net 41 45
Increase in deferred income taxes (72) --
Increase in trade receivables (199) (162)
Decrease in prepaid expenses 211 --
Decrease (increase) in other receivables 154 (132)
Decrease in other assets 79 --
Decrease (increase) in inventories 65 (20)
Increase in trade payables -- 158
Increase (decrease) in related parties (452) 78
Increase in deferred revenue (125) 246
(Decrease) in accounts payable and accrued expenses (594) (18)
Accrued interest on shareholders' loan -- 173
---- ----
Net cash (used in) provided by operating activities (510) 381
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (657) (539)
Proceeds from sales of property and equipment 35 --
Purchase of subsidiary (45) --
Cash acquired in acquisition 1,217 --
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Net cash provided by (used in) investing activities 550 (539)
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</TABLE>
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<PAGE>
MENTORTECH INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30
-------
1997 1996
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(Unaudited)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of shares -- 151
Capital equipment obligation repayments (52) --
Decrease in loans payable (480)
Increase in short-term bank credit 331
Net cash (used in) provided by financing activities (201) 151
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NET DECREASE IN CASH AND CASH EQUIVALENTS (161) (7)
Effect of exchange rate changes on cash and cash equivalent -- (2)
Cash and cash equivalents at the beginning of the period 282 93
----- ---
Cash and cash equivalents at the end of the period $ 121 $ 84
====== ======
Supplemental disclosure of cash flow information:
Cash paid during the period for
Income taxes $ 28 16
Interest 98 --
Supplemental disclosure of non-cash and financing activities:
Two shareholder loans in the amount of $2,578 and $438 were
converted to equity in 1997
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
MENTORTECH INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Interim Financial Statements
The accompanying financial information is unaudited, but in the opinion of
management, reflects all adjustments (which include only normal recurring
adjustments) necessary to present fairly the Company's financial position,
operating results and cash flows for those periods presented. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulation of the Securities and
Exchange Commission (the "Commission"). The comparative figures for the
consolidated balance sheet for the year ended December 31, 1996, consolidated
statements of operations for the three and six month periods ended June 30, 1996
and the consolidated statements of cash flows for the six months ended June 30,
1996 combines the data of Sivan Computers Training Center (1994) Ltd. ("Sivan")
and Mashov Computer Based Training (C.B.T.) Ltd. ("Mashov CBT"). See
Management's Discussion and Analysis, "Background" and "Financial Reporting".
The financial information should be read in conjunction with the audited
financial statements and notes thereto for the year ended December 31, 1996.
Results for the interim period are not necessarily indicative of results for the
entire year.
Note 2. Recent Accounting Pronouncement
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 (FAS 128), "Earnings Per Share". This
statement is effective for the Company's quarter ending December 31, 1997. The
statement redefines earnings per share under generally accepted accounting
principles. Under the new standard, primary earnings per share is replaced by
basic earnings per share and fully diluted earnings per share is replaced by
diluted earnings per share.
The impact of FAS 128 on the calculation of primary and fully diluted
earnings per share for the three and six months ended June 30, 1997 and 1996 is
not material.
Note 3. Pro Forma Results of Operations
The unaudited financial statements for 1997 included in this report reflect
the operations of Sivan and Mashov CBT for the six months ended June 30, 1997,
and PC Etcetera, Inc. since February 13, 1997, the date of the stock purchase
transaction. See Management's Discussion and Analysis, "Background". Because of
the change in control, the stock purchase transaction between Mashov and PC
Etcetera, Inc. was accounted for as a reverse acquisition. Based on such
accounting treatment, Sivan is reported as the surviving entity. The six months
ended June 30, 1996 includes the six months operations of Sivan and the three
months of operations (since inception) of Mashov CBT. It does not include the
operations of PC Etcetera, Inc.
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<PAGE>
MENTORTECH INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
On a pro forma basis had the acquisition occurred January 1, 1997, the pro
forma results of operations for the six months ended June 30, 1997 would have
been as follows:
Revenues $9,289
Net Loss $(132)
Net Loss Per Share $(.01)
Note 4. Accounting Policy
For purposes of the Statements of Cash Flows, the Company considers all
highly liquid instruments with maturity of three months or less when purchased
to be cash equivalents.
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<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
This report contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such forward-looking statements
involve known and unknown risks and uncertainties that may cause the actual
results, performance, levels of activity, or achievements of Mentortech Inc.
(formerly PC Etcetera, Inc.) and its consolidated subsidiaries (collectively,
the "Company"), or industry results, to be materially different from any future
results, performance, levels of activity, or achievements of the Company
expressed or implied by such forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to, general
and economic business conditions, changes in the industry, and the ability of
the Company to implement its business strategy, as well as those discussed
elsewhere in this report. The following discussion and analysis should be read
in conjunction with the Company's financial statements and notes thereto
included elsewhere in this report.
Background
As previously reported, effective February 13, 1997, a change of control of
PC Etcetera, Inc. (hereafter referred to as the "U.S. Operation") occurred
pursuant to a Stock Purchase Agreement dated February 6, 1997 (the "Stock
Purchase Agreement") between the former PC Etcetera, Inc. and Mashov Computers
Marketing Ltd. ("Mashov"), a corporation incorporated under the laws of the
State of Israel whose shares are publicly traded on the Tel-Aviv Stock Exchange.
Mashov is a subsidiary of Mashov Computers Ltd., whose shares are also publicly
traded on the Tel-Aviv Stock Exchange. Based on the Stock Purchase Agreement,
Mashov acquired 8,438,924 shares of Common Stock and 658,412 shares of Series C
Preferred Stock of the U.S. Operation (collectively, the "Sale Stock"), where
each share of Series C Preferred Stock was convertible into 10 shares of Common
Stock and had 10 to 1 voting rights in relation to shares of Common Stock. In
consideration for the Sale Stock, the U.S. Operation acquired two of Mashov's
subsidiaries, Sivan Computers Training Center (1994) Ltd. ("Sivan"), and Mashov
Computer Based Training (C.B.T.) Ltd. ("Mashov CBT"), both of which are
incorporated under the laws of the State of Israel. Sivan and Mashov CBT are
engaged in instructor-led personal computer training and the development and
sale of technology-based training ("TBT") products and services. As a result of
the transactions provided for in the Stock Purchase Agreement, Mashov owned 69%
of the U.S. Operation's equity and voting securities on a fully diluted basis,
subject to an adjustment based upon the fiscal year 1996 audited balance sheets
of the U.S. Operation, Sivan and Mashov. The Company calculated the final
adjustment and Mashov contributed 345,595 shares of its common stock to the
capital of the Company. As a result, Mashov now owns 68.5% of the Company's
equity and voting securities on a fully diluted basis.
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<PAGE>
In connection with the execution of the Stock Purchase Agreement, the U.S.
Operation executed a Conversion and Waiver Agreement effective February 13, 1997
(the "Conversion Agreement") with certain prior holders of its securities and
debt (the "Conversion Parties"). Pursuant to the Conversion Agreement, the
Conversion Parties received Common Stock for the cancellation of the debt owed
by the U.S. Operation and for the dilution of all options and warrants owned by
the Conversion Parties. After giving effect to the Conversion Agreement, and
aggregating their prior holdings, the Conversion Parties, as of June 30, 1997,
own 4,812,509 shares of Common Stock of the Company.
Recent Corporate Events
At the Company's 1997 Annual Meeting held August 4, 1997, the Company's
stockholders voted to (i) amend the Company's Certificate of Incorporation to
change the name of the Company to Mentortech Inc.; (ii) amend the Company's
Certificate of Incorporation to increase the number of authorized shares of
capital stock of the Company from 20,000,000 to 45,000,000 comprised of
40,000,000 shares of Common Stock, par value $.01 per share, and 5,000,000
shares of Preferred Stock, par value of $.001 per share; (iii) authorize the
conversion of each of the 658,412 outstanding shares of the Company's Series C
Preferred Stock into ten shares of Common Stock; and (iv) ratify the Company's
1997 Stock Option Plan.
Financial Reporting
The unaudited financial statements for the first half of 1997 included in
this report reflect the operations of Sivan and Mashov CBT for the six months
ended June 30, 1997 as well as those of the U.S. Operation and PC Etcetera
Israel since February 13, 1997, the effective date of the Stock Purchase
Agreement. Because of the change in control, the transaction has been accounted
for as a reverse acquisition. Based on such accounting treatment, Sivan and
Mashov CBT are reported together as the surviving entity and the financial
information for the three and six months ended June 30, 1996 reflect the
operations of Sivan and those of Mashov CBT since its inception in second
quarter of 1996. The financial statements for the period ended June 30, 1997
also include the operations of Sivan Jerusalem Ltd. ("Sivan Jerusalem"), a
company in which Sivan had held a 50% equity investment until January 1997 when
it purchased the remaining equity in Sivan Jerusalem and it became a
wholly-owned subsidiary. All amounts referred to herein are in thousands. The
following discussion with respect to the U.S. Operation reflects the entire six
month period ended June 30, 1997 in order to provide a clearer description of
such operations during the period.
Three and six months ended June 30, 1997 compared to three and six months ended
June 30, 1996
Revenues consist primarily of revenues from services and product sales. The
Company's revenues relating to instructor-led training ("ILT") are recognized
over the life of the training course. TBT revenues are recognized upon shipment
of the software provided that no significant vendor obligations remain and
collection of the related receivable is probable. Contract consulting revenue is
recognized as the services are performed.
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<PAGE>
The Company 's revenues for the three months ended June 30, 1997 increased
by 110% to $4,420 from $2,100 for the three months ended June 30, 1996. Revenue
for the six months ended June 30, 1997 increased 106% to $8,687 from $4,209 for
the comparable 1996 period. Sivan training revenues increased by 29% and 32%
from $2,057 and $4,166 for the three and six months ended June 30, 1996,
respectively, to $2,657 and $5,491 for the three and six months ended June 30,
1997. Sivan Jerusalem, a company in which Sivan had held a 50% equity investment
until January 1997 when Sivan purchased the remaining equity, accounted for 38%
of Sivan's increased revenues. Sivan's share of Sivan Jerusalem's results of
operations were reported as equity in earnings of an affiliate in 1996. The
remaining increase in Sivan's revenues was due primarily to its success in
offering more profitable technical courses as well as to an increase in the
number of application courses offered. The operations of Mashov CBT began in
April 1996, therefore the 1996 amounts only reflect three months of operations
rather than six.
The revenues of the U.S. Operation were $1,672 and $3,359 for the three and
six months ended June 30, 1997, an increase of 10% and 15%, respectively,
compared to revenues of $1,520 and $2,926, respectively, for the three and six
months ended June 30, 1996.
The U.S. Operation has been placing more emphasis on the growth of its
Consulting Services Division. Consulting revenues for the New York metropolitan
area grew from $809 and $1,558 for the three and six months ended June 30, 1996,
to $1,142 and $2,473, respectively, for the three and six months ended June 30,
1997, an increase of 41% and 59%, respectively.
During the three and six months ended June 30, 1997, the U.S. Operation
continued to experience declining ILT revenues. Application training revenues
decreased by approximately 36% and 46%, respectively, for the three and six
months ended June 30, 1997 compared to the same periods in 1996. Management
attributes the declining ILT revenue to the fact that software vendors have not
released many new versions of existing software. The U.S. Operation had
anticipated that the release of a new application software entitled Office 95
would have a positive impact on ILT revenues. However many clients continued to
delay such conversions and projects pending the market's experiences with
Windows 95. The U.S. Operation now anticipates and has begun to experience an
increase in training demand for the upgraded Office 97 products.
The U.S. Operation is pursuing a move into the higher end training market
as many organizations require certification training for Microsoft and Lotus
back office applications and operating systems, which historically had higher
margins. This higher technical training environment has a better synergy with
the U.S. Operation's growing consulting business. The U.S. Operation has been
authorized as a Lotus Authorized Education Center and its status has been
upgraded to Premium Business partner and has received Microsoft Authorized
Technical Education Center status. During the three and six months ended June
30, 1997, technical training revenues increased by 28% and 29%, respectively,
compared to the same periods in 1996.
Cost of revenues for ILT consists primarily of the expenses of instructors,
classroom space costs as well as amortization of classroom equipment. Cost of
revenues for consulting services consists primarily of the labor costs of the
consultants performing the work at clients' facilities.
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<PAGE>
Cost of revenues for TBT revenues include packaging and manufacturing costs
of the products. Cost of revenues rose to 62% of revenues for the three and six
months ended June 30, 1997, respectively, compared to 55% and 53% of revenues
for the three and six months ended June 30, 1996, respectively. Cost of revenues
for Sivan was 61% of revenues for the three and six months ended June 30, 1997,
respectively, compared to 55% and 51%, respectively, for the comparable periods
in 1996. These increases were primarily due to an increase in amortization
expense as a result of a substantial investment in new classroom computer
equipment. Amortization expense for classroom computers increased by 59% for the
three and six months ended June 30, 1997 as compared to the 1996 comparable
periods. Cost of revenues for the U.S. Operation were 51% and 59% for the three
and six months ended June 30, 1997, respectively.
Selling and marketing expenses consist primarily of costs relating to
promotion, advertising, trade shows and exhibitions. Such expenses also include
compensation of sales support, travel and related expenses. Sales and marketing
expenses increased by $402 and $649 to $686 and $1,205 during the three and six
months ended June 30, 1997, respectively, from $284 and $556 for the three and
six months ended June 30, 1996, respectively. Selling and marketing expenses of
Sivan increased by 63% and 47% for the three and six months ended June 30, 1997,
respectively, compared to the same periods in 1996. This increase is due to
Management's decision to increase sales and marketing expenses in order to
obtain increased revenues. Sivan's increase in sales and marketing expenses
correlates with its increase in revenue. Selling and marketing expenses in the
U.S. increased to $195 and $321 for the three and six months ended June 30,
1997, respectively, from $89 and $185 for the three and six months ended June
30, 1996, respectively.
General and administrative expenses include compensation costs for
administration, finance and general management personnel and office maintenance
and administrative costs. General and administrative costs for the Company
increased by $159 and $558 to $800 and $1,789 during the three and six months
ended June 30, 1997, respectively, from $641 and $1,231 for the three and six
months ended June 30, 1996, respectively. These increases were due entirely to
the expansion and the inclusion of the results of Sivan Jerusalem, Mashov CBT
and the U.S. Operation. General and administrative expenses were $321 and $558,
respectively, for the U.S. Operation, $424 and $1,098, respectively, for Sivan,
and $55 and $132, respectively, for Mashov CBT for the three and six months
ended June 30, 1997. General and administrative expenses for Sivan decreased by
$186 and $101 for the three and six months ended June 30, 1997, respectively,
compared to the same periods in 1996.
Research and development expenses consist primarily of salaries of
employees engaged in on-going research and development activities of TBT
materials and other related costs. Research and development expenses amounted to
$127 and $230, respectively, for the three and six months ended June 30, 1997,
respectively, compared to $102 for the three and six months ended June 30, 1996.
Research and development is primarily incurred by Mashov CBT which did not begin
operating until the second quarter of 1996.
Operating income was $61 for the three months ended June 30, 1997 compared
to an operating loss of $79 for the three months ended June 30, 1996. Operating
income for the six
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<PAGE>
months ended June 30, 1997 was $88 compared to $96 for the six months ended June
30, 1996. This is due to increased revenues, as well as the Company's
investments into profitable operations such as the U.S. Operation and Sivan
Jerusalem, offset by research and development activities.
As discussed above, equity in earnings of affiliate represented Sivan's 50%
investment in Sivan Jerusalem during 1996. Effective January 1, 1997, Sivan
purchased the remaining equity, and Sivan Jerusalem became a wholly-owned
subsidiary. Sivan Jerusalem's results of operations are consolidated in the
financial statements for the three and six months ended June 30, 1997. The
Company's gain on the sale of a subsidiary refers to a 1996 sale of the U.S.
Operation's wholly-owned Canadian subsidiary. Due to the fact that the purchase
agreement included certain covenants that continued for two years, a part of the
purchase price is being recognized over the two year period. The U.S. Operation
is not included in the results for the three and six months ended June 30, 1996.
Financial expenses, net consists primarily of bank charges and interest
expenses. Financial expenses decreased to $69 and $97 for the three and six
months ended June 30, 1997, respectively, from $169 and $307 for the three and
six months ended June 30, 1996, respectively. This decrease was due principally
to the conversion of $2,578 of shareholder loans into equity by Sivan in the
first quarter of 1997 and the repayment of the U.S. Operation's receivables
financing with Rosenthal and Rosenthal during the second quarter of 1997.
As a result of the foregoing, the Company incurred a net profit of $8 and
$18, respectively, for the three and six months ended June 30, 1997 compared to
a net loss of $224 and $179, respectively, for the three and six months ended
June 30, 1996. Sivan's profit was $61 and $165, respectively, for the three and
six months ended June 30, 1997 compared to a net loss of $109 and $69 for the
three and six months ended June 30, 1996. During both the first and second
quarters of 1997, both Sivan and the U.S. Operation operated on a profitable
basis, which profits were offset by the unprofitable operations of Mashov CBT,
which incurred losses of approximately $128 and $257, respectively, during the
three and six months ended June 30, 1996. Management expects Mashov CBT to
continue to operate at a loss for the remainder of 1997 while the Company
invests in the subsidiary's future.
Liquidity and Capital Resources
At June 30, 1997, the Company had $121 in cash and cash equivalents and a
working capital deficiency of $1,903. At December 31, 1996, the cash and working
capital deficiency was $50 and $1,946, respectively, for the U.S. Operation, and
$283 and $1,618, respectively, for Sivan. The improvement of the Company's cash
position was a result of Mashov's infusion of approximately $1,200 pursuant to
the Stock Purchase Agreement. The increase in cash was offset by an increase in
accounts receivable and an investment in computer equipment and other fixed
assets.
The Company used net cash of $510 in operating activities in the six months
ended June 30, 1997. Accounts receivable increased by $199 during the same
period. This increase was due primarily to the increase in revenues. Accounts
payable decreased by $594 during the same period. The Company's investing
activities resulted in $550 mainly from the cash received in connection
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<PAGE>
with the Stock Purchase Agreement offset by the purchase of $657 in fixed assets
and $45 used to purchase Sivan Jerusalem. Financing activities used $201,
principally for the repayment of debt.
In 1997, the Company obtained an oral commitment from its Israeli bank to
provide Sivan up to $1 million in working capital loans. As of June 30, 1997,
Sivan had borrowed $331 from such bank. The Company expects to invest
approximately $400 in new computer equipment during the remainder of 1997. Based
on the commitment of its Israeli bank and the representation by Mashov that it
will provide continued financial support, if necessary, to meet the Company's
obligations for the remainder of 1997, the Company believes it has sufficient
working capital to meet its obligations through at least the end of 1997.
In order to facilitate its planned growth, the Company intends to seek
additional equity or other financing later this year. No assurance can be given
that it will be successful in obtaining such financing. If such financing is not
obtained, no assurance can be given that the Company will be able to implement
its planned growth.
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<PAGE>
Exhibits and Reports on Form 8-K.
Exhibits.
Exhibit
Number Description of Exhibit
- ------ ----------------------
2.1 Stock Purchase Agreement dated February 6, 1997 and effective February 13,
1997 by and between the Company and Mashov (1)
3.1 Certificate of Amendment of Certificate of Incorporation with regard to the
change of the Company's name and the increase in the Company's authorized
capital stock*
3.2 Certificate of Incorporation, as amended (2)
3.3 By-Laws (3)
4.1 Specimen Common Stock Certificate (4)
10.1 Lease for premises situated at 462 Seventh Avenue, 18th Floor, New York,
New York (5)
10.2 Lease for premises situated at 462 Seventh Avenue, 4th Floor New York, New
York (6)
10.3 1997 Stock Option Plan*
10.4 Employment Agreement of Roy Machnes (7)
10.5 Employment Agreement of Elan Penn (7)
10.6 Employment Agreement of Terry I. Steinberg (7)
___________
* Filed herewith
(1) Filed as an exhibit to the Company's Current Report on Form 8-K for an
event dated February 13, 1997 and hereby incorporated by reference thereto.
(2) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989 and incorporated herein by reference,
as amended by document filed as an exhibit to the Company's Annual Report
on Form 10-KSB for the fiscal year ended December 31, 1993 and hereby
incorporated by reference thereto.
(3) Filed as an exhibit to the Company's Registration Statement on Form S-18
(File No. 33-19521) and hereby incorporated by reference thereto.
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<PAGE>
(4) Filed as an exhibit to the Company's Registration Statement No. 33-93842 on
Form S-2 and incorporated herein by reference.
(5) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1993 and hereby incorporated by reference
thereto.
(6) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1994 and hereby incorporated by reference
thereto.
(7) Filed as a "Related Agreement" to the Stock Purchase Agreement, which was
filed as an exhibit to the Company's Current Report on Form 8-K for an
event dated February 13, 1997 and hereby incorporated by reference thereto.
Reports on Form 8-K.
The following Current Report on Form 8-K was filed since December 31, 1996:
A Current Report on Form 8-K ("Form 8-K") was filed by the Company with the
Commission on February 27, 1997 with respect to the execution of the Stock
Purchase Agreement and the change of the Company's auditors.
An Amendment No. 1 to the Form 8-K was filed by the Company on March 4,
1997 with respect to the change of the Company's auditors.
An Amendment No. 2 to the Form 8-K was filed by the Company on March 13,
1997 with respect to the change of the Company's auditors.
An Amendment No. 3 to the Form 8-K was filed by the Company on April 24,
1997 with respect to the financial statements of Sivan and Mashov CBT.
-17-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MENTORTECH, INC.
By: /s/ Roy Machnes
---------------
Roy Machnes
President and Chief Executive Officer
Date: August 12, 1997
-18-
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Description of Exhibit
- ------ ----------------------
2.1 Stock Purchase Agreement dated February 6, 1997 and effective February 13,
1997 by and between the Company and Mashov (1)
3.1 Certificate of Amendment of Certificate of Incorporation with regard to the
change of the Company's name and the increase in the Company's authorized
capital stock*
3.2 Certificate of Incorporation, as amended (2)
3.3 By-Laws (3)
4.1 Specimen Common Stock Certificate (4)
10.1 Lease for premises situated at 462 Seventh Avenue, 18th Floor, New York,
New York (5)
10.2 Lease for premises situated at 462 Seventh Avenue, 4th Floor New York, New
York (6)
10.3 1997 Stock Option Plan*
10.4 Employment Agreement of Roy Machnes (7)
10.5 Employment Agreement of Elan Penn (7)
10.6 Employment Agreement of Terry I. Steinberg (7)
_____________
* Filed herewith
(1) Filed as an exhibit to the Company's Current Report on Form 8-K for an
event dated February 13, 1997 and hereby incorporated by reference thereto.
(2) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989 and incorporated herein by reference,
as amended by document filed as an exhibit to the Company's Annual Report
on Form 10-KSB for the fiscal year ended December 31, 1993 and hereby
incorporated by reference thereto.
(3) Filed as an exhibit to the Company's Registration Statement on Form S-18
(File No. 33- 19521) and hereby incorporated by reference thereto.
<PAGE>
(4) Filed as an exhibit to the Company's Registration Statement No. 33-93842 on
Form S-2 and incorporated herein by reference.
(5) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1993 and hereby incorporated by reference
thereto.
(6) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1994 and hereby incorporated by reference
thereto.
(7) Filed as a "Related Agreement" to the Stock Purchase Agreement, which was
filed as an exhibit to the Company's Current Report on Form 8-K for an
event dated February 13, 1997 and hereby incorporated by reference thereto.
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
PC ETCETERA, INC.
PC ETCETERA, INC., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware (the "Corporation"),
DOES HEREBY CERTIFY:
FIRST: Article I of the Certificate of Incorporation of the Corporation is
hereby amended and restated to read in its entirety as follows:
"ARTICLE I
The name of the corporation (hereinafter referred to as the "Corporation")
is Mentortech Inc."
SECOND: Paragraph (a) of Article IV of the Certificate of Incorporation of
the Corporation is hereby amended and restated to read in its entirety as
follows:
"ARTICLE IV
(a) The aggregate number of shares of stock which the corporation shall
have the authority to issue is 45,000,000, of which 40,000,000 are shares of
Common Stock, with a par value of $.01 per share, and 5,000,000 are shares of
Preferred Stock, with a par value of $.001 per share."
<PAGE>
THIRD: The aforesaid amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
Signed on August 4, 1997
/s/Roy Machnes
--------------
Roy Machnes
Chief Executive Officer
-2-
EXHIBIT 10.3
PC ETCETERA, INC.
1997 STOCK OPTION PLAN
1. Purpose of the Plan. The PC Etcetera, Inc. 1997 Stock Option Plan (the
"Plan") is intended to advance the interests of Mentortech Inc. (the "Company")
by inducing individuals or entities of outstanding ability and potential to join
and remain with, or provide consulting or advisory services to, the Company, by
encouraging and enabling employees, Directors, consultants and advisors to
acquire proprietary interests in the Company, and by providing those employees,
Directors, consultants and advisors with an additional incentive to promote the
success of the Company. This is accomplished by providing for the granting of
"Options," which term, as used herein, includes both "Incentive Stock Options"
and "Nonstatutory Stock Options," as later defined, to employees and
"Nonstatutory Stock Options" to non-employee Directors, consultants and
advisors.
2. Administration. The Plan shall be administered by the Board of Directors
of the Company (the "Board"). Except as herein specifically provided, the
interpretation and construction by the Board of any provision of the Plan or of
any Option granted under it, shall be final and conclusive. The receipt of
Options by Directors shall not preclude their vote on any matters in connection
with the administration or interpretation of the Plan.
3. Shares Subject to the Plan. The stock subject to Options granted under
the Plan shall be shares of the Company's common stock, par value $.01 per share
(the "Common Stock"), whether authorized but unissued or held in the Company's
treasury, or shares purchased from stockholders expressly for use under the
Plan. The maximum number of shares of Common Stock which may be issued pursuant
to Options granted under the Plan shall not exceed Five Million (5,000,000)
shares, subject to adjustment in accordance with the provisions of Section 12
hereof. The Company shall at all times while the Plan is in force reserve such
number of shares of Common Stock as will be sufficient to satisfy the
requirements of all outstanding Options granted under the Plan. In the event any
Option granted under the Plan shall expire or terminate for any reason without
having been exercised in full or shall cease for any reason to be exercisable in
whole or in part, the unpurchased shares subject thereto shall again be
available for Options under the Plan.
4. Participation. The class of persons which shall be eligible to receive
Options under the Plan shall be (a) with respect to Incentive Stock Options
described in Section 6 hereof, all employees of either the Company or any
subsidiary corporation of the Company; and (b) with respect to Nonstatutory
Stock Options described in Section 7 hereof, all employees and non-employee
Directors of, or consultants and advisors to, either the Company or any
subsidiary corporation of the Company; provided, however, that Nonstatutory
Stock Options shall not be granted to any such consultants and advisors unless
(i) bona fide services have been or are to be rendered by such consultant or
advisor; and (ii) such services are not in connection with the offer or sale of
securities in a capital raising transaction. The Board, in its sole discretion,
but subject to the provisions of the Plan, shall determine the employees and
non-employee Directors of, and the
<PAGE>
consultants and advisors to, the Company and its subsidiary corporations to whom
Options shall be granted (the "Optionees"), the time or times when they shall be
granted, the type of option to be granted and the number of shares to be covered
by each Option, taking into account the nature of the employment or services
rendered by the individuals being considered, their annual compensation, their
present and potential contributions to the success of the Company and such other
factors as the Board may deem relevant.
5. Stock Option Agreement. Each Option granted under the Plan shall be
authorized by the Board and shall be evidenced by a Stock Option Agreement which
shall be executed by the Company and by the Optionee to whom such Option is
granted. The Stock Option Agreement shall specify the number of shares of Common
Stock as to which any Option is granted, the period during which the Option is
exercisable and the option price per share thereof. All options shall comply
with and be subject to the provisions of Section 6 or 7, whichever is applicable
as determined by the type of Option to be granted, as well as all other
provisions of this Plan and such other terms and conditions not inconsistent
with the Plan as the Board may deem desirable.
6. Incentive Stock Options. The Board may grant Options under the Plan
which are intended to meet the requirements of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") (referred to herein as an
"Incentive Stock Option"), and which are subject to the following terms and
conditions and any other terms and conditions as may at any time be required by
Code Section 422:
a. An Incentive Stock Option may be granted to any individual eligible to
receive an Option under the Plan pursuant to Section 4(a) hereof.
b. Each Incentive Stock Option under the Plan must be granted prior to June
25, 2007.
c. The option price of the shares subject to any Incentive Stock Option
shall not be less than the fair market value of the Common Stock at the time
such Incentive Stock Option is granted; provided, however, if an Incentive Stock
Option is granted to an Optionee who owns, at the time the Incentive Stock
Option is granted, more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of a parent corporation or
subsidiary corporation of the Company, the option price of the shares subject to
the Incentive Stock Option shall be at least one hundred ten percent (110%) of
the fair market value of the Common Stock at the time the Incentive Stock Option
is granted.
d. No Incentive Stock Option granted under the Plan shall be exercisable
after the expiration of ten (10) years from the date of its grant. However, if
an Incentive Stock Option is granted to an Optionee who owns, at the time the
Incentive Stock Option is granted, more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of a parent
corporation or subsidiary corporation of the Company, such Incentive Stock
Option shall not be exercisable after the expiration of five (5) years from the
date of its grant. Every Incentive Stock Option granted under the Plan shall be
subject to earlier termination as expressly provided in Section 10 hereof.
-2-
<PAGE>
e. For purposes of determining stock ownership under this Section 6, the
attribution rules of Code Section 424(d) shall apply.
f. For purposes of the Plan, fair market value shall be determined by the
Board. If the Common Stock is listed on a national securities exchange or traded
on the Over-the-Counter market, fair market value shall be the closing selling
price or, if not available, the mean of the closing bid and asked prices of the
Common Stock, or, if not available, of the high bid and low asked prices of the
Common Stock quoted on such exchange, or on the Over-the-Counter market as
reported by the National Association of Securities Dealers Automated Quotation
(NASDAQ) system, or if the Common Stock is not listed on NASDAQ, then by the
National Quotation Bureau, Incorporated, as the case may be, on the day on which
the Option is granted, or, if there is no trading or bid or asked price on that
day, the closing selling price or the mean of the closing bid and asked prices
or of the high bid and low asked prices on the nearest trading date before that
day and for which such prices are available, and if the Common Stock is not
listed on such an exchange or traded in such a market, then the fair market
value shall be determined by taking into consideration all relevant factors,
including but not limited to the Company's net worth, prospective earning power
and dividend paying capacity.
7. Nonstatutory Stock Options. The Board may grant Options under the Plan
which are not intended to meet the requirements of Code Section 422, as well as
Options which are intended to meet the requirements of Code Section 422 but the
terms of which provide that they will not be treated as Incentive Stock Options
(referred to herein as a "Nonstatutory Stock Option"). Nonstatutory Stock
Options shall be subject to the following terms and conditions:
a. A Nonstatutory Stock Option may be granted to any individual or entity
eligible to receive an Option under the Plan pursuant to Section 4(b) hereof.
b. The option price of the shares subject to a Nonstatutory Stock Option
shall be determined by the Board, in its sole discretion, at the time of the
grant of the Nonstatutory Stock Option; provided, however, that the option price
of the shares subject to a Nonstatutory Stock Option granted to a person subject
to Section 16(b) of the Securities Exchange Act of 1934, as amended (an
"Insider"), shall not be less than the fair market value of the Common Stock at
the time such Nonstatutory Stock Option is granted.
c. A Nonstatutory Stock Option granted under the Plan may be of such
duration as shall be determined by the Board (subject to earlier termination as
expressly provided in Section 10 hereof); provided, however, that no
Nonstatutory Stock Option granted under the Plan to an Insider shall be
exercisable after the expiration of ten (10) years from the date of its grant.
8. Transferability. No Option granted under the Plan shall be transferable
by the Optionee otherwise than by Will or the laws of descent and distribution,
and, during the lifetime of the Optionee shall not be exercisable by any other
person.
9. Rights of Option Holders. An Option Holder shall have none of the rights
of a stockholder with respect to the Common Stock covered by his Option until
such Common Stock
-3-
<PAGE>
shall be transferred to him upon the exercise of his Option. For purposes of
this Plan, "Option Holder" shall mean (i) an Optionee; or (ii) with respect to
any Option held by an Optionee at the date of his death, the Optionee's
Beneficiary, as determined pursuant to Section 19.
10. Termination of Employment or Death.
a. If the employment of an employee by, or the services of a non-employee
Director for, or consultant or advisor to, the Company or a subsidiary
corporation of the Company shall be terminated for cause or, subject to the
terms of the Stock Option Agreement, voluntarily by the employee, non-employee
Director, consultant or advisor, then his or its Option shall expire forthwith.
Subject to the terms of the Stock Option Agreement, and except as provided in
subsections (b) and (c) of this Section 10, if such employment or services shall
terminate for any other reason, then such Option may be exercised at any time
within three (3) months after such termination, subject to the provisions of
subsection (d) of this Section 10. For purposes of the Plan, the retirement of
an individual either pursuant to a pension or retirement plan adopted by the
Company or at the normal retirement date prescribed from time to time by the
Company shall be deemed to be termination of such individual's employment other
than voluntarily or for cause. For purposes of this subsection (a), an employee,
non-employee Director, consultant or advisor who leaves the employ or services
of the Company to become an employee or a non-employee Director of, or a
consultant or advisor to, a subsidiary corporation of the Company or a
corporation (or subsidiary corporation or parent corporation of the corporation)
which has assumed the Options of the Company as a result of a corporate
reorganization, etc., shall not be considered to have terminated his employment
or services.
b. Subject to the terms of the Stock Option Agreement, if an Optionee dies
(i) while employed by, or while serving as a non-employee Director for or
consultant or advisor to, the Company or a subsidiary corporation of the Company
or (ii) within three (3) months after the termination of his employment or
services other than voluntarily by the employee or non-employee Director, or for
cause, then such Option may, subject to the provisions of subsection (d) of this
Section 10, be exercised by the Optionee's Beneficiary at any time within one
(1) year after such death.
c. Subject to the terms of the Stock Option Agreement, if an Optionee
ceases employment or services because of permanent and total disability (within
the meaning of Code Section 22(e)(3)) while employed by, or while serving as a
non-employee Director for or consultant or advisor to, the Company or a
subsidiary corporation of the Company, then such Option may, subject to the
provisions of subsection (d) of this Section 10, be exercised at any time within
one (1) year after his termination of employment, termination of Directorship or
termination of consulting or advisory services, as the case may be, due to the
disability.
d. An Option may not be exercised pursuant to this Section 10 except to the
extent that the Option Holder was entitled to exercise the Option at the time of
termination of employment, termination of Directorship, termination of
consulting or advisory services, or death, and in any event may not be exercised
after the expiration of the Option.
-4-
<PAGE>
e. For purposes of this Section 10, the employment relationship of an
employee of the Company or of a subsidiary corporation of the Company will be
treated as continuing intact while he is on military or sick leave or other bona
fide leave of absence (such as temporary employment by the Government) if such
leave does not exceed ninety (90) days, or, if longer, so long as his right to
reemployment is guaranteed either by statute or by contract.
11. Exercise of Options.
a. Unless otherwise provided in the Stock Option Agreement, any Option
granted under the Plan shall be exercisable in whole at any time, or in part
from time to time, prior to expiration. The Board, in its absolute discretion,
may provide in any Stock Option Agreement that the exercise of any Option
granted under the Plan shall be subject: (i) to such condition or conditions as
it may impose, including, but not limited to, a condition that the Optionee
remain in the employ or service of, or continue to provide consulting or
advisory services to, the Company or a subsidiary corporation of the Company for
such period or periods from the date of grant of the Option as the Board, in its
absolute discretion, shall determine; and (ii) to such limitations as it may
impose, including, but not limited to, a limitation that the aggregate fair
market value of the Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by any Optionee during any calendar year
(under all plans of the Company and its parent corporation and subsidiary
corporations) shall not exceed one hundred thousand dollars ($100,000). In
addition, in the event that under any Stock Option Agreement the aggregate fair
market value of the Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by any Optionee during any calendar year
(under all plans of the Company and its parent corporation and subsidiary
corporations) exceeds one hundred thousand dollars ($100,000), the Board may,
when shares are transferred upon exercise of such Options, designate those
shares which shall be treated as transferred upon exercise of an Incentive Stock
Option and those shares which shall be treated as transferred upon exercise of a
Nonstatutory Stock Option.
b. An Option granted under the Plan shall be exercised by the delivery by
the Option Holder to the Company at its principal office (attention of the
Secretary) of written notice of the number of shares with respect to which the
Option is being exercised. Such notice shall be accompanied by payment of the
full option price of such shares, and payment of such option price shall be made
by the Option Holder's delivery of his check payable to the order of the Company
in such amount.
12. Adjustment Upon Change in Capitalization.
a. In the event that the outstanding Common Stock is hereafter changed by
reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination of shares, reverse split, stock
dividend or the like, an appropriate adjustment shall be made by the Board in
the aggregate number of shares available under the Plan, in the number of shares
and option price per share subject to outstanding Options, and in any limitation
on exercisability referred to in Section 11(a) (ii) hereof which is set forth in
outstanding Incentive Stock Options. If the Company shall be reorganized,
consolidated or merged with another corporation, an Option Holder shall be
entitled to receive upon the exercise of his Option the same number and kind of
shares of
-5-
<PAGE>
stock or the same amount of property, cash or securities as he would have been
entitled to receive upon the happening of any such corporate event as if he had
been, immediately prior to such event, the holder of the number of shares
covered by his Option; provided, however, that in such event the Board shall
have the discretionary power to take any action necessary or appropriate to
prevent any Incentive Stock Option granted hereunder from being disqualified as
such under the then existing provisions of the Code or any law amendatory
thereof or supplemental thereto.
b. Any adjustment in the number of shares shall apply proportionately to
only the unexercised portion of the Option granted hereunder. If fractions of a
share would result from any such adjustment, the adjustment shall be revised to
the next lower whole number of shares.
13. Further Conditions of Exercise.
a. Unless prior to the exercise of the Option the shares issuable upon such
exercise have been registered with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended, the notice of exercise shall
be accompanied by a representation or agreement of the Option Holder to the
Company to the effect that such shares are being acquired for investment and not
with a view to the resale or distribution thereof, or such other documentation
as may be required by the Company, unless in the opinion of counsel to the
Company such representation, agreement or documentation is not necessary to
comply with such Act.
b. The Company shall not be obligated to deliver any Common Stock until it
has been listed on each securities exchange on which the Common Stock may then
be listed or until there has been qualification under or compliance with such
federal or state laws, rules or regulations as the Company may deem applicable.
The Company shall use reasonable efforts to obtain such listing, qualification
and compliance.
14. Effectiveness of the Plan. The plan was adopted by the Board on June
25, 1997 and approved by the stockholders of the Company on August 4, 1997.
15. Termination, Modification and Amendment.
a. The Plan shall terminate on June 25, 2007, which is ten (10) years from
the date of the earlier of its adoption by the Board or its approval by the
Company's stockholders, or sooner as hereinafter provided, and no Option shall
be granted after termination of the Plan.
b. The Plan may from time to time be terminated, modified or amended by the
affirmative vote of the holders of a majority of the outstanding shares of
capital stock of the Company present in person or by proxy at a meeting of
stockholders of the Company convened for such purpose.
c. The Board may at any time, on or before the termination date referred to
in Section 15 (a) hereof, terminate the Plan, or from time to time make such
modifications or amendments to the Plan as it may deem advisable; provided,
however, that the Board shall not, without approval by the affirmative vote of
the holders of a majority of the outstanding shares of capital stock of the
-6-
<PAGE>
Company present in person or by proxy at a meeting of stockholders of the
Company convened for such purpose, increase (except as provided by Section 12
hereof) the maximum number of shares as to which Options may be granted
hereunder, change the designation of the employees or class of employees to
receive Options, or make any other change which would prevent any Incentive
Stock Option granted hereunder which is intended to be an "incentive stock
option" from qualifying as such under the then existing provisions of the Code
or any law amendatory thereof or supplemental thereto.
d. No termination, modification or amendment of the Plan may, without the
consent of the Option Holder, adversely affect the rights conferred by such
Option.
16. Not a Contract of Employment. Nothing contained in the Plan or in any
Stock Option Agreement executed pursuant hereto shall be deemed to confer upon
any Option Holder any right to remain in the employ or service of the Company or
a subsidiary corporation of the Company or any entitlement to any remuneration
or other benefit pursuant to any consulting or advisory arrangement.
17. Use of Proceeds. The proceeds from the sale of shares pursuant to
Options granted under the Plan shall constitute general funds of the Company.
18. Taxes. The Company may make such provisions and take such steps as it
may deem necessary or appropriate for the withholding of all federal, state and
local taxes required by law to be withheld with respect to Options granted under
the Plan and the exercise thereof including, but not limited to (i) deducting
the amount so required to be withheld from any other amount then or thereafter
payable to an Option Holder; or (ii) requiring an Option Holder to pay to the
Company the amount so required to be withheld as a condition of the issuance,
delivery, distribution or release of any Common Stock.
19. Designation and Change of Beneficiary. Each Optionee shall file with
the Board a written designation of one or more persons (the "Beneficiary") as
the individual who shall be entitled to exercise any Options, or to receive any
amount payable, under the Plan upon his death. An Optionee may, from time to
time, revoke or change his Beneficiary designation without the consent of any
previously designated Beneficiary by filing a new designation with the Board.
The last such designation received by the Board shall be controlling; provided,
however, that no designation, or change or revocation thereof, shall be
effective unless received by the Board prior to the Optionee's death, and in no
event shall it be effective as of a date prior to such receipt. If at the date
of an Optionee's death, there is no designation of a Beneficiary in effect for
the Optionee pursuant to the provisions of this Section 19, or if no Beneficiary
designated by the optionee in accordance with the provisions hereof survives to
exercise any Options that become exercisable, or to receive any amount that
becomes payable, under the Plan by reason of the Optionee's death, the
Optionee's estate shall be treated as the Optionee's Beneficiary for all
purposes.
-7-
<PAGE>
20. Payments to Persons Other Than Optionee. If the Board shall find that
any Option Holder to whom any amount, or any Common Stock, is payable under the
Plan is unable to care for his affairs because of illness, accident or legal
incapacity, then if the Board so directs, such amount, or such Common Stock, may
be paid to such Option Holder's spouse, child or other relative, an institution
maintaining or having custody of such person, or any other person deemed by the
Board to be a proper recipient on behalf of such Option Holder, unless a prior
claim therefor has been made by a duly appointed legal representative of the
Option Holder. Any payment made under this Section 20 shall be a complete
discharge of the liability of the Company with respect to such payment.
21. Indemnification of the Board. In addition to such other rights of
indemnification as they may have, the members of the Board shall be indemnified
by the Company to the extent permitted under applicable law against all costs
and expenses reasonably incurred by them in connection with any action, suit or
proceeding to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any rights
granted hereunder and against all amounts paid by them in settlement thereof or
paid by them in satisfaction of a judgment of any such action, suit or
proceeding, except a judgment based upon a finding of bad faith. Upon the
institution of any such action, suit or proceeding, the member or members of the
Board shall notify the Company in writing, giving the Company an opportunity at
its own cost to defend the same before such member or members undertake to
defend the same on their own behalf.
22. Definitions. For purposes of the Plan, the terms "parent corporation"
and "subsidiary corporation" shall have the meaning set forth in Code Sections
424(e) and 424(f), respectively, and the masculine shall include the feminine
and the neuter as the context requires.
23. Governing Law. The Plan shall be governed by, and all questions arising
hereunder shall be determined in accordance with, the laws of the State of
Delaware.
-8-
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 121
<SECURITIES> 0
<RECEIVABLES> 3,494
<ALLOWANCES> 0
<INVENTORY> 26
<CURRENT-ASSETS> 3,792
<PP&E> 3,600
<DEPRECIATION> 1,378
<TOTAL-ASSETS> 11,430
<CURRENT-LIABILITIES> 5,695
<BONDS> 0
0
1
<COMMON> 150
<OTHER-SE> 4,446
<TOTAL-LIABILITY-AND-EQUITY> 11,430
<SALES> 8,687
<TOTAL-REVENUES> 8,687
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<OTHER-EXPENSES> 0
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